<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999
Registration No. 333-10863
Registration No. 811-07785
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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. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 14 [X]
___________
LINCOLN LIFE & ANNUITY
VARIABLE ANNUITY ACCOUNT L
(Exact Name of Registrant)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Name of Depositor)
120 Madison Street, Suite 1700
Syracuse, New York 13202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: 1-800-893-7168
Robert O. Sheppard, Esquire
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, New York 13202
Copy to:
Kimberly J. Smith, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1999, pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on ________________ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
<PAGE>
Variable Annuity I
Lincoln Life & Annuity Variable Annuity Account L
Group Variable Annuity Contracts
Home Office and Servicing Office:
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
(800) 893-7168
This Prospectus describes group annuity contracts and individual certificates
issued by Lincoln Life & Annuity Company of New York (LLANY), a subsidiary of
The 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 ac-
tive life certificates to them. Participants choose whether account value ac-
cumulates on a variable or a fixed (guaranteed) basis or both. If a partici-
pant allocates contributions to the fixed account, we guarantee principal and
a minimum interest rate.
All contributions for benefits on a variable basis will be placed in Lincoln
Life & Annuity Variable Annuity Account L (variable annuity account [VAA]).
The VAA is a segregated investment account of LLANY. 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 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, Inc.: VP Capital Ap-
preciation
Small Cap Growth Account--Baron Capital Funds Trust: Baron Capital Asset Fund
Insurance Shares
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
Initial Class
Equity-Income Account--Fidelity Variable Insurance Products Fund: Equity-In-
come Portfolio Initial Class
Asset Manager Account--Fidelity Variable Insurance Products Fund II: Asset
Manager Portfolio Initial Class
Global Growth Account--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--Neuberger Berman Advisers Management Trust: Partners
Portfolio
International Stock Account--T. Rowe Price International Series, Inc.
On or about August 6, 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.
This Prospectus gives you information about the contracts and certificates
that contractowners and participants should know before investing. Please re-
view 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 representa-
tion to the contrary is a criminal offense.
A Statement of Additional Information (SAI) has more information about the
contracts and certificates. Its terms are made part of this Prospectus. For a
free copy, write: Lincoln Life & Annuity Company of New York, TDA Client Serv-
ices, P.O. Box 1337, Syracuse, NY 13201-1337, or call 1-800-893-7168, or e-
mail [email protected]. The SAI and other information about LLANY and Ac-
count 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
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Financial statements 7
- ------------------------------------------------
Lincoln Life & Annuity Company of New York 7
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Fixed side of the contract 8
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Variable annuity account (VAA) 8
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Investments of the VAA 8
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Description of the funds 9
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</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Charges and other deductions 11
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The contracts 12
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Annuity payouts 16
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Federal tax matters 17
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Voting rights 20
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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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Variable Annuity I Statement of Additional Information Table of Contents 22
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</TABLE>
Special terms
Account or variable annuity account (VAA) -- The segregated investment account,
Account L, into which LLANY 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, account
value in the VAA is the value of all accumulation units for a contract and ac-
count value in the fixed account is the value of the fixed side of the con-
tract.
Accumulation unit -- A measure used to calculate account value for the variable
side of the contract.
Annuitant -- The person on whose life the annuity benefit payments made after
an annuity commencement date are based.
Annuity commencement date -- The date on which Lincoln Life makes the first an-
nuity 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 participant
dies before his or her annuity commencement date.
LLANY (we, us, our) -- Lincoln Life & Annuity Company of New York.
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 trad-
ing.
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 (valuation
date) and ending at the close of such trading on the next valuation date.
2
<PAGE>
Expense tables
Contractowner transaction expenses:
The maximum surrender charge (contingent deferred sales charge) (as a per-
centage of the gross withdrawal amount): 5%
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.
Contract fee:
Annual administration charge (per participant): $25
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):
<TABLE>
<S> <C>
Mortality and expense risk charge* 1.00%
</TABLE>
* 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 Net
fees fees Expenses Expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. American Century - VP Balanced/1/ 0.97% 0.00% 0.00% 0.97%
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2. American Century - VP Capital
Appreciation 1.00 0.00 0.00 1.00
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3. Baron Capital Funds Trust: Baron
Capital Asset Fund Insurance Shares/2/ 1.00 0.25 0.20 1.45
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4. Calvert Social Balanced Portfolio/3/ 0.70 0.00 0.18 0.88
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5. Dreyfus Stock Index Fund 0.25 0.00 0.01 0.26
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6. Dreyfus VIF: Small Cap Portfolio 0.75 0.00 0.02 0.77
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7. Fidelity VIP - Growth Portfolio
Initial Class/4/ 0.59 0.00 0.09 0.68
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8. Fidelity VIP - Equity-Income Portfolio
Initial Class/4/ 0.49 0.00 0.09 0.58
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9. Fidelity VIP II - Asset Manager
Initial Class/4/ 0.54 0.00 0.10 0.64
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10. Janus Aspen Series: Worldwide Growth
Portfolio/5/ 0.65 0.00 0.07 0.72
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11. Lincoln National Aggressive Growth
Fund 0.73 0.00 0.08 0.81
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12. Lincoln National Social Awareness Fund 0.34 0.00 0.04 0.38
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13. Neuberger Berman AMT: Partners
Portfolio/6/ 0.78 0.00 0.06 0.84
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14. T. Rowe Price International Series 1.05 0.00 0.00 1.05
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</TABLE>
/1/American Century Investment Management, Inc. voluntarily waived a portion
of its management fee from October 1, 1998 through November 16, 1998. In the
absence of the waiver, the average ratio of operating expenses to average
net assets would have been 1.48% for the year ended December 31, 1998. The
annualized fee schedule for the fund, effective November 17, 1998, is as
follows: 1.50% on the first $250 million; 1.20% on the next $250 million;
and 1.10% thereafter.
/2/The Adviser is contractually obligated to reduce its fee to the extent re-
quired to limit Baron Capital Asset Fund's total operating expenses to 1.5%
for the first $250 million of assets in the Fund. 1.35% for Fund assets over
$250 million, and 1.25% for Fund assets over $500 million. Without the ex-
pense limitations, total operating expenses for the Fund for the period Oc-
tober 1, 1998 through December 31, 1998 would have been 7.62%.
/3/The figures above are based on expenses for fiscal year 1998, and have been
restated to reflect the elimination of the performance
adjustment in Social Balanced as of March 1, 1999 (pursuant to shareholder
approval on February 24, 1999). The restatement includes the addition of
0.01% to the portfolio.
/4/A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of cer-
tain funds, have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances were used to reduce
custodian expenses. Including these reductions, the total operating expenses
presented in the table would have been: VIP Equity-Income Portfolio Initial
Class 0.57%, VIP Growth Portfolio Initial Class 0.66% and VIPII Asset Man-
ager Portfolio Initial Class 0.63%.
/5/All expenses are stated with contractual waivers and fee reductions by Ja-
nus Capital. Fee reductions for the Worldwide Growth Portfolio reduce the
Management Fee to the level of the corresponding Janus retail fund. Other
waivers, if applicable, are first applied against the Management Fee and
then against Other Expenses. Janus Capital has agreed to continue the waiv-
ers and fee reductions until at least the next annual renewal of the advi-
sory agreement. Without these waivers, the total operating expenses for the
Portfolio would have been 0.74%.
/6/Neuberger Berman Advisers Management Trust is divided into portfolios
("Portfolios") each of which invests all of its net investable assets in a
corresponding series ("Series") of Advisers Managers Trust. The figures re-
ported under "Management Fees" include the aggregate of the administration
fees paid by the Portfolio and the management fees paid by its corresponding
Series. Similarly, "Other Expenses" includes all other expenses of the Port-
folio and its corresponding Series.
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
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. American Century--VP Balanced $75 $128 $183 $282
- ----------------------------------------------------------------------------------------
2. American Century--VP Capital Appreciation 76 129 184 285
- ----------------------------------------------------------------------------------------
3. Baron Capital Funds Trust: Baron Capital Asset Fund 80 141 205 328
- ----------------------------------------------------------------------------------------
4. Calvert Social Balanced Portfolio 74 125 178 273
- ----------------------------------------------------------------------------------------
5. Dreyfus Stock Index Fund 69 107 148 208
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6. Dreyfus VIF: Small Cap Portfolio 73 122 173 262
- ----------------------------------------------------------------------------------------
7. Fidelity VIP--Growth Portfolio 73 119 169 252
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8. Fidelity VIP--Equity Income Portfolio 72 116 164 242
- ----------------------------------------------------------------------------------------
9. Fidelity VIP II--Asset Manager 72 118 167 248
- ----------------------------------------------------------------------------------------
10. Janus Aspen Series: Worldwide Growth Portfolio 73 120 171 256
- ----------------------------------------------------------------------------------------
11. Lincoln National Aggressive Growth Fund 74 123 175 266
- ----------------------------------------------------------------------------------------
12. Lincoln National Social Awareness Fund 70 111 154 221
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13. Neuberger Berman AMT: Partners Portfolio 74 124 177 269
- ----------------------------------------------------------------------------------------
14. T. Rowe Price International Series 76 130 187 290
- ----------------------------------------------------------------------------------------
</TABLE>
If you do not surrender your contract, 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
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. American Century--VP Balanced 24 73 126 269
- ----------------------------------------------------------------------------------------
2. American Century--VP Capital Appreciation 24 74 127 272
- ----------------------------------------------------------------------------------------
3. Baron Capital Funds Trust: Baron Capital Asset Fund 29 88 149 316
- ----------------------------------------------------------------------------------------
4. Calvert Social Balanced Portfolio 23 71 121 260
- ----------------------------------------------------------------------------------------
5. Dreyfus Stock Index Fund 17 52 89 194
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6. Dreyfus VIF: Small Cap Portfolio 22 67 115 248
- ----------------------------------------------------------------------------------------
7. Fidelity VIP--Growth Portfolio 21 65 111 239
- ----------------------------------------------------------------------------------------
8. Fidelity VIP--Equity Income Portfolio 20 62 106 229
- ----------------------------------------------------------------------------------------
9. Fidelity VIP II--Asset Manager 21 63 109 235
- ----------------------------------------------------------------------------------------
10. Janus Aspen Series: Worldwide Growth Portfolio 21 66 113 243
- ----------------------------------------------------------------------------------------
11. Lincoln National Aggressive Growth Fund 22 69 117 252
- ----------------------------------------------------------------------------------------
12. Lincoln National Social Awareness Fund 18 55 95 207
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13. Neuberger Berman AMT: Partners Portfolio 23 69 119 255
- ----------------------------------------------------------------------------------------
14. T. Rowe Price International Series 25 76 130 277
- ----------------------------------------------------------------------------------------
</TABLE>
We provide these examples 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 LLANY. It may provide for a fixed annuity and/or a vari-
able annuity. This Prospectus describes the variable side of the contract. See
The contracts.
What is the variable annuity account (VAA)? It is a separate account we estab-
lished under New York 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 LLANY 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 Fund; Calvert Variable Series: Cal-
vert Social Balanced Portfolio; Dreyfus Stock Index Fund; Dreyfus Variable In-
vestment Fund: Small Cap Portfolio; Fidelity Variable Insurance Products Fund:
Growth Portfolio; Fidelity Variable Insurance Products Fund: Equity-Income
Portfolio; Fidelity Variable Insurance Products Fund II: Asset Manager Portfo-
lio; Janus Aspen Series: Worldwide Growth Portfolio; Lincoln National Aggres-
sive Growth Fund, Inc.; Lincoln National Social Awareness Fund, Inc.; Neu-
berger Berman Advisers 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 August 6, 1999 we antici-
pate (i) closing the Growth II Account and replacing the VP Capital Apprecia-
tion with the Lincoln National Aggressive Growth Fund and (ii) closing the So-
cially Responsible Account and replacing the Calvert Social Balanced Portfolio
with the Lincoln National Social Awareness Fund. See The variable annuity ac-
count 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. The investment advisor for the Calvert Social Balanced Portfolio is the
Calvert Asset Management Company, Inc., Bethesda, MD. BAMCO, Inc. is advisor
to the Baron fund. 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; Neuberger Berman Management Incorporated is the
investment advisor to the Neuberger Berman Fund. Putnam Investments is sub-ad-
visor to the Lincoln National Aggressive Growth Fund and Vantage Investment
Advisers is sub-advisor to the Lincoln Social Awareness Fund. T. Rowe Price-
Fleming International, Inc. is investment advisor of the T. Rowe Price Inter-
national Series. See Description of 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 Charges and other deduc-
tions.
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 establish a systematic 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 subaccounts, and between the
VAA and the fixed account? Before the annuity commencement date, yes, subject
to the terms of the plan. See The fixed account and The contracts--Transfers
between subaccounts on or before the annuity commencement date.
5
<PAGE>
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. Certain
charges may apply. See Charges and other deductions. A portion of withdrawal
proceeds may be taxable. In addition, a 10% Internal Revenue 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 matters.
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 home office and servicing office. We will refund the participant's contri-
butions less withdrawals, 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
The financial data included below should be read along with the financial
statements of the VAA and the related data included in the SAI.
Accumulation unit values
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
1997 1998
- ------------------------------------------------------------
<S> <C> <C> <C>
Asset Manager Account*
. Beginning of period unit value.............................. 17.769 20.583
. End of period unit value.................................... 20.583 23.445
. End of period number of units (000's omitted)............... 1,420 1,535
- ------------------------------------------------------------
Balanced Account*
. Beginning of period unit value.............................. 16.989 18.551
. End of period unit value.................................... 18.551 21.263
. End of period number of units (000's omitted)............... 439 510
- ------------------------------------------------------------
Equity-Income Account*
. Beginning of period unit value.............................. 16.389 19.985
. End of period unit value.................................... 19.985 22.087
. End of period number of units (000's omitted)............... 889 1,176
- ------------------------------------------------------------
Global Growth Account**
. Beginning of period unit value.............................. 10.000
. End of period unit value.................................... 12.520
. End of period number of units (000's omitted)............... 25
- ------------------------------------------------------------
Growth I Account*
. Beginning of period unit value.............................. 24.529 28.328
. End of period unit value.................................... 28.328 39.122
. End of period number of units (000's omitted)............... 1,819 2,095
- ------------------------------------------------------------
Growth II Account*
. Beginning of period unit value.............................. 15.617 14.063
. End of period unit value.................................... 14.063 13.623
. End of period number of units (000's omitted)............... 683 618
- ------------------------------------------------------------
Index Account*
. Beginning of period unit value.............................. 24.091 29.827
. End of period unit value.................................... 29.827 37.861
. End of period number of units (000's omitted)............... 814 1,129
- ------------------------------------------------------------
International Stock Account*
. Beginning of period unit value ............................. 12.108 12.504
. End of period unit value.................................... 12.504 14.342
. End of period number of units (000's omitted)............... 475 546
- ------------------------------------------------------------
Mid Cap Growth Account**
. Beginning of period unit value.............................. 10.000
. End of period unit value.................................... 12.455
. End of period number of units (000's omitted)............... 6
- ------------------------------------------------------------
Mid Cap Value Account**
. Beginning of period unit value.............................. 10.000
. End of period unit value.................................... 11.861
. End of period number of units (000's omitted)............... 10
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1998
- ------------------------------------------------------------
<S> <C> <C> <C>
Small Cap Account*
. Beginning of period unit value.............................. 15.523 17.632
. End of period unit value ................................... 17.632 16.856
. End of period number of units (000's omitted)............... 966 1,187
- ------------------------------------------------------------
Small Cap Growth Account**
. Beginning of period unit value.............................. 10.000
. End of period unit value ................................... 13.217
. End of period number of units (000's omitted)............... 25
- ------------------------------------------------------------
Social Awareness Account**
. Beginning of period unit value.............................. 10.000
. End of period unit value ................................... 12.791
. End of period number of units (000's omitted)............... 14
- ------------------------------------------------------------
Socially Responsible Account*
. Beginning of period unit value.............................. 14.528 16.873
. End of period unit value ................................... 16.873 19.423
. End of period number of units (000's omitted)............... 69 103
- ------------------------------------------------------------
Pending Allocation Account*
. Beginning of period unit value.............................. 11.328 11.894
. End of period unit value.................................... 11.894 12.545
. End of period number of units (000's omitted)............... 2 3
- ------------------------------------------------------------
</TABLE>
* The Sub-Account indicated commenced operations on January 31, 1997.
** The Sub-Account indicated commenced operations on October 1, 1998.
Investment results
At times, the VAA may compare its investment results to various unmanaged indi-
ces 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 the statutory-basis financial state-
ments of LLANY are located in the SAI. For a free copy of the SAI, complete and
mail the enclosed card, or call 1-800-893-7168, or e-mail at
[email protected].
Lincoln Life & Annuity Company of New York
LLANY is a life insurance company founded in New York on June 6, 1996. LLANY is
a subsidiary of Lincoln Life. Lincoln Life is one of the largest stock life in-
surance companies in the United States. Lincoln Life is owned by Lincoln Na-
tional Corp. (LNC) which is also organized under Indiana law. LNC's primary
businesses are insurance and financial services.
7
<PAGE>
Fixed side of the contract
Contributions allocated to the fixed account become part of LLANY'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 New York In-
surance Department as well as the insurance laws and regulations of the juris-
dictions in which the contracts are distributed.
In reliance on certain exemptions, exclusions and rules, LLANY has not regis-
tered interests in the general account as a security under the Securities Act
of 1933 and has not registered the general account as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
in it are subject to regulation under the 1933 Act or the 1940 Act. LLANY has
been advised that the staff of the SEC has not made a review of the disclo-
sures which are included in this Prospectus which relate to our general ac-
count and to the fixed side of the contract. These disclosures, however, may
be subject to certain provisions of the federal securities laws relating to
the accuracy and completeness of statements made in the Prospectus. This Pro-
spectus is generally intended to serve as a disclosure document only for as-
pects of the contract involving the VAA, and therefore contains only selected
information regarding the fixed side of the contract. Complete details regard-
ing 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. LLANY may vary the way in which it credits in-
terest to the fixed side of the contract from time to time.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN LLANY'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 lesser 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. More information
about loans and loan interest rates is in the contract, the active life cer-
tificates, the annuity loan agreement and is available from us.
Variable annuity account (VAA)
On July 24, 1996, the VAA was established as an insurance company separate ac-
count under New York 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 LLANY. 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 LLANY. The VAA satisfies the
definition of separate account under the federal securities laws. We do not
guarantee the investment performance of the VAA. Any investment gain or loss
depends on the investment performance of the funds. You assume the full in-
vestment risk for all amounts placed in the VAA.
The VAA is used to support other annuity contracts offered by LLANY in addi-
tion 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 VAA
The contractowner decides which of the subaccounts available under the con-
tract will be available for participant allocations. There is a separate
subaccount which corresponds to each fund. Participant allocations may be
changed without penalty 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 con-
tracts. 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.
8
<PAGE>
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.
Description of the funds
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 no 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 Investment 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
appreciation. American Century Investment Management, Inc. is the invest-
ment manager of this portfolio.
3. Baron Capital Funds Trust, Baron Capital Asset Fund seeks capital apprecia-
tion through investments in securities of small sized companies with market
capitalizations of $100 million to $1.5 billion, with undervalued assets or
favorable growth prospects. BAMCO, Inc. serves as the Fund's investment ad-
visor.
4. Calvert Variable Series-The Calvert Social Balanced Portfolio seek to
achieve a competitive total return through actively managed portfolio of
stock, bonds and money market instruments which offer income and capital
growth opportunity and which satisfy the investment and social criteria.
Calvert Asset Management Company, Inc. serves as the Portfolio's Investment
Adviser.
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
sponsored by nor affiliated with Standard & Poor's Corporation. The Dreyfus
Corporation acts as the Fund manager and Mellon Equity Associates, an af-
filiate 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
capital appreciation investing primarily in common stocks of domestic and
foreign issuers. 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 companies with market
capitalization of less than $1.5 billion, at the time of purchase. The
Portfolio 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 Cor-
poration serves as the Portfolio's investment adviser.
7. Fidelity Variable Insurance Products Fund (VIP)--Growth Portfolio seeks
long-term capital appreciation. The Portfolio normally purchases common
stocks. Fidelity Management & Research Company ("FMR") is the manager of
this portfolio.
8. Fidelity Variable Insurance Products Fund (VIP)--Equity-Income Portfolio
seeks reasonable income by investing primarily in income-producing equity
securities, with some potential for capital appreciation, seeking a yield
that exceeds the composite yield on the securities comprising the Standard
and Poor's 500 Index (S&P 500). FMR is the investment manager of this port-
folio.
9. Fidelity Variable Insurance Products Fund II (VIP II)--Asset Manager Port-
folio seeks high total return with reduced risk over the long term by allo-
cating its assets among domestic and foreign stocks, bonds and short-term
money market instruments. FMR is the investment manager of this portfolio.
10. Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital by invest-
ing primarily in common stocks of foreign and domestic issuers. The port-
folio 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 portfolio 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 portfolio invest-
ment advisor.
9
<PAGE>
11. 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 capitaliza-
tions of between $250 million and $5 billion at the time of purchase. Lin-
coln Investment is the fund's investment advisor and Putnam Investments is
the fund's investment sub-advisor.
12. Lincoln National Social Awareness Fund, Inc. seeks long-term capital ap-
preciation by investing primarily in a portfolio of common stock and secu-
rities convertible into common stock, which adhere to certain specific so-
cial criteria. Lincoln Investment Management, Inc. (Lincoln Investment) is
the fund's investment adviser and Vantage Investment Advisors is the
fund's investment sub-advisor.
13. Neuberger Berman Advisers Management Trust Partners Portfolio seeks capi-
tal growth by investing in common stocks and other equity securities of
medium to large capitalization established companies. Neuberger Berman
Management Incorporated serves as the Fund's investment adviser. Neuberger
Berman, LLC serves as the portfolio's investment sub-adviser.
14. T. Rowe Price International Series, Inc.--T. Rowe Price International
Stock Portfolio seeks long-term growth of capital through investments pri-
marily in common stocks of established, non-U.S. companies. Rowe Price-
Fleming International, Inc. is the investment manager of this portfolio.
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 LLANY's receipt of a complete order. See The contracts.
On or about August 6, 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 LLANY (or an affil-
iate) for administration, distribution, or other expenses. Currently these ad-
visors include American Century, BAMCO, FRM, Janus and Neuberger Berman. The
amount of compensation is usually based on assets of the Portfolio from con-
tracts 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 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 trans-
fer 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 LLANY 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.
10
<PAGE>
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 certain
costs and expenses for distribution and administration of the contracts and for
providing the benefits payable thereunder. More particularly, our administra-
tive services include: processing applications and enrollment forms and issuing
the contracts and active life certificates, processing purchases and redemp-
tions of fund shares as required, maintaining records, administering annuity
payout options, furnishing accounting and valuation services (including the
calculation and monitoring of daily subaccount values), reconciling and depos-
iting cash receipts, providing contract confirmations, providing toll-free in-
quiry 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 benefits paid will
exceed actual participant account balances (less outstanding loans); the risk
that more participants than 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 serv-
ices or benefits indicated by the description of the charge. For example, the
surrender charge collected may not fully cover all of the sales and distribu-
tion expenses actually incurred 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
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 con-
tingencies.
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 deducted
from the subaccounts and the fixed account in proportion to the amount with-
drawn 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 is separated
from service from their employer. At the contractowner's option, the contract
may waive the surrender charge if the participant is experiencing financial
hardship. A contractowner may also choose to add the requirement that a partic-
ipant be 55 years of age in addition to being separated from service from their
employer in order for the contract to waive the surrender charge. 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 ac-
count 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. The tax ranges from 0.5%
to 4.0%.
11
<PAGE>
Other charges and deductions
There are deductions from and expenses paid out of the assets of the underlying
funds that are more fully described in the Prospectuses for the funds.
Loans are subject to loan interest charges. In addition, we may impose 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 administrative serv-
ices 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 enroll-
ment procedures; (iv) the performance of administrative or sales functions by
the employer; or (v) the use by an employer of automated techniques in submit-
ting contributions or information relating to contributions on behalf of its
employees. In addition, an employer may pay the annual administration charge on
behalf of participants under a contract, or by election impose 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 re-
quirements of the following Sections of the Internal Revenue Code of 1986, as
amended (tax code): 401(a), 403(b), 408 and other related sections, as well as
for programs offering non-qualified annuities. An employer, association or
trustee in some circumstances may apply for a contract by completing an appli-
cation 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
participant.
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 as se-
lected from those 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 SAI see Tax Law Considera-
tions for a discussion of these limits.
Subject to any restrictions imposed by the plan or the tax code, we will accept
transfers from other contracts and qualified rollover contributions.
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 trans-
fers 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
If we have received a completed enrollment form and all other information nec-
essary 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.
If we receive contributions without a properly complete enrollment form, we
will notify the contractowner and deposit the contributions to the pending al-
location account. 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 contribu-
tion. The pending allocation 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 adminis-
tration 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 allocation account.
12
<PAGE>
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 ac-
count, 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, or to a maximum of nine subaccounts and the fixed
account.
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 employer
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 that subaccount. Subaccount transfers will be done using ac-
cumulation 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 re-
quire 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 er-
13
<PAGE>
ror, the contractowner or participant must notify us within 30 days of the con-
firmation 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 expec-
tations may increase the risk that a transfer will be made at an inopportune
time.
Transfers after the annuity commencement date
We do not permit transfers of a participant's account balance after the annuity
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.
If the participant dies before the annuity commencement date, the death benefit
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 out-
standing 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 in either the form of a lump sum settlement or an annuity
payout, 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 previously,
subject to the laws and regulations governing payment of death benefits. If no
election is made within 60 days after we receive satisfactory notice of the
participant's death, we will pay a lump sum settlement to the beneficiary 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 calendar
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 pro-
vides 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, distri-
butions generally are not required under the tax 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 matters.
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 re-
ceipt of satisfactory proof of the participant's death, but only if we receive
proof of death no later than the end of the fourth calendar year following the
year of the participant's death. In such case, the value of the death benefit
will be determined as of the end of the valuation period during which we re-
ceive 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. Unless
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 account balance.
Unless prohibited, withdrawal payments will be mailed within seven days after
we receive a valid written request. The payment may be postponed 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 matters.
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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 bal-
ance.
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 be eli-
gible for a Systematic Withdrawal Option ("SWO") under the contract. Payments
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 interest
earned between each payment period based upon the interest rate in effect at
the beginning of each respective payment period, or a flat dollar amount with-
drawn 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, including ap-
plicable fees and charges, is available in the contracts and active life cer-
tificates 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) or 408 of the tax
code. The participant must complete the forms we require to elect this option.
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-LLANY contracts.
Withdrawal restrictions. Withdrawals under Section 403(b) contracts are sub-
ject to the limitations under Section 403(b)(11) of the tax code and regula-
tions thereof and in any applicable plan document. That section provides that
withdrawals 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 in-
formation on these provisions see Federal tax matters.
Withdrawal requests for a participant under Section 401(a) 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
participant's account balance which is available for distribution to the par-
ticipant.
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
the participant must certify to us that one of the permitted distribution
events listed in the tax code has occurred (and provide supporting informa-
tion, if requested) and that we may rely on this representation in granting
the withdrawal request. See Federal tax matters. 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
We pay commissions of up to 3.5% of contributions to dealers. In some instanc-
es, we may lower commissions on contributions by as much as 3.5% and include a
commission of up to .50% of annual contract values (or an equivalent sched-
ule). These commissions are not deducted from contributions or account value;
they are paid by us.
Ownership
Contractowners have all rights under the contract except those allocated to
participants. According to New York law, the assets of the VAA are held for
the exclusive
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benefit of all contractowners, participants, and their designated beneficia-
ries; 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, benefi-
ciary, 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 LLANY. Ques-
tions about the contract should be directed to us at 1-800-893-7168.
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
balance or the death benefit to an annuity payout. The contract provides op-
tional forms of payouts of annuities (annuity payout options), each of which
is payable 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 participant's account balance in the fixed account to a fixed annuity, and
account balance in the VAA to a variable annuity.
If the participant's account balance 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 annuity payouts in the VAA, or in another separate
account of LLANY (variable payout division). We do not impose a charge when
the annuity conversion amount is applied to a variable payout division to pro-
vide an annuity payout option. The contract benefits and charges for an annu-
ity payout option, whether maintained in the VAA or in a variable payout divi-
sion, are as described 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 will maintain a participant's variable annuity payout
in a variable payout division, 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 bene-
ficiary, 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 annuity payout; and so forth.
Single Life Annuity. Payouts are made monthly during the lifetime of the annu-
itant, 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 with-
drawals during the annuity period, an annuitant or beneficiary who has se-
lected this annuity option as a variable annuity may request at any time dur-
ing 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 with-
drawal during the accumulation period and may be subject to a surrender
charge. See Charges and deductions and Federal tax matters.
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 payout
annuity payment 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 partici-
pant or contractowner may select an annuity commencement date for the annui-
tant, 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 matters.
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 benefi-
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ciary in a lump sum, the beneficiary may choose any annuity 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.
Annuity payout calculation
Fixed annuity payout are determined by dividing the participant's annuity con-
version amount in the fixed account as of the initial annuity payout calcula-
tion 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 an-
nuity 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 payout, 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 a specified percentage 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 assumed rate. If the actual net investment rate (annualized) exceeds the
assumed rate, the payment will increase at a rate proportional to the amount of
such excess. Conversely, if the actual rate is less than the assumed rate, an-
nuity payouts will decrease. There is a more complete explanation of this cal-
culation 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 conse-
quences, associated with the contract. As a result, contractowner and partici-
pant 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 the contractowner or participant receives a contract distribution. Howev-
er, for this general rule to apply, certain requirement must be satisfied:
. An individual must own the contract (or the tax law must treat the contract
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 the 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 purchase payments for the contract. Exam-
ples of contracts where the owner pays current tax on the contract's earnings
are contracts issued to a corporation or a trust. Exceptions to this rule ex-
ist. 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 employ-
ees.
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 adequately di-
versified. If the VAA fails to comply with these diversification standards,
participant could be required to pay tax currently on the excess of
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the contract value over the contract contributions. Although we do not control
the investments of the underlying investment options, we expect that the
underlying 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 right to choose
particular investments for the contract. Because the IRS has not issued guid-
ance specifying those limits, the limits are uncertain and your right to allo-
cate contract values among the subaccounts may exceed those limits. If so,
contractowner and/or participant would be treated as the owner of the assets of
the VAA and thus subject to current taxation on the income and gains from those
assets. We do not know what limits may be set by the IRS 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 your consent to try to prevent
the tax law from considering you 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 annuity con-
tract provide for amortization, through annuity payouts, of the contract's con-
tributions 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
your 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 your contract.
Taxation of withdrawals and surrenders
Contractowner and/or participant will pay tax on withdrawals to the extent your
contract value exceeds your contributions in the contract. This income (and all
other income from your 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 you receive
exceeds contributions. In certain circumstances, contributions are reduced 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 contribution in the
contract, contractowner and/or participant will pay tax on the full amount of
your annuity payouts. If annuity payouts end because of the annuitant's death
and before the total amount of the contributions in the contract has been re-
ceived, 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 partici-
pant. The tax treatment of these amounts depends on whether participant or the
annuitant dies before or after the annuity commencement 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
payout option, they are excludible from income if they do not exceed the
contributions not yet distributed from the contract. All annuity payouts
in excess of the contributions not previously received are includible in
income.
. 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 purchase not pre-
viously 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 your gross income. The
10% penalty tax does not apply if one of several exceptions exists. These ex-
ceptions 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).
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Special rules if you own more than one annuity contract
In certain circumstances, we must combine some or all of the nonqualified an-
nuity contracts participant owns in order to determine the amount of an annu-
ity payout, a surrender or a withdrawal that participant must include in in-
come. For example, if contractowner and/or participant purchase two or more
deferred annuity contracts from the same life insurance company (or its affil-
iates) during 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 payout that participant must
include in income and the amount that might be subject to the penalty tax de-
scribed above.
Loans and assignments
Except for certain qualified contracts, the tax code treats any amount re-
ceived as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) any portion of your contract value, as a withdrawal of
such amount or portion.
Gifting a contract
If contractowner and/or participant transfer ownership of the contract to a
person other than participant's spouse (or to participant's former spouse in-
cident to divorce), and receive a payment less than the contract's value, par-
ticipant will pay tax on their contract value to the extent that it exceeds
contractowner's and/or participant's contributions not previously received.
The new owner's contributions in the contract would then be increased to re-
flect the amount included in the contractowner's and/or participant's income.
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 contractowner and/or participant pay tax
on the annual increase in the contract value. Entities that are considering
purchasing a contract, or entities that will benefit from someone else's own-
ership of a contract, should consult 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
general information about use of the contract with the various types of quali-
fied plans. Persons planning to use the contract in connection with a quali-
fied 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")
. Public school system and tax-exempt organization annuity plans ("403(b)
plans")
. Qualified employee pension and profit sharing plans ("401(a)") and qualified
annuity plans ("403(a) 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 neces-
sary 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 con-
sent.
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
participant must begin receiving payments from the contract in certain mini-
mum amounts by a certain age, typically age 70 1/2. However, these "minimum
distribution rules" do not apply to a Roth IRA.
. Loans are allowed under certain types of qualified plans, but Federal income
tax rules permit loans under some section 403(b) plans, but prohibit loans
under Traditional and Roth IRAs. If allowed, loans are subject to a variety
of limitations, including restrictions as to the loan amount, the loan dura-
tion, 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 recipient's income as ordinary income. These taxable distribu-
tions will in-
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clude contributions that were deductible or excludible from income. Thus, under
many qualified contracts the total amount received is included in income since
a deduction or exclusion from income was taken for contributions. There are ex-
ceptions. 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 you purchase. For example, in the
case of an IRA, exceptions provide that the penalty tax does not apply to a
withdrawal, 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 you move or attempt to move funds between any quali-
fied plan or contract and another qualified plan or contract.
The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, H.R. 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs). 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% withholding can be avoided
by electing a direct rollover.
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 distribution that tax is not to be withheld. In certain cir-
cumstances, 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 LLANY
Under existing Federal income tax laws, LLANY does not pay tax on investment
income and realized gains of the VAA. LLANY 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 income 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.
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 done according to the instructions
of participants 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 pres-
ent 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 participant has the right to cast will be deter-
mined by applying the participant'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 ap-
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plied on a pro-rata basis to reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, we will furnish participants with a
voting interest in a subaccount with proxy voting materials, reports, and vot-
ing instruction forms for all participants who have voting rights under the
contract. Since the funds engage in shared funding, other persons or entities
besides LLANY 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. The contracts will be sold by properly licensed registered representa-
tives 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 registered with the SEC under the Securities Exchange Act of 1934 as a bro-
ker-dealer and is a member of the National Association of Securities Dealers
(NASD). LLANY will offer contracts in New York.
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 New York law, we are
subject to provisions governing life insurers and to regulation by the New York
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the New York
Insurance 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 Lincoln Life, 1300 South Clinton Street, Fort
Wayne, IN 46802, to provide accounting services to the VAA. The accounting
services for Lincoln Life are in turn provided by Delaware Management Company,
2005 Market Street, Philadelphia, PA 19203, through Lincoln Life's Service
Agreement with Delaware. We will mail to the contractowner, at its last known
address of record at our offices, at least semiannually after the first con-
tract 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. Contract proceeds
from the VAA will be paid within seven days, except (i) when the NYSE is closed
(except weekends and holidays); (ii) times when market trading is restricted or
the SEC declares an emergency, and we cannot value units or the funds cannot
redeem shares; or (iii) when the SEC so orders to protect contractowners.
IMSA. We are a member of the Insurance Marketplace Standards Association
("IMSA") and may include the IMSA logo and information about IMSA membership in
our advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and services for individually
sold life insurance and annuities.
Preparing for Year 2000
Many existing computer programs use only two digits in the date field to iden-
tify the year. If left uncorrected these programs, which were designed and de-
veloped without considering the impact of the upcoming change in the century,
could fail to operate or could produce erroneous results when processing dates
after December 31, 1999. For example, for a bond with a stated maturity date of
July 1, 2000, a computer program could read and store the maturity date as July
1, 1900. This problem is known by many names, such as the "Year 2000 Problem",
"Y2K", and the "Millenium Bug".
21
<PAGE>
The Year 2000 Problem affects virtually all computer programs worldwide. It can
cause a computer system to suddenly stop operating. It can also result in a
computer corrupting vital company records, and the problem could go undetected
for a long time. For our products, if left unchecked it could cause such prob-
lems as contributions collection and deposit errors; claim payment difficul-
ties; accounting errors; erroneous unit values; and difficulties or delays in
processing transfers, surrenders and withdrawals. In a worst case scenario,
this could result in a material disruption to the operations of LLANY and of
Lincoln Life and Delaware Service Company Inc. (Delaware), affiliates of LLANY
and providers of the accounting and valuation services for the VAA.
However, both provider companies (Lincoln Life and Delaware) are wholly owned
by Lincoln National Corporation (LNC), which has had Year 2000 processes in
place since 1996. LNC projects aggregate expenditures in excess of $92 million
for its Y2K efforts through the year 2000. Both Lincoln Life and Delaware have
dedicated Year 2000 teams and steering committees that are answerable to their
counterparts in LNC. LLANY also has a dedicated Year 2000 team and is coordi-
nating its activities with those of Lincoln Life, Delaware and LNC.
In light of the potential problems discussed above, LLANY, as part of its Year
2000 updating process, has assumed responsibility for correcting all high-pri-
ority Information Technology (IT) systems which service the VAA. Delaware is
responsible for updating all its high-priority IT systems to support these vi-
tal services. The Year 2000 effort, for both IT and non-IT systems, is orga-
nized into four phases:
. awareness-raising and inventory of all assets (including third-party agent
and vendor relationships)
. assessment and high-level planning and strategy
. remediation of affected systems and equipment; and
. testing to verify Year 2000 readiness.
All three companies are currently on schedule to have their high-priority IT
systems remediated and tested to demonstrate readiness by June 30, 1999. During
the third and fourth quarters of 1999 additional testing of the environment
will continue. All three companies are currently on schedule to have their
high-priority non-IT systems (elevators, heating and ventilation, security sys-
tems, etc.) remediated and tested by October 31, 1999.
The work on Year 2000 issues has not suffered significant delays; however, some
uncertainty remains. Specific factors that give rise to this uncertainty in-
clude (but are certainly not limited to) a possible loss of technical resources
to perform the work; failure to identify all susceptible systems; and non-com-
pliance by third parties whose systems and operations impact LLANY. In a report
dated February 26, 1999, entitled, Investigating the Impact of the Year 2000
Technology Problem, S. Prt. 106-10, the U.S. Senate Special Committee on the
Year 2000 Technology Problem expressed its concern that "Financial services
firms...are particularly vulnerable to...the risk that a material customer or
business partner will fail, as a result of the computer problems, to meet its
obligations".
One important source of uncertainty is the extent to which the key trading
partners of LLANY, Lincoln Life and of Delaware will be successful in their own
remediation and testing efforts. LLANY, Lincoln Life and Delaware have been
monitoring the progress of their trading partners; however, the efforts of
these partners are beyond our control.
LLANY, Lincoln Life and Delaware expect to have completed their necessary
remediation and testing efforts prior to December 31, 1999. However, given the
nature and complexity of the problem, there can be no guarantee by any of the
three companies that there will not be significant computer problems after De-
cember 31, 1999.
Legal Proceedings
LLANY may be involved in various pending or threatened legal proceedings aris-
ing from the conduct of its business. Most of these proceedings are routine and
in the ordinary course of business.
Variable Annuity I
Statement of Additional Information
Table of Contents
<TABLE>
<CAPTION>
Page
- ------------------------------------------------
<S> <C>
Definitions 2
- ------------------------------------------------
Determination of variable annuity payments 2
- ------------------------------------------------
Performance calculations 3
- ------------------------------------------------
Tax law considerations 8
- ------------------------------------------------
Distribution of contracts 10
- ------------------------------------------------
Independent auditors 10
- ------------------------------------------------
Advertising and Sales Literature 10
- ------------------------------------------------
Financial statements 12
</TABLE>
22
<PAGE>
VARIABLE ANNUITY I
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
GROUP ANNUITY CONTRACTS
FUNDED THROUGH THE SUB-ACCOUNTS OF
LINCOLN LIFE & ANNUITY
VARIABLE ANNUITY ACCOUNT L
OF
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions................................................................ 2
Determination of Variable Annuity Payments................................. 2
Performance Calculations................................................... 3
Tax Law Considerations..................................................... 8
Distribution of Contracts.................................................. 10
Independent Auditors....................................................... 10
Advertising and Sales Literature........................................... 10
Financial Statements....................................................... 12
</TABLE>
This Statement of Additional Information (SAI) is not a prospectus. It should
be read in conjunction 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 & Annuity Company of New York, TDA Client
Services, P.O. Box 1337, Syracuse, New York 13201-1337, calling LLANY at 1-
800-893-7168, or e-mailing [email protected].
NY90021
<PAGE>
DEFINITIONS
ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount
in determining the dollar amount of an annuitant's annuity payments for
Guaranteed Annuities or the initial payment for Variable Annuities.
ANNUITY PAYMENT 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 payments 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 PAYMENTS
As stated in the prospectus, the amount of each Variable Annuity payment will
vary depending on investment experience. The initial payment 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
Payment Calculation Date ("APCD") by the Applicable Annuity Conversion Factor
as defined as follows:
The Annuity Conversion Factors which are used to determine the initial
payments are based on the 1983 Individual Annuity Mortality Table, 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 payment for each
Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment 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 Payment
Calculation Date................................................. $11.0000
2.Accumulation Unit Value as of Annuity Payment Calculation Date..... $20.0000
3.Accumulation Unit Value as of immediately preceding Annuity Payment
Calculation Date................................................. $19.0000
4.Interest Rate...................................................... 6.00%
5.Interest Rate Factor (30 days)..................................... 1.0048
6.Annuity Unit Value as of Annuity Payment Calculation Date =
1 times 2 divided by 3 divided by 5.............................. $11.5236
</TABLE>
2
<PAGE>
Illustration of Annuity Payments
<TABLE>
<S> <C>
1.Annuity Conversion Amount as of Participant's initial Annuity
Payment 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 Payment = 1 divided by 2........... $721.34
4.Assumed Annuity Unit Value as of Participant's initial Annuity
Payment 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
Payment Calculation Date....................................... $11.9000
7.Participant's second Annuity Payment = 5 times 6................. $744.90
</TABLE>
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
LLANY and under corresponding accounts of First UNUM Life Insurance Company,
pending assumption reinsurance by LLANY 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 Annuity Account may also present total return information
computed on the same basis as the standardized method except that
3
<PAGE>
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 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.
4
<PAGE>
Sub-Account Performance
Table A 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 A shows Sub-Account average annual total
return information calculated according to the formula prescribed by the SEC.
This information does not indicate or represent future performance.
TABLE A -- SUB-ACCOUNT STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SUB- LIFE OF
ACCOUNT 1 YEAR SUB-ACCOUNT
INCEPTION ENDING ENDING
DATE 12/31/98 12/31/98
--------- -------- -----------
<S> <C> <C> <C>
Balanced Account 01/31/97 8.63% 9.38%
(American Century VP
Balanced)
Growth II Account 01/31/97 -8.20% -9.41%
(American Century VP
Capital Appreciation)
Small Cap Growth Account 10/01/98 N/A N/A
(Baron Capital Asset
Fund)
Socially Responsible
Account 01/31/97 9.32% 13.22%
(Calvert Social Balanced
Portfolio)
Index Account 01/31/97 20.31% 23.20%
(Dreyfus Stock Index
Fund)
Small Cap Account 01/31/97 -9.22% 1.57%
(Dreyfus VIF Small Cap
Portfolio)
Growth I Account 01/31/97 30.89% 24.15%
(Fidelity VIP Growth
Portfolio)
Equity-Income Account 01/31/97 4.95% 13.70%
(Fidelity VIP Equity
Income Portfolio)
Asset Manager Account 01/31/97 7.95% 12.44%
(Fidelity VIP II--Asset
Manager)
Global Growth Account 10/01/98 N/A N/A
(Janus Aspen Series:
Worldwide Growth
Portfolio)
Mid Cap Growth Account 10/01/98 N/A N/A
(Lincoln National
Aggressive Growth Fund)
Social Awareness Account 10/01/98 N/A N/A
(Lincoln National Social
Awareness Fund)
Mid Cap Value Account 10/01/98 N/A N/A
(Neuberger Berman AMT:
Partners Portfolio)
International Stock
Account 01/31/97 8.93% 6.28%
(T. Rowe Price
International Series)
</TABLE>
5
<PAGE>
Historical Fund Performance Adjusted for Variable Annuity Account 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 B 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 reflect the mortality and expense
risk charge but do not reflect withdrawal charge or deductions of the pro rata
portion of the annual administration charges because certain contracts, and
participants are not assessed such a charge.
TABLE B -- 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>
Balanced Account 05/01/91 14.62% 13.28% 11.58% N/A 10.33%
(American Century VP
Balanced)
Growth II Account 11/20/87 -3.13% -4.38% 2.03% 7.40% 6.95%
(American Century VP
Capital Appreciation)
Small Cap Growth Account 10/01/98 N/A N/A N/A N/A N/A
(Baron Capital Asset
Fund)
Socially Responsible
Account 09/02/86 15.12% 14.97% 13.25% 11.54% 10.29%
(Calvert Social Balanced
Portfolio)
Index Account 09/29/89 26.94% 26.38% 22.15% N/A 15.70%
(Dreyfus Stock Index
Fund)
Small Cap Account 08/31/90 -4.40% 8.30% 11.57% N/A 35.62%
(Dreyfus Small Cap
Portfolio)
Growth I Account 10/09/86 38.10% 24.06% 20.33% 18.00% 15.96%
(Fidelity VIP Growth
Portfolio)
Equity-Income Account 10/09/86 10.52% 16.45% 17.40% 14.26% 13.05%
(Fidelity VIP Equity
Income Portfolio)
Asset Manager Account 09/06/89 13.91% 15.41% 10.51% N/A 11.60%
(Fidelity VIP II--Asset
Manager)
Global Growth Account 09/13/93 27.64% 25.40% 20.11% N/A 22.78%
(Janus Aspen Series:
Worldwide Growth
Portfolio)
Mid Cap Growth Account 02/03/94 -7.13% 9.36% N/A N/A 8.78%
(Lincoln National
Aggressive Growth Fund)
Social Awareness Account 05/02/88 18.69% 27.20% 23.59% 18.67% 17.84%
(Lincoln National Social
Awareness Fund)
Mid Cap Value Account 03/22/94 3.17% 19.80% N/A N/A 18.51%
(Neuberger Berman AMT:
Partners Portfolio)
International Stock
Account 03/31/94 14.70% 9.80% N/A N/A 8.39%
(T. Rowe Price
International Series)
</TABLE>
6
<PAGE>
Table C below shows total return information on a calendar year basis. The
rates of return shown reflect the mortality and expense risk charge but do not
reflect a withdrawal charge or deduction of the pro rata portion of the Annual
Administration Charge because certain Contracts and Participants are not
assessed such a charge.
TABLE C -- SUB-ACCOUNT ADJUSTED CALENDAR YEAR ANNUAL RETURN ASSUMING NO
WITHDRAWAL AND NO ANNUAL ADMINISTRATION CHARGE*
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----- ------ ------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced Account n/a n/a n/a -7.17 6.38 -0.58 19.68 10.81 14.42 14.62
Growth II Account 27.17 -2.40 40.18 -2.52 8.99 -2.34 29.55 -5.43 -4.42 -3.13
Small Cap Growth Account n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Socially Responsible
Account 19.53 2.94 15.02 6.33 6.72 -4.39 28.24 11.28 18.64 15.12
Index Account n/a -4.69 28.29 5.82 8.02 -0.32 35.16 21.09 31.36 26.94
Small Cap Account n/a n/a 156.65 69.25 66.31 6.47 27.85 15.22 15.35 -4.40
Growth I Account 29.95 -12.78 43.78 8.00 17.94 -1.21 33.75 13.35 22.00 38.10
Equity-Income Account 15.95 -16.29 29.88 15.50 16.89 5.80 33.49 12.92 26.57 10.52
Asset Manager Account n/a 5.45 21.11 10.53 19.60 -7.20 15.57 13.24 19.20 13.91
Global Growth Account n/a n/a n/a n/a n/a n/a n/a n/a n/a 27.64
Mid Cap Growth Account n/a n/a n/a n/a n/a n/a n/a n/a n/a -7.13
Social Awareness Account n/a n/a n/a n/a n/a n/a n/a n/a n/a 18.69
Mid Cap Value Account n/a n/a n/a n/a n/a n/a n/a n/a n/a 3.17
International Stock
Account n/a n/a n/a n/a n/a n/a 9.86 13.34 1.86 14.70
</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.
7
<PAGE>
TAX LAW CONSIDERATIONS
Retirement Programs:
Participants are urged to discuss the income tax 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
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 years 1998 and 1999 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
qualified employee.
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.
INDIVIDUAL RETIREMENT ACCOUNT--IRA OR 408 PLAN
For IRAs, 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)
8
<PAGE>
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, LLANY 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. LLANY considers any total or partial transfer
from a LLANY investment vehicle to a non-LLANY 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.
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 IRAs).
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) and 408 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). For 403(b) and 401(a) Plans, an employee 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 (other than a more-than-5% owner).
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.
9
<PAGE>
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 Variable Annuity Account and the statutory-
basis financial statements of LLANY 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 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.
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, LLANY may refer to the following organizations
(and others) in its marketing materials:
A.M. Best's Rating System evaluates the various factors affecting the overall
performance of an insurance company in order to provide an opinion as to an
insurance company's relative financial strength and ability to meet its
contractual obligations. The procedure includes both a quantitative and
qualitative review of each company.
Duff & Phelps insurance company claims paying ability (CPA) service provides
purchasers of insurance company policies and contracts with analytical and
statistical information on the solvency and liquidity of major U.S. licensed
insurance companies, both mutual and stock.
EAFE Index is prepared by Morgan Stanley Capital International (MSCI). It
measures performance of equity securities in Europe, Australia and the Far
East. The index reflects the movements of world stock markets by representing
the evolution of an unmanaged portfolio. The EAFE Index offers international
diversification with over 1,000 companies across 20 different countries.
Lipper Variable Insurance Products Performance Analysis Service is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
Moody's insurance claims-paying rating is a system of rating insurance
company's financial strength, market leadership and ability to meet financial
obligations. The purpose of Moody's ratings is to provide investors with a
simple system of gradation by which the relative quality of insurance
companies may be noted.
Morningstar is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuity contracts.
10
<PAGE>
Standard & Poor's insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element
in the rating determination for such debt issues.
Vards (Variable Annuity Research Data Service) provides a comprehensive guide
to variable annuity contract features and historical fund performance. The
service also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable
contracts.
Standard & Poor's 500 Index--A broad-based measurement of U.S. stock-market
performance based on the weighted average performance of 500 common stocks of
leading company's and leading industries; commonly known as the Standard &
Poor's 500 (S&P 500). The selection of stocks, their relative weightings to
reflect differences in the number of outstanding shares, and publication of the
index itself are services of Standard & Poor's Corporation, a financial
advisory, securities rating, and publishing firm.
NASDAQ-OTC Price Index--This index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted and
was introduced with a base of 100.00 on February 5, 1971.
Dow Jones Industrial Average (DJIA)--Price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but currently including American
Express Company and American Telephone and Telegraph Company. Prepared and
published by Dow Jones & Company, it is the oldest and most widely quoted of
all the market indicators. The average is quoted in points, not dollars.
Russell 1000 Index--Measures the performance of the 1,000 largest companies in
the Russell 3000 Index, which represents approximately 90% of the total market
capitalization of the Russell 3000 that measures 3000 of the largest US
companies.
Russell 2000 Index--Measures the performance of the 2,000 smallest companies in
the Russell 3000 Index, which represents approximately 10% of the total market
capitalization of the Russell 3000 that measures 3000 of the largest US
companies.
Lehman Brothers Aggregate Bond Index--Composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and
the Asset-Backed Securities Index. Indexes are rebalanced monthly by market
capitalization.
Lehman Brothers Government/Corporate Bond Index--Composed of all bonds that are
investment grade (rated Baa or higher by Moody's or BBB or higher by S&P, if
unrated by Moody's). Issues must have at least one year to maturity.
Lehman Brothers Government/Intermediate Bond Index--Composed of all bonds
covered by the Lehman Brothers Government Bond Index (all publicly issued,
noncovertible, domestic debt of the US government or any agency thereof, quasi-
federal corporations, or corporate debt guaranteed by the US government) with
maturities between one and 9.99 years.
Merrill Lynch High Yield Master Index--This is an index of high yield debt
securities. High yield securities are those below the top four quality rating
categories and are considered more risky than investment grade. Issues must be
rated by Standard & Poor's or by Moody's Investors Service as less than
investment grade (i.e., BBB or Baa) but not in default (i.e. DDD1 or less).
Issues must be in the form of publicly placed nonconvertible, coupon-bearing US
domestic debt and must carry a term to maturity of at least one year.
Morgan Stanley Emerging Markets Free Index--A market capitalization weighted
index composed of companies representative of the market structure of 22
Emerging Market countries in Europe, Latin America, and the Pacific Basin. This
index excludes closed markets and those shares in otherwise free markets, which
are not purchasable by foreigners.
Morgan Stanley World Capital International World Index--A market capitalization
weighted index composed of companies representative of the market structure of
22 Developed Market countries in North America, Europe and the Asia/Pacific
Region.
11
<PAGE>
Morgan Stanley Pacific Basin (Ex-Japan) Index--An arithmetic, market value-
weighted average of the performance of securities listed on the stock
exchanges of the following Pacific Basin Countries: Australia, Hong Kong,
Malaysia, New Zealand and Singapore.
Nareit Equity Reit Index--All of the data is based on the last closing price
of the month for all tax-qualified REITs listed on the New York Stock
Exchange, American Stock Exchange, and the NASDAQ National Market System. The
data is market weighted.
Salomon Brothers World Government Bond (Non US) Index--A market capitalization
weighted index consisting of government bond markets of the following 13
countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, The Netherlands, Spain, Sweden, and The United Kingdom.
Salomon Brothers 90 Day Treasury-Bill Index--Equal dollar amounts of three-
month Treasury bills are purchased at the beginning of each of three
consecutive months. As each bill matures, all proceeds are rolled over or
reinvested in a new three-month bill.
Standard and Poor's Index (S&P 400)--Consists of 400 domestic stocks chosen
for market size, liquidity, and industry group representations.
Standard and Poor's Utilities Index--The utility index is one of several
industry groups within the broader S&P 500. Utility stocks include electric,
natural gas, and telephone companies included in the S&P 500.
Internet--As an electronic communications network may be used to provide
information regarding LLANY performance of the subaccounts and advertisement
literature.
In its advertisements and other sales literature for the VAA and the eligible
funds, LLANY intends to illustrate the advantages of the contracts in a number
of ways:
Compound interest illustrations. These will emphasize several advantages of
the variable annuity contract. For example, but not by way of limitation, the
literature may emphasize the potential savings through tax deferral; the
potential advantage of the variable account over the fixed side; and the
compounding effect when a client makes regular contributions to his or her
account.
Dollar-cost averaging illustrations. These illustrations will generally
discuss the price-leveling effect of making regular purchases in the same
subaccounts over a period of time, to take advantage of the trends in market
prices of the portfolio securities purchased for those subaccounts.
LLANY's customers. Sales literature for the VAA and the funds and series may
refer to the number of employers and the number of individual annuity clients
which LLANY serves. As of the date of this SAI, LLANY was serving over 400
employers and more than 145,000 individuals.
LLANY assets, size. LLANY may discuss its general financial condition (see,
for example, the reference to A.M. Best Company, above); it may refer to its
assets; it may also discuss its relative size and/or ranking among companies
in the industry or among any subclassification of those companies, based upon
recognized evaluation criteria (see reference to A.M. Best Company above). For
example, at year-end 1998 LLANY had statutory admitted assets of over $2
billion.
Sales literature may reference the Group Variable Annuity newsletter which is
a newsletter distributed quarterly to clients of the VAA. The contents of the
newsletter will be a commmentary on general economic conditions and, on some
occasions, referencing matters in connection with the Group Variable Annuity.
Sales literature and advertisements may reference these and other similar
reports from Best's or other similar publications which report on the
insurance and financial services industries.
FINANCIAL STATEMENTS
Financial statements of the VAA and the statutory-basis financial statements
of LLANY appear on the following pages.
12
<PAGE>
Lincoln Life & Annuity Variable Annuity Account L
Statement of assets and liability
December 31, 1998
<TABLE>
<CAPTION>
American
Century American
Dreyfus Dreyfus VP Capital Century VIPF
Stock Index Small Cap Appreciation VP Balanced Growth
Combined Fund Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
. Investments at
Market--Affiliated
(Cost $240,580) $ 262,558 $ -- $ -- $ -- $ -- $ --
- ------------------------
. Investments at
Market--Unaffiliated
(Cost $200,661,468) 236,599,223 42,759,554 20,002,893 8,418,234 10,849,165 81,975,161
- ------------------------ ------------ ----------- ----------- ---------- ----------- -----------
Total Assets 236,861,781 42,759,554 20,002,893 8,418,234 10,849,165 81,975,161
- ------------------------
Liability--Payable to
Lincoln Life & Annuity
Company of New York 6,448 1,173 532 224 297 2,235
- ------------------------ ------------ ----------- ----------- ---------- ----------- -----------
Net Assets $236,855,333 $42,758,381 $20,002,361 $8,418,010 $10,848,868 $81,972,926
- ------------------------ ============ =========== =========== ========== =========== ===========
Percent of net assets 100.00% 18.05% 8.44% 3.55% 4.58% 34.61%
- ------------------------ ============ =========== =========== ========== =========== ===========
Net assets are
represented by:
. Units in accumulation
period 1,129,355 1,186,654 617,921 510,233 2,095,310
- ------------------------
. Unit value $ 37.861 $ 16.856 $ 13.623 $ 21.263 $ 39.122
- ------------------------ ----------- ----------- ---------- ----------- -----------
Net Assets $42,758,381 $20,002,361 $8,418,010 $10,848,868 $81,972,926
- ------------------------ =========== =========== ========== =========== ===========
</TABLE>
See accompanying notes.
L-1
<PAGE>
<TABLE>
<CAPTION>
Lincoln Lincoln
VIPF II Calvert VIPF Baron Janus Aspen National National
VIPF Asset Social T. Rowe Price Money AMT Capital Series Social Aggressive
Equity-Income Manager Balanced International Market Partners Asset WorldWide Awareness Growth
Portfolio Portfolio Portfolio Series Portfolio Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $182,447 $80,111
25,977,477 35,986,933 2,006,613 7,828,592 38,231 114,057 334,936 307,377 -- --
----------- ----------- ---------- ---------- ------- -------- -------- -------- -------- -------
25,977,477 35,986,933 2,006,613 7,828,592 38,231 114,057 334,936 307,377 182,447 80,111
709 981 55 214 -- 3 9 9 5 2
----------- ----------- ---------- ---------- ------- -------- -------- -------- -------- -------
$25,976,768 $35,985,952 $2,006,558 $7,828,378 $38,231 $114,054 $334,927 $307,368 $182,442 $80,109
=========== =========== ========== ========== ======= ======== ======== ======== ======== =======
10.97% 15.19% 0.85% 3.31% 0.02% 0.05% .14% 0.13% 0.08% 0.03%
=========== =========== ========== ========== ======= ======== ======== ======== ======== =======
1,176,098 1,534,908 103,307 545,835 3,048 9,616 25,341 24,550 14,264 6,432
$ 22.087 $ 23.445 $ 19.423 $ 14.342 $12.545 $ 11.861 $ 13.217 $ 12.520 $ 12.791 $12.454
----------- ----------- ---------- ---------- ------- -------- -------- -------- -------- -------
$25,976,768 $35,985,952 $2,006,558 $7,828,378 $38,231 $114,054 $334,927 $307,368 $182,442 $80,109
=========== =========== ========== ========== ======= ======== ======== ======== ======== =======
</TABLE>
L-2
<PAGE>
Lincoln Life & Annuity Variable Annuity Account L
Statement of operations
Year Ended December 31, 1998
<TABLE>
<CAPTION>
American
Century VP American
Dreyfus Dreyfus Capital Century VP VIPF
Stock Index Small Cap Appreciation Balanced Growth
Combined Fund Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Investment Income
(Loss):
. Dividends from
investment income $ 2,232,104 $ 486,353 $ 488 $ -- $ 152,747 $ 266,461
- ------------------------
. Dividends from net
realized gains on
investments 12,644,458 59,350 368,795 455,706 947,169 6,970,059
- ------------------------
. Mortality and expense
guarantees (1,980,729) (338,695) (186,414) (84,489) (94,536) (640,515)
- ------------------------ ----------- ---------- ---------- ---------- ---------- ----------- ---
Net investment income
(loss) 12,895,833 207,008 182,869 371,217 1,005,380 6,596,005
- ------------------------
Net Realized and
Unrealized Gain (Loss)
on Investments:
. Net realized gain
(loss) on investments 356,404 350,089 (51,346) (390,660) 8,742 279,881
- ------------------------
. Net change in
unrealized
appreciation or
depreciation on
investments 23,679,166 7,387,011 (1,060,607) (223,168) 250,001 14,528,043
- ------------------------ ----------- ---------- ---------- ---------- ---------- ----------- ---
Net realized and
unrealized gain (loss)
on investments 24,035,570 7,737,100 (1,111,953) (613,828) 258,743 14,807,924
- ------------------------ ----------- ---------- ---------- ---------- ---------- ----------- ---
Net increase (decrease)
in net assets resulting
from operations $36,931,403 $7,944,108 $ (929,084) $ (242,611) $1,264,123 $21,403,929
- ------------------------ =========== ========== ========== ========== ========== =========== ===
</TABLE>
See accompanying notes.
L-3
<PAGE>
<TABLE>
<CAPTION>
Janus Lincoln Lincoln
VIPF VIPF II Calvert VIPF Baron Aspen National National
Equity- Asset Social T. Rowe Price Money AMT Capital Series Social Aggressive
Income Manager Balanced International Market Partners Asset WorldWide Awareness Growth
Portfolio Portfolio Portfolio Series Portfolio Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 258,818 $ 930,189 $ 44,608 $ 89,769 $1,835 $ -- $ -- $ 419 $ 417 $--
921,087 2,790,566 100,043 31,683 -- -- -- -- -- --
(227,290) (321,959) (16,297) (69,580) -- (117) (272) (262) (194) (109)
- ---------- ---------- -------- -------- ------ ------ ------- ------- ------- ------
952,615 3,398,796 128,354 51,872 1,835 (117) (272) 157 223 (109)
88,474 4,036 26,823 39,225 -- 391 2,070 39 789 (2,149)
1,005,317 833,429 74,980 810,790 -- 4,250 23,118 24,024 15,551 6,427
- ---------- ---------- -------- -------- ------ ------ ------- ------- ------- ------
1,093,791 837,465 101,803 850,015 -- 4,641 25,188 24,063 16,340 4,278
- ---------- ---------- -------- -------- ------ ------ ------- ------- ------- ------
$2,046,406 $4,236,261 $230,157 $901,887 $1,835 $4,524 $24,916 $24,220 $16,563 $4,169
========== ========== ======== ======== ====== ====== ======= ======= ======= ======
</TABLE>
L-4
<PAGE>
Lincoln Life & Annuity Variable Annuity Account L
Statements of changes in net assets
Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
American
Century American
Dreyfus Dreyfus VP Capital Century
Stock Index Small Cap Appreciation VP Balanced VIPF Growth
Combined Fund Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at January 1,
1997 $ -- $ -- $ -- $ -- $ -- $ --
Changes From Operations:
. Net investment income 5,995,580 779,176 828,684 90,859 230,624 795,893
- ------------------------
. Net realized gain
(loss) on investments (170,424) 94,127 93 (206,670) (300) 12,403
- ------------------------
. Net change in
unrealized
appreciation or
depreciation on
investments 12,280,567 3,051,696 840,527 (873,957) 413,244 5,499,753
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Net increase in net
assets resulting from
operations 18,105,723 3,924,999 1,669,304 (989,768) 643,568 6,308,049
- ------------------------
Change From Unit
Transactions:
. Contract purchases 153,547,888 21,122,316 15,721,180 12,740,274 7,987,684 46,001,624
- ------------------------
. Terminated contracts (6,937,988) (766,190) (351,570) (2,147,324) (491,452) (776,439)
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in net assets resulting
from unit transactions 146,609,900 20,356,126 15,369,610 10,592,950 7,496,232 45,225,185
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Total increase in net
assets 164,715,623 24,281,125 17,038,914 9,603,182 8,139,800 51,533,234
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Net assets at December
31, 1997 164,715,623 24,281,125 17,038,914 9,603,182 8,139,800 51,533,234
- ------------------------
Changes From Operations:
. Net investment income
(loss) 12,895,833 207,008 182,869 371,217 1,005,380 6,596,005
- ------------------------
. Net realized gain
(loss) on investments 356,404 350,089 (51,346) (390,660) 8,742 279,881
- ------------------------
. Net change in
unrealized
appreciation or
depreciation on
investments 23,679,166 7,387,011 (1,060,607) (223,168) 250,001 14,528,043
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in net assets resulting
from operations 36,931,403 7,944,108 (929,084) (242,611) 1,264,123 21,403,929
- ------------------------
Change From Unit
Transactions:
. Contract purchases 73,993,989 17,158,221 8,267,555 2,493,757 3,500,681 19,090,328
- ------------------------
. Terminated contracts (38,785,682) (6,625,073) (4,375,024) (3,436,318) (2,055,736) (10,054,565)
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Net increase (decrease)
in net assets resulting
from unit transactions 35,208,307 10,533,148 3,892,531 (942,561) 1,444,945 9,035,763
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Total increase
(decrease) in net
assets 72,139,710 18,477,256 2,963,447 (1,185,172) 2,709,068 30,439,692
- ------------------------ ------------ ----------- ----------- ----------- ----------- ------------
Net assets at December
31, 1998 $236,855,333 $42,758,381 $20,002,361 $ 8,418,010 $10,848,868 $ 81,972,926
- ------------------------ ============ =========== =========== =========== =========== ============
</TABLE>
See accompanying notes.
L-5
<PAGE>
<TABLE>
<CAPTION>
Janus Lincoln Lincoln
VIPF VIPF II Calvert VIPF Baron Aspen National National
Equity- Asset Social T. Rowe Price Money AMT Capital Series Social Aggressive
Income Manager Balanced International Market Partners Asset WorldWide Awareness Growth
Portfolio Portfolio Portfolio Series Portfolio Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
828,066 2,295,832 71,067 74,176 1,203 -- -- -- -- --
(31,271) (57,065) 3,443 14,816 -- -- -- -- -- --
1,858,911 1,481,336 50,940 (41,883) -- -- -- -- -- --
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
2,655,706 3,720,103 125,450 47,109 1,203 -- -- -- -- --
15,833,029 26,714,688 1,122,183 6,196,968 107,942 -- -- -- -- --
(725,902) (1,203,630) (85,587) (306,135) (83,759) -- -- -- -- --
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
15,107,127 25,511,058 1,036,596 5,890,833 24,183 -- -- -- -- --
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
17,762,833 29,231,161 1,162,046 5,937,942 25,386 -- -- -- -- --
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
17,762,833 29,231,161 1,162,046 5,937,942 25,386 -- -- -- -- --
952,615 3,398,796 128,354 51,872 1,835 (117) (272) 157 223 (109)
88,474 4,036 26,823 39,225 -- 391 2,070 39 789 (2,149)
1,005,317 833,429 74,980 810,790 -- 4,250 23,118 24,024 15,551 6,427
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
2,046,406 4,236,261 230,157 901,887 1,835 4,524 24,916 24,220 16,563 4,169
10,514,344 7,458,317 1,051,972 2,849,094 215,066 121,748 368,344 297,700 178,746 428,116
(4,346,815) (4,939,787) (437,617) (1,860,545) (204,056) (12,218) (58,333) (14,552) (12,867) (352,176)
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
6,167,529 2,518,530 614,355 988,549 11,010 109,530 310,011 283,148 165,879 75,940
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
8,213,935 6,754,791 844,512 1,890,436 12,845 114,054 334,927 307,368 182,442 80,109
----------- ----------- ---------- ----------- --------- -------- -------- -------- -------- ---------
$25,976,768 $35,985,952 $2,006,558 $ 7,828,378 $ 38,231 $114,054 $334,927 $307,368 $182,442 $ 80,109
=========== =========== ========== =========== ========= ======== ======== ======== ======== =========
</TABLE>
L-6
<PAGE>
Lincoln Life & Annuity Variable Annuity Account L
Notes to Financial Statements
1. Accounting Policies & Account Information
The Account: Lincoln Life & Annuity Variable Annuity Account L (the Variable
Account) is a segregated investment account of Lincoln Life & Annuity Company
of New York (the Company) and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as a unit in-
vestment trust.
On October 1, 1996, UNUM Life Insurance Company of America (UNUM America) and
First Unum Life Insurance Company (First UNUM) completed the sale of their
tax-qualified annuity business to the Company and The Lincoln National Life
Insurance Company (Lincoln Life), the parent of the Company. The contracts of
participants in the variable accounts of UNUM America and First UNUM with re-
spect to which consent is obtained from the contractholders and/or partici-
pants will be reinsured pursuant to an assumption reinsurance agreement. As-
sets attributable to such participants' contracts have been transferred to the
Variable Account and the variable accounts of Lincoln Life. Assets attribut-
able to contracts of participants with respect to which such consent is not
obtained will remain in the variable accounts of UNUM America and First Unum.
During 1998 and 1997, the net assets of the Variable Accounts increased by ap-
proximately $2,169,612 and $118,826,588, respectively, from novations of as-
sets from the variable accounts of UNUM America and First Unum.
The assets of the Variable Account are owned by the Company. The portion of
the Variable Account's assets supporting the annuity contracts may not be used
to satisfy liabilities arising out of any other business of the Company.
Basis of Presentation: The accompanying financial statements have been pre-
pared in accordance with generally accepted accounting principles for unit in-
vestment trusts.
Investments: In accordance with the terms of the variable annuity contracts,
all payments transferred to the Variable Account by contract owners are allo-
cated to purchase shares of either the Dreyfus Stock Index Fund, Dreyfus Vari-
able Investment Fund; Small Cap Portfolio (Dreyfus Small Cap Portfolio), Amer-
ican Century Variable Portfolios; American Century VP Capital Appreciation
(American Century VP Capital Appreciation Portfolio) and American Century VP
Balanced (American Century VP Balanced Portfolio), Fidelity's Variable Insur-
ance Products Fund; Growth Portfolio (VIPF Growth Portfolio) and Equity-Income
Portfolio (VIPF Equity-Income Portfolio), Fidelity's Variable Insurance Prod-
ucts II; Asset Manager Portfolio (VIPF Asset Manager Portfolio), Calvert So-
cial Balanced Portfolio, T. Rowe Price International Series, Inc. (T. Rowe
Price International Series), AMT Partners (MidCap Value Fund), Baron Capital
Asset Fund (Small Cap Growth Fund), Janus Aspen Series Worldwide (Global
Fund), Lincoln National Social Awareness Fund or Lincoln National Aggressive
Growth Fund (the Funds). Fidelity's Variable Insurance Product Funds; Money
Market Portfolio (VIPF Money Market Portfolio) is used only for investments of
initial contributions for which the Company has not yet received complete or-
der instructions. Upon receipt of complete order instructions, the payments
transferred to the VIPF Money Market Portfolio are allocated to purchase
shares of one of the above Funds.
Investments in the Funds are stated at the closing net asset value per share
on December 31, 1998, which approximates fair value. The difference between
cost and fair value is reflected as unrealized appreciation and depreciation
of investments.
Investment transactions are accounted for on a trade date basis. The cost of
investments sold is determined by the average cost method.
Dividends: Dividends paid to the Variable Account are automatically reinvested
in shares of the Funds on the payable date with the exception of VIPF Money
Market Portfolio which is invested monthly. Dividend income is recorded on the
ex-dividend date.
Federal Income Taxes: Operations of the Variable Account form a part of and
are taxed with operations of the Company, which is taxed as a "life insurance
company" under the Internal Revenue Code. The Variable Account will not be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code. Using current federal income tax law, no federal income taxes
are payable with respect to the Variable Account's net investment income and
the net realized gain on investments.
2. Mortality and Expense Guarantees
Amounts are paid to the Company for mortality and expense guarantees at an ef-
fective annual rate of 1.00% (1.20% prior to January 1, 1998) of each portfo-
lio's average daily net assets within the Variable Account with the exception
of VIPF Money Market Portfolio. Accordingly, the Company is responsible for
all sales, general, and administrative expenses applicable to the Variable Ac-
counts.
L-7
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
L-8
<PAGE>
Lincoln National Variable Annuity Account L
Notes to Financial Statements (continued)
3. Net Assets
The following is a summary of net assets owned at December 31, 1998.
<TABLE>
<CAPTION>
American
Century VP American
Dreyfus Dreyfus Capital Century VP VIPF
Stock Index Small Cap Appreciation Balanced Growth
Combined Fund Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unit Transactions:
. Accumulation units $181,818,207 $30,889,274 $19,262,141 $9,650,389 $ 8,941,177 $54,260,948
- -----------------------
. Accumulated net
investment income 18,891,413 986,184 1,011,553 462,076 1,236,004 7,391,898
- -----------------------
. Accumulated net
realized gain (loss)
on investments 185,980 444,216 (51,253) (597,330) 8,442 292,284
- -----------------------
. Net unrealized
appreciation
(depreciation) on
investments 35,959,733 10,438,707 (220,080) (1,097,125) 663,245 20,027,796
- ----------------------- ------------ ----------- ----------- ---------- ----------- -----------
$236,855,333 $42,758,381 $20,002,361 $8,418,010 $10,848,868 $81,972,926
============ =========== =========== ========== =========== ===========
</TABLE>
L-9
<PAGE>
<TABLE>
<CAPTION>
Janus Lincoln Lincoln
VIPF VIPF II Calvert VIPF Baron Aspen National National
Equity- Asset Social T. Rowe Price Money AMT Capital Series Social Aggressive
Income Manager Balanced International Market Partners Asset WorldWide Awareness Growth
Portfolio Portfolio Portfolio Series Portfolio Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
$21,274,656 $28,029,588 $1,650,951 $6,879,382 $35,193 $109,530 $310,011 $283,148 $165,879 $75,940
1,780,681 5,694,628 199,421 126,048 3,038 (117) (272) 157 223 (109)
57,203 (53,029) 30,266 54,041 -- 391 2,070 39 789 (2,149)
2,864,228 2,314,765 125,920 768,907 -- 4,250 23,118 24,024 15,551 6,427
----------- ----------- ---------- ---------- ------- -------- -------- -------- -------- -------
$25,976,768 $35,985,952 $2,006,558 $7,828,378 $38,231 $114,054 $334,927 $307,368 $182,442 $80,109
=========== =========== ========== ========== ======= ======== ======== ======== ======== =======
</TABLE>
L-10
<PAGE>
Lincoln Life & Annuity Variable Annuity Account L
Notes to Financial Statements (continued)
4. Purchases and Sales of Investments
The aggregate cost of investments purchased and the aggregate proceeds from in-
vestments sold were as follows for 1998.
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
- ---------------------------------------------------------------------------
<S> <C> <C>
Dreyfus Stock Index Fund $12,979,538 $ 2,239,009
Dreyfus Small Cap Portfolio 5,782,073 1,706,696
American Century VP Capital Appreciation Portfolio 1,604,285 2,175,715
American Century VP Balanced Portfolio 3,621,932 1,171,577
VIPF Growth Portfolio 18,588,602 2,956,283
VIPF Equity Income Portfolio 8,651,674 1,531,403
VIPF II Asset Manager Portfolio 8,124,034 2,206,685
Calvert Social Balanced Portfolio 1,065,383 322,657
T. Rowe Price International Series 2,015,839 975,400
VIPF Money Market Portfolio 159,545 146,700
AMT Partners Fund 121,563 12,147
Baron Capital Asset Fund 357,390 47,642
Janus Aspen Series Worldwide Fund 284,611 1,297
Lincoln National Social Awareness Fund 178,969 12,862
Lincoln National Aggressive Growth Fund 419,250 343,417
- -------------------------------------------------- ----------- -----------
$63,954,688 $15,849,490
=========== ===========
</TABLE>
5. Investments
The following is a summary of investments owned at December 31, 1998.
<TABLE>
<CAPTION>
Net
Shares Asset Value of Cost of
Outstanding Value Shares Shares
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Stock Index Fund 1,314,869 $32.52 $ 42,759,554 $ 32,320,847
Dreyfus Small Cap Portfolio 371,042 53.91 20,002,893 20,222,973
American Century VP Capital
Appreciation Portfolio 933,285 9.02 8,418,234 9,515,359
American Century VP Balanced
Portfolio 1,300,859 8.34 10,849,165 10,185,920
VIPF Growth Portfolio 1,826,948 44.87 81,975,161 61,947,365
VIPF Equity Income Portfolio 1,021,931 25.42 25,977,477 23,113,249
VIPF II Asset Manager Portfolio 1,981,659 18.16 35,986,933 33,672,168
Calvert Social Balanced Portfolio 938,986 2.14 2,006,613 1,880,693
T. Rowe Price International
Series 539,159 14.52 7,828,592 7,059,685
VIPF Money Market Portfolio 38,231 1.00 38,231 38,231
AMT Partners Fund 6,025 18.93 114,057 109,807
Baron Capital Asset Fund 25,278 13.25 334,936 311,818
Janus Aspen Series Worldwide Fund 10,566 29.09 307,377 283,353
Lincoln National Social Awareness
Fund 4,529 40.28 182,447 166,896
Lincoln National Aggressive
Growth Fund 5,993 13.37 80,111 73,684
------------ ------------
$236,861,781 $200,902,048
============ ============
</TABLE>
6. New Investment Funds
Effective October 1, 1998, the AMT Partners Fund, Baron Capital Asset Fund, Ja-
nus Aspen Series Worldwide Fund, Lincoln National Social Awareness Fund and
Lincoln National Aggressive Growth Fund became available as an investment op-
tion for Variable Account contract owners.
L-11
<PAGE>
Report of Ernst & Young LLP,
Independent Auditors
Board of Directors of Lincoln Life & Annuity Company of New York
and
Contract Owners of Lincoln Life & Annuity Variable Annuity Account L
We have audited the accompanying statement of assets and
liability of Lincoln National Variable Annuity Account L
("Variable Account") (comprised of the Dreyfus Stock Index,
Dreyfus Small Cap, American Century VP Capital Appreciation,
American Century VP Balanced, VIP Fidelity Growth, VIP
Fidelity Equity-Income, VIP Fidelity II Asset Manager,
Calvert Social Balanced, T. Rowe Price International, VIP
Fidelity Money Market, AMT Partners, Baron Capital Asset,
Janus Aspen Series Worldwide, Lincoln National Social
Awareness and Lincoln National Aggressive Growth
subaccounts), as of December 31, 1998, and the related
statement of operations for the year then ended and the
statements of changes in net assets for each of the two
years in the period then ended. These financial statements
are the responsibility of the Variable Account's management.
Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of investments owned as of December 31, 1998, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of each of the respective subaccounts constituting
the Lincoln Life & Annuity Variable Annuity Account L at
December 31, 1998, the results of their operations for the
year then ended, and the changes in their net assets for
each of the two years in the period then ended in conformity
with generally accepted accounting principles.
Fort Wayne, Indiana
March 30, 1999
L-12
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
BALANCE SHEETS -- STATUTORY BASIS
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-------------- ------------
<S> <C> <C>
ADMITTED ASSETS
CASH AND INVESTED ASSETS:
Bonds $1,435,882,019 $593,431,718
- ----------------------------------------------------------------------------
Common stocks 155,039 --
- ----------------------------------------------------------------------------
Mortgage loans on real estate 184,503,805 --
- ----------------------------------------------------------------------------
Policy loans 170,372,567 39,054,927
- ----------------------------------------------------------------------------
Cash and short-term investments 143,546,873 163,773,594
- ----------------------------------------------------------------------------
Other invested assets 60,000 --
- ----------------------------------------------------------------------------
Receivable for securities 3,477,120 34,804
- ---------------------------------------------------------------------------- -------------- ------------
Total cash and invested assets 1,937,997,423 796,295,043
- ----------------------------------------------------------------------------
Premiums and fees in course of collection 6,959,116 --
- ----------------------------------------------------------------------------
Accrued investment income 25,925,055 10,706,003
- ----------------------------------------------------------------------------
Other admitted assets 438,335 335,728
- ----------------------------------------------------------------------------
Separate account assets 236,861,781 164,721,012
- ---------------------------------------------------------------------------- -------------- ------------
Total admitted assets $2,208,181,710 $972,057,786
- ---------------------------------------------------------------------------- -------------- ------------
-------------- ------------
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits and claims $ 851,746,596 $ 1,214,524
- ----------------------------------------------------------------------------
Other policyholder funds 962,725,311 587,465,491
- ----------------------------------------------------------------------------
Other liabilities 44,824,520 6,784,652
- ----------------------------------------------------------------------------
Federal income taxes recoverable (3,206,611) (342,378)
- ----------------------------------------------------------------------------
Asset valuation reserve 5,374,594 2,350,411
- ----------------------------------------------------------------------------
Interest maintenance reserve 5,051,304 2,594,552
- ----------------------------------------------------------------------------
Net transfers due from separate accounts (6,915,063) (5,582,705)
- ----------------------------------------------------------------------------
Separate account liabilities 236,861,781 164,721,012
- ---------------------------------------------------------------------------- -------------- ------------
Total liabilities 2,096,462,432 759,205,559
- ----------------------------------------------------------------------------
CAPITAL AND SURPLUS:
Common stock, $100 par value:
Authorized, issued and outstanding -- 20,000 shares (owned by The Lincoln
National Life Insurance Company) 2,000,000 2,000,000
- ----------------------------------------------------------------------------
Paid-in surplus 384,128,481 227,407,481
- ----------------------------------------------------------------------------
Unassigned surplus -- deficit (274,409,203) (16,555,254)
- ---------------------------------------------------------------------------- -------------- ------------
Total capital and surplus 111,719,278 212,852,227
- ---------------------------------------------------------------------------- -------------- ------------
Total liabilities and capital and surplus $2,208,181,710 $972,057,786
- ---------------------------------------------------------------------------- -------------- ------------
-------------- ------------
</TABLE>
See accompanying notes. S-1
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 6, 1996 TO
YEAR ENDED DECEMBER 31 DECEMBER 31,
1998 1997 1996
-------------- ------------ ---------------
<S> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Premiums and deposits $1,291,566,984 $184,112,330 $ 631,355,849
- -----------------------------------------------------------
Net investment income 105,083,579 43,953,796 10,769,172
- -----------------------------------------------------------
Surrender and administrative charges 2,834,073 1,334,705 310,991
- -----------------------------------------------------------
Mortality and expense charges on deposit funds 1,980,728 1,548,722 --
- -----------------------------------------------------------
Amortization of the interest maintenance reserve 579,137 370,129 205,255
- -----------------------------------------------------------
Other revenues 536,698 183,048 18,347
- ----------------------------------------------------------- -------------- ------------ ---------------
Total revenues 1,402,581,199 231,502,730 642,659,614
- -----------------------------------------------------------
BENEFITS AND EXPENSES:
Benefits and settlement expenses 1,320,787,190 72,475,389 640,912,693
- -----------------------------------------------------------
Commissions 274,529,390 2,459,308 18,931,151
- -----------------------------------------------------------
Underwriting, insurance and other expenses 28,064,172 8,012,925 1,801,204
- -----------------------------------------------------------
Net transfers to separate accounts 33,875,951 141,027,195 --
- ----------------------------------------------------------- -------------- ------------ ---------------
Total benefits and expenses 1,657,256,703 223,974,817 661,645,048
- ----------------------------------------------------------- -------------- ------------ ---------------
Gain (loss) from operations before dividends to
policyholders, federal income taxes (benefit) and net
realized loss on investments (254,675,504) 7,527,913 (18,985,434)
- -----------------------------------------------------------
Dividends to policyholders 3,375,629 -- --
- ----------------------------------------------------------- -------------- ------------ ---------------
Gain (loss) from operations before federal income taxes
(benefit) and net realized loss on investments (258,051,133) 7,527,913 (18,985,434)
- -----------------------------------------------------------
Federal income taxes (benefit) (4,561,826) 1,942,625 (391,144)
- ----------------------------------------------------------- -------------- ------------ ---------------
Gain (loss) from operations before net realized loss on
investments (253,489,307) 5,585,288 (18,594,290)
- -----------------------------------------------------------
Net realized loss on investments (721,449) (73,398) (855)
- ----------------------------------------------------------- -------------- ------------ ---------------
Net income (loss) $ (254,210,756) $ 5,511,890 $ (18,595,145)
- ----------------------------------------------------------- -------------- ------------ ---------------
-------------- ------------ ---------------
</TABLE>
See accompanying notes.
S-2
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
<TABLE>
<CAPTION>
UNASSIGNED TOTAL
COMMON PAID-IN SURPLUS -- CAPITAL AND
STOCK SURPLUS DEFICIT SURPLUS
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balances at June 6, 1996 $ -- $ -- $ -- $ --
Add (deduct):
Capital paid-in 2,000,000 -- -- 2,000,000
- -------------------------------------------------
Surplus paid-in -- 69,000,000 -- 69,000,000
- -------------------------------------------------
Net loss -- -- (18,595,145) (18,595,145)
- -------------------------------------------------
Increase in nonadmitted assets -- -- (1,100,310) (1,100,310)
- -------------------------------------------------
Increase in asset valuation reserve -- -- (1,128,548) (1,128,548)
- ------------------------------------------------- ---------- ------------- ------------- -------------
Balances at December 31, 1996 2,000,000 69,000,000 (20,824,003) 50,175,997
Add (deduct):
Surplus paid-in -- 158,407,481 -- 158,407,481
- -------------------------------------------------
Net income -- -- 5,511,890 5,511,890
- -------------------------------------------------
Increase in nonadmitted assets -- -- (21,278) (21,278)
- -------------------------------------------------
Increase in asset valuation reserve -- -- (1,221,863) (1,221,863)
- ------------------------------------------------- ---------- ------------- ------------- -------------
Balances at December 31, 1997 2,000,000 227,407,481 (16,555,254) 212,852,227
Add (deduct):
Surplus paid-in -- 156,721,000 -- 156,721,000
- -------------------------------------------------
Net loss -- -- (254,210,756) (254,210,756)
- -------------------------------------------------
Increase in unrealized capital losses -- -- (178,648) (178,648)
- -------------------------------------------------
Decrease in nonadmitted assets -- -- 241,698 241,698
- -------------------------------------------------
Increase in asset valuation reserve -- -- (3,024,183) (3,024,183)
- -------------------------------------------------
Increase in liability for reinsurance in
unauthorized companies -- -- (682,060) (682,060)
- ------------------------------------------------- ---------- ------------- ------------- -------------
Balances at December 31, 1998 $2,000,000 $ 384,128,481 $(274,409,203) $ 111,719,278
- ------------------------------------------------- ---------- ------------- ------------- -------------
---------- ------------- ------------- -------------
</TABLE>
See accompanying notes. S-3
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 6, 1996
TO
YEAR ENDED DECEMBER 31 DECEMBER 31,
1998 1997 1996
--------------- ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds, and other considerations received $ 1,284,669,810 $184,112,330 $631,355,849
- ------------------------------------------------------------
Investment income received 96,331,551 43,781,378 1,837,439
- ------------------------------------------------------------
Benefits paid (83,399,329) (85,008,691) (23,169,165)
- ------------------------------------------------------------
Insurance expenses paid (351,272,500) (154,355,904) (20,919,059)
- ------------------------------------------------------------
Federal income taxes received (paid) 1,703,193 (1,893,859) --
- ------------------------------------------------------------
Dividends to policyholders 2,651,237 -- --
- ------------------------------------------------------------
Other income received and expenses paid, net 39,064,672 1,613,631 329,338
- ------------------------------------------------------------ --------------- ------------ -------------
Net cash provided by (used in) operating activities 989,748,634 (11,751,115) 589,434,402
- ------------------------------------------------------------
INVESTING ACTIVITIES
Sale, maturity or repayment of investments 249,409,117 272,961,178 366,021,652
- ------------------------------------------------------------
Purchase of investments (1,280,892,696) (265,700,363) (965,220,343)
- ------------------------------------------------------------
Net decrease (increase) in policy loans (131,317,640) 1,554,149 (40,609,076)
- ------------------------------------------------------------ --------------- ------------ -------------
Net cash provided by (used in) investing activities (1,162,801,219) 8,814,964 (639,807,767)
- ------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Capital and surplus paid-in 156,721,000 158,407,481 71,000,000
- ------------------------------------------------------------
Other (3,895,136) (11,032,743) (1,291,628)
- ------------------------------------------------------------ --------------- ------------ -------------
Net cash provided by financing activities 152,825,864 147,374,738 69,708,372
- ------------------------------------------------------------ --------------- ------------ -------------
Increase (decrease) in cash and short-term investments (20,226,721) 144,438,587 19,335,007
- ------------------------------------------------------------
Total cash and short-term investments at beginning of year 163,773,594 19,335,007 --
- ------------------------------------------------------------ --------------- ------------ -------------
Total cash and short-term investments at end of year $ 143,546,873 $163,773,594 $19,335,007
- ------------------------------------------------------------ --------------- ------------ -------------
--------------- ------------ -------------
</TABLE>
See accompanying notes.
S-4
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND OPERATIONS
Lincoln Life & Annuity Company of New York (the "Company") is a wholly owned
subsidiary of The Lincoln National Life Insurance Company ("Lincoln Life"),
which is a wholly owned subsidiary of Lincoln National Corporation ("LNC").
The Company was organized under the laws of the state of New York on June 6,
1996 as a life insurance company. The Company received approval from the New
York Insurance Department (the "Department") to operate as a licensed
insurance company in the state of New York on September 27, 1996.
The Company's principal business consists of underwriting annuities,
deposit-type contracts and life and health insurance sold through multiple
distribution channels. The Company is licensed to do business in New York
State.
USE OF ESTIMATES
The nature of the insurance and investment management businesses requires
management to make estimates and assumptions that affect amounts reported in
the statutory basis financial statements and accompanying notes. Actual
results could differ from these estimates.
BASIS OF PRESENTATION
The accompanying statutory basis financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the
Department. "Prescribed" statutory accounting practices include state laws,
regulations and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners
("NAIC"). "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state and may
change in the future. In 1998, the NAIC adopted codified statutory
accounting principles ("Codification"). Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the
Department must adopt Codification as the prescribed basis of accounting on
which domestic insurers must report their statutory basis results. At this
time, it is unclear whether the Department will adopt Codification.
Management has not yet determined the impact of Codification to the
Company's statutory basis financial statements.
Existing statutory accounting practices differ from generally accepted
accounting principles ("GAAP"). The more significant variances from GAAP are
as follows:
INVESTMENTS
Bonds are reported at cost or amortized cost or fair value based on their
NAIC rating. For GAAP, the Company's bonds are classified as
available-for-sale and, accordingly, are reported at fair value with changes
in the fair values reported directly in shareholder's equity after
adjustments for related amortization of deferred acquisition costs,
additional policyholder commitment and deferred income taxes.
Changes between cost and admitted asset investment amounts are credited or
charged directly to unassigned surplus rather than to a separate surplus
account.
Under a formula prescribed by the NAIC, the Company defers the portion of
realized capital gains and losses on sales of bonds and mortgage loans
attributable to changes in the general level of interest rates and amortizes
those deferrals over the remaining period to maturity of the individual
security sold. The net deferral is reported as the interest maintenance
reserve ("IMR") in the accompanying balance sheets. Realized capital gains
and losses are reported in income net of federal income tax and transfers to
IMR. The asset valuation reserve ("AVR") is determined by an NAIC prescribed
formula and is reported as a liability rather than a reduction to unassigned
surplus. Under GAAP, realized capital gains and losses are reported in the
income statement on a pretax
S-5
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
basis in the period that the asset giving rise to the gain or loss is sold
and valuation allowances are provided when there has been a decline in value
deemed other than temporary, in which case, the provision for such declines
are charged to income.
POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when incurred.
Under GAAP, acquisition costs related to traditional life insurance, to the
extent recoverable from future policy revenues, are deferred and amortized
over the premium-paying period of the related policies using assumptions
consistent with those used in computing policy benefit reserves. For
universal life insurance, annuity and other investment-type products,
deferred policy acquisition costs, to the extent recoverable from future
gross profits, are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally start-up and
organizational costs and furniture and equipment, are excluded from the
accompanying balance sheets and are charged directly to unassigned surplus.
PREMIUMS AND DEPOSITS
Premiums and deposits with respect to universal life policies and annuity
and other investment-type contracts are reported as premium revenues;
whereas under GAAP, such premiums and deposits are treated as liabilities
and policy charges represent revenues.
BENEFIT RESERVES
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions rather than on estimated expected
experience or actual account balances as would be required under GAAP.
BENEFITS AND SETTLEMENT EXPENSES
Death benefits paid, policy and contract withdrawals, and the change in
policy reserves on universal life policies, annuity and other
investment-type contracts are reported as benefits and settlement expenses
in the accompanying statements of operations; whereas, under GAAP,
withdrawals are treated as a reduction of the policy or contract liabilities
and benefits would represent the excess of benefits paid over the policy
account value and interest credited to the account values.
REINSURANCE
Commissions on business ceded are reported as income when received rather
than deferred and amortized with deferred policy acquisition costs. Business
assumed under 100% indemnity and assumption reinsurance agreements is
accounted for as a purchase for GAAP reporting purposes and the ceding
commission represents the purchase price. Under purchase accounting, assets
acquired and liabilities assumed are reported at fair value at the date of
the transaction and the excess of the purchase price over the sum of the
amounts assigned to assets acquired less liabilities assumed is recorded as
goodwill. On a statutory basis of accounting, the ceding commission is
expensed when paid.
Premiums, benefits and settlement expenses and policy benefits and contract
liabilities are reported in the accompanying financial statements net of
reinsurance amounts. Under GAAP, such amounts are reported on a gross basis.
A liability for reinsurance balances has been provided for unsecured policy
and contract liabilities and unearned premiums ceded to reinsurers not
authorized by the Department to assume such business. Changes to those
amounts are credited or charged directly to unassigned surplus. Under GAAP,
an allowance for amounts deemed uncollectible is established through a
charge to income.
INCOME TAXES
Deferred income taxes are not provided for differences between financial
statement amounts and tax bases of assets and liabilities.
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
S-6
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
POSTRETIREMENT BENEFITS
For purposes of calculating the Company's postretirement benefit obligation,
only vested employees and current retirees are included in the actuarial
benefit valuation. Under GAAP, active employees not currently eligible would
also be included.
CASH FLOWS
Cash and short-term investments in the statements of cash flows represent
cash balances and investments with initial maturities of one year or less
from the date of acquisition. Under GAAP, the corresponding captions of cash
and cash equivalents include cash balances and investments with initial
maturities of three months or less from the date of acquisition.
A reconciliation of the Company's capital and surplus and net income (loss)
determined on a statutory accounting basis with amounts determined in
accordance with GAAP is as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
----------------------------------------------------------
PERIOD FROM
JUNE 6, 1996
TO
DECEMBER 31 DECEMBER 31,
YEAR ENDED DECEMBER 31
1998 1997 1998 1997 1996
----------------------------------------------------------
(IN THOUSANDS)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts as reported on a statutory
basis $ 111,719 $ 212,852 $ (254,211) $ 5,512 $ (18,595)
- -------------------------------------
GAAP adjustments:
Net unrealized gain on investments 27,851 14,327 -- -- --
- -------------------------------------
Interest maintenance reserve 5,051 2,595 (579) (370) 3,204
- -------------------------------------
Net realized gain (loss) on
investments (990) -- 3,050 (240) --
- -------------------------------------
Asset valuation reserve 5,375 2,350 -- -- --
- -------------------------------------
Policy and contract reserves (85,875) (19,204) 271,293 (3,667) (15,537 )
- -------------------------------------
Present value of future profits,
deferred policy acquisition costs
and goodwill 336,568 37,605 6,091 524 37,081
- -------------------------------------
Policyholders' share of earnings
and surplus on participating
business (9,904) -- (100) -- --
- -------------------------------------
Deferred income taxes 35,280 (5,558) (12,696) 671 (1,215 )
- -------------------------------------
Nonadmitted assets 880 1,122 -- -- --
- -------------------------------------
Other, net (1,705) -- (82) -- --
- ------------------------------------- --------- --------- ---------- --------- -------------
Net increase (decrease) 312,531 33,237 266,977 (3,082) 23,533
- ------------------------------------- --------- --------- ---------- --------- -------------
Amounts on a GAAP basis $ 424,250 $ 246,089 $ 12,766 $ 2,430 $ 4,938
- ------------------------------------- --------- --------- ---------- --------- -------------
--------- --------- ---------- --------- -------------
</TABLE>
S-7
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Other significant accounting practices are as follows:
INVESTMENTS
Bonds not backed by loans are principally stated at amortized cost and the
discount or premium is amortized using the interest method.
Mortgage-backed bonds are valued at amortized cost and income is recognized
using a constant effective yield based on anticipated prepayments and the
estimated economic life of the securities. When actual prepayments differ
significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the securities is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition.
Policy loans are reported at unpaid balances.
Mortgage loans on real estate are reported at unpaid balances, less
allowances for impairments.
Realized investment gains and losses on investments sold are determined
using the specific identification method. Changes in admitted asset carrying
amounts of bonds and mortgage loans are credited or charged directly in
unassigned surplus.
CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Unpaid claims and claim adjustment expenses on accident and health policies
represent the estimated ultimate net cost of all reported and unreported
claims incurred during the year. The Company does not discount claims and
claim adjustment expense reserves. The reserves for unpaid claims and claim
adjustment expenses are estimated using individual case-basis valuations and
statistical analyses. Those estimates are subject to the effects of trends
in claim severity and frequency. Although considerable variability is
inherent in such estimates, management believes that reserves for claims and
claim adjustment expenses are adequate. The estimates are continually
reviewed and adjusted as necessary as experience develops or new information
becomes known; such adjustments are included in current operations.
PREMIUMS
Premiums for group tax-qualified annuity business are recognized as revenue
when deposited. Life insurance and individual annuity premiums are
recognized as revenue when due. Accident and health premiums are earned pro
rata over the contract term of the policies.
BENEFIT RESERVES
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using
statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Department. The Company waives deduction of deferred fractional premiums on
the death of life and annuity policy insureds and returns any premium beyond
the date of death, except for policies issued prior to March 1977. Surrender
values on policies do not exceed the corresponding benefit reserves.
Additional reserves are established when the results of cash flow testing
under various interest rate scenarios indicate the need for such reserves.
If net premiums exceed the gross premiums on any insurance in-force,
additional reserves are established. Benefit reserves for policies
underwritten on a substandard basis are determined using the multiple table
reserve method.
The tabular interest, tabular less actual reserves released and the tabular
cost have been determined by formula or from the basic data for such items.
Tabular interest funds not involving life contingencies were determined
using the actual interest credited to the funds plus the change in accrued
interest.
Liabilities related to policyholders' funds left on deposit with the Company
generally are equal to fund balances less applicable surrender charges.
S-8
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
REINSURANCE CEDED AND ASSUMED
Reinsurance premiums, benefits and settlement expenses are accounted for on
bases consistent with those used in accounting for the original policies
issued and the terms of the reinsurance contracts.
PENSION BENEFITS
Costs associated with the Company's defined benefit pension plans are
systematically accrued during the expected period of active service of the
covered employees.
ASSETS HELD IN SEPARATE ACCOUNTS AND LIABILITIES RELATED TO SEPARATE
ACCOUNTS
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for the exclusive
benefit of variable annuity contractholders and for which the
contractholders, and not the Company, bears the investment risk. Separate
account contractholders have no claim against the assets of the general
account of the Company. Separate account assets are reported at fair value
and consist of unit investments in mutual funds. The detailed operations of
the separate accounts are not included in the accompanying financial
statements. The fees received by the Company for administrative and
contractholder maintenance services performed for these separate accounts
are included in the Company's statements of operations.
RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have been reclassified to
conform with the 1998 presentation. These reclassifications had no effect on
unassigned surplus-deficit or net income (loss) previously reported.
2. INVESTMENTS
The major categories of net investment income are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 6, 1996
TO
DECEMBER 31,
YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Income:
Bonds $ 78,205,686 $42,237,959 $ 9,427,203
---------------------------------------------------
Mortgage loans on real estate 14,304,385 -- --
---------------------------------------------------
Policy loans 7,981,377 1,990,613 439,305
---------------------------------------------------
Cash and short-term investments 5,893,453 315,328 1,024,525
--------------------------------------------------- ------------- ----------- --------------
Total investment income 106,384,901 44,543,900 10,891,033
- ------------------------------------------------------
Investment expenses 1,301,322 590,104 121,861
- ------------------------------------------------------ ------------- ----------- --------------
Net investment income $ 105,083,579 $43,953,796 $ 10,769,172
- ------------------------------------------------------ ------------- ----------- --------------
------------- ----------- --------------
</TABLE>
S-9
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The cost or amortized cost, gross unrealized gains and
losses and the fair value of investments in bonds are
summarized as follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1998:
Corporate $1,148,083,966 $27,649,036 $(7,489,560) $1,168,243,442
---------------------------------
U.S. government 39,617,653 564,146 (119,394) 40,062,405
---------------------------------
Foreign government 19,532,744 994,331 (720,250) 19,806,825
---------------------------------
Mortgage-backed 225,005,162 6,239,684 (421,281) 230,823,565
---------------------------------
State and municipal 3,642,494 164,552 -- 3,807,046
--------------------------------- -------------- ----------- ----------- --------------
$1,435,882,019 $35,611,749 $(8,750,485) $1,462,743,283
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
At December 31, 1997:
Corporate $ 445,296,161 $12,163,765 $(1,677,849) $ 455,782,077
---------------------------------
U.S. government 12,326,095 191,925 -- 12,518,020
---------------------------------
Foreign government 17,131,754 636,803 (426,360) 17,342,197
---------------------------------
Mortgage-backed 115,611,907 3,369,970 (3,564) 118,978,313
---------------------------------
State and municipal 3,065,801 72,469 -- 3,138,270
--------------------------------- -------------- ----------- ----------- --------------
$ 593,431,718 $16,434,932 $(2,107,773) $ 607,758,877
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
</TABLE>
The carrying amount of investments in bonds in the balance
sheet at December 31, 1998 reflects adjustments of $178,648
to decrease amortized cost as a result of the Securities
Valuation Office ("SVO") of the NAIC designating certain
investments as low or lower quality.
A summary of the cost or amortized cost and fair value of
investments in bonds at December 31, 1998, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
COST OR
AMORTIZED FAIR
COST VALUE
------------------------------
<S> <C> <C>
Maturity:
In 1999 $ 29,182,134 $ 29,230,713
----------------------------------------------------------------
In 2000-2003 358,100,253 362,502,042
----------------------------------------------------------------
In 2004-2008 525,815,980 536,016,775
----------------------------------------------------------------
After 2008 297,778,590 304,170,188
----------------------------------------------------------------
Mortgage-backed securities 225,005,062 230,823,565
---------------------------------------------------------------- -------------- --------------
Total $1,435,882,019 $1,462,743,283
- ------------------------------------------------------------------- -------------- --------------
-------------- --------------
</TABLE>
The expected maturities may differ from the contractual
maturities in the foregoing table because certain borrowers
may have the right to call or prepay obligations with or
without call or prepayment penalties.
S-10
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
Proceeds from sales of investments in bonds were $203,748,028, $274,742,319
and $365,646,000 in 1998, 1997 and 1996, respectively. Gross gains of
$3,612,434, $1,533,793 and $4,871,624, and gross losses of $1,529,149,
$1,922,165 and $2,433 during 1998, 1997 and 1996, respectively, were
realized on those sales. Net gains (losses) of $17,705, $(26) and $376,041
were realized on sales of short-term investments in 1998, 1997 and 1996,
respectively.
At December 31, 1998 and 1997, investments in bonds with an admitted asset
value of $500,129 and $500,177, respectively, were on deposit with the
Department to satisfy regulatory requirements.
During 1998, the minimum and maximum lending rates for mortgage loans were
6.62% and 10.29%, respectively. At the issuance of a loan, the percentage of
loan to value on any one loan does not exceed 75%. At December 31, 1998, the
Company did not hold any mortgages with interest overdue beyond one year.
All properties covered by mortgage loans have fire insurance at least equal
to the excess of the loan over the maximum loan that would be allowed on the
land without the building.
Realized capital gains and losses are reported net of federal income taxes
of $1,223,897, $55,541 and $1,836,682 in 1998, 1997 and 1996, respectively,
and amounts transferred to the interest maintenance reserve of $3,035,887,
$239,459 and $3,409,395 in 1998, 1997 and 1996, respectively.
At December 31, 1998, the Company did not have a material concentration of
financial instruments in a single investee, industry or geographic location.
3. FEDERAL INCOME TAXES
The Company's federal income tax return is not consolidated with any other
entities. The effective federal income tax rate for financial reporting
purposes differs from the prevailing statutory tax rate principally due to
tax-exempt investment income, other pass through tax attributes from
investments, differences in ceding commissions, policy acquisition costs,
and policy and contract liabilities in the tax return versus the financial
statements.
In 1998, a federal income tax net operating loss of $76,192,977 was
incurred. The Company plans to utilize $9,161,743 of the net operating loss
to recover taxes paid in prior years. The remaining portion of the net
operating loss of $67,031,234 will be available for use to offset taxable
income in future years. The net operating loss carryforward of $67,031,234
will expire in 2018.
The Company paid $3,675,000 in 1997 for federal income taxes. No federal
income tax payments were made in 1998 or 1996.
4. REINSURANCE
The Company cedes insurance to other companies, including affiliated
companies. The portion of risks exceeding the Company's retention limit is
reinsured with Lincoln Life. The Company limits its maximum risk that it
retains on an individual to $500,000. The Company remains obligated for
amounts ceded in the event that the reinsurers do not meet their
obligations. The Company did not cede or assume any business prior to
January 1, 1998. On January 2, 1998, the Company and Lincoln Life entered
into an indemnity reinsurance transaction whereby the Company and Lincoln
Life reinsured 100% of a block of individual life insurance and annuity
business of CIGNA Corporation. The Company paid $149,621,452 to CIGNA on
January 2, 1998 under the terms of the reinsurance agreement and recognized
a ceding commission expense of $149,714,239 in 1998, which is included in
the statements of operations line item "Commissions." At the time of
closing, this block of business had statutory liabilities of $779,551,235
which became the Company's obligation. The Company also received assets,
measured on a historical statutory basis, equal to the liabilities. Pursuant
to the terms of the reinsurance agreement, the Company, Lincoln Life and
CIGNA are in the final stages of agreeing to the statutory basis values of
these assets and liabilities. Any changes to these values which may occur in
future periods will not be material to the Company's financial position.
Subsequent to the CIGNA transaction, the Company and Lincoln Life announced
that they had reached an agreement to sell the administration rights to a
variable annuity portfolio that had been acquired as part of the block of
business assumed
S-11
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
4. REINSURANCE (CONTINUED)
on January 2, 1998. This sale closed on October 12, 1998 with an effective
date of September 1, 1998.
On October 1, 1998, the Company entered into an indemnity reinsurance
transaction whereby the Company and Lincoln Life reinsured 100% of a block
of individual life insurance business from Aetna, Inc. The Company paid
$143,721,000 to Aetna on October 1, 1998 under the terms of the reinsurance
agreement and recognized a ceding commission expense of $135,374,141 in
1998, which is included in the statements of operations line item
"Commissions." At the time of closing, this block of business had statutory
liabilities of $463,007,132 which became the Company's obligation. The
Company also received assets, measured on a historical statutory basis,
equal to the liabilities. Subsequent to the Aetna transaction, the Company
and Lincoln Life announced that they had reached an agreement to retrocede
the sponsored life business assumed for $87,600,000, of which $11,900,000
was received by the Company. The retrocession agreement was executed on
October 14, 1998 with an effective date of October 1, 1998.
In October 1996, the Company and Lincoln Life purchased a block of group
tax-qualified annuity business from UNUM Corporation's affiliates. The
transaction was completed in the form of an assumptive reinsurance
transaction, which resulted in the Company paying a ceding commission of
$15,675,206. Policy liabilities and related accruals of the Company
increased by $714,282,427 as a result of this transaction.
The balance sheet captions, "Future policy benefits and claims" and "Other
policyholder funds," have been reduced for insurance ceded by $54,411,763
and $2,722,404, respectively, at December 31, 1998.
The caption "Premiums and deposits" in the statements of operations includes
$1,276,884,778 of insurance assumed and $52,443,264 of insurance ceded in
1998.
The caption "Benefits and settlement expenses" in the statements of
operations is net of reinsurance recoveries of $47,526,681 for 1998.
The regulatory required liability for unsecured reserves ceded to
unauthorized reinsurers was $682,060 at December 31, 1998. Amounts payable
or recoverable for reinsurance on policy and contract liabilities are not
subject to periodic or maximum limits. At December 31, 1998, the Company's
reinsurance recoverables are not material and no individual reinsurer owed
the Company an amount that was equal to or greater than 3% of the Company's
surplus.
5. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES
At December 31, 1998, the Company had $1,092,753,902 of insurance in force
for which the gross premiums are less than the net premiums according to the
standard of valuation set by the State of New York. Reserves to cover the
above insurance totaled $6,937,379 at December 31, 1998.
At December 31, 1998, the Company's annuity reserves and deposit fund
liabilities, including separate accounts, that are subject to discretionary
withdrawal with adjustment, subject to discretionary withdrawal without
adjustment and not subject to discretionary withdrawal provisions are
summarized as follows:
S-12
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
5. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
AMOUNT PERCENT
-------------- ---------
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value of investment $ 343,050,030 28.5%
- -----------------------------------------------------------------------------
At book value, less surrender charge 153,828,072 12.8
- -----------------------------------------------------------------------------
At market value 229,940,273 19.1
- ----------------------------------------------------------------------------- -------------- ---------
726,818,375 60.4
Subject to discretionary withdrawal without adjustment:
At book value with minimal or no charge or adjustment 461,855,066 38.4
- -----------------------------------------------------------------------------
Not subject to discretionary withdrawal 13,848,286 1.2
- ----------------------------------------------------------------------------- -------------- ---------
Total annuity reserves and deposit fund liabilities, before reinsurance 1,202,521,727 100.0%
---------
---------
Less reinsurance 2,991,673
- ----------------------------------------------------------------------------- --------------
Net annuity reserves and deposit fund liabilities, including separate
accounts $1,199,530,054
- ----------------------------------------------------------------------------- --------------
--------------
</TABLE>
A reconciliation of the total net annuity reserves and deposit fund
liabilities to the amounts reported in the Company's 1998 Annual Statement
and the Company's Separate Accounts Annual Statement is as follows:
<TABLE>
<S> <C>
DECEMBER 31,
1998
--------------
Per 1998 Annual Statement:
Exhibit 8, Section B -- Total (net) $ 9,955,624
- --------------------------------------------------------------------------------------
Exhibit 8, Section C -- Total (net) 1,241,407
- --------------------------------------------------------------------------------------
Exhibit 10, Column 1, Line 19 958,392,750
- -------------------------------------------------------------------------------------- --------------
969,589,781
- --------------------------------------------------------------------------------------
Per Separate Accounts Annual Statement:
- --------------------------------------------------------------------------------------
Exhibit 6, Column 2, Line 0299999 --
- --------------------------------------------------------------------------------------
Page 3, Line 3 229,940,273
- -------------------------------------------------------------------------------------- --------------
229,940,273
--------------
Total net annuity reserves and deposit fund liabilities $1,199,530,054
- -------------------------------------------------------------------------------------- --------------
--------------
</TABLE>
Details underlying the balance sheet caption "Other policyholder funds" are
as follows:
<TABLE>
<S> <C> <C>
DECEMBER 31
1998 1997
------------- ------------
Premium deposit funds $ 931,230,214 $587,465,491
- -------------------------------------------------------------------------
Undistributed earnings on participating business 30,772,519 --
- -------------------------------------------------------------------------
Other 722,578 --
- ------------------------------------------------------------------------- ------------- ------------
$ 962,725,311 $587,465,491
------------- ------------
------------- ------------
</TABLE>
S-13
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
6. CAPITAL AND SURPLUS
The Company was initially capitalized on August 12, 1996 with a capital
contribution from Lincoln Life in the amount of $2,000,000. Additional paid-
in surplus from Lincoln Life of $69,000,000, $158,407,481 and $156,721,000
was received in September 1996, December 1997 and October 1998,
respectively.
Life insurance companies are subject to certain Risk-Based Capital ("RBC")
requirements as specified by the NAIC. Under those requirements, the amount
of capital and surplus maintained by a life insurance company is to be
determined based on the various risk factors related to it. At December 31,
1998, the Company exceeds the RBC requirements.
The payment of dividends by the Company requires 30 day advance notice to
the Department.
7. EMPLOYEE BENEFIT PLANS
LNC maintains defined benefit pension plans for its employees (including
Company employees) and a defined contribution plan for the Company's agents.
LNC also maintains 401(k) plans, deferred compensation plans and
postretirement medical and life insurance plans for its employees and agents
(including the Company's employees and agents). The aggregate expenses and
accumulated obligations for the Company's portion of these plans are not
material to the Company's statutory basis statements of operations or
balance sheets for any of the periods shown.
LNC has various incentive plans for key employees, agents and directors of
LNC and its subsidiaries that provide for the issuance of stock options,
stock appreciation rights, restricted stock awards and stock incentive
awards. These plans are comprised primarily of stock option incentive plans.
Stock options granted under the stock option incentive plans are at the
market value at the date of grants and, subject to termination of
employment, expire ten years from the date of grant. Such options are
transferable only upon death and are exercisable one year from the date of
grant for options issued prior to 1992. Options issued subsequent to 1991
are exercisable in equal increments on the option issuance anniversary in
three to four years following issuance.
As of December 31, 1998, 16,600 shares of LNC common stock were subject to
options granted to Company employees under the stock option incentive plans
of which 2,399 were exercisable on that date. The exercise prices of the
outstanding options range from $58.94 to $89.85. During 1998, 137 options
were exercised. There were no options exercised during 1997.
8. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office space and equipment under lease agreements that
expire at various intervals over the next five years and are subject to
renewal options at market rates prevailing at the time of renewal. Rental
expense for all operating leases was $281,947, $155,664 and $32,252 for
1998, 1997 and 1996, respectively. Future minimum rental commitments are as
follows:
<TABLE>
<S> <C>
1999 $ 225,596
- ------------------------------------
2000 162,908
- ------------------------------------
2001 161,564
- ------------------------------------
2002 161,564
- ------------------------------------
2003 148,100
- ------------------------------------ ---------
$ 859,732
---------
---------
</TABLE>
VULNERABILITY FROM CONCENTRATIONS
At December 31, 1998, the Company did not have a concentration of: 1)
business transactions with a particular customer, lender or distributor; 2)
revenues from a particular product or service; 3) sources of supply of labor
or services used in the business; or 4) a market or geographic area in which
business is conducted that makes it vulnerable to an event that is at least
reasonably possible to occur in the near term and which could cause a severe
impact to the Company's financial condition.
CONTINGENCY MATTERS
The Company is occasionally involved in various pending or threatened legal
proceedings arising from the conduct of business. These proceedings are
routine in the ordinary course of business. In
S-14
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
8. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
some instances, these proceedings include claims for compensatory and
punitive damages and similar types of relief in addition to amounts for
alleged contractual liability or requests for equitable relief. After
consultation with legal counsel and a review of available facts, it is
management's opinion that the ultimate liability, if any, under these
proceedings will not have a material adverse affect on the financial
position of the Company.
The number of insurance companies that are under regulatory supervision has
resulted, and is expected to continue to result, in assessments by state
guaranty funds to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments may be partially recovered
through a reduction in future premium taxes in some states. The Company has
accrued for expected assessments net of estimated future premium tax
deductions.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discussion outlines the methodologies and assumptions used to
determine the estimated fair values of the Company's financial instruments.
Considerable judgment is required to develop these fair values. Accordingly,
the estimates shown are not necessarily indicative of the amounts that would
be realized in a one-time, current market exchange of the Company's
financial instruments.
BONDS AND COMMON STOCK
Fair values of bonds are based on quoted market prices, where available. For
bonds not actively traded, fair values are estimated using values obtained
from independent pricing services. In the case of private placements, fair
values are estimated by discounting expected future cash flows using a
current market rate applicable to the coupon rate, credit quality and
maturity of the investments. The fair values of common stocks are based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE
The estimated fair values of mortgage loans on real estate are established
using a discounted cash flow method based on credit rating, maturity and
future income. The rating for mortgages in good standing are based on
property type, location, market conditions, occupancy, debt service
coverage, loan to value, caliber of tenancy, borrower and payment record.
Fair values for impaired mortgage loans are based on: 1) the present value
of expected future cash flows discounted at the loan's effective interest
rate; 2) the loan's market price; or 3) the fair value of the collateral if
the loan is collateral dependent.
POLICY LOANS
The estimated fair value of investments in policy loans was calculated on a
composite discounted cash flow basis using U.S. Treasury interest rates
consistent with the maturity durations assumed. These durations were based
on historical experience.
CASH AND SHORT-TERM INVESTMENTS
The carrying value of cash and short-term investments approximates their
fair value.
INVESTMENT-TYPE INSURANCE CONTRACTS
The balance sheet captions, "Future policy benefits and claims" and "Other
policyholder funds," include investment type insurance contracts (i.e.,
deposit contracts). The fair values for the deposit contracts are based on
their approximate surrender values.
The remainder of the balance sheet captions "Future policy benefits and
claims" and "Other policyholder funds," that do not fit the definition of
"investment-type insurance contracts" are considered insurance contracts.
Fair value disclosures are not required for these insurance contracts and
have not been determined by the Company. It is the Company's position that
the disclosure of the fair value of these insurance contracts is important
because readers of these financial statements could draw inappropriate
conclusions about the Company's capital and surplus determined on a fair
value basis. It could be misleading if only the fair value of assets and
liabilities defined as financial instruments are disclosed. The Company and
other companies in the insurance industry are monitoring the related actions
of the various rule-making bodies and attempting to determine an appropriate
methodology for estimating and disclosing the "fair value" of their
insurance contract liabilities.
S-15
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
SEPARATE ACCOUNTS
Assets held in separate accounts are reported in the accompanying statutory
basis balance sheets at fair value. The related liabilities are also
reported at fair value in amounts equal to the separate account assets.
The carrying values and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
ASSETS (LIABILITIES)
----------------------------------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
----------------------------------------------
DECEMBER
31
1998 1997
----------------------------------------------
(IN THOUSANDS)
----------------------------------------------
<S> <C> <C> <C> <C>
Bonds $1,435,882 $1,462,743 $ 593,432 $ 607,259
- -----------------------------------------------
Unaffiliated common stock 155 155 -- --
--------------------------------------------
Mortgage loans on real estate 184,504 185,694 -- --
--------------------------------------------
Policy loans 170,373 183,408 39,055 39,055
--------------------------------------------
Cash and short-term investments 143,547 143,547 163,774 163,774
--------------------------------------------
Other invested assets 60 60 -- --
--------------------------------------------
Investment-type insurance contracts (962,725) (938,191) (587,465) (587,465)
--------------------------------------------
Separate account assets 236,862 236,862 164,721 164,721
--------------------------------------------
Separate account liabilities (236,862) (236,862) (164,721) (164,721)
--------------------------------------------
</TABLE>
10. TRANSACTIONS WITH AFFILIATES
The Company has entered into agreements with Lincoln Life to receive
processing and other corporate services. Fees paid to Lincoln Life for such
services were $18,504,450, $3,454,014 and $931,000 in 1998, 1997 and 1996,
respectively. The Company has also entered into an agreement with Lincoln
Life to provide certain processing services. Fees received from Lincoln Life
for such services were $273,952, $578,003 and $229,000 in 1998, 1997 and
1996, respectively.
The Company has an investment management agreement with an affiliate,
Lincoln Investment Management, Inc., for investment advisory and asset
management services. Fees paid for such investment services were $1,501,592,
$558,011 and $122,000 in 1998, 1997 and 1996, respectively.
The Company cedes business to two affiliated companies, Lincoln Life and
Lincoln National Reassurance Company. The caption "Premiums and deposits" in
the accompanying statements of operations has been reduced by the $2,095,019
of premiums paid on these contracts in 1998. The caption "Future policy
benefits and claims" has been reduced by $2,583,702 related to reserve
credits taken on these contracts as of December 31, 1998.
11. SEPARATE ACCOUNTS
Separate account premiums, deposits and other considerations amounted to
$73,993,993 and $167,895,749 in 1998 and 1997, respectively. Reserves for
separate accounts with assets at fair value were $229,940,273 and
$159,132,918 at December 31, 1998 and 1997, respectively. All reserves are
subject to discretionary withdrawal at market value. All of the Company's
separate accounts are nonguaranteed. The investment risks associated with
market value changes are borne entirely by the policyholder.
S-16
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
11. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of transfers to (from) separate accounts are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
------------------------
<S> <C> <C>
Transfers as reported in the Summary of Operations of
various Separate Accounts:
Transfers to separate accounts $73,993,993 $167,895,749
- ------------------------------------------------------------ --------- ---------
Transfers from separate accounts (40,118,042) (26,868,553)
- ------------------------------------------------------------ --------- ---------
Net transfer to separate accounts as reported in the
Company's NAIC Annual Statement -- Summary of Operations $33,875,951 $141,027,195
- ------------------------------------------------------------ --------- ---------
--------- ---------
</TABLE>
12. CENTURY COMPLIANCE (UNAUDITED)
The Year 2000 issue is pervasive and complex and affects virtually every
aspect of the Company's business. The Company's computer systems and
interfaces with the computer systems of vendors, suppliers, customers and
business partners are particularly vulnerable. The Company has been
redirecting a large portion of internal Information Technology efforts and
contracting with affiliate service providers, who have contracted with
outside consultants, to update systems to address Year 2000 issues. Experts
have been engaged to assist in developing work plans and cost estimates and
to complete remediation activities.
For the year ended December 31, 1998, the Company identified expenditures of
$235,809 to address this issue which represent all expenditures to date. The
Company's financial plans for 1999 and 2000 include expected expenditures of
an additional $410,000. Actual Year 2000 expenditures through December 31,
1998 and future Year 2000 expenditures are expected to be funded from
operating cash flows. The anticipated cost of addressing Year 2000 issues is
based on management's current best estimates which were derived utilizing
numerous assumptions of future events, including the continued availability
of certain resources, third party modification plans and other factors. Such
costs will be closely monitored by management. Nevertheless, there can be no
guarantee that actual costs will not be higher than these estimated costs.
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. The total expenditures identified represent only the
Company's portion of Lincoln Life's and LNC's larger expenditures to address
the Year 2000 issue.
The current scope of the Company's and its affiliates overall Year 2000
program includes the following four major project areas: 1) addressing the
readiness of business applications, operating systems and hardware on
mainframe, personal computer and Local Area Network platforms (IT); 2)
addressing the readiness of non-IT embedded software and equipment (non-IT);
3) addressing the readiness of key business partners; and 4) establishing
Year 2000 contingency plans.
The projects to address IT and non-IT readiness have four major phases.
Phase one involves raising awareness and creating an inventory of all IT and
non-IT assets. The second phase consists of assessing all items inventoried
to initially determine whether they are affected by the Year 2000 issue and
preparing general plans and strategies. The third phase entails the detailed
planning and remediation of affected systems and equipment. The last phase
consists of testing to verify Year 2000 readiness.
The Company and its affiliates have completed those four phases for over
two-thirds of its high priority IT systems respectively, including those
provided by software vendors. While the Company's year 2000 program for
nearly all high priority IT systems is expected to be completed in the first
quarter 1999, phase four, for a small but important subset of these systems,
will continue through the end of the second quarter 1999. As of
S-17
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
12. CENTURY COMPLIANCE (UNAUDITED) (CONTINUED)
December 31, 1998, the status of projects addressing readiness of IT assets
is: 100% of IT assets have been inventoried (Phase 1) and assessed (Phase
2); 94% of IT projects have been through the remediation phase (Phase 3)
with the last project scheduled for completion by the end of March 1999; and
69% of IT projects have completed the testing phase (Phase 4) with the last
project scheduled to finish testing by the end of June 1999. A portion of
the effort that extends into 1999 is dependent on outside third parties and
is behind the original schedule. The Company is working with these parties
to modify the completion schedule.
As of December 31, 1998, the status of projects that address readiness of
high priority non-IT assets is: 100% of non-IT assets have been inventoried
(Phase 1) and assessed (Phase 2); 79% of non-IT projects addressing
remediation (Phase 3) have been completed and 21% of non-IT projects have
completed the testing phase (Phase 4). The Company expects to have all
phases related to high priority non-IT completed by the end of October 1999.
Concurrent with the IT and non-IT projects, the readiness of key business
partners is being reviewed and Year 2000 contingency plans are being
developed. The most significant categories of key business partners are
financial institutions, software vendors and utility providers (gas,
electric and telecommunications). Surveys have been mailed to these key
business partners. Based on responses received, current levels of readiness
are being assessed, follow-up contacts are underway, alternative strategies
are being developed and testing is being scheduled where feasible. This
effort is expected to continue well into 1999. As noted above, software
vendor assessments are considered part of the IT projects and, therefore,
would follow the schedule shown above for such projects.
While the Company is working to meet the schedules outlined above, some
uncertainty remains. Specific factors that give rise to this uncertainty
include a possible loss of technical resources to perform the work, failure
to identify all susceptible systems, non-compliance by third parties whose
systems and operations impact the Company and other similar uncertainties.
A worst case scenario might include the Company's inability to achieve Year
2000 readiness with respect to one or more of the Company's significant
policyholder systems resulting in a material disruption to the Company's
operations. Specifically, the Company could experience an interruption in
its ability to collect and process premiums or deposits, process claim
payments, accurately maintain policyholder information, accurately maintain
accounting records and/or perform adequate customer service. Should the
worst case scenario occur, it could, depending on its duration, have a
material impact on the Company's results of operations and financial
position. Simple failures can be repaired and returned to production within
a matter of hours with no material impact. Unanticipated failures with a
longer service disruption period would have a more serious impact. For this
reason, the Company is placing significant emphasis on risk management and
Year 2000 contingency planning. The Company is in the process of modifying
its contingency plans to address potential Year 2000 issues. Where these
efforts identify high risks due either to unacceptable work around
procedures or significant readiness risks, appropriate risk management
techniques are being developed. These techniques, such as resource shifting
or use of alternate providers, will be employed to provide stronger
assurances of readiness. The Company has gone through exercises to identify
worst case scenario failures. At this time, the Company believes its plans
are sufficient to mitigate identified worst case scenarios.
S-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Lincoln Life & Annuity Company of New York
We have audited the accompanying statutory-basis balance sheets
of Lincoln Life & Annuity Company of New York (a wholly owned
subsidiary of The Lincoln National Life Insurance Company) as of
December 31, 1998 and 1997, and the related statutory-basis
statements of operations, changes in capital and surplus, and
cash flows for the years then ended and the period from June 6,
1996 (date of incorporation) to December 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company
presents its financial statements in conformity with accounting
practices prescribed or permitted by the New York Insurance
Department, which practices differ from generally accepted
accounting principles. The variances between such practices and
generally accepted accounting principles and the effects on the
accompanying financial statements are described in Note 1.
In our opinion, because of the effects of the matter described
in the preceding paragraph, the financial statements referred to
above do not present fairly, in conformity with generally
accepted accounting principles, the financial position of
Lincoln Life & Annuity Company of New York at December 31, 1998
and 1997, or the results of its operations or its cash flows for
the years then ended and the period from June 6, 1996 (date of
incorporation) to December 31, 1996.
However, in our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Lincoln Life & Annuity Company of New York at
December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended and the period from
June 6, 1996 (date of incorporation) to December 31, 1996, in
conformity with accounting practices prescribed or permitted by
the New York Insurance Department.
/s/ Ernst & Young LLP
March 18, 1999
S-19
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) List of Financial Statements
1. Part A. The Table of Condensed Financial Information is included in
Part A of this Registration Statement.
2. Part B. The following Financial Statements of Account L are included
in Part B of this Registration Statement:
Statement of Assets and Liability--December 31, 1998
Statement of Operations--Year ended December 31, 1998
Statement of Changes in Net Assets--Years ended December 31, 1998
and 1997
Notes to Financial Statements--December 31, 1998
Report of Ernst & Young LLP, Independent Auditors
3. The following Statutory-Basis Financial Statements of The Lincoln
National Life Insurance Company are included in the SAI:
Balance Sheets--Statutory Basis--Years ended December 31, 1998 and
1997
Statements of Operations--Statutory Basis--Years ended December 31,
1998, 1997, and 1996
Statements of Changes in Capital and Surplus--Statutory Basis--Years
ended December 31, 1998, 1997, and 1996
Statements of Cash Flows--Statutory Basis--Years ended December 31,
1998, 1997, and 1996
Notes to Financial Statements--December 31, 1998
Report of Ernst & Young LLP, Independent Auditors
(b) Exhibits
1. Resolution adopted by the Board of Directors of Lincoln Life & Annuity
Company of New York on July 24, 1996 establishing the Lincoln Life &
Annuity Variable Annuity Account L of Lincoln Life & Annuity Company
of New York./1/
2. Not applicable.
3(a). Principal Underwriting Contract./2/
3(b). Broker-dealer sales agreement./2/
4(a). Forms of Group Annuity Contracts for Lincoln Life & Annuity Company
of New York./2/
4(b). Form of 401(a) Group Annuity Contract for Lincoln Life & Annuity
Company of New York./3/
4(c). Form of endorsement to Group Annuity Contract and Certificate./4/
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))./2/
6. Copy of certificate of incorporation and by-laws of Lincoln Life &
Annuity Company of New York./1/
7. Not applicable.
8(a). Participation Agreement between Lincoln Life & Annuity Company of New
York and Dreyfus Life & Annuity Index Fund, Inc. and Dreyfus Variable
Investment Fund./2/
8(b). Participation Agreement between Lincoln Life & Annuity Company of New
York and Variable Insurance Products Fund and Fidelity Distributors
Corporation./2/
8(c). Participation Agreement between Lincoln Life & Annuity Company of New
York and Variable Insurance Products Fund II and Fidelity Distributors
Corporation./2/
C-1
<PAGE>
8(d). Participation Agreement between Lincoln Life & Annuity Company of
New York and Twentieth Century Securities, Inc./2/
8(e). Participation Agreement between Lincoln Life & Annuity Company of New
York and Acacia Capital Corporation and Calvert Distributors, Inc./2/
8(f). Participation Agreement between Lincoln Life & Annuity Company of New
York and T. Rowe Price International Series, Inc. and T. Rowe Price
Investment Services, Inc./2/
8(g). Participation Agreement between Lincoln Life & Annuity Company of New
York and The Lincoln National Social Awareness Fund, Inc.
8(h). Participation Agreement between Lincoln Life & Annuity Company of New
York and Janus Aspen Series.
8(i). Participation Agreement between Lincoln Life & Annuity Company of New
York and The Lincoln National Aggressive Growth Fund, Inc.
8(j). Participation Agreement between Lincoln Life & Annuity Company of New
York and Baron Capital Funds Trust.
8(k). Participation Agreement between Lincoln Life & Annuity Company of New
York and Neuberger & Berman Advisers Management Trust.
9. Consent and opinion of Counsel as to the legality of the securities
being registered./2/
10(a). Consent of Ernst & Young LLP, Independent Auditors.
11. Not applicable.
12. Not applicable.
13(a). Schedule for Computation of Performance Quotations./3/
13(b). Supplement to Schedule for Computation of Performance Quotations./4/
14. Not applicable.
15(a). Organizational Chart of Lincoln National Life Insurance Holding
Company System.
15(b). Memorandum Concerning Books and Records
- -------------
/1/ Incorporated herein by reference to the registrant's initial
registration statement filed with the Securities and Exchange Commission on
August 27, 1996 (File No. 333-10863).
/2/ Incorporated herein by reference to Pre-effective Amendment No. 1 on
Form N-4 filed by the Lincoln Life & Annuity Variable Account L of Lincoln
Life & Annuity Company of New York with the Securities and Exchange
Commission on September 30, 1996.
/3/ Incorporated herein by reference to Post-effective Amendment No. 1 on
Form N-4 filed by Lincoln Life & Annuity Variable Annuity Account L of Lincoln
Life & Annuity Company of New York on April 30, 1997 (File No. 333-10863).
/4/ Incorporated herein by reference to Post-effective Amendment No. 2 on
Form N-4 filed by Lincoln Life & Annuity Variable Annuity Account L on May 1,
1998 (File No. 333-10863).
/5/ Incorporated herein by reference to Post-effective Amendment No. 3 on
Form N-4 filed by Lincoln Life & Annuity Variable Annuity Account L of Lincoln
Life & Annuity Company of New York on September 30, 1998 (File No. 333-10863).
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following list contains the officers and directors of Lincoln Life & Annuity
Company of New York who are engaged directly or indirectly in activities
relating to the Lincoln Life & Annuity Variable Annuity Account L as well as the
Contracts. The list also shows Lincoln Life & Annuity Company of New York's
executive officers.
Positions and Offices with Lincoln Life &
Name Annuity Company of New York
- ---- -----------------------------------------
Philip L. Holstein* President, Treasurer and Director
Troy D. Panning* Second Vice President and Chief
Financial Officer
Roland C. Baker Director
1801 S. Meyers Road
Oakbrook Terrace, IL 60181
J. Patrick Barrett Director
Chairman & CEO
Carpat Investments
4605 Watergap
Manlius, NY 13104
C-2
<PAGE>
Thomas D. Bell, Jr. Director
President & CEO
Burson-Marstellar Worldwide
230 Park Avenue South
New York, NY 10003
Jon A. Boscia** Director
Kathleen R. Gorman* Assistant Vice President and
Assistant Secretary
Harry L. Kavetas Director
Executive Vice President & CFO
Eastman Kodak Company
343 State Street
Rochester, NY 14650-0235
Barbara S. Kowalczyk*** Director
M. Leanne Lachman Director
Managing Director
Schroder Real Estate Associates
437 Madison Avenue - 18th Floor
New York, NY 10022
Louis G. Marcoccia Director
Senior Vice President
Syracuse University
Skytop Office Building
Skytop Road
Syracuse, NY 13244-5300
John M. Pietruski Director
27 Paddock Lane
Colts Neck, NJ 07722
Lawrence T. Rowland**** Director
Gabriel L. Shaheen** Director
Robert O. Sheppard* Assistant Vice President and
Associate Counsel
Richard C. Vaughan*** Director
* Principal business address of each person is 120 Madison Street,
Suite 1700, Syracuse, New York 13202.
** Principal business address of each person is 1300 S. Clinton Street, Fort
Wayne, Indiana 46802-2706.
*** Principal business address of each person is 200 E. Berry Street, Fort
Wayne, Indiana 46802-2706.
**** Principal business address of each person is 1700 Magnavox Way, One
Reinsurance Place, Fort Wayne, Indiana 46804-1538.
Item 26. Persons Controlled by or Under Common Control with Lincoln Life &
Annuity Company of New York (LLANY) or the Lincoln Life & Annuity
Variable Annuity Account L.
Lincoln Life & Annuity Variable Annuity Account L is a separate account of LLANY
and may be deemed to be controlled by LLANY although LLANY 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 is hereby incorporated herein by this reference.
C-3
<PAGE>
Item 27. Number of Contractholders
As of March 31, 1999, Registrant had 213 Contractholders.
Item 28. Indemnification
Under the Participation Agreements entered into between LLANY 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"), LLANY 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 LLANY against any liability, loss, damages, costs or
expenses which LLANY 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) Lincoln Financial Advisors Corporation also acts as the principal
underwriter for Lincoln National 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 Lincoln Financial Advisors Corporation:
POSITIONS AND OFFICES
WITH LINCOLN FINANCIAL
NAME AND ADDRESS ADVISORS CORPORATION
- ---------------- ---------------------
J. Michael Hemp***** President and Director
Priscilla S. Brown* Vice President
John M. Behrendt* Vice President and Director
Richard C. Boyles*** Chief Financial Officer and
Administrative Officer
C-4
<PAGE>
Carolyn P. Brody* Vice President and Director
Gary D. Giller**** Director
Janet C. Chrzan** Vice President and Treasurer
Cynthia A. Rose** Secretary
Todd R. Stephenson*** Senior Vice President
Michael McMath***** Senior Vice President
* 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, Ohio 43235.
***** Principal business address of each person is 350 Church Street, Hartford,
Ct 06103
(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 $0 N/A N/A N/A
Advisors Corporation
</TABLE>
Item 30. Location of Accounts and Records
Exhibit 15(b) is hereby expressly incorporated herein by this reference.
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 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.
C-5
<PAGE>
SIGNATURES
(a) As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Amendment and has caused
this Amendment to the Registration Statement to be signed on its behalf, in the
City of Syracuse, and State of New York on this 29th day of April, 1999.
Lincoln Life & Annuity Variable Annuity Account L
(Group Variable Annuity I) (Registrant)
By: Lincoln Life & Annuity Company of New York
By: /s/ Philip L. Holstein
--------------------------------------------
Philip L. Holstein, President
Lincoln Life & Annuity Company of New York
(Depositor)
By: /s/ Philip L. Holstein
--------------------------------------------
Philip L. Holstein, President
(b) As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed for the Depositor by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Philip L. Holstein April 29, 1999
- ----------------------------
Philip L. Holstein President, Treasurer and
Director (Principal
Executive Officer)
/s/ Troy D. Panning
- ---------------------------- April 29, 1999
Troy D. Panning Second Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Roland C. Baker April 29, 1999
- ----------------------------
Roland C. Baker Director
- ----------------------------
J. Patrick Barrett Director
/s/ Thomas D. Bell, Jr. April 29, 1999
- ----------------------------
Thomas D. Bell, Jr. Director
/s/ Jon A. Boscia April 29, 1999
- ----------------------------
Jon A. Boscia Director
- ----------------------------
Harry L. Kavetas Director
/s/ Barbara S. Kowalczyk April 29, 1999
- ----------------------------
Barbara S. Kowalczyk Director
- ----------------------------
M. Leanne Lachman Director
/s/ Louis G. Marcoccia April 29, 1999
- ----------------------------
Louis G. Marcoccia Director
- ----------------------------
John M. Pietruski Director
- ----------------------------
Lawrence T. Rowland Director
- ----------------------------
Gabriel L. Shaheen Director
/s/ Richard C. Vaughan April 29, 1999
- ----------------------------
Richard C. Vaughan Director
</TABLE>
<PAGE>
Exhibit 10(a)
Consent of Ernst & Young LLP,
Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" in the Post Effective Amendment No. 5 to the Registration Statement
(Form N-4 No. 333-10863) and the related Statement of Additional Information
appearing therein and pertaining to Lincoln Life & Annuity Variable Annuity
Account L, and to the use therein of our reports dated (a) March 18, 1999, with
respect to the statutory-basis financial statements of Lincoln Life & Annuity
Company of New York, and (b) March 30, 1999, with respect to the financial
statements of Lincoln Life & Annuity Variable Annuity Account L.
Fort Wayne, Indiana
April 27, 1999
<PAGE>
<TABLE>
<CAPTION>
<S><C>
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with
the exception of, Delaware Distributors, L.P and Founders CBO, L.P.
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| ---------------------------------------------
|--| Lincoln National Management Corporation |
| | 100% - Pennsylvania - Management Company |
| ---------------------------------------------
| ---------------------------------------------
|--| City Financial Partners Ltd. |
| | 100% - England/Wales - Distribution of life |
| | assurance & pension products |
| ---------------------------------------------
| ------------------------------------------------
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
| ------------------------------------------------
| ---------------------------------------------------
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| |100% - Indiana - Insurance Agency |
| ---------------------------------------------------
| | ---------------------------------
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| | ---------------------------------
| | ---------------------------------------
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| | ---------------------------------------
| | -----------------------------------------
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| | -----------------------------------------
| | -----------------------------------------------
| | | Financial Investment Services, Inc. |
| |--| (formerly Financial Services Department, Inc.)|
| | | 100% - Indiana - Insurance Agency |
| | -----------------------------------------------
| | -----------------------------------------
| | | Financial Investments, Inc. |
| |--| (formerly Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| | -----------------------------------------
| | -------------------------------------------
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| | -------------------------------------------
| | -----------------------------------------
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| | -----------------------------------------
| | --------------------------------------
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| | --------------------------------------
| | --------------------------------------
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
--------------------------------------
<PAGE>
-------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
-------------------------------
| ---------------------------------------------------
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| |100% - Indiana - Insurance Agency |
| ---------------------------------------------------
| | ------------------------------------
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| | ------------------------------------
| | ----------------------------------------
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
| ----------------------------------------
| -------------------------------------------
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
| -------------------------------------------
| ----------------------------------------------
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (formerly Lincoln Financial Group, Inc.) |
| | 100% - Indiana - Insurance Agency |
| ----------------------------------------------
| | ----------------------------------------
| |--| Lincoln Financial Advisors Corporation |
| | | (formerly LNC Equity Sales Corporation)|
| | | 100% - Indiana - Broker-Dealer |
| | ----------------------------------------
| | -------------------------------------------------------------
| | |Corporate agencies: Lincoln Life and Annuity Distributors, |
| | |Inc. ("LLAD")has subsidiaries of which LLAD owns from |
| | |80%-100% of the common stock (see Attachment #1). These |
| | |subsidiaries serve as the corporate agency offices for the |
| | |marketing and servicing of products of The Lincoln National |
| | |Life Insurance Company. Each subsidiary's assets are less |
| | |than 1% of the total assets of the ultimate controlling |
| | |person. |
| | -------------------------------------------------------------
| | ------------------------------------------------
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
| ------------------------------------------------
| ---------------------------------------
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
| ---------------------------------------
|
| -----------------------------------------------
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
| -----------------------------------------------
|
| ---------------------------------------------
|--| Lincoln National Intermediaries, Inc. |
| | 100% - Indiana - Reinsurance Intermediary |
| ---------------------------------------------
|
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| |
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
--------------------------------------------
<PAGE>
-------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
-------------------------------
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | --------------------------------------------
| | | ----------------------------------
| | |--|Delaware Management Holdings, Inc.|
| | | |100% - Delaware - Holding Company |
| | | ----------------------------------
| | | | ------------------------------------
| | | |--| DMH Corp. |
| | | | 100% - Delaware - Holding Company |
| | | ------------------------------------
| | | | ----------------------------------------
| | | ---| Delaware International Advisers Ltd. |
| | | | 81.1% - England - Investment Advisor |
| | | ----------------------------------------
| | | --------------------------------------
| | |--| Delaware Management Trust Company |
| | | | 100% - Pennsylvania - Trust Service |
| | | --------------------------------------
| | | | -------------------------------------------------
| | | |__| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Investment Advisor |
| | | | -------------------------------------------------
| | | | | --------------------------------------
| | | | |--| Delaware International Advisers, Ltd.|
| | | | | 18.9% - England - Investment Advisor |
| | | | --------------------------------------
| | | | -------------------------------------------------
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | -------------------------------------------------
| | | | | ---------------------------------------
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | ---------------------------------------
| | | | | | ------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & Broker/Dealer |
| | | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | | ------------------------------------------------------
| | | | | | ------------------------------------
| | | | | |--| Founders Holdings, Inc. |
| | | | | | | 100% - Delaware - General Partner |
| | | | | | ------------------------------------
| | | | | | | -----------------------------------------
| | | | | | |--| Founders CBO, L.P. |
| | | | | | | 1% - Delaware - Investment Partnership |
| | | | | | | 99% held by outside investors |
| | | | | | -----------------------------------------
| | | | | | | ------------------------------------------
| | | | | | |--|Founders CBO Corporation |
| | | | | | | |100%-Delaware-Co-Issuer with Founders CBO |
| | | | | | | ------------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | --------------------------------------------
| | | ----------------------------------
| | |--|Delaware Management Holdings, Inc.|
| | | |100% - Delaware - Holding Company |
| | | ----------------------------------
| | | | -----------------------------------
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | | -----------------------------------
| | | | -------------------------------------------------
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | -------------------------------------------------
| | | | | ------------------------------------
| | | | |--| Delaware Distributors, Inc. |
| | | | | | 100% - Delaware - General Partner |
| | | | | ------------------------------------
| | | | | | -------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & Broker/Dealer |
| | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | -------------------------------------------------------
| | | | | -----------------------------------------------
| | | | |--| Delaware Capital Management, Inc. |
| | | | | |(formerly Delaware Investment Counselors, Inc.)|
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | -----------------------------------------------
| | | | | | -----------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & Broker/Dealer |
| | | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | -----------------------------------------------------------
| | | | | -----------------------------------------------------
| | | | |--| Delaware Service Company, Inc. |
| | | | | | 100%-Delaware-Shareholder Services & Transfer Agent |
| | | | | -----------------------------------------------------
| | | | | -------------------------------------------------
| | | | |__| Delaware Investment & Retirement Services, Inc. |
| | | | | | 100% - Delaware - Registered Transfer Agent |
| | | | | -------------------------------------------------
| | | -----------------------------------------
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | -----------------------------------------
| | | | ---------------------------------------
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | | ---------------------------------------
| | | ----------------------------------------------------
| | | | Vantage Global Advisors, Inc. |
| | |--| (formerly Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
----------------------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| | -----------------------------------------------------------
| | | Lincoln Investment Management, Inc. |
| |--| (formerly Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
| | -----------------------------------------------------------
| -----------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -----------------------------------------------
| | --------------------------------------------------
| |--|AnnuityNet, Inc. |
| | |100% - Indiana - Distribution of annuity products |
| | --------------------------------------------------
| | | -------------------------------------
| | |--| AnnuityNet Insurance Agency, Inc. |
| | | | 100% - Indiana - Insurance Agency |
| | -------------------------------------
| | -------------------------------------------
| |--|Lincoln National Insurance Associates, Inc.|
| | |(fka Cigna Associates, Inc.) |
| | |100% - Connecticut - Insurance Agency |
| | -------------------------------------------
| | | --------------------------------------------------------
| | |--|Lincoln National Insurance Associates of Alabama, Inc. |
| | | |100% - Alabama - Insurance Agency |
| | | --------------------------------------------------------
| | | -------------------------------------------------------------
| | | | Lincoln National Insurance Associates of Massachusetts, Inc.|
| | | | (formerly Cigna Associates of Massachusetts, Inc.) |
| | |--| 100% - Massachusetts - Insurance Agency |
| | -------------------------------------------------------------
| | -------------------------------------------
| |--| Sagemark Consulting, Inc. |
| | | (fka Cigna Financial Advisors, Inc.) |
| | | 100% - Connecticut - Broker Dealer |
| | -------------------------------------------
| | -------------------------------------------
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| | -------------------------------------------
| | -----------------------------------------------
| |--| Lincoln Life & Annuity Company of New York |
| | | 100% - New York |
| | -----------------------------------------------
| | ------------------------------------------------
| |--| Lincoln National Aggressive Growth Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------
| | -----------------------------------
| |--| Lincoln National Bond Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------
| | --------------------------------------------------
| |--| Lincoln National Capital Appreciation Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | --------------------------------------------------
| | --------------------------------------------
| |--| Lincoln National Equity-Income Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | --------------------------------------------
| | ------------------------------------------------------
| | | Lincoln National Global Asset Allocation Fund, Inc. |
| |--| (formerly Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -----------------------------------------------
| | ------------------------------------------------
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (formerly Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------
| | --------------------------------------------------------
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| | --------------------------------------------------------
| | -----------------------------------------------
| |--| Lincoln Re, S.A. |
| | | 1% Argentina - General Business Corp |
| | | (Remaining 99% owned by Lincoln National |
| | | Reassurance Company) |
| | -----------------------------------------------
| | -------------------------------------------
| |--| Lincoln National International Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -------------------------------------------
| | ---------------------------------------
| |--| Lincoln National Managed Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | ---------------------------------------
| | --------------------------------------------
| |--| Lincoln National Money Market Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | --------------------------------------------
| | -----------------------------------------------
| |--| Lincoln National Social Awareness Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------------------
| | -----------------------------------------------------
| |--| Lincoln National Special Opportunities Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------------------------
| | ------------------------------------------------------
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| ------------------------------------------------------
| | -----------------------------------------------
| |--| Lincoln Re, S.A. |
| | | 99% Argentina - General Business Corp |
| | | (Remaining 1% owned by Lincoln National Health|
| | | & Casualty Insurance Company) |
| | -----------------------------------------------
| | -----------------------------------------------
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
| -----------------------------------------------
| ---------------------------------------------------------
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
| ---------------------------------------------------------
| ---------------------------------------
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
| ---------------------------------------
| -----------------------------------------------------------
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
| -----------------------------------------------------------
| ----------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
----------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| ----------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| ----------------------------------------------
| | ---------------------------------------------------------
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| | ---------------------------------------------------------
| | --------------------------------------------------------
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
| --------------------------------------------------------
| ---------------------------------------------
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
| ---------------------------------------------
| ------------------------------------------------
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
| ------------------------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | -------------------------------------------------------
| |--| Allied Westminster & Company Limited |
| | | (formerly One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| | -------------------------------------------------------
| | --------------------------------------------------------
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| | --------------------------------------------------------
| | ---------------------------------------------------------
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| | ---------------------------------------------------------
| | --------------------------------------------
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| | --------------------------------------------
| | ------------------------------------------------
| |--| Lincoln Financial Advisers Limited |
| | | (formerly: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| | ------------------------------------------------
| | --------------------------------------------------
| |--| Lincoln Financial Group PLC |
| | | (formerly: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | --------------------------------------------------
| | | ----------------------------------------------------
| | |--| Lincoln ISA Management Limited |
| | | | (formerly Lincoln Unit Trust Management Limited; |
| | | | Laurentian Unit Trust Management Limited) |
| | | | 100% - England/Wales - Unit Trust Management |
----------------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | --------------------------------------------------
| |--| Lincoln Financial Group PLC |
| | | (formerly: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | --------------------------------------------------
| | | ---------------------------------------
| | |--| Lincoln Milldon Limited |
| | | | (formerly: Laurentian Milldon Limited)|
| | | | 100% - England/Wales - Sales Company |
| | | ---------------------------------------
| | | -----------------------------------------------------------
| | |--| Laurtrust Limited |
| | | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | | -----------------------------------------------------------
| | | --------------------------------------------------
| | |--|Lincoln Management Services Limited |
| | | |(formerly: Laurentian Management Services Limited)|
| | | |100% - England/Wales - Management Services |
| | | --------------------------------------------------
| | | | ------------------------------------------------
| | | |--|Laurit Limited |
| | | | |100% - England/Wales - Data Processing Systems |
| | | | ------------------------------------------------
| | --------------------------------------------------------
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund (Dormat) |
| | --------------------------------------------------------
| | ----------------------------------------------------------
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services (Dormat) |
| | ----------------------------------------------------------
| | | -----------------------------------
| | |--| UK Mortgage Securities Limited |
| | | 100% - England/Wales - Inactive |
| | -----------------------------------
| | ------------------------------------------
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | ----------------------------------------------
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| | ----------------------------------------------
| | --------------------------------------------
| |--|Lincoln Assurance Limited |
| | |100% ** - England/Wales - Life Assurance |
| | --------------------------------------------
| | | | ---------------------------------------------
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | ---------------------------------------------
| | | | | ------------------------------------------
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | | ------------------------------------------
| | | | | --------------------------------------------
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | | | --------------------------------------------
| | | | -----------------------------------------------------
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment (Inactive)|
| | | -----------------------------------------------------
| | | ----------------------------------------------------
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | ----------------------------------------------------
| | | | ---------------------------------
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | | ---------------------------------
| | | | ----------------------------------------------------------
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension Fund (Inactive) |
| | | | ----------------------------------------------------------
| | | | -------------------------------------
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
-------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | |----------------------------------------------
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | ----------------------------------------------
| | ----------------------------------------------------------
| |--| LIV Limited (formerly Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | ----------------------------------------------------------
| | | -----------------------------------------------
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| | -----------------------------------------------
| | -----------------------------------------------------------
| |--| Lincoln Independent Limited |
| | | (formerly: Laurentian Independent Financial Planning Ltd.)|
| | | 100% - England/Wales - Independent Financial Adviser |
| | -----------------------------------------------------------
| | ----------------------------------------------
| |--| Lincoln Investment Management Limited |
| | | (formerly: Laurentian Fund Management Ltd.) |
| | | 100% - England/Wales - Investment Management |
| | ----------------------------------------------
| | ------------------------------------------
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| | ------------------------------------------
| | --------------------------------------------
| |--| Niloda Limited |
| | | 100% - England/Wales - Investment Company |
| | --------------------------------------------
| | ------------------------------------------------
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln Independent (Jersey) Limited |
| | | (formerly Lincoln National (Jersey) Limited) |
| | | 100% - England/Wales - Dormat |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln National(Guernsey) Limited |
| | | 100% - England/Wales - Dormat |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln SBP Trustee Limited |
| | | 100% - England/Wales |
------------------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -------------------------------------------------
| | Linsco Reinsurance Company |
|--| (formerly Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
| -------------------------------------------------
| ------------------------------------
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| ------------------------------------
| | --------------------------------------------------------
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| | --------------------------------------------------------
| | ---------------------------------------------------
| | | Solutions Holdings, Inc. |
| |--| 100% - Delaware - General Business Corporation |
| | ---------------------------------------------------
| | | -----------------------------------------
| | |--|Solutions Reinsurance Limited |
| | | |100% - Bermuda - Class III Insurance Co |
| -----------------------------------------
| ----------------------------------------------------------
| | Seguros Serfin Lincoln, S.A. |
|--| 49% - Mexico - Insurance |
| ----------------------------------------------------------
| ----------------------------------------------------------
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
| ----------------------------------------------------------
| --------------------------------------------
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
--------------------------------------------
</TABLE>
FOOTNOTES:
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
<PAGE>
ATTACHMENT #1
LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport,
LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(formerly: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (formerly: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (formerly: Resources/Financial, Inc.
(Albuquerque, NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act as Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (formerly Laurentian
Financial Group PLC); Lincoln Milldon Limited (formerly Laurentian Milldon
Limited); Lincoln Management Services Limited (formerly Laurentian
Management Services Limited).
FEBRUARY 1997
a. Removal of Lincoln National Financial Group of Philadelphia, Inc. which was
dissolved effective February 25, 1997.
MARCH 1997
a. Removal of Lincoln Financial Services, Inc. which was dissolved effective
March 4, 1997.
APRIL 1997
a. Acquisition of Dougherty Financial Group, Inc. on April 30, 1997. Company
then changed its name to Delvoy, Inc. The acquisition included the mutual
fund group of companies as part of the Voyager acquisition. The following
companies all then were moved under the newly formed holding company,
Delvoy, Inc. effective April 30, 1997: Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
b. Acquisition of Voyager Fund Managers, Inc. and Voyager Fund Distributors,
Inc. on April 30, 1997; merger is scheduled for May 31, 1997 for Voyager
Fund Managers, Inc. into Delaware Management Company, Inc. and Voyager Fund
Distributors, Inc. is to merge into Delaware Distributors, L.P.
c. Removal of Aseguradora InverLincoln, S.A. Compania de Seguros y Reaseguros,
Grupo Financiero InverMexico. Stock was sold to Grupo Financiero
InverMexico effective April 18, 1997.
MAY 1997
a. Name change of The Richard Leahy Corporation to Lincoln National Financial
Institutions Group, Inc. effective May 6, 1997.
b. Voyager Fund Managers, Inc. merged into Delaware Management Company, Inc.
effective May 30, 1997 at 10:00 p.m. with Delaware Management Company, Inc.
surviving.
c. On May 31, 1997 at 2:00 a.m., Voyager Fund Distributors, Inc. merged into a
newly formed company Voyager Fund Distributors (Delaware), Inc.,
incorporated as a Delaware corporation on May 23, 1997. Voyager Fund
Distributors (Delaware), Inc. then merged into Delaware Distributors, L.P.
effective May 31, 1997 at 2:01 a.m. Delaware Distributors, L.P. survived.
JUNE 1997
a. Removal of Lincoln National Sales Corporation of Maryland -- company
dissolved June 13, 1997.
b. Addition of Lincoln Funds Corporation, incorporated as a Delaware
corporation on June 10, 1997 at 2:00 p.m.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Soutwest Financial Group, Inc. -- company's term of existence
expired July 18, 1998.
<PAGE>
BOOKS AND RECORDS
LINCOLN LIFE & ANNUITY VARIABLE ANNUITY ACCOUNT L
RULES UNDER SECTION 31 OF THE INVESTMENT COMPANY ACT OF 1940
Records to Be Maintained by Registered Investment Companies, Certain
Majority-Owned Subsidiaries Thereof, and Other Persons Having Transactions with
Registered Investment Companies.
Reg. 270.31a-1. (a) Every registered investment company, and every underwriter,
broker, dealer, or investment advisor which is a majority-owned subsidiary of
such a company, shall maintain and keep current the accounts, books, and other
documents relating to its business which constitute the record forming the basis
for financial statements required to be filed pursuant to Section 30 of the
Investment Company Act of 1940 and of the auditor's reports relating thereto.
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ----------------------
<S> <C> <C> <C>
Annual Reports Finance Eric Jones Permanently, the first
To Shareholders two years in an easily
accessible place
Semi-Annual Finance Eric Jones Permanently, the first
Reports two years in an easily
accessible place
Form N-SAR Finance Eric Jones Permanently, the first
two years in an easily
accessible place
</TABLE>
(b) Every registered investment company shall maintain and keep current the
following books, accounts, and other documents:
Type of Record
- --------------
(1) Journals (or other records of original entry) containing an itemized daily
record in detail of all purchases and sales of securities (including sales and
redemptions of its own securities), all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash and all other debits and
credits. Such records shall show for each such transaction the name and quantity
of securities, the unit and aggregate purchase or sale price, commission paid,
the market on which effected, the trade date, the settlement date, and the name
of the person through or from whom purchased or received or to whom sold or
delivered.
Purchases and Sales Journals
- ----------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Daily reports CSRM Kathleen Adamson Permanently, the first
of securities (Portland) two years in an easily
transactions Finance Eric Jones accessible place
Portfolio Securities
- ----------------------
C-Port Purchase/ Finance Eric Jones Permanently, the first
Sales Reports two years in an easily
accessible place
</TABLE>
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Receipts and Deliveries of Securities (units)
- ---------------------------------------------
Not Applicable.
Portfolio Securities
- --------------------
Not Applicable.
Receipts and Disbursements of Cash and other Debits and Credits
- ---------------------------------------------------------------
Daily Journals CSRM (Portland) Kathleen Adamson Permanently, the first
Finance Eric Jones two years in an easily
accessible place
(2) General and auxiliary ledgers (or other record) reflecting all asset,
liability, reserve, capital, income and expense accounts, including:
(i) Separate ledger accounts (or other records) reflecting the following:
(a) Securities in transfer;
(b) Securities in physical possession;
(c) Securities borrowed and securities loaned;
(d) Monies borrowed and monies loaned (together with a record of the
collateral therefore and substitutions in such collateral);
(e) Dividends and interest received;
(f) Dividends receivable and interest accrued.
Instructions. (a) and (b) shall be stated in terms of securities quantities
only; (c) and (d) shall be stated in dollar amounts and securities quantities as
appropriate; (e) and (f) shall be stated in dollar amounts only.
General Ledger
- --------------
LNL trial Finance Eric Jones Permanently, the first
Balance (5000 two years in an easily
series) accessible place
Securities in Transfer
- ----------------------
Not Applicable.
Securities in Physical Possession
- ---------------------------------
Not Applicable.
Securities Borrowed and Loaned
- ------------------------------
Not Applicable.
Monies Borrowed and Loaned
- --------------------------
<PAGE>
Not Applicable.
Dividends and Interest Received
- -------------------------------
LNL Trial Finance Eric Jones Permanently, the first
Balance (5000 two years in an easily
series) accessible place
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Dividends Receivable and Interest Accrued
- -----------------------------------------
LNL Trial Finance Eric Jones Permanently, the first
Balance (5000 two years in an easily
series) accessible place
(ii) Separate ledger accounts (or other records) for each portfolio security,
showing (as of trade dates), (a) the quantity and unit and aggregate price for
each purchase, sale, receipt, and delivery of securities and commodities for
such accounts, and (b) all other debits and credits for such accounts.
Securities positions and money balances in such ledger accounts (or other
records) shall be brought forward periodically but not less frequently than at
the end of fiscal quarters. Any portfolio security, the salability of which is
conditioned, shall be so noted. A memorandum record shall be available setting
forth, with respect to each portfolio security accounts, the amount and
declaration, ex-dividend, and payment dates of each dividend declared thereon.
Ledger Account for each portfolio Security
- ------------------------------------------
Daily Report Finance Eric Jones Permanently, the first
Of Securities two years in an easily
Transactions (Daily accessible place
Trade File)
(iii) Separate ledger accounts (or other records) for each broker-dealer, bank
or other person with or through which transactions in portfolio securities are
affected, showing each purchase or sale of securities with or through such
persons, including details as to the date of the purchase or sale, the quantity
and unit and aggregate prices of such securities, and the commissions or other
compensation paid to such persons. Purchases or sales effected during the same
day at the same price may be aggregated.
Not Applicable.
(iv) Separate ledger accounts (or other records), which may be maintained by a
transfer agent or registrar, showing for each shareholder of record of the
investment company the number of shares of capital stock of the
<PAGE>
company held. in respect of share accumulation accounts (arising from periodic
investment plans, dividend reinvestment plans, deposit of issued shares by the
owner thereof, etc.), details shall be available as to the dates and number of
shares of each accumulation, and except with respect to already issued shares
deposited by the owner thereof, prices of each such accumulation.
Shareholder Accounts
- --------------------
Master file Finance Eric Jones Permanently, the first
Record (Daily CSRM (Portland) Kathleen Adamson two years in an easily
Trade File & Leg accessible place
Syst Client Rpt)
(3) A securities record or ledger reflecting separately for each portfolio
security as of trade date all "long" and "short" positions carried by the
investment company for its own account and showing the location of all
securities long and the off-setting position to all securities short. The record
called for by this paragraph shall not be required in circumstances under which
all portfolio securities are maintained by a bank or banks or a member or
members of a national securities exchange as custodian under a custody agreement
or as agent for such custodian.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Not Applicable
(4) Corporate charters, certificates of incorporation or trust agreements, and
bylaws, and minute books of stockholders' and directors' or trustees' meetings;
and minute books of directors' or trustees' committee and advisory board or
advisory committee meetings.
Corporate Documents
- -------------------
Memorandum Legal Janet Lindenberg Permanently, the first two
Establishing SA years in an easily
accessible place
(5) A record of each brokerage order given by or in behalf of the investment
company for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such record shall include the name of the broker, the
terms and conditions of the order and of any modification or cancellation
thereof, the time of entry or cancellation, the price at which executed, and the
time of receipt of report of execution. The record shall indicate the name of
the person who placed the order in behalf of the investment company.
Order Tickets
- -------------
UIT applica- CSRM (Portland) Kathleen Adamson Six years, the first
tions and Finance Eric Jones two years in an easily
daily reports accessible place
of securities
transactions
(6) A record of all other portfolio purchase or sales showing details
comparable to those prescribed in paragraph 5 above.
Commercial Paper
- ----------------
Not Applicable.
(7) A record of all puts, calls, spreads, straddles, and other options in which
the investment company has any direct or indirect interest or which the
investment company has granted or guaranteed; and a record of any contractual
commitments to purchase, sell, receive or deliver securities or other property
(but not including open orders placed with broker-dealers for the purchase or
sale of securities, which may be cancelled by the company on notices without
penalty or cost of any kind); containing at least an identification of the
security, the number of units involved, the option price, the date of maturity,
the date of issuance, and the person to whom issued.
Record of Puts, Calls, Spreads, Etc.
- ------------------------------------
Not Applicable.
(8) A record of the proof of money balances in all ledger accounts (except
shareholder accounts), in the form of trial balances. Such trial balances shall
be prepared currently at least once a month.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Trial Balance
- -------------
LNL Trial Finance Eric Jones Permanently, the first
Balance (5000 two years in an easily
series accessible place
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio securities
to named brokers or dealers and the division of brokerage commissions or other
compensation on such purchase and sale orders among named persons were made
during such quarter. The record shall indicate the consideration given to (a)
sales of shares of the investment company by brokers or dealers, (b) the
supplying of services or benefits by brokers or dealers to the investment
company, its investment advisor or principal underwriter or any persons
affiliated therewith, and (c) any other considerations other than the technical
qualifications of the brokers and the dealers as such. The record shall show the
nature of their services or benefits made available, and shall describe in
detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sales orders and such
division of brokerage commissions or other compensation. The record shall also
include the identifies of the person responsible for the determination of such
allocation and such division of brokerage commissions or other compensation.
Not Applicable.
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph
are applicable to the extent they are not met by compliance with the
requirements of paragraph 4 of this Rule 31a1(b).
Advisory Legal Janet Lindenberg Six years, the first
Agreements two years in an easily
accessible place
(11) Files of all advisory material received from the investment advisor, any
advisory board or advisory committee, or any other persons from whom the
investment company accepts investment advice publications distributed generally.
Not Applicable.
(12) The term "other records" as used in the expressions "journals (or other
records of original entry)" and "ledger accounts (or other records)" shall be
construed to include, where appropriate, copies of voucher checks,
confirmations, or similar documents which reflect the information required by
the applicable rule or rules in appropriate sequence and in permanent form,
including similar records developed by the use of automatic data processing
systems.
Correspondence CSRM (Portland) Kathleen Adamson Six years, the first
two years in an easily
accessible place
<PAGE>
LN-Record Location Person to Contact Retention
- ----------- -------------- ----------------- ---------------------
Proxy State- CSRM (Portland) Kathleen Adamson Six years, the first
ments and two years in an easily
Proxy Cards accessible place
Pricing Sheets Finance Eric Jones Permanently, the first
two years in an easily
accessible place
Bank State- Treasurers Rusty Summers Six years, the first
ments two years in an easily
accessible place
March 24, 1999
