<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 1999
Registration No. 333-4999
Registration No. 811-7645
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM N-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
(Group Variable Annuity I)
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 4 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 [X]
___________
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
(Exact Name of Registrant)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, Indiana 46801
(Address of Depositor's Principal Executive Offices)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: 219-455-2000
JOHN L. STEINKAMP, ESQUIRE
Vice President & Associate General Counsel
Lincoln National Life Insurance Company
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, IN 46801
(Name and Complete Address of Agent for Service)
Copy to:
Kimberly J. Smith, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
<PAGE>
It is proposed that this filing will become effective (check appropriate
box)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on __________________ pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on April 22, 1999 pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of securities being registered:
Interests in a separate account under group variable annuity contracts.
<PAGE>
Variable Annuity I
Lincoln National Variable Annuity Account L
group variable annuity contracts
Servicing Office:
Lincoln National Life Insurance Company
P.O. Box 9740
Portland, ME 04104
(800) 341-0441
This Prospectus describes group annuity contracts and individual certificates
issued by Lincoln National Life Insurance Company (Lincoln Life). They are for
use with qualified and non-qualified retirement plans. Generally, neither the
contractowner nor the individual participant pays federal income tax on the
contract's growth until it is paid out. The contract is designed to accumulate
account value and, as permitted by the plan for which the contractowner pur-
chases the contract, to provide retirement income that a participant cannot
outlive or for an agreed upon time. These benefits may be a variable or fixed
amount or a combination of both. If a participant dies before the annuity com-
mencement date, we pay the beneficiary or the plan a death benefit.
If the contractowner gives certain rights to plan participants, we issue active
life certificates to them. Participants choose whether account value accumu-
lates on a variable or a fixed (guaranteed) basis or both. If a participant al-
locates contributions to the fixed account, we guarantee principal and a mini-
mum interest rate.
All contributions for benefits on a variable basis will be placed in Lincoln
National Variable Annuity Account L (variable annuity account [VAA]). The VAA
is a segregated investment account of Lincoln Life. If a participant puts all
or some contributions into one or more of the contract's subaccounts, the par-
ticipant takes all the investment risk on the account value and the retirement
income. If the selected subaccounts make money, account value goes up; if they
lose money, it goes down. How much it goes up or down depends on the perfor-
mance of the selected subaccounts. We do not guarantee how any of the
subaccounts or their funds will perform. Also, neither the U.S. Government nor
any federal agency insures or guarantees the investment in the contract.
The available subaccounts, and the funds in which they invest, are listed be-
low. The contractowner decides which of these subaccounts are available under
the contract for participant allocations. For more information about the in-
vestment objectives, policies and risks of the funds please refer to the Pro-
spectuses for the funds.
Balanced Account -- American Century Variable Portfolios, Inc.: VP Balanced
Growth II Account -- American Century Variable Portfolios: VP Capital
Appreciation
Small Cap Growth Account -- Baron Capital Funds Trust: Baron Capital Asset
Funds
Socially Responsible Account -- Calvert Variable Series: Calvert Social
Balanced Portfolio
Index Account -- Dreyfus Stock Index Fund
Small Cap Account -- Dreyfus Variable Investment Fund: Small Cap Portfolio
Growth I Account -- Fidelity Variable Insurance Products Fund: Growth Portfolio
Equity-Income Account -- Fidelity Variable Insurance Products Fund: Equity-
Income Portfolio
Asset Manager Account -- Fidelity Variable Insurance Products Fund II: Asset
Manager Portfolio
Global Growth Account -- The Janus Aspen Series: Worldwide Growth Portfolio
Mid Cap Growth Account -- Lincoln National Aggressive Growth Fund, Inc.
Social Awareness Account -- Lincoln National Social Awareness Fund, Inc.
Mid Cap Value Account -- The Neuberger Berman Advisers Management Trust:
Partners Portfolio
International Stock Account -- T. Rowe Price International Series, Inc.
On or about , 1999 we anticipate (i) closing the Growth II Account and re-
placing the VP Capital Appreciation with the Lincoln National Aggressive Growth
Fund and (ii) closing the Socially Responsible Account and replacing the Cal-
vert Social Balanced Portfolio with the Lincoln National Social Awareness Fund.
This Prospectus gives you information about the contracts and certificates that
contractowners and participants should know before investing. Please review the
Prospectuses for the funds, and keep them for reference.
Neither the SEC nor any state securities commission has approved the contracts
or determined that this Prospectus is accurate and complete. Any representation
to the contrary is a criminal offense.
A Statement of Additional Information (SAI) has more information about the con-
tracts and certificates. Its terms are made part of this Prospectus. For a free
copy, write: Lincoln National Life Insurance Company, P.O. Box 9740, Portland,
ME 04104, or call 1-800-341-0441. The SAI and other information about Lincoln
Life and Account L are also available on the SEC's web site
(http://www.sec.gov). There is a table of contents for the SAI on the last page
of this Prospectus.
May 1, 1999
1
<PAGE>
Table of contents
<TABLE>
<CAPTION>
Page
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<S> <C>
Special terms 2
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Expense tables 3
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Summary 5
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Condensed financial information 7
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Investment results 7
- -----------------------------------------
Financial statements 7
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Lincoln National Life Insurance Co. 7
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Fixed side of the contract 7
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Variable account (VAA) 8
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Investments of the VAA 8
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Charges and other deductions 10
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</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
The contracts 11
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Annuity payouts 16
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Federal tax status 17
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Voting rights 21
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Distribution of the contracts 21
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Return privilege 21
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State regulation 21
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Records and reports 21
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Other information 21
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Statement of additional information table of contents for Variable
Annuity Account L Variable Annuity I
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</TABLE>
Special terms
Account or variable annuity account (VAA) -- The segregated investment ac-
count, Account L, into which Lincoln Life sets aside and invests the assets
for the variable side of the contract offered in this Prospectus.
Account value -- At a given time before the annuity commencement date, the to-
tal value of all accumulation units for a contract plus the value of the fixed
side of contract.
Accumulation unit -- A measure used to calculate account value for the vari-
able side of the contract.
Annuitant -- The person on whose life the annuity benefit payments are based
and made after the annuity commencement date.
Annuity commencement date -- The date on which Lincoln Life makes the first
annuity payout to the annuitant.
Annuity payout -- An amount paid at regular intervals after the annuity com-
mencement date under one of several options available to the annuitant and/or
any other payee. This amount may be paid on a variable or fixed basis, or a
combination of both.
Annuity unit -- A measure used to calculate the amount of each annuity payout
for the variable side of the contract after an annuity commencement date.
Beneficiary -- The person the participant chooses to receive any death benefit
paid if the participant dies before the annuity commencement date.
Contractowner -- The party named on the group annuity contract (for example,
an employer, a retirement plan trust, an association, or other entity allowed
by law).
Contributions -- Amounts paid into the contract.
Death benefit -- An amount payable to a designated beneficiary if a partici-
pant dies before his or her annuity commencement date.
Lincoln Life (we, us our) -- Lincoln National Life Insurance Company.
Participant -- An employee or other person affiliated with the contractowner
on whose behalf we maintain an account under the contract.
Participation year -- A period beginning with one participation anniversary
and ending the day before the next participation anniversary, except for the
first participation year which begins with the participation date.
Plan -- The retirement program that an employer offers to its employees for
which a contract is used to accumulate funds.
Subaccount -- The portion of the VAA that reflects investments in accumulation
and annuity units of a class of a particular fund available under the con-
tracts. There is a separate subaccount which corresponds to each fund.
Valuation date -- Each day the New York Stock Exchange (NYSE) is open for
trading.
Valuation period -- The period starting at the close of trading (currently
4:00 p.m. New York time) on each day that the NYSE is open for trading (valua-
tion date) and ending at the close of such trading on the next valuation date.
2
<PAGE>
Expense tables
Summary of Contract expenses:
The maximum surrender charge (contingent deferred sales charge)
(as a percentage of the gross withdrawal amount): 5%
Annual administration charge (per participant): $25
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or with-
drawal.
The annual administration charge may be paid by an employer on behalf of par-
ticipants. It is not charged during the annuity period.
We may reduce or waive these charges in certain situations. See Charges and
other deductions.
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Account L annual expenses for Variable Annuity I subaccounts:
(as a percentage of average account value):
Mortality and expense risk charge* 1.00%
-----
Total annual charge for each Variable Annuity I subaccount 1.00%
*Before January 1, 1998, the mortality and expense risk charge was 1.20%.
Annual expenses of the funds for the year ended December 31, 1998:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
Management 12b-1 Other Total
fees + fees + expenses = expenses
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<S> <C> <C> <C> <C> <C> <C> <C>
1. American Century - VP
Balanced
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2. American Century - VP
Capital Appreciation
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3. Baron Capital Funds Trust:
Baron Capital Asset Funds
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4. Calvert Social Balanced
Portfolio
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5. Dreyfus Stock Index Fund
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6. Dreyfus VIF: Small Cap
Portfolio
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7. Fidelity VIP - Growth
Portfolio
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8. Fidelity VIP - Equity
Income Portfolio
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9. Fidelity VIP II - Asset
Manager
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10. Janus Aspen - WW Growth
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11. Lincoln Nat'l Aggressive
Growth
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12. Lincoln Nat'l Social
Awareness
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13. Neuberger Berman Adv. Mgmt.
Trust
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14. T. Rowe Price Int'l Series
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</TABLE>
3
<PAGE>
Examples
(expenses of the subaccounts and the funds):
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
1. American Century - VP Balanced
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2. American Century - VP Capital Appreciation
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3. Baron Capital Funds Trust: Baron Capital
Asset Funds
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4. Calvert Social Balanced Portfolio
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5. Dreyfus Stock Index Fund
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6. Dreyfus VIF: Small Cap Portfolio
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7. Fidelity VIP - Growth Portfolio
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8. Fidelity VIP - Equity Income Portfolio
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9. Fidelity VIP II - Asset Manager
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10. Janus Aspen - WW Growth
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11. Lincoln Nat'l Aggressive Growth
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12. Lincoln Nat'l Social Awareness
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13. Neuberger Berman Adv. Mgmt. Trust
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14. T. Rowe Price Int'l Series
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If you do not surrender your contract, you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return:
<CAPTION>
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. American Century - VP Balanced
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2. American Century - VP Capital Appreciation
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3. Baron Capital Funds Trust: Baron Capital
Asset Funds
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4. Calvert Social Balanced Portfolio
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5. Dreyfus Stock Index Fund
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6. Dreyfus VIF: Small Cap Portfolio
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7. Fidelity VIP - Growth Portfolio
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8. Fidelity VIP - Equity Income Portfolio
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9. Fidelity VIP II - Asset Manager
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10. Janus Aspen - WW Growth
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11. Lincoln Nat'l Aggressive Growth
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12. Lincoln Nat'l Social Awareness Fund
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13. Neuberger Berman Adv. Mgmt. Trust
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14. T. Rowe Price Int'l Series
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</TABLE>
We provide these examples, which are unaudited, to show the direct and indirect
costs and expenses of the contract.
For more information, see Charges and other deductions in this Prospectus, and
in the Prospectuses for the funds. Premium taxes may also apply, although they
do not appear in the examples. These examples should not be considered a repre-
sentation of past or future expenses. Actual expenses may be more or less than
those shown.
4
<PAGE>
Summary
What kind of contract is this? It is a group variable annuity contract between
the contractowner and Lincoln Life. It may provide for a fixed annuity and/or
a variable annuity. This Prospectus describes the variable side of the con-
tract. See The contracts.
What is the variable annuity account (VAA)? It is a separate account we estab-
lished under Indiana insurance law, and registered with the SEC as a unit in-
vestment trust. VAA assets are allocated to one or more subaccounts, according
to your investment choices. VAA assets are not chargeable with liabilities
arising out of any other business which Lincoln Life may conduct. See The
variable annuity account.
What are the contract's investment choices? Based on instructions, the VAA ap-
plies contributions to buy fund shares in one or more of the investment funds
of the subaccounts: American Century Variable Portfolios, Inc.: VP Balanced;
American Century Variable Portfolios, Inc.: VP Capital Appreciation; Baron
Capital Funds Trust: Baron Capital Asset Funds; Calvert Social Balanced Port-
folio; Dreyfus Stock Index Fund; Dreyfus Variable Investment Fund: Small Cap
Portfolio; Fidelity Variable Insurance Products Fund: Growth Portfolio; Fidel-
ity Variable Insurance Products Fund: Equity-Income Portfolio; Fidelity Vari-
able Insurance Products Fund II: Asset Manager Portfolio; The Janus Aspen Se-
ries: Worldwide Growth Portfolio; Lincoln National Aggressive Growth Fund,
Inc.; Lincoln National Social Awareness Fund, Inc.; The Neuberger Berman Ad-
visers Management Trust: Partners Portfolio; and T. Rowe Price International
Series, Inc. In turn, each fund holds a portfolio of securities consistent
with its investment policy. On or about , 1999 we anticipate (i) closing
the Growth II Account and replacing the VP Capital Appreciation with the Lin-
coln National Aggressive Growth Fund and (ii) closing the Socially Responsible
Account and replacing the Calvert Social Balanced Portfolio with the Lincoln
National Social Awareness Fund. See The variable annuity account and The funds
for a description of the subaccounts.
Who invests contributions? American Century Investment Management, Inc. is the
investment advisor of American Century VP Balanced and VP Capital Apprecia-
tion; BAMCO, Inc. is advisor to the Baron fund. The investment advisor for the
Calvert Social Balanced Portfolio is the Calvert Asset Management Company,
Inc., Bethesda, MD; The investment advisor of the Dreyfus funds is The Dreyfus
Corporation, New York, NY. The investment advisor of the Fidelity funds is Fi-
delity Management & Research Company, Boston, MA. Janus Capital Corporation is
the advisor to the Janus fund. Lincoln Investments, Inc. is the investment ad-
visor of the Lincoln funds; Lynch & Mayer, Inc. is sub-advisor to the Lincoln
National Aggressive Growth Fund and Vantage Investment Advisors is sub-advisor
to the Lincoln National Social Awareness Fund. Rowe Price-Fleming Internation-
al, Inc. is investment advisor of the T. Rowe Price International Series. See
The funds.
How does the contract work? If we approve the application, we will send the
contractowner a contract. When participants make contributions, they buy accu-
mulation units. If the participant decides to purchase retirement income pay-
ments, we convert accumulation units to annuity units. Retirement income pay-
ments will be based on the number of annuity units received and the value of
each annuity unit on payout days. See The contracts.
What are the charges under the contract? If participants withdraw account val-
ue, a surrender charge applies of from 0% to 5%, depending upon how many par-
ticipation years the participant has been in the contract. We may reduce or
waive surrender charges in certain situations. See Surrender charges.
We charge an annual administration charge of $25 per participant account.
We will deduct any applicable premium tax from contributions or account value
at the time the tax is incurred or at another time we choose.
We apply an annual charge totaling 1.00% to the daily net asset value of the
VAA. See Charges and other deductions.
We may charge additional fees to set up a participant loan or establish a sys-
tematic withdrawal option.
We may waive these charges in certain situations.
The funds' investment management fees, 12b-1 fees, expenses and expense limi-
tations, if applicable, are more fully described in the Prospectuses for the
funds.
What contributions are necessary, and how often? Contributions by or on behalf
of participants may be in any amount unless the contractowner or the plan has
a minimum amount. See The Contracts -- contributions.
How will annuity payouts be calculated? If a participant decides to annuitize,
they select an annuity option and start receiving retirement income payments
from the contract as a fixed option or variable option or a combination of
both. See Annuity payout options. Remember that participants in the VAA bene-
fit from any gain, and take a risk of any loss, in the value of the securities
in the funds' portfolios.
What happens if a participant dies before he or she annuitizes? The benefi-
ciary has options as to how any death benefit is paid. See Death benefits and
annuity period.
May participants transfer account value between sub-accounts, and between the
VAA and the fixed account? Before the annuity commencement date, yes, subject
to the terms of the contract and the plan. See The fixed account and The con-
tracts -- Transfers be -
5
<PAGE>
tween subaccounts on or before the annuity commencement date.
May a participant withdraw account value? Yes, during the accumulation period,
subject to contract requirements and to the restrictions of any plan. See Sur-
renders and withdrawals. The contractowner must also approve participant with-
drawals under Section 401(a) plans, plans subject to Title I of ERISA, and Sec-
tion 457 plans. Certain charges may apply. See Charges and other deductions. A
portion of withdrawal proceeds may be taxable. In addition, a 10% Internal Rev-
enue Service (IRS) tax penalty may apply to distributions before age 59 1/2. A
withdrawal also may be subject to 20% withholding. See Federal tax status.
Do participants get a free look at their certificates? A participant under a
Section 403(b) or 408 plan and certain non-qualified plans can cancel the ac-
tive life certificate within ten days (in some states longer) of the date the
participant receives the certificate. The participant needs to give notice to
our servicing office. We will refund the participant's contributions less with-
drawals, or for the variable side of the contract if greater, the participant's
account balance on the day we receive the written notice. See Return privilege.
6
<PAGE>
Condensed financial
information for the
variable investment division
The financial data included below should be read along with the financial
statements and the related data included in the Statement of Additional Infor-
mation.
Accumulation unit values
(For an accumulation unit outstanding throughout the period)
[Insert updated AUV table]
Investment results
At times, the VAA may compare its investment results to various unmanaged in-
dices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods, with or without surrender charges. Results calculated without
surrender charges will be higher. Total returns include the reinvestment of
all distributions, which are reflected in changes in unit value. See the SAI
for further information.
Financial Statements
The financial statements for the VAA and Lincoln Life are located in the SAI.
For a free copy of the SAI, complete and mail the enclosed card, or call
1-800-341-0441.
Lincoln National Life Insurance Co.
Lincoln Life was founded in 1905 and is organized under Indiana law. We are
one of the largest stock life insurance companies in the United States. We are
owned by Lincoln National Corp. (LNC) which is also organized under Indiana
law. LNC's primary businesses are insurance and financial services.
Fixed side of the contract (the Fixed Account)
Contributions allocated to the fixed account become part of Lincoln Life's
general account, and do not participate in the investment experience of the
VAA. The general account is subject to regulation and supervision by the Indi-
ana Insurance Department as well as the insurance laws and regulations of the
jurisdictions in which the contracts are distributed.
In reliance on certain exemptions, exclusions and rules, Lincoln Life has not
registered interests in the general account as a security under the Securities
Act of 1933 and has not registered the general account as an investment com-
pany under the 1940 Act. Accordingly, neither the general account nor any in-
terests in it are subject to regulation under the 1933 Act or the 1940 Act.
Lincoln Life has been advised that the staff of the SEC has not made a review
of the disclosures which are included in this Prospectus which relate to our
general account and to the fixed side of the contract. These disclosures, how-
ever, may be subject to certain provisions of the federal securities laws re-
lating to the accuracy and completeness of statements made in the Prospectus.
This Prospectus is generally intended to serve as a disclosure document only
for aspects of the contract in-
7
<PAGE>
volving the VAA, and therefore contains only selected information regarding
the fixed side of the contract. Complete details regarding the fixed side of
the contract can be found in the contract.
Contributions allocated to the fixed account are guaranteed to be credited
with a minimum interest rate, specified in the contract, of at least 3.0%. A
contribution allocated to the fixed side of the contract is credited with in-
terest beginning on the next calendar day following the date of receipt if all
participant data is complete. Lincoln Life may vary the way in which it cred-
its interest to the fixed side of the contract from time to time.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN LINCOLN LIFE'S
SOLE DISCRETION. PARTICIPANTS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0%
WILL BE DECLARED.
If a participant's plan permits loans, then during the participant's accumula-
tion period, the participant may apply for a loan by completing a loan appli-
cation that we provide. The participant's account balance in the Fixed account
secures the loan. Loans are subject to restrictions imposed by the IRC, Title
I of the Employee Retirement Income Security Act of 1974 (ERISA), and the par-
ticipant's plan. For plans subject to Title I of ERISA, the initial amount of
a participant loan cannot exceed the greater of 50% of the participant's
vested account balance in the fixed account or $50,000 and must be at least
$1,000. For plans not subject to Title I of ERISA, a participant may borrow up
to $10,000 of his or her vested account balance. A participant may have only
one loan outstanding at a time and may not take more than one loan in any six-
month period. Amounts serving as collateral for the loan are not subject to
the minimum interest rate under the contract and will accrue interest at a
rate below the loan interest rate provided in the contract. Under certain con-
tracts, a fee of up to $50 may be charged for a loan. More information about
loans, loan interest rates, and fees and charges, is in the contract, the ac-
tive life certificates, the annuity loan agreement and is available from us.
Variable annuity account (VAA)
On April 29, 1996, the VAA was established as an insurance company separate
account under Indiana law. It is registered with the SEC as a unit investment
trust under the provisions of the 1940 Act. The SEC does not supervise the VAA
or Lincoln Life. The VAA is a segregated investment account, meaning that its
assets may not be charged with liabilities resulting from any other business
that we may conduct. Income, gains and losses, whether realized or not, from
assets allocated to the VAA are, in accordance with the applicable annuity
contracts, credited to or charged against the VAA. They are credited or
charged without regard to any other income, gains or losses of Lincoln Life.
The VAA satisfies the definition of separate account under the federal securi-
ties laws. We do not guarantee the investment performance of the VAA. Any in-
vestment gain or loss depends on the investment performance of the funds. You
assume the full investment risk for all amounts placed in the VAA.
The VAA is used to support other annuity contracts offered by Lincoln Life in
addition to the contracts described in this Prospectus. The other annuity con-
tracts supported by the VAA invest in the same funds as the contracts de-
scribed in this Prospectus. These other annuity contracts may have different
charges that could affect the performance of the subaccount.
Investments of the variable annuity account
You decide which of the subaccounts available under the contract will be
available for participant allocations. There is a separate subaccount which
corresponds to each fund. Participant allocations may be changed without pen-
alty or charges. Shares of the funds will be sold at net asset value with no
initial sales charge to the VAA in order to fund the contracts. The funds are
required to redeem fund shares at net asset value on our request. We reserve
the right to add, delete, or substitute funds.
Each fund, described below, is an investment vehicle for insurance company
separate accounts. Certain funds offered as part of this contract have similar
investment objectives and policies to other portfolios managed by the fund's
advisor. The investment results of the funds, however, may be higher or lower
than the results of other portfolios that are managed by the advisor. There
can be no assurance, and no representation is made, that the investment re-
sults of any of the funds will be comparable to the investment results of any
other portfolio managed by the advisor.
Following are brief summaries of the investment objectives and policies of the
funds, and a description of their managers. Each fund is subject to certain
investment policies and restrictions which may not be changed without a major-
ity vote of shareholders of that fund. More detailed information can be ob-
tained from the current Prospectus for the funds. There is not assurance that
any of the funds will achieve its stated objective.
1. American Century Variable Portfolios, Inc.--American Century VP Balanced
seeks capital growth and current income. Its investment team intends to
maintain approximately 60% of the portfolio's assets in common stocks that
are considered by its manager to have better than average prospects for ap-
preciation and the balance in bonds and other fixed income securities.
American Century Invest-
8
<PAGE>
ment Management, Inc. is the investment manager of this portfolio.
2. American Century Variable Portfolios, Inc--American Century VP Capital Ap-
preciation seeks capital growth by investing primarily in common stocks that
are considered by management to have better-than-average prospects for ap-
preciation.
3. Baron Capital Funds Trust, Insurance Shares--Baron Capital Asset Fund seeks
capital appreciation through investments in securities of small sized compa-
nies with market capitalizations of $1 billion to $2 billion, with underval-
ued assets or favorable growth prospects. BAMCO, Inc. serves as the Fund's
investment advisor.
4. Calvert Variable Series--The Calvert Social Balanced Portfolio seeks total
return above the rate of inflation through an actively managed, non-diversi-
fied portfolio of common and preferred stocks, bonds and money market in-
struments which offer income and growth opportunity and which satisfy the
social concern criteria established for the portfolio. Shares of the portfo-
lio are offered only to insurance companies for allocation to certain of
their variable accounts.
5. Dreyfus Stock Index Fund is a non-diversified index fund that seeks to pro-
vide investment results that correspond to the price and yield performance
of publicly traded common stocks in the aggregate, as represented by the
Standard & Poor's 500 Composite Stock Price Index. The Fund is neither spon-
sored by nor affiliated with Standard & Poor's Corporation. The Dreyfus Cor-
poration acts as the Fund manager and Mellon Equity Associates, an affiliate
of Dreyfus located at 500 Grant Street, Pittsburgh, Pennsylvania 15258, is
the Fund index manager.
6. Dreyfus Variable Investment Fund--Small Cap Portfolio seeks to maximize cap-
ital appreciation. The Small Cap Portfolio seeks out companies that have the
potential for significant growth. Under normal market conditions, the Port-
folio will invest at least 65% of its total assets in domestic and foreign
companies with market capitalization of less than $1.5 billion, at the time
of purchase. The manager seeks companies believed to be characterized by new
or innovative products or services which should enhance prospects for growth
in future earnings. The Portfolio may also invest in special situations such
as corporate restructurings, mergers or acquisitions. The Dreyfus Corpora-
tion serves as the Funds investment advisor
7. Fidelity VIP--Growth Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities, including bonds and preferred stocks.
Fidelity Management & Research Company ("FMR") is the manager of this port-
folio.
8. Fidelity VIP--Equity-Income Portfolio seeks reasonable income by investing
at least 65% of its total assets in income-producing, securities. The Port-
folio has the flexibility, however, to invest the balance in all types of
domestic and foreign securities, including bonds. FMR is the investment man-
ager of this portfolio.
9. Fidelity Variable Insurance Products Fund II (VIP II)--Asset Manager Portfo-
lio seeks high total return with reduced risk over the long term by allocat-
ing its assets among domestic and foreign stocks, bonds and short-term money
market instruments. FMR is the investment manager of this portfolio.
10. The Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth
of capital in a manner consistent with the preservation of capital by in-
vesting primarily in common stocks of foreign and domestic issuers. The
Fund has flexibility to invest on a worldwide basis in companies and other
organizations of any size, regardless of country of organization or place
of principal business activity. The Fund normally invests in issuers from
at least five different countries, including the United States, but may at
times invest in fewer than five countries or even a single country. Janus
Capital Corporation serves as the Fund's investment advisor.
11. The Lincoln National Aggressive Growth Fund, Inc. seeks to maximize capital
appreciation by investing in a diversified portfolio of equity securities
of small and medium-sized companies which have a dominant position within
their respective industries, are undervalued or have a potential for growth
in earnings. the fund invests in companies with market capitalizations of
between $250 million and $5 billion at the time of purchase. Lincoln In-
vestment is the fund's investment advisor, and Lynch & Mayer, Inc. is the
fund's investment sub-advisor.
12. The Lincoln National Social Awareness Fund, Inc. seeks long-term capital
appreciation by investing primarily in a portfolio of common stock and se-
curities convertible into common stock, which adhere to certain specific
social criteria. Lincoln Investment Management, Inc. (Lincoln Investment)
is the fund's investment advisor and Vantage Investment Advisors is the
fund's investment sub-advisor.
13. The Neuberger Berman Advisers Management Trust--Partners Portfolio seeks
capital growth by investing in common stocks and other equity securities of
medium to large capitalization established companies. Neuberger Berman Man-
agement Incorporated serves as the Fund's investment advisor. Neuberger
Berman, LLC serves as the Fund's investment sub-advisor.
14. T. Rowe Price International Series, Inc.--International Stock Portfolio
seeks long-term growth of capital through investments primarily in common
stocks of established, non-U.S. companies. Rowe
9
<PAGE>
Price-Fleming International, Inc. is the investment manager of this portfo-
lio.
Fidelity VIP--Money Market Portfolio seeks to obtain as high a level of cur-
rent income as is consistent with preserving capital and providing liquidity.
For more information about the Portfolio, into which initial contributions are
invested pending Lincoln Life's receipt of a complete order. See The con-
tracts.
On or about , 1999 we anticipate (i) closing the Growth II Account
and replacing the VP Capital Appreciation with the Lincoln National Aggressive
Growth Fund and (ii) closing the Socially Responsible Account and replacing
the Calvert Social Balanced Portfolio with the Lincoln National Social Aware-
ness Fund.
Some advisors (or their affiliate) may pay compensation to Lincoln Life (or an
affiliate) for administration, distribution, or other expenses. Currently,
these advisors include American Century, BAMCO, FRM, Janus, and Neuberger &
Berman. The amount of compensation is usually based on assets of the Portfolio
from contracts that we issue or administer, and some advisors may pay us more
than others.
Sale of shares by the funds
We will purchase shares of the funds at net asset value and direct them to the
appropriate subaccounts of the VAA. We will redeem sufficient shares of the
appropriate funds to pay annuity payouts, death benefits, surrender/withdrawal
proceeds or for other purposes described in the contract. If a participant
wants to transfer all or part of his or her account balance from one
subaccount to another, we redeem shares held in the first and purchase shares
of the other. The shares are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to Lincoln Life and may be sold to other insurance companies for investment of
assets of the subaccounts established by those insurance companies to fund
variable annuity and variable life insurance contracts.
When a fund sells shares both to variable annuity and to variable life insur-
ance separate accounts, it is engaging in mixed funding. When a fund sells
shares to separate accounts of unaffiliated life insurance companies, it is
engaging in shared funding.
The funds may engage in mixed and shared funding. Due to differences in re-
demption rates or tax treatment, or other considerations, the interests of
various contract owners participating in a fund could conflict. The funds' Di-
rectors or Trustees will monitor for the existence of any material conflicts,
and determine what action, if any, should be taken. See the Prospectuses for
the funds.
Reinvestment of dividends and capital gain distributions
All dividend and capital gain distributions of the funds are automatically re-
invested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as addi-
tional units, but are reflected as changes in unit values.
Addition, deletion or substitution of investments
We reserve the right, within the law, to make additions, deletions and substi-
tutions for the funds in which the VAA participates. (We may substitute shares
of other funds for shares already purchased, or to be purchased in the future,
under the contract. This substitution might occur if shares of a fund should
no longer be available, or if investment in any fund's shares should become
inappropriate, in the judgment of our management, for the purposes of the con-
tract.) We cannot substitute shares without approval by the SEC. We will also
notify contractowners and participants.
Charges and other deductions
We will deduct the charges described below to cover our costs and expenses,
services provided, and risks assumed under the contracts. We will incur cer-
tain costs and expenses for distribution and administration of the contracts
and for providing the benefits payable thereunder. More particularly, our ad-
ministrative services include: processing applications and enrollment forms
and issuing the contracts and active life certificates, processing purchases
and redemptions of fund shares as required, maintaining records, administering
payout annuity options, furnishing accounting and valuation services (includ-
ing the calculation and monitoring of daily subaccount values), reconciling
and depositing cash receipts, providing contract confirmations, providing
toll-free inquiry services and furnishing telephone fund transfer services.
The risks we assume include: the risk that annuitants receiving annuity
payouts under the contract will live longer than we assumed when we calculated
our guaranteed rates (these rates cannot be changed); the risk that death ben-
efits paid will exceed actual participant account balances (less outstanding
loans); the risk that more participants that expected will qualify for waiver
of the surrender charge; and the risk that our costs in providing the services
will exceed our revenues from contract charges (which we cannot change). The
amount of a charge may not necessarily correspond to the costs associated with
providing the services or benefits indicated by the description of the charge.
For example, the surrender charge (contingent deferred sales charge) collected
may not fully cover all of the sales and distribution expenses actually in-
curred by us.
Deductions from the VAA for Variable Annuity I
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.00% (1.20% before January 1, 1998) of the daily net asset value. The
10
<PAGE>
charge is a mortality and expense risk charge. It is assessed during the accu-
mulation period and during the annuity period, even though during the annuity
period, we bear no mortality risk on annuity options that do not have life
contingencies.
Annual administration charge
During the accumulation period, we currently deduct $25 (or the balance of the
participant's account, if less) per year from each participant's account bal-
ance on the last business day of the month in which a participant anniversary
occurs. We also deduct the charge from a participant's account balance if the
participant's account is totally withdrawn. The charge may be increased or de-
creased.
Surrender charge
A surrender charge applies (except as described below) to total or partial
withdrawals of a participant's account balance during the accumulation period
and prior to the 11th participation year, as follows:
<TABLE>
<CAPTION>
During Participation Year Surrender Charge
- ------------------------- ----------------
<S> <C>
1-6 5%
7 4%
8 3%
9 2%
10 1%
11 and later 0%
</TABLE>
The surrender charge is imposed on the gross withdrawal amount, and is de-
ducted from the subaccounts and the fixed account in proportion to the amount
withdrawn from each. We do not impose a surrender charge on death benefits, or
on account balances converted to a payout annuity option. For any participant,
the surrender charge will never exceed 8.5% of the cumulative contributions to
the participant's account.
We will not impose a surrender charge on a withdrawal if we receive with the
withdrawal request reasonable proof that (i) the participant has attained age
59 1/2; (ii) the participant has died; (iii) the participant has incurred a
disability as defined under the contract; or (iv) the participant has termi-
nated employment with the employer. At the contractowner's option, the con-
tract may waive the surrender charge if the participant is experiencing finan-
cial hardship, or is age 55 or older and has terminated employment. A
contractowner may also elect a contract provision that permits participants to
make a withdrawal once each contract year of up to 20% of the participant's
account balance without a surrender charge. If the contractowner makes these
elections, then we may adjust the interest crediting rate under the fixed ac-
count of that contract.
We impose the surrender charge to compensate us for the loss we experience on
our distribution costs when a participant withdraws account value before dis-
tribution costs have been recovered. We may also recover distribution costs
from other contract charges, including the mortality and expense risk charge.
Deductions for premium taxes
Any premium tax or other tax levied by any governmental entity as a result of
the existence of the contracts or the VAA will be deducted from account value
when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. These premium taxes gen-
erally depend upon the law of the [participant's state of residence]. The tax
ranges from 0.5% to 4.0%.
Other charges and deductions
There are deductions from and expenses paid out of the assets of the under-
lying funds that are more fully described in the Prospectuses for the funds.
We may impose a $50 fee to establish a participant loan from the fixed ac-
count, and loans are subject to loan interest charges. In addition, we may im-
pose a $30 fee to set up a systematic withdrawal option for a participant.
Additional information
The annual administration charge and surrender charge described previously may
be reduced or eliminated under a particular contract. However, these charges
will be reduced only to the extent that we anticipate lower distribution
and/or administrative expenses, or that we perform fewer sales or administra-
tive services than those originally contemplated in establishing the levels of
those charges. Lower distribution and/or administrative expenses may be the
result of economies associated with (i) the size of a particular group; (ii)
an existing relationship with the contractowner or employer; (iii) the use of
mass enrollment procedures; (iv) the performance of administrative or sales
functions by the employer; or (v) the use by an employer of automated tech-
niques in submitting contributions or information relating to contributions on
behalf of its employees. In addition, an employer may pay the annual adminis-
tration charge on behalf of participants under a contract, or by election im-
pose this charge only on participants with account balances in the VAA.
The Contracts
Purchase of the Contracts
We designed the contracts for employers and other entities to enable partici-
pants and employers to accumulate funds for retirement programs meeting the
requirements of the following Sections of the Internal Revenue Code of 1986,
as amended (tax code): 401(a), 403(b), 408, 457 and other related sections, as
well as for programs offering non-qualified annuities. An employer, associa-
tion or trustee in some circumstances may apply for a contract by completing
an application
11
<PAGE>
and returning it to us. If we accept the application, the contractowner or an
affiliated employer can forward contributions on behalf of employees who then
become participants under the contracts. For plans that have allocated rights
to the participant, we will issue to each participant a separate active life
certificate that describes the basic provisions of the contract to each par-
ticipant.
Contributions
Contractowners generally forward contributions to us for investment. Depending
on the plan, the contributions may consist of salary reduction contributions,
employer contributions or post-tax contributions.
Contributions may accumulate on either a guaranteed or variable basis selected
from those subaccounts available by the contractowner.
Contributions by participants may be in any amount unless there is a minimum
amount set by the contractowner or plan. A contract may require the
contractowner to contribute a minimum annual amount on behalf of all partici-
pants. Annual contributions under qualified plans may be subject to maximum
limits imposed by the tax code. Annual contributions under non-qualified plans
may be limited by the terms of the contract. In the Statement of Additional
Information see "Tax Law Considerations" for a discussion of these limits.
Subject to any restrictions imposed by the plan or the tax code, we will ac-
cept transfers from other contracts and qualified rollover contributions.
Section 830.205 of the Texas Education Code provides that employer or state
contributions (other than salary reduction contributions) on behalf of partic-
ipants in the Texas Optional Retirement Program ("ORP") vest after one year of
participation in the program. We will return employer contributions to the
contractowner for those employees who terminate employment in all Texas insti-
tutions of higher education before becoming vested. During this first partici-
pation year in the ORP, ORP Participants may only direct employer and state
contributions to the fixed account.
Contributions must be in U.S. funds, and all withdrawals and distributions un-
der the contract will be in U.S. funds. If a bank or other financial institu-
tion does not honor the check or other payment method used for a contribution,
we will treat the contribution as invalid. All allocation and subsequent
transfers resulting from the invalid contributions will be reversed and the
party responsible for the invalid contribution must reimburse us for any
losses or expenses resulting from the invalid contribution.
Initial contributions
When we receive a completed enrollment form and all other information neces-
sary for processing a contribution, we will price the initial contribution for
a participant to his or her account no later than two business days after we
receive the contribution. While attempting to finish an incomplete set of en-
rollment information, we may hold the initial contribution for no more than
five business days. If the incomplete information cannot be completed within
those five days, the contractowner or participant will be informed of the rea-
sons, and we will return the contribution less any withdrawals (unless the
contractowner or the participant specifically authorizes us to keep it until
the enrollment information is complete).
If the contract includes language regarding the Pending Allocation Account,
then these rules apply to initial contributions instead: Where state approval
has been obtained, if we receive contributions without a properly complete en-
rollment form, we will notify the contractowner and deposit the contributions
to the pending allocation account, unless the contributions have been allo-
cated to another subaccount or the fixed account under the plan. Within two
business days of receipt of a properly completed enrollment form, we will
transfer the participant's account balance in the pending allocation account
in accordance with the allocation percentages elected on the enrollment form.
We will allocate all future contributions in accordance with these percentages
until the participant notifies us of a change. If we do not receive a properly
completed enrollment form after we send three monthly notices, then we will
refund the participant's account balance in the pending allocation account
within 105 days of the date of the initial contribution. The pending alloca-
tion account invests in Fidelity VIP--Money Market Portfolio, which is not
available as an investment option under the contract. We do not impose the
mortality and expense risk charges or the annual administration charge on the
pending allocation account. We begin imposing these charges when we receive a
properly completed enrollment form. The participant's participation date will
be the date we deposited the participant's contribution into the pending allo-
cation account.
Valuation date
Accumulation units and annuity units will be valued once daily at the close of
trading (currently 4:00 p.m., New York time) on each day the New York Stock
Exchange is open (valuation date). On any date other than a valuation date,
the accumulation unit value and the annuity unit value will not change.
Allocation of contributions
The contractowner forwards contributions to us, specifying the amount being
contributed on behalf of each participant and allocation information in accor-
dance with our procedures. Contributions are placed into the VAA's
subaccounts, each of which invests in shares of a fund,
and/or the fixed account, according to written participant instructions and
subject to the plan. The contribution allocation percentage to the subaccounts
or the fixed account can be in any whole percent. A participant may allocate
contributions to a maximum of ten subaccounts and the fixed account.
12
<PAGE>
Upon allocation to the appropriate subaccount, contributions are converted to
accumulation units. The number of accumulation units credited is determined by
dividing the amount allocated to each subaccount by the value of an accumula-
tion unit for that subaccount on the valuation date on which the contribution
is received by us if received before 4:00 p.m., New York time. If the contri-
bution is received at or after 4:00 p.m., New York time, we will use the accu-
mulation unit value computed on the next valuation date. The number of accumu-
lation units determined in this way is not changed by any subsequent change in
the value of an accumulation unit. However, the dollar value of an accumula-
tion unit will vary depending not only upon how well the underlying fund's in-
vestments perform, but also upon the expenses of the VAA and the underlying
funds.
Subject to the terms of the plan, a participant may change the allocation of
contributions by notifying us in writing or by telephone in accordance with
our published procedures. The change is effective for all contributions re-
ceived concurrently with the allocation change form and for all future contri-
butions, unless the participant specifies a later date. Changes in the alloca-
tion of future contributions have no effect on amounts a participant may have
already contributed. Such amounts, however, may be transferred between
subaccounts and the fixed account pursuant to the requirements described in
"Transfers on or before the annuity commencement date." Allocations of em-
ployer contributions may be restricted by the applicable plan.
Valuation of accumulation units
Contributions allocated to the VAA are converted into accumulation units. This
is done by dividing each contribution by the value of an accumulation unit for
the valuation period during which the contribution is allocated to the VAA.
The accumulation unit value for each subaccount was or will be established at
the inception of the subaccount. It may increase or decrease from valuation
period to valuation period. The accumulation unit value for a subaccount for a
later valuation period is determined as follows:
(1) The total value of the fund shares held in the subaccount is calculated by
multiplying the number of fund shares owned by the subaccount at the be-
ginning of the valuation period by the net asset value per share of the
fund at end of the valuation period, and adding any dividend or other dis-
tribution of the fund if an ex-dividend date occurs during the valuation
period; minus
(2) The liabilities of the subaccount at the end of the valuation period;
these liabilities include daily charges imposed on the subaccount, and may
include a charge or credit with respect to any taxes paid or reserved for
by us that we determine result from the operations of the VAA; and
(3) The result of (2) is divided by the number of subaccount units outstanding
at the beginning of the valuation period.
The daily charges imposed on a subaccount for any valuation period are equal
to the mortality and expense risk charge multiplied by the number of calendar
days in the valuation period.
Transfers on or before the annuity commencement date
Subject to the terms of a plan, a participant may transfer all or a portion of
the participant's account balance from one subaccount to another, and between
the VAA and the fixed account.
A transfer from a subaccount involves the surrender of accumulation units in
that subaccount, and a transfer to a subaccount involves the purchase of accu-
mulation units in the that subaccount. Subaccount transfers will be done using
accumulation unit values determined at the end of the valuation date on which
we receive the transfer request. There is no charge for a transfer. We do not
require any minimum transfer amount, and do not limit the number of transfers.
A transfer may be made by writing to us or, if a Telephone Exchange Authoriza-
tion form (available from us) is on file with us, by a toll-free telephone
call. In order to prevent unauthorized or fraudulent telephone transfers, we
may require the caller to provide certain identifying information before we
will act upon their instructions. We may also assign the participant a Per-
sonal Identification Number (PIN) to serve as identification. We will not be
liable for following telephone instructions we reasonably believe are genuine.
Telephone requests may be recorded and written confirmation of all transfer
requests will be mailed to the participant on the next valuation date. If the
participant or contractowner determines that a transfer was made in error, the
contractowner or participant must notify us within 30 days of the confirmation
date. Telephone transfers will be processed on the valuation date that they
are received when they are received by us before 4:00 p.m. New York time.
When thinking about a transfer of account value, the participant should con-
sider the inherent risk involved. Frequent transfers based on short-term ex-
pectations may increase the risk that a transfer will be made at an in-
opportune time.
Transfers after the annuity commencement date
We do not permit transfers of a participant's account balance after the annu-
ity commencement date.
Death benefit before the annuity commencement date
The payment of death benefits is governed by the applicable plan and the tax
code. The participant may designate a beneficiary during the participant's
lifetime and change the beneficiary by filing a written request with us. Each
change of beneficiary revokes any previous designation.
13
<PAGE>
If the participant dies before the annuity commencement date, the death bene-
fit paid to the participant's designated beneficiary will be the greater of:
(1) the net contributions; or (2) the participant's account balance less any
outstanding loan (including principal and due and accrued interest), provided
that, if we are not notified of the participant's death within six months of
such death, we pay the beneficiary the amount in (2).
We determine the value of the death benefit as of the date on which the death
claim is approved for payment. This payment will occur when we receive (1)
proof, satisfactory to us, of the death of the participant; (2) written autho-
rization for payment; and (3) all required claim forms, fully completed.
If a death benefit is payable, the beneficiary may elect to receive payment of
the death benefit either in the form of a lump sum settlement or a payout an-
nuity, or as a combination of these two.
If a lump sum settlement is requested, the proceeds will be mailed within
seven days of receipt of satisfactory claim documentation as discussed previ-
ously, subject to the laws and regulations governing payment of death bene-
fits. If no election is made within 60 days after we receive satisfactory no-
tice of the participant's death, we will pay a lump sum settlement to the ben-
eficiary at that time. This payment may be postponed as permitted by the 1940
Act.
Payment will be made in accordance with applicable laws and regulations gov-
erning payment of death benefits.
Under qualified contracts, if the beneficiary is someone other than the spouse
of the deceased participant, the tax code provides that the beneficiary may
not elect an annuity which would commence later than December 31st of the cal-
endar year following the calendar year of the participant's death. If a non-
spousal beneficiary elects to receive payment in a single lump sum, the tax
code provides that such payment must be received no later than December 31st
of the fourth calendar year following the calendar year of the participant's
death.
If the beneficiary is the surviving spouse of the deceased participant, dis-
tributions generally are not required under the Code to begin earlier than De-
cember 31st of the calendar year in which the participant would have attained
age 70 1/2. If the surviving spouse dies before the date distributions com-
mence, then, for purposes of determining the date distributions to the benefi-
ciary must commence, the date of death of the surviving spouse is substituted
for the date of death of the participant.
Other rules apply to non-qualified annuities. See Federal tax status.
If there is no living named beneficiary on file with us at the time of a par-
ticipant's death and unless the plan directs otherwise, we will pay the death
benefit to the participant's estate in the form of a lump sum payment, upon
receipt of satisfactory proof of the participant's death, but only if we re-
ceive proof of death no later than the end of the fourth calendar year follow-
ing the year of the participant's death. The value of the death benefit will
be determined as of the end of the valuation period during which we receive
due proof of death, and the lump sum death benefit generally will be paid
within seven days of that date.
Withdrawals
Before the annuity commencement date and subject to the terms of the plan,
withdrawals may be made from the subaccounts or the fixed account of all or
part of the participant's account balance remaining after deductions for any
applicable (1) surrender charge; (2) annual administration charge (imposed on
total withdrawals), (3) premium taxes, and (4) outstanding loan including loan
security. Annuity conversion amounts are not considered withdrawals.
The account balance available for withdrawal is determined at the end of the
valuation period during which we receive the written withdrawal request. Un-
less a request for withdrawal specifies otherwise, withdrawals will be made
from all subaccounts within the VAA and from the fixed account in the same
proportion that the amount of withdrawal bears to the total participant ac-
count balance. Unless prohibited, withdrawal payments will be mailed within
seven days after we receive a valid written request. The payment may be post-
poned as permitted by the 1940 Act.
There are charges associated with withdrawals of account value. See charges
and other deductions.
The tax consequences of a withdrawal are discussed later in this booklet. See
Federal tax status.
Total Withdrawals. Only participants with no outstanding loans can make a to-
tal withdrawal. A total withdrawal of a participant's account will occur when
(a) the participant or contractowner requests the liquidation of the partici-
pant's entire account balance, or (b) the amount requested plus any surrender
charge results in a remaining participant account balance of an amount less
than or equal to the annual administration charge, in which case we treat the
request as a request for liquidation of the participant's entire account
balance.
Any active life certificate must be surrendered to us when a total withdrawal
occurs. If the contractowner resumes contributions on behalf of a participant
after a total withdrawal, the participant will receive a new participation
date and active life certificate.
Partial Withdrawals. A partial withdrawal of a participant's account balance
will occur when less than a total withdrawal is made from a participant's ac-
count.
Systematic Withdrawal Option. Participants who are at least age 59 1/2, are
separated from service from their employer, or are disabled, and certain
spousal beneficiaries and alternate payees who are former spouses, may
14
<PAGE>
be eligible for a Systematic Withdrawal Option (SWO) under the contract. Pay-
ments are made only from the fixed account. Under the SWO a participant may
elect to withdraw either a monthly amount which is an approximation of the in-
terest earned between each payment period based upon the interest rate in ef-
fect at the beginning of each respective payment period, or a flat dollar
amount withdrawn on a periodic basis. A participant must have a vested pre-tax
account balance of at least $10,000 in the fixed account in order to select the
SWO. A participant may transfer amounts from the VAA to the fixed account in
order to support SWO payments. These transfers, however, are subject to the
transfer restrictions imposed by any applicable plan. A one-time fee of up to
$30 may be charged to set up the SWO. This charge is waived for total vested
pre-tax account balances of $25,000 or more. More information about SWO, in-
cluding applicable fees and charges, is available in the contracts and active
life certificates and from us.
Maximum conservation option. Under certain contracts participants who are at
least age 70 1/2 may ask us to calculate and pay to them the minimum annual
distribution required by Sections 401(a)(9), 403(b)(10), 408 or 457(d) of the
tax code. The participant must complete the forms we require to elect this op-
tion. We will base our calculation solely on the participant's account value
with us. Participants who select this option are responsible for determining
the minimum distributions amount applicable to their non-Lincoln Life con-
tracts.
Withdrawal restrictions. Withdrawals under Section 403(b) contracts are subject
to the limitations under Section 403(b)(11) of the tax code and regulations
thereof and in any applicable plan document. That section provides that with-
drawals of salary reduction contributions deposited and earnings credited on
any salary reduction contributions after December 31, 1988 can only be made if
the participant has (1) died; (2) become disabled; (3) attained age 59 1/2; (4)
separated from service; or (5) incurred a hardship. If amounts accumulated in a
Section 403(b)(7) custodial account are deposited in a contract, these amounts
will be subject to the same withdrawal restrictions as are applicable to post-
1988 salary reduction contributions under the contracts. For more information
on these provisions see Federal tax status.
Withdrawal requests for a participant under Section 401(a) plans, Section
457(b) plans and plans subject to Title I of ERISA must be authorized by the
contractowner on behalf of a participant. All withdrawal requests will require
the contractowner's written authorization and written documentation specifying
the portion of the participants account balance which is available for distri-
bution to the participant. Withdrawal requests for Section 457(f) plans must be
requested by the contractowner.
As required by Section 830.105 of the Texas Education Code, withdrawal requests
by participants in the Texas Optional Retirement Program (ORP) are only permit-
ted in the event of (1) death; (2) retirement; (3) termination of employment in
all Texas institutions of higher education; or (4) attainment of age 70 1/2. A
participant in an ORP contract is required to obtain a certificate of termina-
tion from the participant's employer before a withdrawal request can be grant-
ed.
For withdrawal requests (other than transfers to other investment vehicles) by
participants under plans not subject to Title I of ERISA and non-401(a) Plans
and non-457 Plans, the participant must certify to us that one of the permitted
distribution events listed in the tax code has occurred (and provide supporting
information, if requested) and that we may rely on this representation in
granting the withdrawal request. See Federal tax status. A participant should
consult his or her tax adviser as well as review the provisions of their plan
before requesting a withdrawal.
A plan and applicable law may contain additional withdrawal or transfer re-
strictions.
Withdrawals may have Federal tax consequences. In addition, early withdrawals,
as defined under Section 72(q) and 72(t) of the tax code, may be subject to a
ten percent excise tax.
Amendment of the contract
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. The contractowner
will be notified in writing of any changes, modifications or waivers.
Commissions
The commissions paid to dealers are a maximum of 3.5% of contributions under a
contract. These commissions are not deducted from contributions or account val-
ue; they are paid by us.
Ownership
Contractowners have all rights under the contract except those allocated to
participants. According to Indiana law, the assets of the VAA are held for the
exclusive benefit of all contractowners, participants, and their designated
beneficiaries; and the assets of the VAA are not chargeable with liabilities
arising from any other business that we may conduct. Qualified contracts and
active life certificates may not be assigned or transferred
except as permitted by ERISA and on written notification to us. In addition, a
participant, beneficiary, or annuitant may not, unless permitted by law, assign
or encumber any payment due under the contract.
Contractowner questions
The obligations to purchasers under the contracts are those of Lincoln Life.
Questions about the contract should be directed to us at 1-800-341-0441.
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Annuity payouts
As permitted by the plan, the participant, or the beneficiary of a deceased
participant, may elect to convert all or part of the participant's account bal-
ance or the death benefit to an annuity payout. The contract provides optional
forms of payouts of annuities (annuity payout options), each of which is pay-
able on a variable basis, a fixed basis or a combination of both as specified.
If the contractowner does not give us instructions, we will apply the partici-
pant's account value in the fixed account to a fixed annuity, and account value
in the VAA to a variable annuity.
If the participant's account value or the beneficiary's death benefit is less
than $2,000 or if the amount of the first payout is less than $20, we have the
right to cancel the annuity and pay the participant or beneficiary the entire
amount in a lump sum.
We may maintain variable payout annuities in the (Variable Payout Division)
VAA, or in another separate account of Lincoln Life. We do not impose a charge
when the annuity conversion amount is applied to a variable payout on a vari-
able basis. The contract benefits and charges for an annuity payout option,
whether maintained in the VAA or in a variable payout division, are as de-
scribed in this Prospectus. The selection of funds available through a variable
payout division may be different from the funds available through the VAA. If
we maintain a participant's variable annuity payout in a variable payout divi-
sion, we will provide a Prospectus for the variable payout division before the
annuity commencement date.
Under qualified plans, any annuity selected must be payable over a period that
does not extend beyond the life expectancy of the participant and the benefi-
ciary. If the beneficiary is not the participant's spouse, the present value of
payouts to be made to the participant must be more than 50% of the present
value of the total payouts to be made to the participant and the beneficiary.
If an annuitant dies before the end of a guaranteed annuity period, the benefi-
ciary, if any, or the annuitant's estate will receive any remaining payouts due
under the annuity option in effect.
Annuity payout options
Note Carefully: Under the Single Life Annuity and Joint Life Annuity options it
would be possible for only one annuity payout to be made if the annuitant(s)
were to die before the due date of the second annuity payout; only two annuity
payouts if the annuitant(s) were to die before the due date of the third annu-
ity payout; and so forth.
Single Life Annuity. Payouts are made monthly during the lifetime of the annui-
tant, and the annuity terminates with the last payout preceding death.
Life Annuity With Guaranteed Periods of 10, 15 or 20 Years. Payouts are made
monthly during the lifetime of the annuitant with a monthly payout guaranteed
to the beneficiary for the remainder of the selected number of years, if the
annuitant dies before the end of the period selected. Payouts under this annu-
ity option are smaller than a single life annuity without a guaranteed payout
period.
Joint Life Annuity. Payouts are made monthly during the joint lifetime of the
annuitant and a designated second person.
Non-Life Annuities. Annuity payouts are guaranteed monthly for the selected
number of years. While there is no right to make any total or partial withdraw-
als during the annuity period, an annuitant or beneficiary who has selected
this annuity option as a variable annuity may request at any time during the
payout period that the present value of any remaining installments be paid in
one lump sum. This lump sum payout will be treated as a total withdrawal during
the accumulation period and may be subject to a surrender charge. See Charges
and deductions and Federal tax status.
Additional information
Annuity payout options are only available if consistent with the contract, the
plan, the tax code, and ERISA.
The annuity commencement date is the date on which we make the first annuity
payout to an annuitant. For plans subject to Section 401(a)(9)(B) of the tax
code, a beneficiary must select an annuity commencement date that is not later
than one year after the date of the participant's death. A participant or
contractowner may select an annuity commencement date for the annuitant, which
is shown in the retired life certificate. Selection of an annuity commencement
date may be affected by the distribution restrictions under the tax code and
the minimum distribution requirements under Section 401(a)(9) of the tax code.
See Federal tax status.
You must send us written notice of the selected annuity commencement date, the
annuity payout option (including whether fixed or variable), and the annuity
conversion amount to be converted on behalf of a participant or beneficiary, at
least 30 days before the selected annuity commencement date. If proceeds become
available to a beneficiary in a lump sum, the beneficiary may choose any annu-
ity payout option.
The annuity conversion amount is either the participant's account balance or a
portion thereof, or the death benefit plus interest, as of the annuity payout
calculation date. For a fixed annuity, the annuity commencement date is usually
one month after the annuity payout calculation date; subsequent annuity payouts
are at one-month intervals from the annuity commencement date. For a variable
annuity, the annuity commencement date is ten business days after the initial
annuity payout calculation date; subsequent monthly payouts have annuity payout
calculation dates which are ten business days prior.
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Annuity payout calculation
Fixed annuity payouts are determined by dividing the participant's annuity
conversion amount in the fixed account as of the initial annuity payout calcu-
lation date by the applicable annuity conversion factor in the contract, for
the annuity payout option selected.
Variable annuity payouts will be determined using:
1. The participant's annuity conversion amount in the VAA as of the initial
annuity payout calculation date;
2. The annuity conversion factor in the contract;
3. The annuity payout option selected; and
4. The investment performance of the funds selected.
To determine the amount of annuity payouts, we make this calculation:
1. Determine the dollar amount of the first payout; then
2. Credit the retired life certificate with a specific number of annuity units
equal to the first payout divided by the annuity unit value; and
3. Calculate the value of the annuity units each period thereafter.
We assume an investment return of 4% per year, as applied to the applicable
mortality table. The amount of each annuity payout after the initial payout
will depend upon how the underlying fund(s) perform, relative to the 4% as-
sumed rate. There is a more complete explanation of this calculation in the
SAI.
Federal Tax Matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules
that may affect the contractowner, participant and contract. This discussion
also does not address other Federal tax consequences, or state or local tax
consequences, associated with the contract. As a result, contractowner and
participant should always consult a tax adviser about the application of tax
rules to their individual situation.
Taxation of nonqualified annuities
This part of the discussion describes some of the Federal income tax rules ap-
plicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan receiving special tax
treatment under the tax code, such as an IRA or a section 403(b) plan.
Tax deferral on earnings
The Federal income tax law generally does not tax any increase in the contract
value until contractowner or participant receives a contract distribution.
However, for this general rule to apply, certain requirements must be satis-
fied:
.. An individual must own the contract (or the tax law must treat the contact
as owned by an individual).
.. The investments of the VAA must be "adequately diversified" in accordance
with IRS regulations.
.. The right to choose particular investments for a contract must be limited.
.. The annuity commencement date must not occur near the end of the annuitant's
life expectancy.
Contracts not owned by an individual
If a contract is owned by an entity (rather than an individual) the tax code
generally does not treat it as an annuity contract for Federal income tax pur-
poses. This means that the entity owning the contract pays tax currently on
the excess of the contract value over the contributions for the contract. Ex-
amples of contracts where the owner pays current tax on the contract's earn-
ings are contracts issued to a corporation or a trust. Exceptions to this rule
exist. For example, the tax code treats a contract as owned by an individual
if the named owner is a trust or other entity that holds the contract as an
agent for an individual. However, this exception does not apply in the case of
any employer that owns a contract to provide deferred compensation for its em-
ployees.
Investments in the VAA must be diversified
For a contract to be treated as an annuity for Federal income tax purposes,
the investments of the VAA must be "adequately diversified." IRS regulations
define standards for determining whether the investments of the VAA are ade-
quately diversified. If the VAA fails to comply with these diversification
standards, participant could be required to pay tax currently on the excess of
the contract value over the contract contributions. Although we do not control
the investments of the underlying investment options, we expect that the un-
derlying investment options will comply with the IRS regulations so that the
VAA will be considered "adequately diversified."
Restrictions
Federal income tax law limits contractowner's and participant's rights to
choose particular investments for the contract. Because the I.R.S. has not is-
sued guidance specifying those limits, the limits are uncertain and your right
to allocate contract values among the subaccounts may exceed those limits. If
so, contractowner and/or participant would be treated as the owner of the as-
sets of the VAA and thus subject to current taxation on the income and gains
from those
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assets. We do not know what limits may be set by the I.R.S. in any guidance
that it may issue and whether any such limits will apply to existing contracts.
We reserve the right to modify the contract without contractowner's or partici-
pant's consent to try to prevent the tax law from considering them as the owner
of the assets of the VAA.
Age at which annuity payouts begin
Federal income tax rules do not expressly identify a particular age by which
annuity payouts must begin. However, those rules do require that an annuity
contract provide for amortization, through annuity payouts, of the contract's
contributions and earnings. If annuity payouts under the contract begin or are
scheduled to begin on a date past the annuitant's 85th birthday, it is possible
that the tax law will not treat the contract as an annuity for Federal income
tax purposes. In that event, contractowner and/or participant would be cur-
rently taxable on the excess of the contract value over the contributions of
the contract.
Tax treatment of payments
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
that the contract will be treated as an annuity for Federal income tax purposes
and that the tax law will not tax any increase in the contract value until
there is a distribution from the contract.
Taxation of withdrawals and surrenders
Contractowner and/or participant will pay tax on withdrawals to the extent
their contract value exceeds contributions in the contract. This income (and
all other income from the contract) is considered ordinary income. A higher
rate of tax is paid on ordinary income than on capital gains. Contractowner
and/or participant will pay tax on a surrender to the extent the amount re-
ceived exceeds contributions. In certain circumstances contributions are re-
duced by amounts received from the contract that were not included in income.
Taxation of annuity payouts
The tax code imposes tax on a portion of each annuity payout (at ordinary in-
come tax rates) and treats a portion as a nontaxable return of contributions in
the contract. We will notify you annually of the taxable amount of your annuity
payout. Once you have recovered the total amount of the purchase payment in the
contract, you will pay tax on the full amount of your annuity payouts. If annu-
ity payouts end because of the annuitant's death and before the total amount of
the contributions in the contract has been received, the amount not received
generally will be deductible.
Taxation of death benefits
We may distribute amounts from the contract because of the death of a
contractowner or a participant. The tax treatment of these amounts depends on
whether the participant or the annuitant dies before or after the annuity com-
mencement date.
.. Death prior to the annuity commencement date--
.. If the beneficiary receives death benefits under an annuity payout option,
they are taxed in the same manner as annuity payouts.
.. If the beneficiary does not receive death benefits under an annuity payout
option, they are taxed in the same manner as a withdrawal.
.. Death after the annuity commencement date--
.. If death benefits are received in accordance with the existing annuity pay-
out option, they are excludible from income if they do not exceed the con-
tributions not yet distributed from the contract. All annuity payouts in
excess of the contributions not previously received are includible in in-
come.
.. If death benefits are received in a lump sum, the tax law imposes tax on
the amount of death benefits which exceeds the amount of contributions not
previously received.
Penalty taxes payable on withdrawals, surrenders, or annuity payouts
The tax code may impose a 10% penalty tax on any distribution from the contract
which contractowner and/or participant must include in gross income. The 10%
penalty tax does not apply if one of several exceptions exists. These excep-
tions include withdrawals, surrenders, or annuity payouts that:
.. participant receives on or after they reach age 59 1/2,
.. participant receives because they became disabled (as defined in the tax
law),
.. a beneficiary receives on or after participant's death, or
.. participant receives as a series of substantially equal periodic payments for
their life (or life expectancy).
Special rules if you own more than one annuity contract
In certain circumstances, we must combine some or all of the nonqualified annu-
ity contracts a participant owns in order to determine the amount of an annuity
payout, a surrender, or a withdrawal that participant must include in income.
For example, if contractowner and/or participant purchase two or more deferred
annuity contracts from the same life insurance company (or its affiliates) dur-
ing any calendar year, the tax code treats all such contracts as one contract.
Treating two or more contracts as one contract could affect the amount of a
surrender, a withdrawal or an annuity pay -
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out that a participant must include in income and the amount that might be sub-
ject to the penalty tax described above.
Loans and assignments
Except for certain qualified contracts, the tax code treats any amount received
as a loan under a contract, and any assignment or pledge (or agreement to as-
sign or pledge) any portion of participant's contract value, as a withdrawal of
such amount or portion.
Gifting a contract
If contractowner and participant transfer ownership of the contract to a person
other than participant's spouse (or to participant's former spouse incident to
divorce), and receive a payment less than the contract's value, participant
will pay tax on their contract value to the extent it exceeds contractowner's
and participant's contributions not previously received. The new owner's con-
tributions in the contract would then be increased to reflect the amount in-
cluded in contractowner's and/or participant's income.
Charges for a contract's death benefit
The contract may have an EGMDB, for which contractowner and/or participant pay
an annual charge, computed daily. It is possible that the tax law may treat all
or a portion of the EGMDB charge as a contract withdrawal.
Loss of interest deduction
After June 8, 1997 if a contract is issued to a taxpayer that is not an indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should con-
sult a tax advisor.
Qualified retirement plans
We also designed the contracts for use in connection with certain types of re-
tirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called "quali-
fied contracts." We issue contracts for use with different types of qualified
plans. The Federal income tax rules applicable to those plans are complex and
varied. As a result, this Prospectus does not attempt to provide more than gen-
eral information about use of the contract with the various types of qualified
plans. Persons planning to use the contract in connection with a qualified plan
should obtain advice from a competent tax advisor.
Types of qualified contracts and terms of contracts
Currently, we issue contracts in connection with the following types of quali-
fied plans:
.. Individual Retirement Accounts and Annuities ("Traditional IRAs")
.. Roth IRAs
.. Simplified Employee Pensions ("SEPs")
.. Savings Incentive Matched Plan for Employees ("SIMPLE 401(k) plans")
.. Public school system and tax-exempt organization annuity plans ("403(b)
plans")
.. Qualified corporate employee pension and profit-sharing plans ("401(a)
plans") and qualified annuity plans ("403(a) plans")
.. Self-employed individual plans ("H.R. 10 plans" or "Keogh Plans")
.. Deferred compensation plans of state and local governments and tax-exempt or-
ganizations ("457 plans").
We may issue a contract for use with other types of qualified plans in the fu-
ture.
We will amend contracts to be used with a qualified plan as generally necessary
to conform to tax law requirements for the type of plan. However, the rights of
a person to any qualified plan benefits may be subject to the plan's terms and
conditions, regardless of the contract's terms and conditions. In addition, we
are not bound by the terms and conditions of qualified plans to the extent such
terms and conditions contradict the contract, unless we consent.
Tax treatment of qualified contracts
The Federal income tax rules applicable to qualified plans and qualified con-
tracts vary with the type of plan and contract. For example,
.. Federal tax rules limit the amount of contributions that can be made, and the
tax deduction or exclusion that may be allowed for the contributions. These
limits vary depending on the type of qualified plan and the plan partici-
pant's specific circumstances, e.g., the participant's compensation.
.. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the par-
ticipant must begin receiving payments from the contract in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum dis-
tribution rules" do not apply to a Roth IRA.
.. Loans are allowed under certain types of qualified plans, but Federal income
tax rules prohibit loans under other types of qualified plans. For example,
Federal income tax rules permit loans under some
section 403(b) plans, but prohibit loans under
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Traditional and Roth IRAs. If allowed, loans are subject to a variety of limi-
tations, including restrictions as to the loan amount, the loan's duration,
and the manner of repayment. Your contract or plan may not permit loans.
Tax treatment of payments
Federal income tax rules generally include distributions from a qualified con-
tract in the participant's income as ordinary income. These taxable distribu-
tions will include contributions that were deductible or excludible from in-
come. Thus, under many qualified contracts the total amount received is in-
cluded in income since a deduction or exclusion from income was taken for con-
tributions. There are exceptions. For example, participant does not include
amounts received from a Roth IRA in income if certain conditions are satisfied.
Failure to comply with the minimum distribution rules applicable to certain
qualified plans, such as Traditional IRAs, will result in the imposition of an
excise tax. This excise tax generally equals 50% of the amount by which a mini-
mum required distribution exceeds the actual distribution from the qualified
plan.
Federal penalty taxes payable on distributions
The tax code may impose a 10% penalty tax on the amount received from the qual-
ified contract that must be included in income. The tax code does not impose
the penalty tax if one of several exceptions applies. The exceptions vary de-
pending on the type of qualified contract purchased. For example, in the case
of an IRA, exceptions provide that the penalty tax does not apply to a with-
drawal, surrender, or annuity payout:
.. received on or after the participant reaches age 59 1/2,
.. received on or after the participant's death or because of the participant's
disability (as defined in the tax law),
.. received as a series of substantially equal periodic payments for the partic-
ipant's life (or life expectancy), or
.. received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific re-
quirements of the exception may vary.
Transfers and direct rollovers
In many circumstances, money may be moved between qualified contracts and qual-
ified plans by means of a rollover or a transfer. Special rules apply to such
rollovers and transfers. If the applicable rules are not followed, participant
may suffer adverse Federal income tax consequences, including paying taxes
which might not otherwise have had to be paid. A qualified advisor should al-
ways be consulted before contractowner or participant move or attempt to move
funds between any qualified plan or contract and another qualified plan or con-
tract.
The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs or section 457 plans).
The direct rollover rules require that we withhold Federal income tax equal to
20% of the eligible rollover distribution from the distribution amount, unless
participant elects to have the amount directly transferred to certain qualified
plans or contracts. Before we send a rollover distribution, we will provide the
participant with a notice explaining these requirements and how the 20% with-
holding can be avoided by electing a direct rollover.
The EGMDB and IRAs
Pursuant to IRS regulations, IRAs may not invest in life insurance contracts.
We do not believe that these regulations prohibit the EGMDB from being provided
under the contracts when we issue the contracts as Traditional IRAs or Roth
IRAs. However, the law is unclear and it is possible that the presence of the
EGMDB under a contract issued as a Traditional or Roth IRA could result in in-
creased taxes to participant.
Federal income tax withholding
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a contract unless the participant notifies us at or be-
fore the time of the distribution that tax is not to be withheld. In certain
circumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender, or annuity payout is requested, we will give the
participant an explanation of the withholding requirements.
Tax status of Lincoln Life
Under existing Federal income tax laws, Lincoln Life does not pay tax on in-
vestment income and realized capital gains of the VAA. Lincoln Life does not
expect that it will incur any Federal income tax liability on the income and
gains earned by the VAA. We, therefore, do not impose a charge for Federal in-
come taxes. If Federal income tax law changes and we must pay tax on some or
all of the income and gains earned by the VAA, we may impose a charge against
the VAA to pay the taxes.
Changes in the law
The above discussion is based on the tax code, IRS regulations, and interpreta-
tions existing on the date of this Prospectus. However, Congress, the IRS, and
the courts may modify these authorities, sometimes retroactively.
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Voting rights
As required by law, we will vote the fund shares held in the VAA at meetings of
shareholders of the funds. The voting will be done according to the instruc-
tions of contractowners that have interests in any subaccounts which invest in
the funds. If the 1940 Act or any regulation under it should be amended or if
present interpretations should change, and if as a result we determine that we
are permitted to vote the fund shares in our own right, we may elect to do so.
The number of votes which the contractowner has the right to cast will be de-
termined by applying the contractowner's percentage interest in a subaccount to
the total number of votes attributable to the subaccount. In determining the
number of votes, fractional shares will be recognized.
Shares held in a subaccount for which no timely instructions are received will
be voted by us in proportion to the voting instructions which are received for
all contracts participating in that subaccount. Voting instructions to abstain
on any item to be voted on will be applied on a pro-rata basis to reduce the
number of votes eligible to be cast.
Whenever a shareholders meeting is called, we will furnish contractowners with
a voting interest in a subaccount with proxy voting materials, reports, and
voting instruction forms for all participants who have voting rights under the
contract. Since the funds engage in shared funding, other persons or entities
besides Lincoln Life may vote fund shares. See Sale of fund shares.
Distribution of the contracts
Lincoln Financial Advisors Corporation (LFA), 1300 South Clinton Street, Fort
Wayne, Indiana 46802, is the distributor and principal underwriter of the con-
tracts. They will be sold by properly licensed registered representatives of
independent broker-dealers which in turn have selling agreements with LFA and
have been licensed by state insurance departments to represent us. LFA is reg-
istered with the SEC under the Securities Exchange Act of 1934 as a broker-
dealer and is a member of the National Association of Securities Dealers
(NASD). Lincoln Life will offer contracts in all states where it is licensed to
do business.
Return privilege
Participants under Sections 403(b), 408 and certain non-qualified plans will
receive an active life certificate. Within the free-look period (ten days) af-
ter the participant receives the active life certificate, the participant may
cancel it for any reason by giving us written notice. The postmark date of the
notice is the date of notice for these purposes. An active life certificate
canceled under this provision will be void. With respect to the fixed side of
the contract, we will return the participant's contributions less withdrawals
made on behalf of the participant. With respect to the VAA, we will return the
greater of the participant's contributions less withdrawals made on behalf of
the participant, or the participant's account balance in the VAA on the date we
receive the written notice. No surrender charge applies.
State regulation
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the Indiana In-
surance Department at all times. A full examination of our operations is con-
ducted by that department at least every five years.
Records and reports
As presently required by the 1940 Act and applicable regulations, we are re-
sponsible for maintaining all records and accounts relating to the VAA. We have
entered into an agreement with the Delaware Management Company, 2005 Market
Street, Philadelphia, PA 19203, to provide accounting services to the VAA. We
will mail to the contractowner, at its last known address of record at our of-
fices, at least semiannually after the first contract year, reports containing
information required by that Act or any other applicable law or regulation.
Other information
Contract deactivation. Under certain contracts, we may deactivate a contract by
prohibiting new contributions and/or new participants after the date of deacti-
vation. We will give the contractowner and participants at least ninety days
notice of the deactivation date.
Delay in payments. We may delay payments from the fixed account for up to six
months. During this period, we will continue to credit the current declared in-
terest rate to a participant's account in the fixed account. We will make pay-
ments from the VAA within seven days, unless (i) the New York Stock Exchange is
closed (other than customary weekend or holiday closings; (ii) market trading
is restricted, or the SEC determines that an emergency exists, and disposal of
investments or determination of the accumulation unit value or variable annuity
payout option payment amount is not reasonably practicable; or (iii) the SEC by
order permits us to do so to protect participants.
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Preparing for Year 2000. Lincoln Life, as part of its year 2000 updating proc-
ess, is responsible for the updating of the VAA related computer systems. Many
existing computer programs use only two digits to identify a year in the date
field. These programs were designed and developed without considering the im-
pact of the upcoming change in the century. If not corrected, many computer ap-
plications could fail or create erroneous results by or at the year 2000. The
year 2000 issue affects virtually all companies and organizations.
An affiliate of Lincoln Life, Delaware Management Company (Delaware), provides
substantially all of the necessary accounting and valuation services for the
VAA. Delaware, for its part, is responsible for updating all of its computer
systems, including those which service the VAA, to accommodate the Year 2000.
Lincoln Life and Delaware have begun formal discussions with each other to as-
sess the requirements for their respective systems to interface properly in or-
der to facilitate the accurate and orderly operation of the VAA beginning in
the year 2000.
The year 2000 issue is pervasive and complex and affects virtually every aspect
of the businesses of both Lincoln Life and Delaware (the Companies). The com-
puter systems of the Companies and their interfaces with the computer systems
of vendors, suppliers, customers and other business partners are particularly
vulnerable. The inability to properly recognize date-sensitive electronic in-
formation and to transfer data between systems could cause errors or even com-
plete failure of systems, which would result in a temporary inability to proc-
ess transactions correctly and engage in normal business activities for the
VAA. The Companies respectively are redirecting significant portions of their
internal information technology efforts and are contracting, as needed, with
outside consultants to help update their systems to accommodate the year 2000.
Also, in addition to the discussions with each other noted above, the Companies
have respectively initiated formal discussions with other critical parties that
interface with their systems to gain an understanding of the progress by those
parties in addressing year 2000 issues. While the Companies are making substan-
tial efforts to address their own systems and the systems with which they in-
terface, it is not possible to provide assurance that operational problems will
not occur. The Companies presently believe that, assuming the modification of
existing computer systems, updates by vendors and conversion to new software
and hardware, the year 2000 issue will not pose significant operations problems
for their respective computer systems. In addition, the Companies are in-
corporating potential issues surrounding year 2000 into their contingency plan-
ning process, in the event that, despite these substantial efforts, there are
unresolved year 2000 problems. If the remediation efforts noted above are not
completed timely or properly, the year 2000 issue could have a material adverse
impact on the operation of the businesses of Lincoln Life or Delaware, or both.
The cost of addressing year 2000 issues and the timeliness of completion will
be closely monitored by management of the respective Companies. Nevertheless,
there is no guarantee either by Lincoln Life or by Delaware that estimated
costs will be achieved, and actual results could differ significantly from
those anticipated. Specific factors that might cause such differences include,
but are not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer problems, and
other uncertainties.
Legal Proceedings. Lincoln Life is involved in various pending or threatened
legal proceedings arising from the conduct of its business. Most of these pro-
ceedings are routine and in the ordinary course of business. In some instances
these proceedings include claims for unspecified or substantial punitive dam-
ages and similar types of relief in addition to amounts for alleged contractual
liability or requests for equitable relief. After consultation with legal coun-
sel and a review of available facts, it is management's opinion that the ulti-
mate liability, if any, under these suits will not have a material adverse ef-
fect on the financial position of Lincoln Life.
During the 1990s class action lawsuits alleging sales practices fraud have been
filed against many life insurance companies, and Lincoln Life has not been im-
mune. Two lawsuits alleging fraud in the sale of interest-sensitive universal
and whole life insurance policies have been filed against Lincoln Life. These
two suits have been filed as class actions, although as of the date of this
Prospectus the court had not certified a class in either case. Plaintiffs seek
unspecified damages and penalties for themselves and on behalf of the putative
class. Although the relief sought in these cases is substantial, the cases are
in the early stages of litigation, and it is premature to make assessments
about potential loss, if any. Management denies the allegations and intends to
defend these suits vigorously. The amount of liability, if any, which may arise
as a result of these suits (exclusive of any indemnification from professional
liability insurers) cannot be reasonably estimated at this time.
22
<PAGE>
TABLE OF CONTENTS FORSTATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS.............. 2
DETERMINATION OF VARIABLE
ANNUITY PAYOUTS......... 2
PERFORMANCE CALCULA-
TIONS................... 3
TAX LAW CONSIDERATIONS... 9
DISTRIBUTION OF CON-
TRACTS.................. 11
INDEPENDENT AUDITORS..... 11
FINANCIAL STATEMENTS..... 11
Audited Financial State-
ments of Variable Annu-
ity Account
Audited Statutory-Basis
Financial Statements
and Schedules of Lin-
coln Life
</TABLE>
23
<PAGE>
VARIABLE ANNUITY I
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
GROUP ANNUITY CONTRACTS
FUNDED THROUGH THE SUB-ACCOUNTS OF
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
OF
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions............................................................. 2
Determination of Variable Annuity Payouts............................... 2
Performance Calculations................................................ 3
Tax Law Considerations.................................................. 11
Distribution of Contracts............................................... 13
Independent Auditors.................................................... 13
Financial Statements.................................................... 13
Audited Financial Statements of Variable Annuity Account
Audited Statutory-Basis Financial Statements and Schedules of Lincoln
Life
</TABLE>
This Statement of Additional Information (SAI) is not a prospectus. It should
be read in along with the prospectus for the Group Annuity Contracts (the
"Contracts"), dated May 1, 1999.
A copy of the prospectus to which this SAI relates is available at no charge by
writing to Lincoln Life at Lincoln National Life Insurance Company, P.O. Box
9740, Portland, Maine 04104; or by calling Lincoln Life at 1-800-341-0441.
90021
<PAGE>
DEFINITIONS
ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount
in determining the dollar amount of an annuitant's annuity payouts for
Guaranteed Annuities or the initial payout for Variable Annuities.
ANNUITY PAYOUT CALCULATION DATE: For Guaranteed Annuities, this is the first
day of a calendar month. For Variable Annuities, this is the Valuation Date
ten (10) business days prior to the first day of a calendar month.
ANNUITY UNIT: An accounting unit of measure that is used in calculating the
amounts of annuity payouts to be made from a Sub-Account during the Annuity
Period.
ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in a Sub-Account on
any Valuation Date.
CODE: The Internal Revenue Code of 1986, as amended.
DETERMINATION OF VARIABLE ANNUITY PAYOUTS
As stated in the prospectus, the amount of each Variable Annuity payout will
vary depending on investment experience.
The initial payout amount of the Annuitant's Variable Annuity for each Sub-
Account is determined by dividing his Annuity Conversion Amount in each Sub-
Account as of the initial Annuity Payout Calculation Date ("APCD") by the
Applicable Annuity Conversion Factor defined as follows:
The Annuity Conversion Factors which are used to determine the initial payouts
are based on the 1983 Individual Annuity Mortality Table, set back four (4)
years, and an interest rate in an integral percentage ranging from zero to six
percent (0 to 6.00%) as selected by the Annuitant.
The amount of the Annuitant's subsequent Variable Annuity payout for each Sub-
Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payout amount by the
Annuity Unit Value for that Sub-Account selected for his interest rate
option as described above as of his initial APCD; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for his
respective subsequent APCDs.
Each subsequent Annuity Unit Value for a Sub-Account for an interest rate
option is determined by:
Dividing the Accumulation Unit Value for the Sub-Account as of
subsequent APCD by the Accumulation Unit Value for the Sub-Account as of
the immediately preceding APCD;
Dividing the resultant factor by one (1.00) plus the interest rate
option to the n/365 power where n is the number of days from the
immediately preceding APCD to the subsequent APCD; and
Multiplying this factor times the Annuity Unit Value as of the
immediately preceding APCD.
Illustration of Calculation of Annuity Unit Value
<TABLE>
<S> <C>
1.Annuity Unit Value as of immediately preceding Annuity Payout Calculation
Date.................................................................$11.0000
2.Accumulation Unit Value as of Annuity Payout Calculation Date........$20.0000
3.Accumulation Unit Value as of immediately preceding Annuity Payout Calcula-
tion Date............................................................$19.0000
4.Interest Rate...........................................................6.00%
5.Interest Rate Factor (30 days).........................................1.0048
6.Annuity Unit Value as of Annuity Payout Calculation Date =
1 times 2 divided by 3 divided by 5................................$11.5236
</TABLE>
Illustration of Annuity Payouts
<TABLE>
<S> <C>
1.Annuity Conversion Amount as of Participant's initial Annuity Payout Calculation Date..$100,000.00
2.Assumed Annuity Conversion Factor per $1 of Monthly Income for an individual age 65
selecting a Single Life Annuity with Assumed Interest Rate of 6%.........................$138.63
3.Participant's initial Annuity Payout = 1 divided by 2......................................$721.34
4.Assumed Annuity Unit Value as of Participant's initial Annuity Payout Calculation Date....$11.5236
5.Number of Annuity Units = 3 divided by 4...................................................62.5968
6.Assumed Annuity Unit Value as of Participant's second Annuity Payout Calculation Date.....$11.9000
7.Participant's second Annuity Payout = 5 times 6............................................$744.90
</TABLE>
2
<PAGE>
PERFORMANCE CALCULATIONS
Standard Total Return Calculation
The Variable Annuity Account may advertise average annual total return
information calculated according to a formula prescribed by the Securities and
Exchange Commission ("SEC"). Average annual total return shows the average
annual percentage increase, or decrease, in the value of a hypothetical
Contribution allocated to a Sub-Account from the beginning to the end of each
specified period of time. The SEC standardized version of this performance
information is based on an assumed Contribution of $1,000 allocated to a Sub-
Account at the beginning of each period and surrender or withdrawal of the
value of that amount at the end of each specified period, giving effect to any
CDSC and all other charges and fees applicable under the Contract. The effect
of the Annual Administration Charge for a period is determined by dividing the
total amount of such charges collected in the previous year by the total
average net assets of the accounts for the previous year, as of the previous
month ended; accounts include accounts available under Variable Annuity I of
Lincoln Life and under corresponding accounts of UNUM Life Insurance Company
of America, pending assumption reinsurance by Lincoln Life of Variable Annuity
I contracts issued through such corresponding accounts. This method of
calculating performance further assumes that (i) a $1,000 Contribution was
allocated to a Sub-Account and (ii) no transfers or additional payments were
made. Premium taxes are not included in the term "charges" for purposes of
this calculation. Average annual total return is calculated by finding the
average annual compounded rates of return of a hypothetical Contribution that
would compare the Accumulation Unit value on the first day of the specified
period to the ending redeemable value at the end of the period according to
the following formula:
T = (ERV/C) 1/n - 1
Where T equals average annual total return, where ERV (the ending redeemable
value) is the value at the end of the applicable period of a hypothetical
Contribution of $1,000 made at the beginning of the applicable period, where C
equals a hypothetical Contribution of $1,000, and where n equals the number of
years.
For Sub-Account average annual total return information calculated according
to the formula prescribed by the SEC, see "Sub-Account Performance."
Non-Standardized Calculation of Total Return Performance
In addition to the standardized average annual total return information
described above, we may present total return information computed on bases
different from that standardized method. Such non-standard performance
information may be based on the historical performance of a Fund and adjusted
to reflect some or all of the fees and charges imposed under a Contract.
The Variable Annuity Account may also present total return information
computed on the same basis as the standardized method except that charges
deducted from the hypothetical Contribution will not include any CDSC.
Consistent with the long-term investment and retirement objectives of the
Contract, this total return presentation assumes either (i) investment in the
Contract continues beyond the Accumulation Period and/or (ii) one or more of
the conditions for Total or Partial Withdrawal without incurring a CDSC are
met. The Variable Investment Division may also present total return
information computed on the same basis as the standardized method except that
charges deducted from the hypothetical Contribution will not include either
the CDSC or the Annual Administration Charge. The total return percentage
under both of these non-standardized methods will be higher than that
resulting from the standardized method.
The Sub-Accounts also may present total return information calculated by
subtracting a Sub-Account's Accumulation Unit Value at the beginning of a
period from the Accumulation Unit Value of that Sub-Account at the end of the
period and dividing that difference (in that Sub-Account's Accumulation Unit
Value) by the Accumulation Unit Value of that Sub-Account at the beginning of
the period. This computation results in a total growth rate for the specified
period which we annualize in order to obtain the average annual percentage
change in the Accumulation Unit Value for the period used. This method of
calculating performance does not take into
3
<PAGE>
account CDSC, the Annual Administration Charge or premium taxes, and assumes
no transfers. Such percentages would be lower if these charges were included
in the calculation.
In addition, the Variable Annuity Account may present actual aggregate total
return figures for various periods, reflecting the cumulative change in value
of an investment in the Variable Annuity Account for the specified period.
For information regarding the historical performance of the Funds adjusted for
the fees and charges imposed under a Contract, see "Historical Fund
Performance Adjusted for Variable Annuity Account and Contract Fees and
Charges."
Performance Information
The tables below provide performance information for each Sub-Account for
specified periods ending December 31, 1998. This information does not indicate
or represent future performance.
Total Return
Total returns quoted in sales literature or advertisements reflect all aspects
of a Sub-Account's return. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in the Sub-Account over a stated period of time, and then
calculating the annually compounded percentage rate that would have produced
the same result if the rate of growth or decline had been constant over the
period. Contractholders and participants should recognize that average annual
returns represent averaged returns rather than actual year-to-year
performance.
Sub-Account Performance
The tables below assume a hypothetical investment of $1,000 at the beginning
of the period in the Sub-Account investing in the applicable Fund and
withdrawal of the investment on 12/31/98. The rates thus reflect the mortality
and expense risk charge, the withdrawal charge and a pro rata portion of the
Annual Administration Charge. The first table shows Sub-Account average annual
total return information calculated according to the formula prescribed by the
SEC. The second table shows Sub-Account cumulative total information. This
information does not indicate or represent future performance.
SUB-ACCOUNT STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
LIFE OF
SUB- SUB-
ACCOUNT 1 YEAR ACCOUNT
INCEPTION ENDING ENDING
DATE 12/31/98 12/31/98
--------- -------- --------
<S> <C> <C> <C>
Asset Manager 09/26/96
(Fidelity VIP II: Asset Manager)
Balanced 09/26/96
(American Century VP Balanced)
Equity-Income 09/26/96
(VIP Equity-Income)
Index Account 09/26/96
(Dreyfus Stock Index)
Growth I 09/26/96
(Fidelity VIP Growth)
Socially Responsible 09/26/96
(Calvert Social Balanced Portfolio)
International Stock 09/26/96
(T. Rowe Price International Stock Portfolio)
Small Cap 09/26/96
(Dreyfus Small Cap)
Small Cap Growth 09/26/96
(Baron Capital Asset Funds)
Global Growth 09/26/96
(Janus Worldwide)
Mid Cap Growth 09/26/96
(Lincoln National Aggressive Growth)
Social Awareness 09/26/96
(Lincoln National Social Awareness)
Mid Cap Value 09/26/96
(Neuberger Berman Partners)
</TABLE>
4
<PAGE>
SUB-ACCOUNT CUMULATIVE TOTAL RETURN (NONSTANDARD)
<TABLE>
<CAPTION>
LIFE OF
SUB- SUB-
ACCOUNT YEAR TO 1 YEAR ACCOUNT
INCEPTION QUARTER DATE ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Asset Manager 09/26/96
(Fidelity VIP II: Asset
Manager)
Socially Responsible 09/26/96
(Calvert Social Balanced
Portfolio)
Balanced 09/26/96
(American Century VP
Balanced)
Equity-Income 09/26/96
(VIP Equity-Income)
Index 09/26/96
(Dreyfus Stock Index)
Growth I 09/26/96
(Fidelity VIP Growth)
Growth II 09/26/96
(American Century VP Capital
Appreciation)
International Stock 09/26/96
(T. Rowe Price International
Stock Portfolio)
Small Cap 09/26/96
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
Social Awareness
(Lincoln National Social
Awareness)
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
Historical Fund Performance Adjusted for Variable Investment Division and
Contract Fees and Charges
Performance information for the periods prior to the date the Sub-Accounts
commenced operations will be calculated based on the performance of the Funds
and the assumption that the Sub-Accounts were in existence for the same
periods as those indicated for the Funds, with the Contract charges that were
in effect during the time periods shown. This performance information is
referred to as "adjusted" performance information. This information does not
indicate or represent future performance.
Table 1A below assumes a hypothetical investment of $1,000 at the beginning of
the period in the Sub-Account investing in the applicable fund and withdrawal
of the investment on 12/31/98. The rates thus reflect the mortality and
expense risk charge, the withdrawal charge and a pro rata portion of the
Annual Administration Charge. Table 1B shows the cumulative total return on
the same basis.
5
<PAGE>
TABLE 1A -- SUB-ACCOUNT ADJUSTED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89
(Fidelity VIP II: Asset
Manager)
Balanced 05/01/91
(American Century VP
Balanced)
Equity-Income 10/09/86
(VIP Equity-Income)
Index Account 09/29/89
(Dreyfus Stock Index)
Growth I 10/09/86
(Fidelity VIP Growth)
International Stock 03/31/94
(T. Rowe Price International
Stock Portfolio)
Small Cap 08/31/90
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
Social Awareness
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
TABLE 1B -- SUB-ACCOUNT ADJUSTED CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89
(Fidelity VIP II: Asset
Manager)
Socially Responsible
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91
(American Century VP
Balanced)
Equity-Income 10/09/86
(VIP Equity-Income)
Index Account 09/29/89
(Dreyfus Stock Index)
Growth I 10/09/86
(Fidelity VIP Growth)
Growth II
(American Century VP Capital
Appreciation)
International Stock 03/31/94
(T. Rowe Price International
Stock Portfolio)
Small Cap 08/31/90
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
(Lincoln National Social
Awareness)
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
6
<PAGE>
Table 2A below shows annual average total return on the same assumptions as
Table 1A except that the value in the Sub-Account is not withdrawn at the end
of the period or is withdrawn to affect an annuity. Table 2B shows the
cumulative total return on the same basis. The rates of return shown below
reflect the mortality and expense risk charge and a pro rata portion of the
Annual Administration Charge.
TABLE 2A -- SUB-ACCOUNT ADJUSTED AVERAGE TOTAL RETURN ASSUMING NO WITHDRAWAL
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89
(Fidelity VIP II: Asset
Manager)
Socially Responsible
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91
(American Century VP
Balanced)
Equity-Income 10/09/86
(VIP Equity-Income)
Index Account 09/29/89
(Dreyfus Stock Index)
Growth I 10/09/86
(Fidelity VIP Growth)
Growth II
(American Century VP Capital
Appreciation)
International Stock 03/31/94
(T. Rowe Price International
Stock Portfolio)
Small Cap 08/31/90
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
Social Awareness
(Lincoln National Social
Awareness)
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
7
<PAGE>
TABLE 2B -- SUB-ACCOUNT ADJUSTED CUMULATIVE TOTAL RETURN ASSUMING NO
WITHDRAWAL
<TABLE>
<CAPTION>
LIFE OF
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS 10 YEARS FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89
(Fidelity VIP II: Asset
Manager)
Socially Responsible
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91
(American Century VP
Balanced)
Equity-Income 10/09/86
(VIP Equity-Income)
Index Account 09/29/89
(Dreyfus Stock Index)
Growth I 10/09/86
(Fidelity VIP Growth)
Growth II
(American Century VP Capital
Appreciation)
International Stock 03/31/94
(T. Rowe Price International
Stock Portfolio)
Small Cap 08/31/90
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
Social Awareness
(Lincoln National Social
Awareness)
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
Tables 3A and 3B show performance information on the same assumptions as
Tables 2A and 2B except that Tables 3A and 3B do not reflect deductions of the
pro rata portion of the Annual Administration Charge because certain Contract
and Participants are not assessed such a charge.
8
<PAGE>
TABLE 3A -- SUB-ACCOUNT ADJUSTED AVERAGE ANNUAL TOTAL RETURN ASSUMING NO
WITHDRAWAL AND NO ANNUAL ADMINISTRATION CHARGE
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89
(Fidelity VIP II: Asset
Manager)
Socially Responsible
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91
(American Century VP
Balanced)
Equity-Income 10/09/86
(VIP Equity-Income)
Index Account 09/29/89
(Dreyfus Stock Index)
Growth I 10/09/86
(Fidelity VIP Growth)
Growth II
(American Century VP Capital
Appreciation
International Stock 03/31/94
(T. Rowe Price International
Stock Portfolio)
Small Cap 08/31/90
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
Social Awareness
(Lincoln National Social
Awareness)
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
TABLE 3B -- SUB-ACCOUNT ADJUSTED CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWAL
AND NO ANNUAL ADMINISTRATION CHARGE
<TABLE>
<CAPTION>
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING ENDING
DATE 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89
(Fidelity VIP II: Asset
Manager)
Balanced 05/01/91
(American Century VP
Balanced)
Equity-Income 10/09/86
(VIP Equity-Income)
Index Account 09/29/89
(Dreyfus Stock Index)
Growth I 10/09/86
(Fidelity VIP Growth)
International Stock 03/31/94
(T. Rowe Price International
Stock Portfolio)
Small Cap 08/31/90
(Dreyfus Small Cap)
Small Cap Growth
(Baron Capital Asset Funds)
Global Growth
(Janus Worldwide)
Mid Cap Growth
(Lincoln National Aggressive
Growth)
Social Awareness
(Lincoln National Social
Awareness)
Mid Cap Value
(Neuberger Berman Partners)
</TABLE>
9
<PAGE>
Table 4 below shows total return information on a calendar year basis using the
same assumptions as Tables 3A and 3B. The rates of return shown reflect the
mortality and expense risk charge. Similar to Tables 3A and 3B, Table 4 does
not reflect deduction of the pro rata portion of the Annual Administration
Charge because certain Contracts and Participants are not assessed such a
charge.
TABLE 4 -- SUB-ACCOUNT ADJUSTED CALENDAR YEAR ANNUAL RETURN ASSUMING NO
WITHDRAWAL AND NO ANNUAL ADMINISTRATION CHARGE*
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----- ----- ------ ------ ----- ----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager na na 5.45 21.11 10.53 19.60 -7.20 15.57 13.24 19.20
Social Awareness 10.42 19.53 2.94 15.02 6.33 6.72 -4.39 28.24 11.28 18.64
Balanced na na na na -7.17 6.38 -0.58 19.68 10.81 14.42
Equity-Income 21.25 15.95 -16.29 29.88 15.50 16.89 5.80 33.49 12.92 26.57
Index na na -4.69 28.29 5.82 8.02 -0.32 35.16 21.09 31.36
Growth I 14.21 29.95 -12.78 43.78 8.00 17.94 -1.21 33.75 13.35 22.00
International Stock na na na na na na na 9.86 13.34 1.86
Small Cap na na na 156.65 69.25 66.31 6.47 27.85 15.22 15.35
Small Cap Growth
Global Growth
Mid Cap Growth
Mid Cap Value
</TABLE>
*The above calendar-year returns assume a hypothetical investment of $1,000 on
January 1 of the first full calendar year that the underlying fund was in
existence. The returns assume that the money will be left on account until
retirement and thus no CDSC will be deducted. Returns are provided for years
before the fund was an available investment option under the contract. Returns
for those periods reflect a hypothetical return as if those funds were
available under the contract, and reflect the deduction of the mortality and
expense risk charge. The returns do not reflect deductions for the pro rata
portion of the Annual Administration Charge or the CDSC.
SEC regulations require that any product performance data be accompanied by
standardized performance data.
10
<PAGE>
TAX LAW CONSIDERATIONS
Retirement Programs:
Participants are urged to discuss the income taxes considerations of their
retirement plan with their tax advisors. In many situations special rules may
apply to the plans and/or to the participants. See the Prospectus for a more
complete discussion of tax considerations and for limitations on the following
discussion.
Contributions to retirement programs subject to Sections 401(a), 403(b), 408
and 457(b) may be excludable from a Participant's reportable gross income if
the Contributions do not exceed the limitations imposed under the Code. Certain
plans allow employees to make Elective Salary Deferral Contributions. Certain
Plans allow Employers to make Contributions. The information below is a brief
summary of some the important federal tax considerations that apply to
retirement plans. When there is a written Plan, often the Contribution limits,
withdrawal rights and other provisions of the Plan may be more restrictive than
those allowed by the Code.
Elective Salary Deferral Contributions:
For calendar year 1998 the maximum elective salary deferral contributions to a
401(k) Plan which is a type of 401(a) Plan is limited to $10,000; for a 403(b)
plan the limit is $10,000 unless the employee is a qualified employee; for an
Eligible 457 Plan the limit is $8,000.
Total Salary Deferral & Employer Contributions:
QUALIFIED RETIREMENT PLAN -- 401(a) PLAN
The Code limits the Contributions to a defined contribution 401(a) plan to the
lesser of $30,000 or 25% of compensation.
TAX SHELTERED ANNUITY PLAN -- 403(b) PLAN
Total contributions which include both salary deferral contributions and
employer contributions are also limited.
The combined limit is:
(a) the amount determined by multiplying 20 percent of the employee's
includable compensation by the number of years of service, over
(b) the aggregate of the amount contributed by the employer for annuity
contracts and excludable from the gross income of the employee for the
prior taxable year.
Therefore, if the maximum exclusion allowance is less than $10,000 a year, the
employee's elective deferrals plus any other employer Contributions cannot
exceed this lesser amount.
Section 415 of the Code imposes limitations with respect to annual
contributions to all Section 403(b) programs, qualified plans and simplified
employee pensions maintained by the Employer. A Participant's annual
contributions to these programs and defined contribution plans generally cannot
exceed the lesser of $30,000 or 25 percent of the employee's compensation. This
amount is subject to the maximum exclusion allowance and the salary deferral
amount limitations.
ELIGIBLE 457 PLAN -- 457(b) PLAN
For a 457(b) plan the contribution limit is generally the lesser of $7,500, as
indexed, or 33% of the employee's compensation.
SECTION 457(f) PLANS
These are non-qualified deferred compensation arrangements between an Employer
and its employees. There are no stated limits in the Code regarding this type
of Plan.
11
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT -- IRA OR 408 PLAN
For IRA's, the maximum deductible contribution is the lesser of $2,000 or 100%
of taxable income. The $2,000 is increased to $4,000 when the IRA covers the
taxpayer and a non-working spouse.
Transfers and Rollovers:
Participants who receive distributions from their 401(a) or 403(b) contract may
transfer the amount not representing employee contributions to an Individual
Retirement Account or Annuity (IRA) or another Section 401(a) or 403(b) program
without including that amount in gross income for the taxable year in which
paid. Note 401(a) distributions may not be transferred to a 403(b) plan or vice
versa. If the amount is paid directly to an acceptable rollover account,
Lincoln Life is not required to withhold any amount. In order for the
distribution to qualify for rollover, the distribution must be made on account
of the employee's death, after the employee attains age 59 1/2, on account of
the employee's separation from service, or after the employee has become
disabled. The distribution cannot be part of a series of substantially equal
payments made over the life expectancy of the employee or the joint life
expectancies of the employee and his or her spouse or made for a specified
period of 10 years or more. The rollover must be made within sixty days of the
distribution to avoid taxation.
Pursuant to Revenue Ruling 90-24, a Participant, to the extent permitted by any
applicable Contract or Plan, may transfer funds between Section 403(b)
investment vehicles, including both Section 403(b)(1) annuity contracts and
Section 403(b)(7) custodial accounts. Any amount transferred must continue to
be subject to withdrawal restrictions at least as restrictive as that of the
transferring investment vehicle. Lincoln Life considers any total or partial
transfer from a Lincoln Life investment vehicle to a non-Lincoln Life
investment vehicle to be a withdrawal.
Once every twelve months a participant in an IRA may roll the money from one
IRA to another IRA.
The rollover rules are not available to Section 457 Plans; limited transfers
are permitted under Eligible 457 Plans. If the rollover amount is paid directly
to the Participant, the amount distributed may be subject to a 20% federal tax
withholding.
Excise Tax on Early Distributions:
Section 72(t) of the Code provides that any distribution made to a Participant
in a 401(a), 403(b) or 408 plan other than on account of the following events
will be subject to a 10 percent excise tax on the taxable amount distributed:
a) the employee has attained age 59 1/2;
b) the employee has died;
c) the employee is disabled;
d) the employee is 55 and has separated from service (Does not apply to IRA's).
Distributions which are received as a life annuity where payment is made at
least annually will not be subject to an excise tax. Certain amounts paid for
medical care may also not be subject to an excise tax. Distributions from 408
Plans may qualify for additional exceptions.
Minimum Distribution Rules:
The value in a contract under Sections 401(a), 403(b), 408 and Eligible 457
Plans are subject to the distribution rules provided in Section 401(a)(9) of
the Code. Generally, that section requires that an employee must begin
receiving distributions of his post-1986 balance by April 1 of the calendar
year following the calendar year in which the employee attains age 70 1/2. Such
distributions must not exceed the life expectancy of the employee or the life
expectancy of such employee and the designated beneficiary (as defined under
the plan). An employee who attained age 70 1/2 before January 1, 1988 must
begin receiving distributions by April 1 of the calendar year following the
later of (a) the calendar year in which the employee attains age 70 1/2 or (b)
the calendar year in which the employee retires. There are special rules for
Section 403(b) Plans. Amounts contributed to an Eligible 457 contract must be
distributed not earlier than the earliest of: 1) calendar year in which the
Participant attains age 70 1/2, 2) the Participant separates from service with
the Employer, or 3) when the Participant has an unforeseen emergency. However,
in no event may the distribution begin any later than described in Sections
401(a)(9) and 457(d) of the Code.
12
<PAGE>
Additionally, distribution of an employee's entire account balance (including
pre-1987 funds) must satisfy the minimum distribution incidental benefit
requirement. In general, this requires that death and other non-retirement
benefits payable under the above plans be incidental to the primary purpose of
the program which is to provide deferred compensation to the employee. A payee
is subject to a penalty for failing to receive the required minimum annual
distribution. Section 4974(a) of the Code provides that a payee will be subject
to a penalty equal to 50 percent of the amount by which the required minimum
distribution exceeds the actual amount distributed during the taxable year.
Additional information on federal income taxation is included in the
prospectus.
DISTRIBUTION OF CONTRACTS
Lincoln Financial Advisors Corporation ("LFA"), an indirect subsidiary of
Lincoln National Corporation, is registered with the Securities and Exchange
Commission as a broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc. LFA is the
Variable Investment Division's principal underwriter and also enters into
selling agreements with other unaffiliated broker-dealers authorizing them to
offer the Contracts.
INDEPENDENT AUDITORS
The financial statements of the Lincoln National Variable Annuity Account L and
the statutory-basis financial statements and schedules of The Lincoln National
Life Insurance Company appearing in this SAI and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports also appearing elsewhere in this document and in the Registration
Statement. The financial statements and schedules audited by Ernst & Young LLP
have been included in this document in reliance on their reports given on their
authority as experts in accounting and auditing.
FINANCIAL STATEMENTS
Financial statements of the Variable Investment Division and the statutory-
basis financial statements and schedules of Lincoln Life appear on the
following pages.
13
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) The following financial statements are included in Part B:
Financial Statements of Registrant - Lincoln National Variable Annuity
Account L. (to be filed by Amendment)
Statutory-basis Financial Statements and Schedules of Depositor - The
Lincoln National Life Insurance Company. (to be filed by
Amendment)
(b) Exhibits
1(a). Resolution adopted by the Board of Directors of The Lincoln
National Life Insurance Company on April 29, 1996 establishing
the Lincoln National Variable Annuity Account L ("Account
L")./1/
1(b). Amendment dated December 2, 1996 adopted by the Board of
Directors to resolution establishing Account L./5/
2. Not applicable.
3(a). Principal Underwriting Contract./1/
3(b). Broker-dealer sales agreement./1/
4(a). Forms of Group Annuity Contracts for The Lincoln National Life
Insurance Company./1/
4(b). Form of endorsement to Group Annuity Contract and
Certificate./5/
5(a). Form of application for Group Annuity Contract./1/
5(b). Form of Participant enrollment form (including acknowledgment
of restrictions on redemption imposed by I.R.C. Section
403(b))./1/
6. Articles of incorporation and by-laws of The Lincoln National
Life Insurance Company./1/
7. Not applicable.
8(a). Participation Agreement between The Lincoln National Life
Insurance Company and Dreyfus Life & Annuity Index Fund, Inc.
and Dreyfus Variable Investment Fund./1/
8(b). Participation Agreement between The Lincoln National Life
Insurance Company and Variable Insurance Products Fund and
Fidelity Distributors Corporation./1/
8(c). Participation Agreement between The Lincoln National Life
Insurance Company and Variable Insurance Products Fund II and
Fidelity Distributors Corporation./1/
8(d). Participation Agreement between The Lincoln National Life
Insurance Company and Twentieth Century Securities, Inc./1/
8(e). Participation Agreement between The Lincoln National Life
Insurance Company and Acacia Capital Corporation./1/
C-1
<PAGE>
8(f). Participation Agreement between The Lincoln National Life
Insurance Company and T. Rowe Price./1/
8(g). Services Agreement between Delaware Management Holdings, Inc.,
Delaware Service Company, Inc. and Lincoln National Life
Insurance Company./3/
8(h). Participation Agreement between The Lincoln National Life
Insurance Company and Janus Aspen Series./6/
8(i). Participation Agreement between The Lincoln National Life
Insurance Company and The Lincoln National Aggressive Growth
Fund, Inc./6/
8(j). Participation Agreement between The Lincoln National Life
Insurance Company and The Lincoln National Social Awareness
Fund, Inc./6/
8(k). Participation Agreement between The Lincoln National Life
Insurance Company and Neuberger & Berman Advisers Management
Trust./6/
8(l). Participation Agreement between The Lincoln National Life
Insurance Company and Baron Capital Funds Trust./6/
9. Consent and opinion of Jeremy Sachs, Senior Counsel, The
Lincoln National Life Insurance Company, as to the legality of
the securities being registered./1/
10(a). Consent of Ernst & Young LLP, Independent Auditors (to be
filed by amendment).
10(b). Powers of Attorney./2/
11. Not applicable.
12. Not applicable.
13(a). Schedule for Computation of Performance Quotations./4/
13(b). Supplement to Schedule for Computation of Performance
Quotations.
14. Not applicable.
15(a). Organizational Chart of Lincoln National Life Insurance Holding
Company System (to be filed by amendment).
15(b). Memorandum Concerning Books and Records (to be filed by
amendment).
/1/ Incorporated herein by reference to Pre-effective Amendment No.
1 on Form N-4 filed by the Lincoln National Variable Annuity
Account L of The Lincoln National Life Insurance Company with
the Securities and Exchange Commission on September 26,
1996 (File No. 333-04999).
/2/ Incorporated herein by reference to the registrant's initial
registration statement on Form N-4 filed with the Securities
and Exchange Commission on June 12, 1996 (File No. 333-5827).
/3/ Incorporated herein by reference to Registration Statement on
Form S-6 filed by Lincoln Life Flexible Premium Variable Life
Account F of The Lincoln National Life Insurance Company on
November 21, 1997 (File No. 333-40745).
/4/ Incorporated herein by reference to Post-effective Amendment
No. 1 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on April 30, 1997 (File No. 333-04999).
/5/ Incorporated herein by reference to Post-effective Amendment
No. 2 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on April 30, 1998 (File No. 333-4999).
/6/ Incorporated herein by reference to Post-effective Amendment
No. 3 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on September 30, 1998 (File No. 333-4999).
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following list contains the officers and directors of The Lincoln National
Life Insurance Company who are engaged directly or indirectly in activities
relating to Account L as well as the Contracts. The list also shows The Lincoln
National Life Insurance Company's executive officers.
<TABLE>
<CAPTION>
Name Positions and Offices with Lincoln Life
- ---- ---------------------------------------
<S> <C>
Jon A. Boscia** Director
Carolyn P. Brody* Second Vice President
Thomas L. Clagg* Vice President and Associate General Counsel
Kelly D. Clevenger* Vice President
Jeffrey K Dellinger* Vice President
Jack D. Hunter** Executive Vice President and General Counsel
Donald E. Keller* Vice President
Reed P. Miller* Vice President
Ian M. Rolland** Director
Lawrence T. Rowland*** Executive Vice President and Director
Keith J. Ryan* Senior Vice President, Asst. Treasurer and Chief
Financial Officer
Gabriel L. Shaheen* President, Chief Executive Officer
Richard C. Vaughan** Director
Janet C. Whitney** Vice President and Treasurer
C. Suzanne Womack** Assistant Vice President and Secretary
O. Douglas Worthingon* Vice President, Controller and Assistant Treasurer
</TABLE>
C-2
<PAGE>
* Principal business address of each person is 1300 South Clinton Street, Fort
Wayne, Indiana 46802.
** Principal business address is 200 East Berry Street, Fort Wayne, Indiana
46802-2706.
*** Principal business address is 1700 Magnavox Way, One Reinsurance Place, Fort
Wayne, Indiana 46804.
Item 26. Persons Controlled by or Under Common Control with The Lincoln
National Life Insurance Company ("Lincoln Life") or Account L
Account L is a separate account of Lincoln Life and may be deemed to be
controlled by Lincoln Life although Lincoln Life will follow voting instructions
of Contractholders with respect to voting on certain important matters requiring
a vote of Contractholders.
See Exhibit 15(a): The Organizational Chart of Lincoln National Life Insurance
Holding Company System.
C-3
<PAGE>
Item 27. Number of Contractholders
As of ________________ Registrant had ___ Contractholders (to be updated)
Item 28. Indemnification
Under the Participation Agreements entered into between Lincoln Life and the
Dreyfus Life & Annuity Index Fund, Inc., Dreyfus Variable Investment Fund and
Dreyfus Corporation, Variable Insurance Products Funds I and II and Fidelity
Distributors Corporation, Twentieth Century Management Company, Acacia Capital
Corporation, and T. Rowe Price (the "Funds"), Lincoln Life and its directors,
officers, employees, agents and control persons have been indemnified by the
Funds against any losses, claims or liabilities that arise out of any untrue
statement or alleged untrue statement or omission of a material fact in the
Funds' registration statements, prospectuses or sales literature. In addition,
the Funds will indemnify Lincoln Life against any liability, loss, damages,
costs or expenses which Lincoln Life may incur as a result of the Funds'
incorrect calculations, incorrect reporting and/or untimely reporting of the
Funds' net asset values, dividend rates or capital gain distribution rates.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) LNC Equity Sales Corporation also acts as the principal
underwriter for Lincoln Life & Annuity Variable Annuity Account
L, the VA-I Separate Account of UNUM Life Insurance Company of
America, and the VA-I Separate Account of First UNUM Life
Insurance Company.
(b)(1) The following table sets forth certain information regarding
the officers and directors of LNC Equity Sales Corporation:
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITIONS AND OFFICERS
- ----------------
WITH LINCOLN FINANCIAL ADVISORS CORPORATION
-------------------------------------------
<S> <C>
J. Michael Hemp* President and Director
Priscilla S. Brown* Chief Operating Officer, Sales and
Marketing and Director
John M. Behrendt* Vice President and Director
Richard C. Boyles*** Chief Financial Officer and
Administrative Officer
Kenneth Ehinger*** Chief Operating Officer and
Director
Gary D. Giller**** Director
Janet C. Whitney** Vice President and Treasurer
C. Suzanne Womack** Secretary
</TABLE>
* Principal business address of each person is 1300 S. Clinton
Street, Fort Wayne, Indiana 46802.
** Principal business address of each person is 200 East Berry
Street, Fort Wayne, Indiana 46802-2706.
*** Principal business address of each person is 3811 Illinois
Road, Suite 205, Fort Wayne, Indiana 46804-1202.
**** 7650 Rivers Edge Dr., Suite 250, Columbus, OH 43235.
c)
<TABLE>
<CAPTION>
Name of Net Underwriting
Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- ----------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Lincoln Financial Advisors Corporation $0 N/A N/A N/A
</TABLE>
Item 30. Location of Accounts and Records
Exhibit 15(b) is hereby expressly incorporated herein by this reference (to be
updated).
Item 31. Management Services
None
Item 32. Undertakings and Representations
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
in this registration statement are never more than 16 months old for so
long as
C-5
<PAGE>
payments under the variable annuity contracts may be accepted, unless
otherwise permitted.
(b) to include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the applicant
can remove to send for a Statement of Additional Information.
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
403(b) ANNUITIES
----------------
The Registrant intends to rely on the no-action response dated November 28,
1988, from Ms. Angela C. Goelzer of the Commission staff to the American Council
of Life Insurance concerning the redeemability of Section 403(b) annuity
contracts and the Registrant has complied with the provisions of paragraphs (1)-
(4) thereof.
TEXAS ORP
---------
The Registrant intends to offer Contracts to Participants in the Texas
Optional Retirement Program. In connection with that offering, Rule 6c-7 of the
Investment Company Act of 1940 is being relied upon and paragraphs (a)-(d) of
that Section will be complied with.
FEES AND CHARGES
----------------
The Lincoln National Life Insurance Company hereby represents that the fees
and charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by The Lincoln National Life Insurance Company.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933 and the Investment
Company Act of 1940, this Amendment to the Registration has duly caused the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authroized, in the city of Fort Wayne, and State of Indiana, on the 1st day
of February, 1999.
Lincoln National Variable Annuity Account L
(Group Variable Annuity I) (Registrant)
By: /s/ Stephen H. Lewis
-------------------------------------------
Stephen H. Lewis, Senior Vice President
(Name of Officer of Depositor) (Title)
The Lincoln National Life Insurance Company
(Depositor)
By: /s/ Gabriel L. Shaheen
-------------------------------------------
Gabriel L. Shaheen, Chief Executive Officer
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on January 29, 1999, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Gabriel L. Shaheen President, Chief Executive February 1, 1999
- ---------------------------- Officer and Director
Gabriel L. Shaheen (Principal Executive Officer)
* Director February 1, 1999
- ----------------------------
Jon A. Boscia
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Keith J. Ryan Senior Vice President, Chief February 1, 1999
- ---------------------------- Financial Officer and Assistant
Keith J. Ryan Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Executive Vice President February 1, 1999
- ---------------------------- and Director
Lawrence T. Rowland
* Director February 1, 1999
- ----------------------------
Richard C. Vaughan
* Director February 1, 1999
- ----------------------------
H. Thomas McMeekin
</TABLE>
* By /s/ Jeremy Sachs, attorney-in-fact, pursuant to a Power of Attorney filed
----------------
with the initial Registration Statement.
