<PAGE>
Legacy III
As filed with the Securities and Exchange Commission on October , 1999
Registration No.: 333-38007
811-08441
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 1 [X]
LINCOLN LIFE & ANNUITY VARIABLE ANNUITY ACCOUNT H
(Exact Name of Registrant)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Name of Depositor)
1300 South Clinton Street
Post Office Box 1110
Fort Wayne, Indiana 46801
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(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (315) 428-8400
ROBERT O. SHEPPARD
120 Madison Street, Suite 1700
Syracuse, New York 13202
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(Name and Address of Agent for Service)
Copy to:
Kimberly J. Smith
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Title of securities being registered:
Interests in a separate account under individual flexible premium deferred
variable annuity contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
American Legacy III
Lincoln Life & Annuity Variable Annuity Account H individual variable annuity
contracts
Home Office:
Servicing Office:
Lincoln Life & Annuity Company of New York
P.O.Box 2348
120 Madison Street, Suite 1700
1300 South Clinton Street
Syracuse, NY 13202
Fort Wayne, IN 46801
This Prospectus describes the individual flexible premium deferred variable
annuity contract that is issued by Lincoln Life & Annuity Company of New York
("LNY"). It is for use with nonqualified and qualified retirement plans. Gen-
erally, you do not pay federal income tax on the contract's growth until it is
paid out. The contract is designed to accumulate contract value and to provide
retirement income that you cannot outlive or for an agreed upon time. These
benefits may be a variable or fixed amount or a combination of both. If you
die before the annuity commencement date, we will pay your beneficiary a death
benefit.
The minimum initial purchase payment for the contract is:
1. $1,500 for a nonqualified plan and a 403(b) transfer/rollover or
2. $1,000 for a qualified plan.
Additional purchase payments may be made to the contract and must be at least
$100 per payment ($25 if transmitted electronically), and at least $300 annu-
ally.
You choose whether your contract value accumulates on a variable or a fixed
(guaranteed) basis or both. If you put all your purchase payments into the
fixed account, we guarantee your principal and a minimum interest rate. We
limit withdrawals and transfers from the fixed side of the contract.
All purchase payments for benefits on a variable basis will be placed in Lin-
coln Life & Annuity Variable Annuity Account H (variable annuity account
[VAA]). The VAA is a segregated investment account of LNY. If you put all or
some of your purchase payments into one or more of the contract's variable op-
tions you take all the investment risk on the contract value and the retire-
ment income. If the subaccounts you select make money, your contract value
goes up; if they lose money, it goes down. How much it goes up or down depends
on the performance of the subaccounts you select. We do not guarantee how any
of the variable options or their funds will perform. Also, neither the U.S.
Government nor any federal agency insures or guarantees your investment in the
contract.
The available funds, listed below, are each part of American Variable Insur-
ance Series (series) Class 2 Shares:
Global Growth
Global Small Capitalization
Growth
International
New World
Growth-Income
Asset Allocation
Bond
High-Yield Bond
U.S. Government/AAA-Rated Securities
Cash Management
This Prospectus gives you information about the contracts that you should know
before you decide to buy a contract and make purchase payments. You should
also review the prospectus for the funds that is attached, and keep both pro-
spectuses for reference.
Neither the SEC nor any state securities commission has approved this contract
or determined that this prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
You can obtain a current Statement of Additional Information (SAI) about the
contracts which has more information. Its terms are made part of this Prospec-
tus. For a free copy, write: Lincoln Life & Annuity Company of New York, P.O.
Box 2348, Fort Wayne, Indiana 46801, or call 1-800-942-5500. The SAI and other
information about LNY and Account H 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.
, 1999
1
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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 6
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Investment results 6
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Financial statements 6
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Lincoln Life & Annuity Company of
New York 6
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Fixed side of the contract 6
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Variable annuity account (VAA) 6
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Investments of the variable annuity account 7
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Charges and other deductions 9
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The contract 10
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</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Annuity payouts 13
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Federal tax matters 15
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Voting rights 18
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Distribution of the contracts 18
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Return privilege 18
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State regulation 18
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Records and reports 19
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Other information 19
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Statement of additional information table of contents for Variable
Annuity Account H American Legacy III 21
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</TABLE>
Special terms
(We have italicized the terms that have special meaning throughout the Pro-
spectus)
Account or variable annuity account (VAA) -- The segregated investment ac-
count, Account H, into which LNY sets aside and invests the assets for the
variable side of the contract offered in this Prospectus.
Accumulation unit -- A measure used to calculate contract value for the vari-
able side of the contract before the annuity commencement date.
Annuitant -- The person on whose life the annuity benefit payments made after
the annuity commencement date are based.
Annuity commencement date -- The valuation date when funds are withdrawn or
converted into annuity units or fixed dollar payout for payment of retirement
income benefits under the annuity payout option you select.
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 annuity payouts for
the variable side of the contract after the annuity commencement date.
Beneficiary -- The person you choose to receive the death benefit that is paid
if you die before the annuity commencement date.
Contractowner (you, your, owner) -- The person who has the ability to exercise
the rights within the contract (decides on investment allocations, transfers,
payout option, designates the beneficiary, etc.). Usually, but not always, the
owner is the annuitant.
Contract value -- At a given time before the annuity commencement date, the
total value of all accumulation units for a contract plus the value of the
fixed side of the contract.
Contract year -- Each one-year period starting with the effective date of the
contract and starting with each contract anniversary after that.
Death benefit (GMDB, EGMDB) -- The amount payable to your designated benefi-
ciary if the owner dies before the annuity commencement date. An enhanced
guaranteed minimum death benefit is also available.
Lincoln Life -- The Lincoln National Life Insurance Co.
LNY (we, us, our) -- Lincoln Life & Annuity Company of New York.
Purchase payments -- Amounts paid into the contract.
Series -- American Variable Insurance Series (series), the funds to which pur-
chase payments allocated to the Variable Account are directed.
American Legacy III subaccount -- The portion of the VAA that reflects invest-
ments in accumulation and annuity units of a class of a particular fund avail-
able under the contracts. There is a separate subaccount which corresponds to
each class of a fund.
Valuation date -- Each day the New York Stock Exchange (NYSE) is open for
trading.
Valuation period -- The period starting at the close of trading (currently
4:00 p.m. New York time) on each day that the NYSE is open for trading (valua-
tion date) and ending at the close of such trading on the next valuation date.
2
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Expense tables
Summary of Contractowner expenses:
The maximum surrender charge (contingent deferred sales charge)
(as a percentage of purchase payments surrendered/withdrawn): 6%
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. We may waive this charge in certain situations. See Surrender charges.
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Account H annual expenses for American Legacy III subaccounts:*
(as a percentage of average account value):
<TABLE>
<CAPTION>
With Enhanced Without Enhanced
Death Benefit Death Benefit
<S> <C> <C>
Mortality and expense risk charge 1.30% 1.15%
Administrative charge .10% .10%
----- -----
Total annual charge for each American Legacy
III subaccount 1.40% 1.25%
</TABLE>
Estimated annual expenses
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
Management 12b-1 Other Total
fees + fees + expenses = expenses
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<S> <C> <C> <C> <C> <C> <C> <C>
1. Global Growth .69% .25% .06% 1.00%
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2. Global Small Capitalization .79 .25 .03 1.07
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3. Growth .40 .25 .01 .66
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4. International .57 .25 .09 .91
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5. New World .85 .25 .08 1.18
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6. Growth-Income .35 .25 .01 .61
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7. Asset Allocation .44 .25 .01 .70
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8. Bond .51 .25 .02 .78
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9. High-Yield Bond .50 .25 .01 .76
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10. U.S. Govt./AAA-Rated
Securities .49 .25 .01 .75
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11. Cash Management .44 .25 .01 .70
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</TABLE>
*The VAA is divided into separately-named subaccounts, eleven of which are
available under the contracts. Each subaccount, in turn, invests purchase pay-
ments in shares of a class of its respective fund.
3
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Examples
(expenses of the subaccounts and of 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 re-
turn:
<TABLE>
<CAPTION>
1 year 3 years
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<S> <C> <C>
1. Global Growth $84 $125
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2. Global Small Capitalization 82 118
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3. Growth 81 115
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4. International 83 122
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5. New World 86 130
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6. Growth-Income 80 113
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7. Asset Allocation 81 116
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8. Bond 82 119
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9. High-Yield Bond 82 118
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10. U.S. Govt./AAA-Rated Securities 82 118
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11. Cash Management 81 116
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If you do not surrender your contract, you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return:
<CAPTION>
1 year 3 years
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<S> <C> <C>
1. Global Growth $24 $75
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2. Global Small Capitalization 22 68
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3. Growth 21 65
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4. International 23 72
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5. New World 26 80
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6. Growth-Income 20 63
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7. Asset Allocation 21 66
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8. Bond 22 69
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9. High-Yield Bond 22 68
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10. U.S. Govt./AAA-Rated Securities 22 68
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11. Cash Management 21 66
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</TABLE>
We provide these examples to help you understand the direct and indirect costs
and expenses of the contract. The examples assume that an enhanced death bene-
fit is in effect. Without this benefit, expenses would be lower.
For more information, see Charges and other deductions in this Prospectus, and
Management and organization in the Prospectus for the funds. Premium taxes may
also apply, although they do not appear in the examples. We also reserve the
right to impose a charge on transfers between subaccounts and to and from the
fixed account--currently, there is no charge. These examples should not be
considered a representation of past or future expenses. Actual expenses may be
more or less than those shown.
4
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Summary
What kind of contract am I buying? It is an individual annuity contract be-
tween you and LNY. It may provide for a fixed annuity and/or a variable annui-
ty. This Prospectus describes the variable side of the contract. See The con-
tracts.
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 LNY may conduct. See Variable annuity
account.
What are my investment choices? Based upon your instruction, the VAA applies
your purchase payments to buy series shares in one or more of the investment
funds of the series: Global Growth, Global Small Capitalization, Growth, In-
ternational, New World, Growth-Income, Asset Allocation, Bond, High-Yield
Bond, U.S. Government/AAA-Rated Securities and Cash Management. In turn, each
fund holds a portfolio of securities consistent with its investment policy.
See Investments of the variable annuity account and Description of the series.
Who invests my money? The investment advisor for the series is Capital Re-
search and Management Company (CRMC), Los Angeles, California. CRMC is regis-
tered as an investment advisor with the SEC. See Investments of the variable
annuity account and Investment advisor.
How does the contract work? If we approve your application, we will send you a
contract. When you make purchase payments during the accumulation phase, you
buy accumulation units. If you decide to receive retirement income payments,
your accumulation units are converted to annuity units. Your retirement income
payments will be based on the number of annuity units you received and the
value of each annuity unit on payout days. See The contracts.
What charges do I pay under the contract? If you withdraw contract value, you
pay a surrender charge from 0% to 6%, depending upon how many contract years
those payments have been in the contract. We may waive surrender charges in
certain situations. See Surrender charges.
We will deduct any applicable premium tax from purchase payments or contract
value at the time the tax is incurred or at another time we choose.
We apply an annual charge totaling 1.40% to the daily net asset value of the
VAA. This charge includes 0.10% as an administrative charge and 1.30% as a
mortality and expense risk charge. If the enhanced death benefit is not in ef-
fect, the mortality and expense risk charge is 1.15%, for an annual charge to-
taling 1.25%. See Charges and other deductions.
The series pays a management fee to CRMC based on the average daily net asset
value of each fund. See Investments of the variable annuity account--Invest-
ment advisor. Each fund also has a 12b-1 fee and additional operating ex-
penses. These are described in the Prospectus for the series.
What purchase payments do I make, and how often? Subject to the minimum and
maximum payment amounts, your payments are completely flexible. See The con-
tracts--Purchase payments.
How will my annuity payouts be calculated? If you decide to annuitize, you may
select an annuity option and start receiving retirement income payments from
your contract as a fixed option or variable option or a combination of both.
See Annuity Options. Remember that participants in the VAA benefit from any
gain, and take a risk of any loss, in the value of the securities in the
funds' portfolios.
What happens if I die before I annuitize? If the enhanced death benefit is in
effect, your beneficiary will receive the greater of the enhanced death bene-
fit or the contract value. If the enhanced death benefit is not in effect,
your beneficiary will receive the greater of the guaranteed minimum death ben-
efit or the contract value. Your beneficiary has options as to how the death
benefit is paid. See Death benefit before the annuity commencement date.
May I transfer contract value between variable options and between the fixed
side of the contract? Yes, with certain limits. See The contracts--Transfers
between subaccounts on or before the annuity commencement date and Transfers
following the annuity commencement date. Transfers to and from the General Ac-
count on or before the annuity commencement date.
May I surrender the contract or make a withdrawal? Yes, subject to contract
requirements and to the restrictions of any qualified retirement plan for
which the contract was purchased. See Surrenders and withdrawals. If you sur-
render the contract or make a withdrawal, certain charges may apply. See
Charges and other deductions. A portion of surrender/withdrawal proceeds may
be taxable. In addition, if you decide to take a distribution before age 59
1/2, a 10% Internal Revenue Service (IRS) tax penalty may apply. A surrender
or a withdrawal also may be subject to 20% withholding. See Federal tax status
and withholding.
Do I get a free look at this contract? Yes. You can cancel the contract within
ten days of the date you first receive the contract. You need to return the
contract, postage prepaid, to our servicing office. You assume the risk of any
market drop on purchase payments you allocate to the variable side of the con-
tract. See Return privilege.
5
<PAGE>
Condensed financial information for the variable annuity account
Accumulation unit values
No condensed financial information for the VAA is presented because as of
December 31, 1998, the account had not yet commenced operations.
Investment results
At times, the VAA may compare its investment results to various unmanaged in-
dices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods, with or without contingent deferred sales charges. Results
calculated without contingent deferred sales charges will be higher. Total re-
turns include the reinvestment of all distributions, which are reflected in
changes in unit value. See the SAI for further information.
Financial statements
The audited statutory-basis financial statements of LNY as of December 31,
1998 and 1997 and for the years ended December 31, 1998 and 1997 and the pe-
riod from June 6, 1996 to December 31, 1996 may be found in the Statement of
Additional Information. No financial statements are included for the VAA be-
cause as of December 31, 1998, the account had not yet commenced operations.
Lincoln Life & Annuity Company of New York
LNY is a life insurance company founded in New York on June 6, 1996. LNY 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). LNC & Lincoln Life are both organized under Indiana law.
LNC's primary businesses are insurance and financial services.
Fixed side of the contract
Purchase payments allocated to the fixed side of the contract become part of
LNY'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 Insurance Department.
In reliance on certain exemptions, exclusions and rules, LNY 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 regulated under the 1933 Act or the 1940 Act. LNY has been advised
that the staff of the SEC has not made a review of the disclosures which are
included in this Prospectus which relate to our general account and to the
fixed account under 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 Prospectuses. This Prospectus is gener-
ally intended to serve as a disclosure document only for aspects of the con-
tract involving the VAA, and therefore contains only selected information re-
garding the fixed side of the contract. Complete details regarding the fixed
side of the contract are in the contract.
Purchase payments allocated to the fixed side of the contract are guaranteed
to be credited with a minimum interest rate, specified in the contract, of at
least 3.0%. A purchase payment allocated to the fixed side of the contract is
credited with interest beginning on the next calendar day following the date
of receipt if all data is complete. LNY may vary the way in which it credits
interest to the fixed side of the contract from time to time.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN LNY'S SOLE DIS-
CRETION. CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0% WILL
BE DECLARED.
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 Investment Company Act of 1940 (1940 Act).
The SEC does not supervise LNY. 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 applica-
ble annuity contracts, credited to or charged against the VAA. They are cred-
ited or charged without regard to any other income, gains or losses of LNY.
The VAA satisfies the definition of a separate account under the federal secu-
rities 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 investment risk for all amounts placed in the VAA.
The VAA is used to support other annuity contracts offered by LNY in addition
to the contracts described in this prospectus. The other annuity contracts
supported by the VAA invest in the same portfolios of the series as the con-
tracts described in this Prospectus. These other annuity contracts may have
different charges that could affect performance of the subaccount.
6
<PAGE>
Investments of the variable annuity account
You decide the subaccount(s) to which you allocate purchase payments. There is
a separate subaccount which corresponds to each class of each fund of the se-
ries. You may change your allocation 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 contracts. The series is required to redeem fund shares
at net asset value upon our request. We reserve the right to add, delete or
substitute funds.
Investment advisor
The investment advisor for the series is Capital Research and Management Com-
pany (CRMC), 333 South Hope Street, Los Angeles, California 90071. CRMC is one
of the nation's largest and oldest investment management organizations. As
compensation for its services to the series, the investment advisor receives a
fee from the series which is accrued daily and paid monthly. This fee is based
on the net assets of each fund, as defined under Purchase and Redemption of
Shares, in the Prospectus for the series.
Description of the series
The series was organized as a Massachusetts business trust in 1983 and is reg-
istered as a diversified, open-end management investment company under the
1940 Act. Diversified means not owning too great a percentage of the securi-
ties of any one company. An open-end company is one which, in this case, per-
mits LNY to sell its shares back to the series when you make a withdrawal,
surrender the contract or transfer from one fund to another. Management in-
vestment company is the legal term for a mutual fund. These definitions are
very general. The precise legal definitions for these terms are contained in
the 1940 Act.
The series has eleven separate portfolios of funds. Fund assets are segregated
and a shareholder's interest is limited to those funds in which the share-
holder owns shares. The series has adopted a plan pursuant to Rule 18f-3 under
the 1940 Act to permit the series to establish a multiple class distribution
system for all of its portfolios. The series' Board of Trustees may at any
time establish additional funds or classes, which may or may not be available
to the VAA.
Under the multi-class system adopted by the series, shares of each multi-class
fund represent an equal pro rata interest in that fund and, generally, have
identical voting, dividend, liquidation, and other rights, preferences, pow-
ers, restrictions, limitations, qualifications and terms and conditions, ex-
cept that: (1) each class has a different designation; (2) each class of
shares bears its class expenses; (3) each class has exclusive voting rights on
any matter submitted to shareholders that relates solely to its distribution
arrangement; and (4) each class has separate voting rights on any matter sub-
mitted to shareholders in which the interests of one class differ from the in-
terests of any other class. Expenses currently designated as class expenses by
the series' Board of Trustees under the plan pursuant to Rule 18f-3 include,
for example, service fees paid under a 12b-1 plan to cover servicing fees paid
to dealers selling the contracts as well as related expenses incurred by LNY.
Each fund has two classes of shares, designated as Class 1 shares and Class 2
shares. Class 1 and 2 differ primarily in that Class 2 (but not Class 1)
shares are subject to a 12b-1 plan. Only Class 2 shares are available under
the contracts.
Certain funds offered as part of this contract have similar investment objec-
tives and policies to other portfolios managed by the advisor. The investment
results of the funds, however, may be higher or lower than the other portfo-
lios that are managed by the advisor. There can be no assurance, and no repre-
sentation is made, that the investment results of any of the funds will be
comparable to the investment results of any other portfolio managed by the ad-
visor.
Following are brief summaries of the investment objectives and policies of the
funds. Each fund is subject to certain investment policies and restrictions
which may not be changed without a majority vote of shareholders of that fund.
More detailed information may be obtained from the current Prospectus for the
series which is included in this booklet. Please be advised that there is no
assurance that any of the funds will achieve their stated objectives.
1. Global Growth Fund--The fund seeks to make your investment grow over time
by investing primarily in common stocks of companies located around the
world. The fund is designed for investors seeking capital appreciation
through stocks. Investors in the fund should have a long-term perspective
and be able to tolerate potentially wide price fluctuations.
2. Global Small Capitalization Fund--The fund seeks to make your investment
grow over time by investing primarily in stocks of smaller companies lo-
cated around the world that typically have market capitalizations of $50
million to $1.2 billion. The fund is designed for investors seeking capital
appreciation through stocks. Investors in the fund should have a long-term
perspective and be able to tolerate potentially wide price fluctuations.
3. Growth Fund--The fund seeks to make your investment grow by investing pri-
marily in common stocks of companies that appear to offer superior opportu-
nities for growth of capital. The fund is designed for investors seeking
capital appreciation through stocks. Investors in the fund should have a
long-term perspective and be able to tolerate potentially wide price fluc-
tuations.
7
<PAGE>
4. International Fund--The fund seeks to make your investment grow over time
by investing primarily in common stocks of companies located outside the
United States. The fund is designed for investors seeking capital apprecia-
tion through stocks. Investors in the fund should have a long-term perspec-
tive and be able to tolerate potentially wide price fluctuations.
5. New World Fund--The fund seeks to make your investment grow over time by
investing primarily in stocks of companies with significant exposure to
countries which have developing economies and/or markets. The fund may also
invest in debt securities of issuers, including issuers of high-yield,
high-risk bonds, in these countries.
6. Growth-Income Fund--The fund seeks to make your investment grow and provide
you with income over time by investing primarily in common stocks or other
securities which demonstrate the potential for appreciation and/or divi-
dends. The fund is designed for investors seeking both capital appreciation
and income.
7. Asset Allocation Fund--The fund seeks to provide you with high total return
(including income and capital gains) consistent with preservation of capi-
tal over the long-term by investing in a diversified portfolio of common
stocks and other equity securities; bonds and other intermediate and long-
term debt securities, and money market instruments (debt securities matur-
ing in one year or less).
8. Bond Fund--The fund seeks to maximize your level of current income and pre-
serve your capital by investing primarily in bonds. The fund is designed
for investors seeking income and more price stability than stocks, and cap-
ital preservation over the long-term.
9. High-Yield Bond Fund--The fund seeks to provide you with a high level of
current income and secondarily capital appreciation by investing primarily
in lower quality debt securities (rated Ba or BB or below by Moody's In-
vestors Services, Inc. or Standard & Poor's Corporation), including those
of non-U.S. issuers. The fund may also invest in equity securities that
provide an opportunity for capital appreciation.
10. U.S. Government/AAA-Rated Securities Fund--The fund seeks to provide you
with a high level of current income, as well as preserve your investment.
The fund invests primarily in securities that are guaranteed by the "full
faith and credit" pledge of the U.S. Government and securities that are
rated AAA or Aaa by Moody's Investor's Services, Inc. or Standard & Poor's
Corporation or unrated but determined to be of equivalent quality.
11. Cash Management Fund--The fund seeks to provide you an opportunity to earn
income on your cash reserves while preserving the value of your investment
and maintaining liquidity by investing in a diversified selection of high
quality money market instruments.
Sale of fund shares by the series
We will purchase shares of the funds at net asset value and direct them to the
appropriate subaccounts of the VAA. We will redeem sufficient shares of the
appropriate funds to pay annuity payouts, death benefits, surrender/withdrawal
proceeds or for other purposes described in the contract. If you want to
transfer all or part of your investment from one subaccount to another, we may
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 LNY, and may be sold to other insurance companies, for investment of the
assets of the subaccounts established by those insurance companies to fund
variable annuity and variable life insurance contracts.
When the series sells shares in any of its funds both to variable annuity and
to variable life insurance separate accounts, it is said to engage in mixed
funding. When the series sells shares in any of its funds to separate accounts
of unaffiliated life insurance companies, it is said to engage in shared fund-
ing.
The series currently engages in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interests of various contractowners participating in a fund could conflict.
The series' Board of Trustees will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. See the Pro-
spectus for the series.
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
additional 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 series and/or any funds within the series in which the VAA
participates. (We may substitute shares of other funds for shares already pur-
chased, or to be purchased in the future, under the contract. This substitu-
tion might occur if shares of a fund should no longer be available, or if in-
vestment in any fund's shares should become inappropriate, in the judgment of
our management, for the purposes of the contract.) We cannot substitute shares
of one fund for another without approval by the SEC. We will also notify you.
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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 incur certain costs
and expenses for the distribution and administration of the contracts and for
providing the benefits payable thereunder. More particularly, our administra-
tive services include: processing applications for and issuing the contracts,
processing purchases and redemptions of fund shares as required (including dol-
lar cost averaging, cross-reinvestment, and automatic withdrawal services),
maintaining records, administering annuity payouts, furnishing accounting and
valuation services (including the calculation and monitoring of daily
subaccount values), reconciling and depositing cash receipts, providing con-
tract confirmations, providing toll-free inquiry services and furnishing tele-
phone fund transfer services. The risks we assume include: the risk that
annuitants receiving annuity payouts under contract live longer than we assumed
when we calculated our guaranteed rates (these rates are incorporated in the
contract and cannot be changed); the risk that death benefits paid under the
EGMDB, will exceed the actual contract value; the risk that more owners than
expected will qualify for waivers of the contingent deferred sales 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 nec-
essarily correspond to the costs associated with providing the services or ben-
efits indicated by the description of the charge. For example, the contingent
deferred sales load collected may not fully cover all of the sales and distri-
bution expenses actually incurred by us.
Deductions from the VAA for American Legacy III
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.40% (1.25% for contracts without the EGMDB) of the daily net asset
value. The charge consists of a 0.10% administrative charge and a 1.30% (1.15%
for contracts without the EGMDB) mortality and expense risk charge.
Surrender charge
A surrender charge applies (except as described below) to surrenders and with-
drawals of other purchase payments that have been invested for the periods in-
dicated as follows:
<TABLE>
<CAPTION>
Number of complete contract years
that a purchase payment has been
invested
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than At least
2 years 2 3 4 5 6 7+
Surrender charge as a percentage of the
surrendered or withdrawn purchase payments 6% 5 4 3 2 1 0
</TABLE>
A surrender charge does not apply to:
1. A surrender or withdrawal of purchase payments that have been invested at
least seven full contract years.
2. The first four withdrawals of contract value during a contract year to the
extent that the total contract value withdrawn during the current contract
year does not exceed 10% of the current contract value;
3. Electing an annuity option available within the contract;
4. A surrender of a contract or withdrawal of contract value as a result of the
permanent and total disability of the owner as described in the contract,
and before the 65th birthday of the owner.
5. When the surviving spouse assumes ownership of the contract as a result of
the death of the original owner;
6. A surrender of the contract as a result of the death of the contractowner.
However, the surrender charge is not waived as a result of the death of an
annuitant who is not the contractowner; and
7. A surrender of a contract or withdrawal of contract value of a contract is-
sued to employees and registered representatives of any member of the sell-
ing group and their spouses and minor children, or to officers, directors,
trustees or bona-fide full-time employees of LNC or The Capital Group, Inc.
or their affiliated or managed companies (based upon the contractowner's
status at the time the contract was purchased).
The surrender charge is calculated separately for each contract year's purchase
payments to which a charge applies. (For purposes of calculating this charge,
we assume that purchase payments are withdrawn on a first in-first out basis,
and that all purchase payments are withdrawn before any earnings are with-
drawn.) The surrender charges associated with surrender or withdrawal are paid
to us to compensate us for the loss we experience on contract distribution
costs when contractowners surrender or withdraw before distribution costs have
been recovered.
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 the contract
value when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. These premium taxes gener-
ally depend upon the law of your state of residence. The tax ranges from 0.5%
to 5.0%.
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<PAGE>
Other charges and deductions
There are deductions from and expenses paid out of the assets of the under-
lying series that are more fully described in the Prospectus for the series.
Among these deductions and expenses are 12b-1 fees which reimburse LNY for
certain expenses incurred in connection with certain administrative and dis-
tribution support services provided to the series.
Additional information
The administrative and surrender charges described previously may be reduced
or eliminated for any particular contract. However, these charges will be re-
duced only to the extent that we anticipate lower distribution and/or adminis-
trative expenses, or that we perform fewer sales or administrative services
than those originally contemplated in establishing the level of those charges.
Lower distribution and administrative expenses may be the result of economies
associated with (1) the use of mass enrollment procedures, (2) the performance
of administrative or sales functions by the employer, (3) the use by an em-
ployer of automated techniques in submitting deposits or information related
to deposits on behalf of its employees or (4) any other circumstances which
reduce distribution or administrative expenses. The exact amount of adminis-
trative and surrender charges applicable to a particular contract will be
stated in that contract.
The contract
Purchase of contract
If you wish to purchase a contract, you must apply for it through a sales rep-
resentative authorized by us. The completed application is sent to us and we
decide whether to accept or reject it. If the application is accepted, a con-
tract is prepared and executed by our legally authorized officers. The con-
tract is then sent to you through your sales representative. See Distribution
of the contracts.
When a completed application and all other information necessary for process-
ing a purchase order is received, an initial purchase payment will be priced
no later than two business days after we receive the order. While attempting
to finish an incomplete application, we may hold the initial purchase payment
for no more than five business days. If the incomplete application cannot be
completed within those five days, you will be informed of the reasons, and the
purchase payment will be returned immediately. Once the application is com-
plete, the initial purchase payment must be priced within two business days.
Who can invest
To apply for a contract, you must be of legal age and also be eligible to par-
ticipate in any of the qualified or nonqualified plans for which the contracts
are designed. The contractowner cannot be older than age 85.
Purchase payments
Purchase payments are payable to us at a frequency and in an amount selected
by you in the application. You may change the amount and/or frequency of pur-
chase payments at any time. The minimum initial purchase payment is $1,500 for
nonqualified contracts; and $1,000 for qualified contracts. The minimum annual
amount for additional purchase payments is $300 for nonqualified and qualified
contracts. The minimum payment to the contract at any one time must be at
least $100 ($25 if transmitted electronically). Purchase payments in total may
not exceed $2 million. If you stop making purchase payments, the contract will
remain in force as a paid-up contract. However, we may terminate the contract
as allowed by the New York's non-forfeiture law for individual deferred annui-
ties. Purchase payments may be made or, if stopped, resumed at any time until
the annuity commencement date, the surrender of the contract, maturity date or
the death of the contractowner (or joint owner, if applicable), whichever
comes first.
Valuation date
Accumulation and annuity units will be valued once daily at the close of trad-
ing (currently 4:00 p.m., New York time) on each day the New York Stock Ex-
change 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 purchase payments
Purchase payments are placed into the VAA's subaccounts, each of which invests
in shares of the class of its corre-
sponding fund of the series, accord-
ing to your instructions.
The minimum amount of any purchase payment which can be put into any one
subaccount is $20. Upon allocation to a subaccount, purchase payments are con-
verted into accumulation units. The number of accumulation units credited is
determined by dividing the amount allocated to each subaccount by the value of
an accumulation unit for that subaccount on the valuation date on which the
purchase payment is received at our home office if received before 4:00 p.m.,
New York time. If the purchase payment is received at or after 4:00 p.m., New
York time, we will use the accumulation unit value computed on the next valua-
tion date. The number of accumulation units determined in this way is not
changed by any subsequent change in the value of an accumulation unit. Howev-
er, the dollar value of an accumulation unit will vary depending not only upon
how well the underlying fund's investments perform, but also upon the expenses
of the VAA and the underlying funds.
Valuation of accumulation units
Purchase payments allocated to the VAA are converted into accumulation units.
This is done by dividing each purchase payment by the value of an accumulation
unit for the valuation period during which the purchase payment is
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<PAGE>
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 de-
crease 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 the end of the valuation period, and adding any dividend or other
distribution of the fund if an ex-dividend date occurs during the valua-
tion 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 daily mortality and expense risk charge and the daily administrative
charge multiplied by the number of calendar days in the valuation period. Be-
cause a different daily charge is made for contracts with the EGMDB than for
those without, each of the two types of contracts will have different corre-
sponding accumulation unit values on any given day.
Transfers between subaccounts on or before the annuity commencement date
You may transfer all or a portion of your investment from one subaccount to
another. A transfer involves the surrender of accumulation units in one
subaccount and the purchase of accumulation units in the other subaccount. A
transfer will be done using the respective accumulation unit values determined
at the end of the valuation date on which the transfer request is received.
Currently, there is no charge for a transfer. However, we reserve the right to
impose a charge in the future of up to $50 per transfer.
The minimum amount which may be transferred between subaccounts is $300 (or
the entire amount in the subaccount, if less than $300). If the transfer from
a subaccount would leave you with less than $300 in the subaccount, we may
transfer the total balance of the subaccount.
A transfer may be made by writing to our servicing office or, if a Telephone
Exchange Authorization 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 informa-
tion before we will act upon their instructions. We may also assign the
contractowner a Personal Identification Number (PIN) to serve as identifica-
tion. We will not be liable for following telephone instructions we reasonably
believe are genuine. Telephone requests may be recorded and written confirma-
tion of all transfer requests will be mailed to the contractowner on the next
valuation date. Telephone transfers will be processed on the valuation date
that they are received when they are received at our customer service center
before 4 p.m. New York time.
When thinking about a transfer of contract value, you should consider the in-
herent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time.
Transfers to and from the
General Account on or before the
annuity commencement date
You may transfer all or any part of the contract value from the subaccount(s)
to the fixed side of the contract. The minimum amount which can be transferred
to the fixed side is $300 or the total amount in the subaccount, if less than
$300. However, if a transfer from a subaccount would leave you with less than
$300 in the subaccount, we may transfer the total amount to the fixed side.
You may also transfer all or any part of the contract value from the fixed
side of your contract to the various subaccount(s) subject to the following
restrictions: (1) the sum of the percentages of fixed value transferred is
limited to 25% of the value of the fixed side in any 12 month period and (2)
the minimum amount which can be transferred is $300 or the amount in the fixed
account.
Currently, there is no charge to you for a transfer. However, we reserve the
right to impose a charge in the future for any transfers to and from the Gen-
eral Account.
Transfers after the annuity commencement date
You may transfer all or a portion of your investment in one subaccount to an-
other subaccount or to the fixed side of the contract. Those transfers will be
limited to three times per contract year. Currently, there is no charge for
these transfers. However, we reserve the right to impose a charge of up to $50
per transfer. No transfers are allowed from the fixed side of the contract to
the subaccounts.
Death benefit before the annuity commencement date
You may designate a beneficiary during your lifetime and change the benefi-
ciary by filing a written request with our servicing office. Each change of
beneficiary revokes any previous designation. We reserve the right to request
that you send us the contract for endorsement of a change of beneficiary.
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<PAGE>
If the contractowner dies before the annuity commencement date and the enhanced
guaranteed minimum death benefit (EGMDB) is in effect, the death benefit paid
to your designated beneficiary will be the greater of: (1) the contract value
as of the day on which LNY approves the payment of the claim; or (2) the high-
est contract value which the contract attains on any policy anniversary date
(including the inception date) on ages up to, and including, the
contractowner's age 75. The highest contract value is increased by purchase
payments and is decreased by partial withdrawals, partial annuitizations, and
any premium taxes made, effected or incurred subsequent to the anniversary date
on which the highest contract value is obtained. If the EGMDB is not in effect,
the death benefit will be equal to the greater of contract value or the guaran-
teed minimum death benefit (GMDB). The GMDB is equal to the sum of all purchase
payments minus any withdrawals, partial annuitizations or premium taxes in-
curred.
The value of the death benefit will be determined as of the date on which the
death claim is approved for payment. This payment will occur upon receipt of:
(1) proof (e.g. an original certified death certificate), or any other proof of
death satisfactory to us, of the death of the owner; (2) written authorization
for payment; and (3) our receipt of all required claim forms, fully completed.
If the beneficiary is a minor, court documents appointing the
guardian/custodian must be submitted.
When applying for a contract, an applicant can request a contract without the
EGMDB. The EGMDB is not available under contracts issued to a contractowner who
is age 75 or older at the time of issuance.
After a contract is issued, the contractowner may discontinue the EGMDB at any
time by completing the Enhanced Guaranteed Minimum Death Benefit Discontinuance
form and sending it to our servicing office. The benefit will be discontinued
as of the valuation date we receive the request, and we will stop deducting the
charge for the benefit as of that date. See Charges and other deductions. If
you discontinue the benefit, it cannot be reinstated.
If the death benefit becomes payable, the beneficiary may elect to receive pay-
ment of the death benefit either in the form of a lump sum settlement or an an-
nuity payout.
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 an
election has not been made by the end of the 60-day period, a lump sum settle-
ment will be made to the beneficiary at that time. This payment may be post-
poned as permitted by the 1940 Act.
Payment will be made in accordance with applicable laws and regulations gov-
erning payment of death benefits.
Unless otherwise provided in the beneficiary designation, one of the following
procedures will take place on the death of a beneficiary:
1. If any beneficiary dies before the contractowner, that beneficiary's inter-
est will go to any other beneficiaries named, according to their respective
interests (There are no restrictions on the beneficiary's use of the pro-
ceeds.); and/or
2. If no beneficiary survives the contractowner, the proceeds will be paid to
the contractowner's estate.
The death benefit payable to the beneficiary must be distributed within five
years of the contractowner's date of death unless the beneficiary begins re-
ceiving within one year of the contractowner's death the distribution in the
form of a life annuity or an annuity for a designated period not extending be-
yond the beneficiary's life expectancy. If a lump sum settlement is elected,
the proceeds will be mailed within seven days of approval by us of the claim,
subject to the laws and regulations governing payment of death benefits. This
payment may be postponed as permitted by the Investment Company Act of 1940.
If the beneficiary is the spouse of the contractowner, then the spouse may
elect to continue the contract as owner. If the contractowner is a corporation
or other non-individual (non-natural person), the death of the annuitant will
be treated as death of the contractowner and the above distribution rules ap-
ply.
If the surviving spouse continues the contract as the owner instead of receiv-
ing the death benefit, then the designated beneficiary(s) named by the spouse,
as new owner, will receive the death benefit upon the death of the surviving
spouse.
Death of annuitant
If the annuitant is also the contractowner, then the death benefit provided
will be the death benefit subject to the provisions of this contract regarding
death of the contractowner. If the surviving spouse assumes the contract, the
contingent annuitant becomes the annuitant. If no contingent annuitant is
named, the surviving spouse becomes the annuitant.
If an annuitant who is not the contractowner dies, then the contingent annui-
tant, if any, becomes the annuitant. If no contingent annuitant is named, the
contractowner becomes the annuitant.
Surrenders and withdrawals
Before the annuity commencement date, we will allow the surrender of the con-
tract or a withdrawal of the contract value upon your written request, subject
to the rules discussed below.
The amount available upon surrender/withdrawal is the cash surrender value
(contract value less any applicable
12
<PAGE>
charges, fees, and taxes) at the end of the valuation period during which the
written request for surrender/withdrawal is received at the servicing office.
Unless a request for withdrawal specifies otherwise, withdrawals will be made
from all subaccounts within the VAA and from the General Account in the same
proportion that the amount of withdrawal bears to the total contract value.
The minimum amount which can be withdrawn is $300, and the remaining contract
value must be at least $300. Unless prohibited, surrender/ withdrawal payments
will be mailed within seven days after we receive a valid written request at
the servicing office. The payment may be postponed as permitted by the 1940
Act. 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.
There are charges associated with surrender of a contract or withdrawal of
contract value. You may specify whether these charges are deducted from the
amount you request to be withdrawn or from the remaining contract value. See
Charges and other deductions.
The tax consequences of a surrender/withdrawal are discussed later in this
prospectus. See Federal tax status.
We may terminate the contract, if withdrawals reduce your contract value below
$2,000 and purchase payments have stopped for a period of 3 full years.
Reinvestment privilege
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal, and we will recredit the surrender/withdrawal charges
previously deducted. This election must be made within 30 days of the date of
the surrender/withdrawal, and the repurchase must be of a contract covered by
this Prospectus. A representation must be made that the proceeds being used to
make the purchase have retained their tax-favored status under an arrangement
for which the contracts offered by this Prospectus are designed. The number of
accumulation units which will be credited when the proceeds are reinvested
will be based on the value of the accumulation unit(s) on the next valuation
date. This computation will occur following receipt of the proceeds and re-
quest for reinvestment at the servicing office. You may utilize the reinvest-
ment privilege only once. For tax reporting purposes, we will treat a
surrender/withdrawal and a subsequent reinvestment purchase as separate trans-
actions. You should consult a tax advisor before you request a
surrender/withdrawal or subsequent reinvestment purchase.
Amendment of 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. You will be
notified in writing of any changes, modifications or waivers.
Commissions
Commissions are paid to dealers under different commission options. The maxi-
mum commission paid as a percentage of each purchase payment is 6.25%. Alter-
nate commission schedules are available with lower initial commission amounts
based on purchase payments, plus ongoing annual compensation of up to 1.00%.
At times, additional sales incentives (up to an annual continuing 0.10% of
contract value) may be provided to dealers maintaining certain sales volume
levels. Upon annuitization, the commissions paid to dealers are a maximum of
3.00% of account annuitized and/or an annual continuing commission of up to
0.80% (or up to 0.90% for dealers maintaining certain sales volume levels) of
statutory reserves. These commissions are not deducted from purchase payments
or contract value; they are paid by us.
Ownership
As contractowner, you have all rights under the contract. According to New
York law, the assets of the VAA are held for the exclusive benefit of all
contractowners and their designated beneficiaries; and the assets of the VAA
are not chargeable with liabilities arising from any other business that we
may conduct. Qualified contracts may not be assigned or transferred except as
permitted by the Employee Retirement Income Security Act (ERISA) of 1974 and
upon written notification to us. Non-qualified contracts may not be collater-
ally assigned. We assume no responsibility for the validity or effect of any
assignment. Consult your tax advisor about the tax consequences of an assign-
ment.
Contractowner questions
The obligations to purchasers under the contracts are those of LNY. Questions
about your contract should be directed to us at 1-800-942-5500.
Annuity payouts
When you apply for a contract, you may select any annuity commencement date
permitted by law.
The contract provides optional forms of payouts of annuities (annuity op-
tions), each of which is payable on a variable basis, a fixed basis or a com-
bination of both as you specify. The contract provides that all or part of the
contract value may be used to purchase an annuity.
You may elect annuity payouts in monthly, quarterly, semiannual or annual in-
stallments. If the payouts from any subaccount would be or become less than
$50, we have the right to reduce their frequency until the payouts are at
least $50 each. Following are explanations of the annuity options available.
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<PAGE>
Annuity options
Life Annuity. This option offers a periodic payout during the lifetime of the
annuitant and ends with the last payout before the death of the annuitant.
This option offers the highest periodic payout since there is no guarantee of
a minimum number of payouts or provision for a death benefit for beneficia-
ries. However, there is the risk under this option that the recipient would
receive no payouts if the annuitant dies before the date set for the first
payout; only one payout if death occurs before the second scheduled payout,
and so on.
Life Income with Payouts Guaranteed for Designated Period. This option guaran-
tees periodic payouts during a designated period, usually 10 or 20 years, and
then continues throughout the lifetime of the annuitant. The designated period
is selected by the contractowner.
Joint Life Annuity. This option offers a periodic payout during the joint
lifetime of the annuitant and a designated joint annuitant. The payouts con-
tinue during the lifetime of the survivor.
Joint Life Annuity with Guaranteed Period. This option guarantees periodic
payouts during a designated period, usually 10 or 20 years, and continues dur-
ing the joint lifetime of the annuitant and a designated joint annuitant. The
payouts continue during the lifetime of the survivor. The designated period is
selected by the contractowner.
Joint-and-Two-Thirds Survivor Annuity. This option provides a periodic payout
during the joint lifetime of the annuitant and a designated joint annuitant.
When one of the joint annuitants dies, the survivor receives two thirds of the
periodic payout made when both were alive.
Unit Refund Life Annuity. This option offers a periodic payout during the
lifetime of the annuitant with the guarantee that upon death a payout will be
made of the value of the number of annuity units (see Variable annuity
payouts) equal to the excess, if any, of: (a) the total amount applied under
this option divided by the annuity unit value for the date payouts begin, di-
vided by (b) the annuity units represented by each payout to the annuitant
multiplied by the number of payouts paid before death. The value of the number
of annuity units is computed on the date the death claim is approved for pay-
ment by the servicing office.
General Information
Under the options listed above, you may not make withdrawals. Other options,
with or without withdrawal features, may be made available by us. Options are
only available to the extent they are consistent with the requirements of the
contract as well as Sections 72(s) and 401(a)(9) of the tax code, if applica-
ble. The mortality and expense risk charge and the charge for administrative
services will be assessed on all variable annuity payouts, including options
that may be offered that do not have a life contingency and therefore no mor-
tality risk.
The annuity commencement date must be on or before the annuitant's 90th birth-
day. You may change the annuity commencement date, change the annuity option
or change the allocation of the investment among subaccounts up to 30 days be-
fore the scheduled annuity commencement date, upon written notice to the ser-
vicing office. You must give us at least 30 days notice before the date on
which you want payouts to begin. If proceeds become available to a beneficiary
in a lump sum, the beneficiary may choose any annuity payout option.
Unless you select another option, the contract automatically provides for a
life annuity with annuity payouts guaranteed for 10 years (on a fixed, vari-
able or combination fixed and variable basis, in proportion to the account al-
locations at the time of annuitization) except when a joint life payout is re-
quired by law. Under any option providing for guaranteed period payouts, the
number of payouts which remain unpaid at the date of the annuitant's death (or
surviving annuitant's death in case of joint life annuity) will be paid to
your beneficiary as payouts become due.
Variable annuity payouts
Variable annuity payouts will be determined using:
1. The contract value on the annuity commencement date;
2. The annuity tables contained in the contract;
3. The annuity option selected; and
4. The investment performance of the fund(s) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of annuity units equal to the first
periodic payout divided by the annuity unit value; and
3. Calculate the value of the annuity units each period thereafter.
For variable payouts, we assume an investment return of 4% per year, as ap-
plied to the applicable mortality table. The amount of each payout after the
initial payout will depend upon how the underlying fund(s) perform, relative
to the 4% assumed rate. If the actual net investment rate (annualized) exceeds
4%, the payment will increase at a rate equal to the amount of such excess.
Conversely, if the actual rate is less than 4%, annuity payments will de-
crease. There is a more complete explanation of this calculation in the SAI.
14
<PAGE>
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 you and your contract. This discussion also does not address
other Federal tax consequences, or state or local tax consequences, associated
with the contract. As a result, you should always consult a tax advisor about
the application of tax rules to your 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.
Tax deferral on earnings
The Federal income tax law generally does not tax any increase in your con-
tract value until you receive a contract distribution. However, for this gen-
eral rule to apply, certain requirements must be satisfied:
. An individual must own the contract (or the tax law must treat the contract
as owned by the individual).
. The investments of the VAA must be "adequately diversified" in accordance
with IRS regulations.
. Your 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.
Examples of contracts where the owner pays current tax on the contract's earn-
ings are contracts issued to a corporation or a trust. Exceptions to this rule
exist. For example, the tax code treats a contract as owned by an individual
if the named owner is a trust or other entity that holds the contract as an
agent for an individual. However, this exception does not apply in the case of
any employer that owns a contract to provide deferred compensation for its em-
ployees.
Investments in the VAA must be diversified
For a contact to be treated as an annuity for Federal income tax purposes, the
investments of the VAA must be "adequately diversified." IRS regulations de-
fine standards for determining whether the investments of the VAA are ade-
quately diversified. If the VAA fails to comply with these diversification
standards, you could be required to pay tax currently on the excess of the
contract value over the contract purchase payments. Although we do not control
the investments of the underlying investment options, we expect that the un-
derlying investment options will comply with the IRS regulations so that the
VAA will be considered "adequately diversified."
Restrictions
Federal income tax law limits your right to choose particular investments for
the contract. Because the IRS has not issued guidance specifying those limits,
the limits are uncertain and your right to allocate contract value among
subaccounts may exceed those limits. If so, you 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 an annuity
contract provide for amortization, through annuity payouts, of the contract's
purchase payments 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 Fed-
eral income tax purposes. In that event, you would be currently taxable on the
excess of the contract value over the purchase payments of the contract.
Tax treatment of payments
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
that your contract will be treated as an annuity for Federal income tax pur-
poses and that the tax law will not tax any increase in your contract value
until there is a distribution from your contract.
Taxation of withdrawals and surrenders
You will pay tax on withdrawals to the extent your contract value exceeds your
purchase payments in the contract. This income (and all other income from your
contract) is considered ordinary income. A higher rate of tax is paid on ordi-
nary income than on capital gains. You will pay tax on a surrender to the ex-
tent the amount you receive extends your purchase payments. In certain circum-
stances, your purchase payments are re-
15
<PAGE>
duced by amounts received from your 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 tax
rates) and treats a portion as a nontaxable return of your purchase payments in
the contract. We will notify you annually of the taxable amount of your annuity
payout. Once you have recovered the total amount of the purchase payment in the
contract, you will pay tax on the full amount of your annuity payouts. If annu-
ity payouts end because of the annuitant's death and before the total amount of
the purchase payments in the contract has been received, the amount not re-
ceived generally will be deductible.
Taxation of death benefits
We may distribute amounts from your contract because of the death of a
contractowner or an annuitant. The tax treatment of these amounts depends on
whether you 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 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
purchase payments not yet distributed from the contract. All annuity
payouts in excess of the purchase payments 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 payments
not previously received.
Penalty taxes payable on withdrawals, surrenders, or annuity payouts
The tax code may impose a 10% penalty tax on any distribution from your con-
tract which you must include in your gross income. The 10% penalty tax does not
apply if one of several exceptions exists. These exceptions include withdraw-
als, surrenders or annuity payouts that:
. you receive on or after you reach age 59 1/2,
. you receive because you became disabled (as defined in the tax law),
. a beneficiary receives on or after your death, or
. you receive as a series of substantially equal periodic payments for life (or
life expectancy).
Special rules if you own more than one annuity contract
In certain circumstances, you must combine some or all of the nonqualified an-
nuity contracts you own in order to determine the amount of an annuity payout,
a surrender or a withdrawal that you must include in income. For example, if
you purchase two or more deferred annuity contracts from the same life insur-
ance company (or its affiliates) during any calendar year, the tax code treats
all such contracts as one contract. Treating two or more contracts as one con-
tract could affect the amount of a surrender, withdrawal or an annuity payout
that you must include in income and the amount that might be subject to the
penalty tax described above.
Loans and assignments
Except for certain qualified contracts, the tax code treats any amount received
as a loan under a contract, and any assignments or pledge (or agreement to as-
sign or pledge) any portion of your contract value, as withdrawal of such
amount or portion.
Gifting a contract
If you transfer ownership of your contract to a person other than your spouse
(or to your former spouse incident to divorce), and receive a payment less than
your contract's value, you will pay tax on your contract value to the extent it
exceeds your purchase payments not previously received. The new owner's pur-
chase payments in the contract would then be increased to reflect the amount
included in income.
Charges for a contract's death benefit
Your contract may have an EGMDB, for which you pay an annual charge, computed
daily. It is possible that the tax law may treat all or a portion of the EGMDB
charge as a contract withdrawal.
Loss of income deduction
After June 8, 1997, if a contract is issued to a taxpayer that is not an indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should con-
sult a tax advisor.
Qualified retirement plans
We also designed the contracts for use in connection with certain types of re-
tirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called "quali-
fied contracts." We issue contracts for use with different types of qualified
plans. The Federal income tax rules applicable to those plans are complex and
varied. As a result, this Prospectus does not attempt to provide more than gen-
eral information about
16
<PAGE>
1use of the contract with various types of qualified plans. Persons planning
to use the contract in connection with a qualified plan should obtain advice
from a competent tax advisor.
Types of qualified contracts and terms of contracts
Currently, we issue contracts in connection with the following types of quali-
fied plans:
. Individual Retirement Accounts and Annuities ("Traditional IRAs")
. Roth IRAs
We currently do not but may, in the future, issue contracts in connection
with:
. Simplified Employee Pensions ("SEPs")
. Savings Incentive Matched Plan for Employees ("SIMPLE 401(k) plans")
. Public School system and tax-exempt organization annuity plans ("403(b)
plans")
. Qualified corporate employee pension and profit sharing plans ("401(a)
plans") and qualified annuity plans ("403(a) plans")
. Self-employed individual plans ("H.R. 10 plans" or "Keogh Plans")
. Deferred compensation plans of state and local governments and tax-exempt
organizations ("457 plans").
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 purchase payments that can be made,
and the tax deduction or exclusion that may be allowed for the purchase pay-
ments. These limits vary depending on the type of qualified plan and the
plan participant's specific circumstances, e.g., the participant's compensa-
tion.
. Under most qualified plans, e.g., Traditional IRAs, the annuitant must begin
receiving payments from the contract in certain minimum amounts by a certain
age, typically age 70 1/2. However, these "minimum distribution rules" do
not apply to a Roth IRA.
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 include purchase payments that were deductible or excludible from
income. Thus, under many qualified contracts the total amount received is in-
cluded in income since a deduction or exclusion from income was taken for pur-
chase payments. There are exceptions. For example, you do 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 min-
imum 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
qualified contract that must be included in income. The tax code does not im-
pose the penalty tax if one of several exceptions applies. The exceptions vary
depending 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 annuitant reaches age 59 1/2,
. received on or after the annuitant's death or because of the annuitant's
disability (as defined in the tax law),
. received as a series of substantially equal periodic payments for the
annuitant'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 ap-
ply to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
Transfers and direct rollovers
In many circumstances, money may be moved between qualified contracts and
qualified plans by means of a rollover or transfer. Special rules apply to
such rollovers and transfers. If the applicable rules are not followed, you
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 di-
rect rollover rules do not apply to distributions from IRAs or section 457
plans.) The direct rollover rules require that Federal income tax equal to 20%
of the eligible rollover distribution from the distri -
17
<PAGE>
bution amount, unless you elect to have the amount directly transferred to
certain qualified plans or contracts.
The EGMDB and IRAs
Pursuant to IRS regulations, IRAs may not invest in life insurance contracts.
We do not believe that these regulations prohibit the EGMDB from being pro-
vided under the contracts when we issue the contract as Traditional IRAs or
Roth IRAs. However, the law is unclear and it is possible that the presence of
the EGMDB under a contract issued as a Traditional IRA or Roth IRA could re-
sult in increased taxes to you.
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 distributee notifies us at or
before the time of the distribution that tax is not to be withheld. In certain
circumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender or annuity payout is requested, we will give the
recipient an explanation of the withholding requirements.
Tax status of Lincoln Life
Under existing Federal income tax laws, LNY does not pay tax on investment in-
come and realized capital gains of the VAA. LNY 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 Fed-
eral 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 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 series shares held in the VAA at meetings
of the shareholders of the series. The voting will be done according to the
instructions of contractowners who have interests in any subaccounts which in-
vest in classes of funds of the series. If the 1940 Act or any regulation un-
der it should be amended or if present interpretations should change, and if
as a result we determine that we are permitted to vote the series shares in
our own right, we may elect to do so.
The number of votes which you have the right to cast will be determined by ap-
plying your 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.
Series shares of a class held in a subaccount for which no timely instructions
are received will be voted by us in proportion to the voting instructions
which are received for all contracts participating in that subaccount. Voting
instructions to abstain on any item to be voted on will be applied on a pro-
rata basis to reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, each person having a voting inter-
est in a subaccount will receive proxy voting material, reports and other ma-
terials relating to the series. Since the series engages in shared funding,
other persons or entities besides LNY may vote series shares. See Sale of fund
shares by the series.
Distribution of the contracts
American Funds Distributors, Inc. (AFD), 333 South Hope Street, Los Angeles,
CA 90071, is the distributor and principal underwriter of the contracts. They
will be sold by properly licensed registered representatives of independent
broker-dealers which in turn have selling agreements with AFD and have been
licensed by the New York Insurance Department to represent us. AFD is regis-
tered with the SEC under the Securities Exchange Act of 1934 as a broker-
dealer and is a member of the Association of Securities Dealers (NASD). LNY
will offer contracts in New York State only.
Return privilege
Within the 10 day free-look period after you receive the contract, you may
cancel it for any reason by delivering or mailing it postage prepaid, to the
servicing office at P.O. Box 2348, 1300 South Clinton Street, Fort Wayne, In-
diana, 46801. A contract canceled under this provision will be void. With re-
spect to the fixed portion of a contract, we will return purchase payments.
With respect to the VAA, except as explained in the following paragraph, we
will return the contract value as of the date of receipt of the cancellation,
plus any premium taxes which had been deducted. No contingent deferred sales
charge will be assessed. A purchaser who participates in the VAA is subject to
the risk of a market loss during the free-look period.
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 Superintendent 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
conducted by that Department at least every five years.
18
<PAGE>
Records and reports
As presently required by the 1940 Act and applicable regulations, we are re-
sponsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Mar-
ket Street, Philadelphia, PA 19203, to provide accounting services to the VAA.
We will mail to you, at your last known address of record at the servicing of-
fice, at least semiannually after the first contract year, reports containing
information required by that Act or any other applicable law or regulation.
Administration services necessary for the operation of the VAA and the con-
tracts are currently provided by Lincoln Life. However, neither the assets of
Lincoln Life nor the assets of LNC support the obligations of Lincoln Life un-
der the contracts.
Other information
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered here. This Prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further informa-
tion about the VAA, LNY and the contracts offered. Statements in this Prospec-
tus about the content of contracts and other legal instruments are summaries.
For the complete text of those contracts and instruments, please refer to
those documents as filed with the SEC.
We are a member of the Insurance Marketplace Standards Association ("IMSA")
and may include the IMSA logo and information about IMSA membership in our ad-
vertisements. 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".
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 unde-
tected for a long time. For our products, if left unchecked it could cause
such problems as purchase payment collection and deposit errors; claim payment
difficulties; 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 LNY
and of Lincoln Life and Delaware Service Company Inc. (Delaware), affiliates
of LNY and providers of the accounting and valuation services for the VA Ac-
count.
However, both provider companies are wholly owned by Lincoln National Corpora-
tion (LNC), which has had Year 2000 processes in place since 1996. LNC pro-
jects 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. LNY also has a dedicated Year 2000 team and is coordinating its activi-
ties with those of Lincoln Life, Delaware and LNC.
In light of the potential problems discussed above, LNY, as part of its Year
2000 updating process, has assumed responsibility for correcting all high-pri-
ority internal Information Technology (IT) systems which service the VA Ac-
count. Delaware is responsible for updating all its high-priority internal IT
systems to support these vital services. The Year 2000 effort, for both IT and
non-IT systems, is organized 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.
The high-priority IT processes and systems--those LNY uses to maintain its
customers' records and accounts--have been assessed and repaired, and testing
of those processes and systems is more than 99% complete. Our efforts will
continue through the end of 1999 to work on keeping our business dealings un-
interrupted. And, we continue to work closely with our key business partners
and suppliers so they can provide the information and service we need from
them. All three companies are currently on schedule and remediation and test-
ing of their high-priority non-IT systems (elevators, heating and ventilation,
security systems, etc.) was completed 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
include (but are certainly not limited to) a possible loss of technical re-
sources to perform the work; failure to identify all susceptible systems; and
non-compliance by third parties whose systems and operations impact LNY. In a
report dated February 26, 1999, entitled, INVESTIGATING THE IMPACT OF THE YEAR
2000 TECHNOLOGY PROBLEM; S. Rpt. 106-10, the U.S. Senate Special
19
<PAGE>
Committee on the Year 2000 Technology Problem expressed its concern that "Fi-
nancial services firms...are particularly vulnerable to...the risk that a mate-
rial customer or business partner will fail, as a result of the computer prob-
lems, to meet its obligations".
One important source of uncertainty is the extent to which the key trading
partners of LNY, Lincoln Life and of Delaware will be successful in their own
remediation and testing efforts. LNY, Lincoln Life and Delaware have been moni-
toring the progress of their trading partners; however, the efforts of these
partners are beyond our control.
LNY, 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 either com-
pany that there will not be significant computer problems in and around
December 31, 1999.
Statement of additional information table of contents for Separate Account H
<TABLE>
<CAPTION>
Item
- -------------------------------------------
<S> <C>
General information and history of LNY B-2
- -------------------------------------------
Special terms B-2
- -------------------------------------------
Services B-2
- -------------------------------------------
Principal underwriter B-2
- -------------------------------------------
Purchase of securities being offered B-2
</TABLE>
For a free copy of the SAI please see page one of this booklet.
<TABLE>
<CAPTION>
Item
- ---------------------------------------
<S> <C>
Calculation of investment results B-2
- ---------------------------------------
Annuity payouts B-7
- ---------------------------------------
Federal tax status B-7
- ---------------------------------------
Advertising and sales literature B-10
- ---------------------------------------
Financial statements B-12
</TABLE>
20
<PAGE>
The American Legacy III
Lincoln Life & Annuity VariableAnnuity Account H (Registrant)
Lincoln Life & Annuity Company of New York (Depositor)
Statement of Additional Information (SAI)
This Statement of Additional Information should be read in conjunction with the
American Legacy III Prospectus of Lincoln Life & Annuity Variable Annuity Ac-
count H dated , 1999.
You may obtain a copy of the American Legacy III Prospectus on request and
without charge.
Please write Lincoln Life & Annuity Company of New York, P.O. Box 2348, Fort
Wayne, Indiana 46801 or call 1-800-942-5500.
Table of Contents
<TABLE>
<CAPTION>
Item Page
- ------------------------------------------
<S> <C>
General information and history
of LNY B-2
- ------------------------------------------
Special terms B-2
- ------------------------------------------
Services B-2
- ------------------------------------------
Principal underwriter B-2
- ------------------------------------------
Purchase of securities being offered B-2
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Item Page
<S> <C>
Calculation of investment results B- 2
Annuity payouts B- 7
Federal tax status B- 7
Advertising and sales literature B-10
Financial statements B-12
</TABLE>
This SAI is not a Prospectus.
The date of this SAI is , 1999.
<PAGE>
General information and
history of Lincoln Life & Annuity Company of New York ("LNY")
LNY is a life insurance company founded in New York on June 6, 1996. LNY 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). LNC and Lincoln Life are organized under Indiana law.
LNC's primary businesses are insurance and financial services.
Special terms
The special terms used in this SAI are the ones defined in the Prospectus. In
connection with the term, valuation date, the New York Stock Exchange is cur-
rently closed on weekends and on these holidays: New Year's Day, Martin Luther
King's Birthday, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. If any of these holidays oc-
curs on a weekend day, the Exchange may also be closed on the business day oc-
curring just before or just after the holiday.
Services
Independent auditors
The statutory-basis financial statements of LNY appearing in this SAI and Reg-
istration Statement have been audited by Ernst & Young LLP, independent audi-
tors, as set forth in their reports also appearing elsewhere in this document
and in the Registration Statement. The financial statements and schedules au-
dited 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.
Keeper of records
All accounts, books, records and other documents which are required to be
maintained for the VAA are maintained by LNY or by third parties responsible
to LNY. We have entered into an agreement with the Delaware Management Compa-
ny, 2005 Market Street, Philadelphia, PA 19203, to provide accounting services
to the VAA. No separate charge against the assets of the VAA is made by LNY
for this service. Administrative services necessary for the operation of the
VAA and the contracts are currently provided by Lincoln Life. However, neither
the assets of Lincoln Life nor the assets of LNC support the obligations of
Lincoln Life under the contracts.
Principal underwriter
LNY has contracted with American Funds Distributors, Inc. (AFD), 333 South
Hope Street, Los Angeles, California 90071, a licensed broker-dealer, to dis-
tribute the contracts through certain legally authorized sales persons and or-
ganizations (brokers). AFD and its brokers are compensated under a standard
compensation schedule.
Purchase of securities being offered
The contracts are offered to the public through certain securities
broker/dealers who have entered into selling agreements with AFD and whose
personnel are legally authorized to sell annuity products. Although there are
no special purchase plans for any class of prospective buyers, the contingent
deferred sales charge normally assessed upon surrender or withdrawal of con-
tract value will be waived for officers, directors or bona fide full time em-
ployees of LNC, The Capital Group, Inc., their affiliated or managed compa-
nies, and certain other persons. See Charges and other deductions in the Pro-
spectus.
Both before and after the annuity commencement date, there are exchange privi-
leges between subaccounts, and from the VAA to the General Account subject to
restrictions set out in the Prospectus. See The contracts, in the Prospectus.
No exchanges are permitted between the VAA and other separate accounts.
The offering of the contracts is continuous.
Calculation of investment results
The paragraphs set forth below present performance information for the VAA and
the subaccounts calculated in several different ways. Once the VAA has a his-
tory of operations, Paragraph (A) will show the average annual total return of
each subaccount since its inception. The information presented in Paragraph
(A) is commonly referred to as "standard performance" because it is calculated
in accordance with formulas prescribed by the SEC. Under rules issued by the
SEC, standard performance must be included in certain advertising material
that discusses the performance of the VAA and the subaccounts. Paragraph (B)
shows the performance of the series over the periods indicated in the table
set forth in the Paragraph adjusted to reflect the charges and expenses asso-
ciated with the contracts. Standard performance is described in Paragraph (C).
Paragraph (D) shows additional "non-standardized" performance information
(i.e., performance information not calculated in accordance with SEC guide-
lines) for each
B-2
<PAGE>
of the subaccounts that may be used to advertise the performance of the VAA and
the subaccounts.
Subaccount performance adjusted for contract expense charges
The examples in Paragraph (B) below show, for the various subaccounts of the
VAA, annual total return as of the stated periods, based upon a hypothetical
initial purchase payment of $1,000, calculated according to the formula pro-
vided after the examples. The annual total return has been calculated to show
the annual total return for a hypothetical contract with the enhanced guaran-
teed minimum death benefit (EGMDB) and without EGMDB. Although the subaccounts
have not yet commenced activity, these figures are calculated as if the
subaccounts had commenced activity at the same time as the underlying funds.
Further, since the class of shares of the funds in which the subaccounts invest
was not created until 1997, the figures below are based on the performance of
the class of shares of the funds issued since the funds commenced operations in
1989, as adjusted to reflect the fees and expenses chargeable against assets
attributable to shares of Class 2.
(A) Average annual total return
As noted above, sub-accounts of the VAA do not yet have an operating history.
B-3
<PAGE>
(B) Subaccount performance (adjusted for contract expense charges)
Period Ending December 31, 1998
<TABLE>
<CAPTION>
10-year
1-year period 5-year period period
With Without With Without With Without
EGMDB EGMDB EGMDB EGMDB EGMDB EGMDB
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Growth Subaccount 26.96% 27.15% 20.34%* 20.57%* N/A N/A
(as if commenced activity 4/30/97)
Global Small Capitalization Subaccount 1.31%* 1.41%* N/A N/A N/A N/A
(as if commenced activity 4/30/98)
Growth Subaccount 33.36% 33.56% 19.80% 19.98% 17.23% 17.40%
(as if commenced activity 2/8/84)
International Subaccount 19.24% 19.42% 10.46% 10.62% 9.53%* 9.69%*
(as if commenced activity 5/1/90)
Growth-Income Subaccount 16.45% 16.62% 17.21% 17.39% 14.12% 14.29%
(as if commenced activity 2/8/84)
Asset Allocation Subaccount 11.37% 11.54% 13.45% 13.62% 10.65%* 10.82%*
(as if commenced activity 8/1/89)
Bond Subaccount 2.67% 2.82% 5.02%* 5.18%* N/A N/A
(as if commenced activity 1/2/96)
High-Yield Bond Subaccount -1.13% -0.98% 6.03% 6.19% 8.91% 9.08%
(as if commenced activity 2/8/84)
U.S. Government/AAA-Rated Securities 6.43% 6.59% 4.23% 4.39% 6.56% 6.72%
Subaccount
(as if commenced activity 12/1/85)
Cash Management Subaccount 3.44% 3.60% 3.26% 3.41% 3.57% 3.72%
(as if commenced activity 2/8/84)
</TABLE>
*The lifetime of this subaccount is less than the complete period indicated.
See the date the subaccount commenced activity under its name.
There is a New World subaccount but it is not in the chart because it did not
begin activity until 1999.
The length of the periods and the last day of each period used in the above ta-
ble are set out in the table heading and in the footnotes above.
(C) Formulas
Average annual total return for each period is determined by finding the averge
annual compounded rate of return over each period that would equate the initial
amount invested to the ending redeemable value for that period, according to
the following formula--
P(1 + T)n = ERV
Where: P = a hypothetical initial purchase payment of $1,000
T = average annual total return for the period in question
n = number of years
ERV = redeemable value (as of the end of the period in question) of a hypo-
thetical $1,000 purchase payment made at the beginning of the 1-year,
5-year, or 10-year period in question (or fractional portion thereof)
The formula assumes that: 1) all recurring fees have been charged to
contractowner accounts; 2) all applicable non-recurring charges are deducted at
the end of the period in question; and 3) there will be a complete redemption
at the end of the period in question.
B-4
<PAGE>
(D) Other Non-standardized investment results:
The VAA may illustrate its results over various periods and compare its results
to indices and other variable annuities in sales materials including advertise-
ments, brochures and reports. Such results may be computed on a cumulative
and/or annualized basis.
Cumulative quotations are arrived at by calculating the change in the Accumula-
tion Unit Value between the first and last day of the base period being mea-
sured, and expressing the difference as a percentage of the unit value at the
beginning of the base period.
Annualized quotations are arrived at by applying a formula which determines the
level rate of return which, if earned over the entire base period, would pro-
duce the cumulative return.
Non-standardized investment results
subaccounts of Account H
$10,000 invested in
this fund through
American Legacy III
this many years ago...
...would have grown to this amount on December 31, 1998
<TABLE>
<CAPTION>
With EGMDB
-------------------------------------------------------------------------------
Growth Growth-Income High-Yield Bond Cash Management
- -------------------------------------------------------------------------------------------------------------------
Number Compound Compound Compound Compound
of Growth Growth Growth Growth
Years Periods Amount Rate Amount Rate Amount Rate Amount Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $13,336.35 33.36% $11,644.90 16.45% $ 9,887.19 -1.13% $10,344.01 3.44%
2 12/31/96-12/31/98 17,069.98 30.65% 14,415.89 20.06% 10,928.01 4.54% 10,701.76 3.45%
3 12/31/95-12/31/98 19,037.42 23.94% 16,838.04 18.97% 12,170.30 6.76% 11,062.71 3.42%
4 12/31/94-12/31/98 24,946.43 25.70% 22,033.67 21.53% 14,580.18 9.89% 11,486.82 3.52%
5 12/31/93-12/31/98 24,678.07 19.79% 22,124.49 17.20% 13,403.48 6.02% 11,737.35 3.25%
Lifetime of fund 02/08/84-12/31/98 89,590.77 15.85% 72,968.21 14.27% 43,079.28 10.31% 18,367.64 4.16%
<CAPTION>
Without EGMDB
-------------------------------------------------------------------------------
Growth Growth-Income High-Yield Bond Cash Management
- -------------------------------------------------------------------------------------------------------------------
Number Compound Compound Compound Compound
of Growth Growth Growth Growth
Years Periods Amount Rate Amount Rate Amount Rate Amount Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $13,356.36 33.56% $11,662.37 16.62% $ 9,902.04 -0.98% $10,359.53 3.60%
2 12/31/96-12/31/98 17,121.36 30.85% 14,459.08 20.24% 10,960.48 4.69% 10,734.07 3.60%
3 12/31/95-12/31/98 19,123.54 24.11% 16,913.99 19.15% 12,225.07 6.92% 11,112.65 3.57%
4 12/31/94-12/31/98 25,114.83 25.89% 22,166.11 22.04% 14,667.67 10.04% 11,555.89 3.68%
5 12/31/93-12/31/98 24,863.82 19.97% 22,290.62 17.39% 13,504.02 6.19% 11,825.60 3.41%
Lifetime of fund 02/08/84-12/31/98 91,611.48 16.03% 74,613.74 14.44% 44,049.84 10.46% 18,781.92 4.32%
</TABLE>
<TABLE>
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
U.S. Govt/AAA U.S. Govt/AAA
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $10,642.67 6.43% $10,658.64 6.59%
2 12/31/96-12/31/98 11,356.00 6.56% 11,390.24 6.73%
3 12/31/95-12/31/98 11,517.74 4.82% 11,569.77 4.98%
4 12/31/94-12/31/98 13,074.46 6.92% 13,153.11 7.08%
5 12/31/93-12/31/98 12,302.32 4.23% 12,394.88 4.38%
Lifetime of fund 12/01/85-12/31/98 22,882.32 6.52% 23,336.11 6.67%
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
Asset Allocation Asset Allocation
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $11,136.80 11.37% $11,153.51 11.54%
2 12/31/96-12/31/98 13,195.08 14.87% 13,234.53 15.04%
3 12/31/95-12/31/98 15,030.00 14.55% 15,097.73 14.71%
4 12/31/94-12/31/98 19,153.79 17.65% 19,274.86 17.83%
5 12/31/93-12/31/98 18,793.48 13.44% 18,934.54 13.61%
Lifetime of fund 08/01/89-12/31/98 25,955.90 10.66% 26,324.21 10.82%
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
International International
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $11,924.50 19.24% $11,942.37 19.42%
2 12/31/96-12/31/98 12,795.10 13.12% 12,834.05 13.29%
3 12/31/95-12/31/98 14,795.14 13.95% 14,862.08 14.11%
4 12/31/94-12/31/98 16,400.57 13.17% 16,499.35 13.36%
5 12/31/93-12/31/98 16,443.41 10.45% 16,567.19 10.62%
Lifetime of fund 04/30/90-12/31/98 22,020.29 9.53% 22,308.28 9.69%
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
Bond Bond
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $10,266.52 2.67% $10,281.93 2.82%
2 12/31/96-12/31/98 11,124.39 5.47% 11,157.87 5.64%
Lifetime of fund 01/02/96-12/31/98 11,583.36 5.03% 11,635.57 5.19%
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
Global Growth Global Growth
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $12,696.01 26.96% $12,715.04 27.15%
Lifetime of fund 04/30/97-12/31/98 13,618.84 20.35% 13,662.77 20.58%
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
Global Small Global Small
Capitalization Capitalization
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lifetime of fund 04/30/98-12/31/98 $10,130.63 1.31% $10,140.84 1.41%
</TABLE>
There is also a New World subaccount but it is not in this chart because it did
not begin activity until 1999.
B-6
<PAGE>
Annuity payouts
Variable annuity payouts
Variable annuity payouts will be determined on the basis of: (1) the dollar
value of the contract on the annuity commencement date; (2) the annuity tables
contained in the contract; (3) the type of annuity option selected; and (4)
the investment results of the fund(s) selected. In order to determine the
amount of variable annuity payouts, LNY makes the following calculation:
first, it determines the dollar amount of the first payout; second, it credits
the contract with a fixed number of annuity units based on the amount of the
first payout; and third, it calculates the value of the annuity units each pe-
riod thereafter. These steps are explained below.
The dollar amount of the first periodic variable annuity payout is determined
by applying the total value of the accumulation units credited under the con-
tract valued as of the annuity commencement date (less any premium taxes) to
the annuity tables contained in the contract. The first variable annuity pay-
out will be paid 14 days after the annuity commencement date. This day of the
month will become the day on which all future annuity payouts will be paid.
Amounts shown in the tables are based on the 1983 Table "a" Individual Annuity
Mortality Tables, modified, with an assumed investment return at the rate of
4% per annum. The first annuity payout is determined by multiplying the bene-
fit per $1,000 of value shown in the contract tables by the number of thou-
sands of dollars of value accumulated under the contract. These annuity tables
vary according to the form of annuity selected and the age of the annuitant at
the annuity commencement date. The 4% interest rate stated above is the mea-
suring point for subsequent annuity payouts. If the actual net investment rate
(annualized) exceeds 4%, the payout will increase at a rate equal to the
amount of such excess. Conversely, if the actual rate is less than 4%, annuity
payouts will decrease. If the assumed rate of interest were to be increased,
annuity payouts would start at a higher level but would decrease more rapidly
or increase more slowly.
LNY will use sex distinct annuity tables in the contracts, except for those
contracts associated with employer sponsored plans and where prohibited by
law.
At an annuity commencement date, the contract is credited with annuity units
for each subaccount on which variable annuity payouts are based. The number of
annuity units to be credited is determined by dividing the amount of the first
periodic payout by the value of an annuity unit in each subaccount selected.
Although the number of annuity units is fixed by this process, the value of
such units will vary with the value of the underlying fund. The amount of the
second and subsequent periodic payouts is determined by multiplying the
contractowner's fixed number of annuity units in each subaccount by the appro-
priate annuity unit value for the valuation date ending 14 days prior to the
date that payout is due.
The value of each subaccount's annuity unit will be set initially at an arbi-
trary dollar amount. The annuity unit value for each subaccount at the end of
any valuation date is determined by multiplying the subaccount annuity unit
value for the immediately preceding valuation date by the product of:
(a) The net investment factor of the subaccount for the valuation period for
which the annuity unit value is being determined, and
(b) A factor to neutralize the assumed investment return in the annuity table.
The value of the annuity units is determined as of a valuation date 14 days
prior to the payment date in order to permit calculation of amounts of annuity
payouts and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
Proof of age, sex and survival
LNY may require proof of age, sex, or survival of any payee upon whose age,
sex, or survival payments depend.
Federal tax status
General
The operations of the VAA form a part of, and are taxed with, the operations
of LNY under the Internal Revenue Code of 1986, as amended (the Code). VAA in-
vestment income and realized net capital gains on the assets of the VAA are
reinvested and taken into account in determining the accumulation and annuity
unit values. As a result, such investment income and realized net capital gain
are automatically retained as part of the reserves under the contract. Under
existing federal income tax law, LNY believes that the VAA investment income
and realized net capital gain are not taxed to the extent they are retained as
part of the reserves under the contract. Accordingly, LNY does not anticipate
that it will incur any federal income tax liability attributable to the VAA,
and therefore it does not intend to make any provision for such taxes. Howev-
er, if changes in the federal tax laws or interpretations thereof result in
LNY's being taxed on income or gain attributable to the VAA, then LNY may im-
pose a charge against the VAA (with respect to some or all (contracts) in or-
der to make provision for payment of such taxes.
B-7
<PAGE>
Tax status of non-qualified contracts
Section 817(h) of the code provides that separate account investments (or the
investments of a mutual fund the shares of which are owned by separate ac-
counts of insurance companies) underlying the contract be adequately diversi-
fied in accordance with Treasury regulations in order for the contract to
qualify as an annuity contract under Section 72 of the code. The VAA, through
each of the funds, intends to comply with the diversification requirements
prescribed in regulations, which affect how the assets in each of the funds in
which the VAA invests may be invested. Capital Research and Management Company
is not affiliated with LNY and LNY does not have control over the series, or
its investments. However, LNY believes that each fund in which the VAA owns
shares will meet the diversification requirements and that therefore the con-
tracts will be treated as annuities under the code.
The regulations relating to diversification requirements do not provide guid-
ance concerning the extent to which contractowners may direct their invest-
ments to particular subaccounts of a separate account. When guidance is pro-
vided, the contract may need to be modified to comply with that guidance. For
these reasons, LNY reserves the right to modify the contract as necessary to
prevent the contractowner from being considered the owner of the assets of the
VAA.
In addition to the requirements of Section 817(h), code Section 72(s) provides
that contracts will not be treated as annuity contracts for purposes of Sec-
tion 72 unless the contract provides that (1) if any contractowner dies on or
after the annuity starting date prior to the time the entire interest in the
contract has been distributed, the remaining portion of such interest must be
distributed at least as rapidly as under the method of distribution in effect
at the time of the contractowner's death; and (2) if any contractowner dies
prior to the annuity starting date, the entire interest must be distributed
within five years after the death of the contractowner. These requirements are
considered satisfied if any portion of the contractowner's interest that is
payable to or for the benefit of a designated beneficiary is distributed over
that designated beneficiary's life, or a period not extending beyond the des-
ignated beneficiary's life expectancy, and if that distribution begins within
one year of the contractowner's death. The designated beneficiary must be a
natural person. No regulations interpreting these requirements have yet been
issued. Thus, no assurance can be given that the provisions contained in con-
tracts satisfy all such code requirements. However, LNY believes that such
provisions in such contracts meet these requirements. LNY intends to review
such provisions and modify them as necessary to assure that they comply with
the requirements of Section 72(s) when clarified by regulations or otherwise.
Tax status of contracts used with certain plans
The rules governing the tax treatment of contributions and distributions under
qualified plans, as set forth in the code and applicable rulings and regula-
tions, are complex and subject to change. These rules also vary according to
the type of plan and the terms and conditions of the plan itself. Therefore,
no attempt is made herein to provide more than general information about the
use of contracts with the various types of plans, based on LNY's understanding
of the current federal tax laws as interpreted by the Internal Revenue Serv-
ice. Purchasers of contracts for use with such a plan and plan participants
and beneficiaries should consult counsel and other competent advisers as to
the suitability of the plan and the contract to their specific needs, and as
to applicable code limitations and tax consequences. Participants under such
plans, as well as contractowners, annuitants, and beneficiaries, should also
be aware that the rights of any person to any benefits under such plans may be
subject to the terms and conditions of the plans themselves regardless of the
terms and conditions of the contract.
Following are brief descriptions of the various types of plans and of the use
of contracts in connection therewith.
Individual retirement annuities (IRA)
Under Section 408 of the code, individuals may participate in a retirement
program known as Individual Retirement Annuity (IRA). An individual may make
an annual IRA contribution of up to the lesser of $2,000 (or $4,000 if IRAs
are maintained for both the individual and his spouse) or 100% of compensa-
tion. However, IRA contributions may be non-deductible in whole or in part if
(1) the individual or his spouse is an active participant in certain other re-
tirement programs and (2) the income of the individual (or of the individual
and his spouse) exceeds a specified amount. Distributions from certain other
IRA plans or qualified plans may be rolled over to an IRA on a tax deferred
basis without regard to the limit on contributions, provided certain require-
ments are met. Distributions from IRA's are subject to certain restrictions.
Deductible IRA contributions and all IRA earnings will be taxed as ordinary
income when distributed. The failure to satisfy certain code requirements with
respect to an IRA may result in adverse tax consequences.
Roth IRA
Beginning in 1998, Roth IRA's may be established. Non-deductible contributions
of $2,000 per year can be made to the Roth IRA. The contribution limits for
deductible and non-deductible IRA's are coordinated. In general, distributions
from a Roth IRA are not taxable and are not subject to the 10% early with-
drawal penalty that applies to Traditional IRA's. A five-year holding period
as well as other requirements must be satis-
B-8
<PAGE>
fied if distributions are to be non-taxable. Assuming certain income restric-
tions are satisfied, a Traditional IRA can be converted to a Roth IRA. This is
a taxable event.
Simplified employee pension plans
[Section 408(k)]
An employer may make contributions on behalf of employees to a simplified em-
ployee pension plan ("SEP") established prior to January 1, 1997, as provided
by Section 408(k) of the code. The contributions and distribution dates are
limited by the code provisions. All distributions from the plan will be taxed
as ordinary income. Any distribution before the employee attains age 59 1/2
(except in the event of death or disability) or the failure to satisfy certain
other code requirements may result in adverse tax consequences. For tax years
after 1996, salary reduction SEPs (SAR/SEP) may no longer be established. How-
ever, SAR/SEPs in existence prior to January 1, 1997 may continue to receive
contributions.
Tax on distributions from
qualified contracts
The following rules generally apply to distributions from contracts purchased
in connection with the plans discussed above, other than Roth IRAs.
The portion, if any, of any contribution under a contract made by or on behalf
of an individual which is not excluded from the employee's gross income (gen-
erally, the employee's own non-deductible contributions) constitutes his in-
vestment in the contract. If a distribution is made in the form of annuity
payouts, the employee's investment in the contract (adjusted for certain re-
fund provisions) divided by his life expectancy (or other period for which an-
nuity payouts are expected to be made) constitutes a return of capital each
year. The dollar amount of annuity payouts received in any year in excess of
such return is taxable as ordinary income. However, all distributions will be
fully taxable once the employee is deemed to have recovered the dollar amount
of his investment in the contract. Notwithstanding the above, if the employ-
ee's annuity starting date was on or before July 1, 1986 and if his investment
in the contract will be recovered within three years of his annuity starting
date, no amount is included in income until he has fully recovered such in-
vestment. Rules generally provide that all distributions which are not re-
ceived as an annuity will be taxed as a pro rata distribution of taxable and
non-taxable amounts (rather than as a distribution first of non-taxable
amounts).
If a surrender of or withdrawal from the contract is effected and a distribu-
tion is made in a single payment, the proceeds may qualify for special lump-
sum distribution treatment under certain qualified plans, as discussed above.
Otherwise, the amount by which the payment exceeds the investment in the con-
tract (adjusted for any prior withdrawals) allocated to that payment, if any,
will be taxed as ordinary income in the year of receipt.
Distributions from plans, IRAs and SEPs will be subject to a 10% penalty tax
if made before age 59 1/2 unless certain other exceptions apply. Failure to
meet certain minimum distribution requirements for the above plans will result
in a 50% excise tax. Various other adverse tax consequences may also be poten-
tially applicable in certain circumstances to these types of plans.
Upon an annuitant's death, the taxation of benefits payable to his beneficiary
generally follow these same principles, subject to a variety of special rules.
Other considerations
It should be understood that the foregoing comments about the federal tax con-
sequences under these contracts are not exhaustive and that special rules are
provided with respect to other tax situations not discussed herein. Further,
the foregoing discussion does not address any applicable state, local, or for-
eign tax laws. In recent years, numerous changes have been made in the federal
income tax treatment of contracts and retirement plans, which are not fully
discussed above. Before an investment is made in any of the above plans, a tax
adviser should be consulted.
Advertising and sales
literature
As set forth in the Prospectus, LNY may refer to the following organizations
(and others) in its marketing materials:
A.M. Best's Rating System is designed to evaluate the various factors affect-
ing 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 quantita-
tive and qualitative review of each company. A.M. Best also provides certain
rankings, to which LNY intends to refer.
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 mea-
sures 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 di-
versification
B-9
<PAGE>
representing 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, includ-
ing reports on performance and portfolio analysis, fee and expense analysis.
Moody's insurance financial strength rating is an opinion of an insurance
company's financial strength 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 sta-
tistical and analytical coverage of open-end and closed-end funds and variable
annuities.
Standard & Poor's insurance claims-paying ability rating is an opinion 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 con-
tracts.
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 Ameri-
can 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.
In its advertisements and other sales literature for the VAA and the series
funds, LNY 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 illustration,
the literature may emphasize the potential tax savings through tax deferral;
the potential advantage of the variable annuity account over the fixed ac-
count; and the compounding effect when a client makes regular deposits to his
or her contract.
Internet. An electronic communications network which may be used to provide
information regarding LNY, performance of the subaccounts and advertisement
literature.
Dollar-Cost Averaging. (DCA) -- You may systematically transfer on a monthly
basis amounts from the DCA Fixed Account or certain variable subaccounts into
the variable subaccounts or the fixed side of the contract. You may elect to
participate in the DCA program at the time of application or at anytime before
the annuity commencement date by completing an election form available from
us. The minimum balance needed to establish the DCA program is $10,000. DCA
transfers can take place over any period between six and 60 months. Once
elected, the program will remain in effect until the earlier of: (1) the annu-
ity commencement date; (2) the value of the amount being DCA'd is depleted; or
(3) you cancel the program by written request or by telephone if we have your
telephone authorization on file. Currently, there is no charge for this serv-
ice. However, we reserve the right to impose one. A transfer under this pro-
gram is not considered a transfer for purposes of limiting the number of
transfers that may be made, or assessing any charges which may apply to trans-
fers. We reserve the right to discontinue this program at any time. DCA does
not assure a profit or protect against loss. If the DCA program is in effect,
you may not participate in the Automatic Withdrawal Service or cross-reinvest-
ment service.
Automatic Withdrawal Service. (AWS) -- AWS provides an automatic, periodic
withdrawal of contract value to you. You may elect to participate in AWS at
the time of application or at any time before the annuity commencement date by
sending a written request to our servicing office. The minimum contract value
required to establish AWS is $10,000. You may cancel or make changes to your
AWS program at any time by sending a written request to our servicing office.
If telephone authorization has been elected, certain changes may be
B-10
<PAGE>
made by telephone. Notwithstanding the requirements of the program, any with-
drawal must be permitted by Section 401(a)(9) of the code for qualified plans
or permitted under Section 72 for non-qualified contracts. To the extent that
withdrawals under AWS do not qualify for an exemption from the contingent de-
ferred sales charge, we will assess any applicable surrender charges on those
withdrawals. See Contingent deferred sales charges. Currently, there is no
charge for this service. However, we reserve the right to impose one. If a
charge is imposed, it will not exceed $25 per transaction or 2% of the amount
withdrawn, whichever is less. We reserve the right to discontinue this service
at any time. If the AWS program is in effect, you may not participate in the
DCA program or cross-reinvestment service.
Cross-reinvestment service -- Under this option, account value in a designated
variable subaccount or the fixed side of the contract that exceeds a certain
baseline amount is automatically transferred to another specific variable
subaccount(s) or the fixed side of the contract at specific intervals. You may
elect to participate in cross-reinvestment at the time of application or at
any time before the annuity commencement date by sending a written request to
our servicing office or by telephone if we have your telephone authorization
on file. You designate the holding account, the receiving account(s), and the
baseline amount. Cross-reinvestment will continue until we receive authoriza-
tion to terminate the program.
The minimum holding account value required to establish cross-reinvestment is
$10,000 and the minimum amount transferred is $50.00. Currently, there is no
charge for this service. However, we reserve the right to impose one. A trans-
fer under this program is not considered a transfer for purposes of limiting
the number of transfers that may be made, or assessing any charges which may
apply to transfers. We reserve the right to discontinue this service at any
time. This program is not available if you are utilizing an automatic deposit
feature. Also you may not use the DCA program on the AWS if you are using this
cross-reinvestment service.
LNY's customers. Sales literature for the VAA and the series' funds may refer
to the number of employers and the number of individual annuity clients which
Lincoln Life serves. As of the date of this SAI, Lincoln Life was serving over
200 employers and more than 33,000 individuals.
LNY's assets, size. LNY may discuss its general financial condition (see, for
example, the reference to A.M. Best Company, above); it may refer to its as-
sets; it may also discuss its relative size and/or ranking among companies in
the industry or among any sub-classification of those companies, based upon
recognized evaluation criteria (see reference to A.M. Best Company above). For
example, at year-end 1998 LNY had statutory admitted assets of over $2 bil-
lion.
Financial Statements
The statutory-basis financial statements of LNY as of December 31, 1998 and
1997 and for the years ended December 31, 1998 and 1997 and the period from
June 6, 1996 to December 31, 1996 appear on the following pages.
B-11
<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>
LINCOLN LIFE & ANNUITY VARIABLE ANNUITY ACCOUNT H
REGISTRATION STATEMENT ON FORM N-4
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) List of Financial Statements
1. Part A The Table of Condensed Financial Information will be included
in Part A of this Registration Statement when available.
2. Part B The Financial Statements for the Variable Account will be
included in Part B of this Registration Statement when available.
3. Part B The following Statutory-Basis Financial Statements of Lincoln
Life & Annuity Company of New York are included in the SAI:
Balance Sheets Statutory-Basis--December 31, 1998 and 1997
Statements of Operations Statutory-Basis--Years ended December 31, 1998 and
1997 and the period from June 6, 1996 (date of incorporation) to December 31,
1996
Statements of Changes in Capital and Surplus Statutory-Basis--Years ended
December 31, 1998 and 1997, and the period from June 6, 1996 (date of
incorporation) to December 31, 1996
Statements of Cash Flows Statutory-Basis--Years ended December 31, 1998 and
1997, and the period from June 6, 1996 (date of incorporation) to
December 31, 1996
Notes to Financial Statements--December 31, 1998
Report of Ernst & Young LLP, Independent Auditors
<PAGE>
Item 24. (Continued)
(b) List of Exhibits
(1) Resolutions of the Board of Directors and memorandum authorizing
establishment of the Variable Account are incorporated herein by reference to
Registration Statement on Form N-4 (333-38007) filed on October 16, 1997.
(2) None.
(3)(a) Form of Underwriting Agreement.
(3)(b) Form of Selling Group Agreement.
(4) Variable Annuity Contract.
(5) Application.
(6) Articles of Incorporation and Bylaws of Lincoln Life & Annuity Company of
New York are incorporated herein by reference to Registration Statement
on Form N-4 (333-10863) filed on 8/27/96.
(7) Not applicable.
(8)(a) Form of Services Agreement between Delaware Management Holdings, Inc.,
Delaware Service Company, Inc. and LNY.
(8)(b) Form of Fund Participation Agreement.
(9) Opinion and consent of Robert O. Sheppard, Counsel of Lincoln Life &
Annuity Company of New York as to legality of securities being issued.
(10) Consent of Ernst & Young LLP, Independent Auditors
(11) Not applicable.
(12) Not applicable.
(13) Schedule for Computation for Performance Quotations.
(14) Other Exhibits:
(a) Organizational Chart of the Lincoln National Insurance
Holding Company System
(b) Books and Records Report
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.
Item 25.
<TABLE>
<CAPTION>
Positions and Officers with Lincoln Life &
Name Annuity Company of New York
- ---- ------------------------------------------
<S> <C>
Joanne B. Collins........................ 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 60161
J. Patrick Barrett....................... Director
Chairman & CEO
Carpat Investments
4605 Watergap
Manlius, NY 13104
Thomas D. Bell, Jr. ..................... Director
President & CEO
Young & Rubicam Advertising
285 Madison Avenue
New York, NY 10017
</TABLE>
<PAGE>
DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name Positions and Offices with LNY
- ---- ------------------------------
Jon A. Boscia***................................. Director
Kathleen R. Gorman*.............................. Assistant Vice President
John H. Gotta*****............................... Director
Barbara S. Kowalczyk***.......................... Director
M. Leanne Lachman................................ Director
Managing Director
Boston Financial
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
One Penn Plaza
Suite 3408
New York, NY 10119
Lawrence T. Rowland****.......................... Director
Gabriel L. Shaheen**............................. Director
Robert O. Sheppard*.............................. Assistant Vice President
Richard C. Vaughan***............................ Director
C. Suzanne Wamack***............................. Secretary
* Principal business address of each person is 120 Madison Street, 17th
Floor, Syracuse, New York 13202.
** Principal business address of each person is 1300 S. Clinton Street, Fort
Wayne, Indiana 46802.
*** Principal business address of each person is Centre Square, West Tower,
1500 Market St., Suite 3900, Philadelphia, PA 19102.
**** Principal business address of each person is 1700 Magnovox Way, One
Reinsurance Place, Fort Wayne, Indiana 46804.
*****Principal business address of each person is 350 Church Street,
Hartford, CT 06103.
<PAGE>
Item 26.
PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR REGISTRANT
See Exhibit 15(a): The Organizational Chart of The Lincoln National
Insurance Holding Company System is hereby incorporated herein by this
reference.
Item 27.
NUMBER OF CONTRACT OWNERS
Not applicable.
Item 28.
INDEMNIFICATION--UNDERTAKING
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of Lincoln Life & Annuity Co. of NY
(LNY) provides that LNY will indemnify certain persons against expenses,
judgments and certain other specified costs incurred by any such person if
he/she is made a party or is threatened to be made a party to a suit or
proceeding because he/she was a director, officer, or employee of LNY, as
long as he/she acted in good faith and in a manner he/she reasonably
believed to be in the best interests of, or not opposed to the best
interests of, LNY. Certain additional conditions apply to indemnification
in criminal proceedings.
In particular, separate conditions govern indemnification of directors,
officers, and employees of LNY in connection with suits by, or in the
rights of LNY.
Please refer to Article VII of the By-Laws of LNY (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements of,
Indiana law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities Act
of 1933:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in Item 28(a) above or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense
of any such 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 Act and will be governed by the
final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriter
(a) American Funds Distributors, Inc., is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds Tax-
Exempt Series II, American High-Income Municipal Bond Fund, Inc., American High-
Income Trust, American Mutual Fund, Inc., Capital Income Builder, Inc., Capital
World Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The Cash
Management Trust of America, EuroPacific Growth Fund, Fundamental Investors,
Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc., New
World Fund, Inc., The Bond Fund of America, Inc., Intermediate Bond Fund of
America, The Investment Company of America, Limited Term Tax-Exempt Bond Fund of
America, The New Economy Fund, New Perspective Fund, Inc., SMALLCAP World Fund,
Inc., The Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America and Washington Mutual Investors
Fund, Inc. along with certain variable annuity contracts issued by our affiliate
The Lincoln National Life Insurance Company.
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
David L. Abzug Regional Vice President
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President
#61 Point West Circle
Little Rock, AR 72207
<PAGE>
Robert B. Aprison Vice President
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President
Steven L. Barnes Senior Vice President
5400 Mount Meeker Road, Suite 1
Boulder CO 80301
B Carl R. Bauer Assistant Vice President
Michelle A. Bergeron Senior Vice President
4160 Gateswalk Drive
Smyrna, GA 30080
J. Walter Best, Jr. Regional Vice President
9013 Brentmeade Blvd.
Brentwood, TN 37027
Joseph T. Blair Senior Vice President
148 E. Shore Ave
Groton Long Point, CT 06340
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
John A. Blanchard Vice President
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President
P.O. Box 1665
Brentwood, TN 37024-1655
Mick L. Brethower Senior Vice President
2320 North Austin Avenue
Georgetown, TX 78628
Alan Brown Regional Vice President
4129 Laclede Avenue
St. Louis, MO 63108
H J. Peter Burns Vice President
Brian C. Casey Regional Vice President
8002 Greentree Road
Bethesda, MD 20817
<PAGE>
Victor C. Cassato Senior Vice President
609 W. Littleton Blvd., Suite 310
Greenwood Village, CO 80120
Christopher J. Cassin Senior Vice President
19 North Grant Street
Hinsdale, IL 60521
Denise M. Cassin Vice President
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director
L Kevin G. Clifford Director, President and Co-Chief
Executive Officer
Ruth M. Collier Senior Vice President
29 Landsdowne Drive
Larchmont, NY 10538
S David Coolbaugh Assistant Vice President
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
--------------------- ---------------------
Thomas E. Cournoyer Vice President
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President
Dan J. Delianedis Regional Vice President
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President
505 E. Main Street
Jenks, OK 74037
<PAGE>
Kirk D. Dodge Senior Vice President
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Director, Senior Vice President
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary
Robert W. Durbin Vice President
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President
L Paul H. Fieberg Sr. Vice President
L Paul H. Fieberg Senior Vice President
John Fodor Vice President
15 Latisquama Road
Southborough, MA 01772
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ----------------------
Clyde E. Gardner Senior Vice President
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President
Jeffrey J. Greiner Vice President
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director
B Mariellen Hamann Assistant Vice President
David E. Harper Senior Vice President
150 Old Franklin School Road
Pittstown, NJ 08867
Ronald R. Hulsey Vice President
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President
1225 Vista Del Mar Drive
Delray Beach, FL 33483
Michael J. Johnston Director
630 Fifth Ave., 36th Floor
New York, NY 10111
B Damien M. Jordan Vice President
Arthur J. Levine Senior Vice President
12558 Highlands Place
Fishers, IN 46038
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
B Karl A. Lewis Assistant Vice President
T. Blake Liberty Regional Vice President
5506 East Mineral Lane
Littleton, CO 80122
Mark J. Lien Regional Vice President
5570 Beechwood Terrace
West Des Moines IA 50266
L Lorin E. Liesy Assistant Vice President
L Susan G. Lindgren Vice President - Institutional
Investment Services
LW Robert W. Lovelace Director
Stephen A. Malbasa Vice President
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice President
L E. Lee McClennahan Senior Vice President
L Jamie R. McCrary Assistant Vice President
S John V. McLaughlin Senior Vice President
Terry W. McNabb Vice President
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President-Institutional
Investment Services
David R. Murray Vice President
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President
P.O. Box 470528
Charlotte, NC 28247-0528
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
William E. Noe Regional Vice President
304 River Oaks Road
Brentwood, TN 37207
Peter A. Nyhus Vice President
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President
62 Park Drive
Glenview, IL 60025
Fredric Phillips Senior Vice President
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President
Carl S. Platou Vice President
7455 80th Place, SE
Mercer Island, WA 98040
L John O. Post Senior Vice President
S Richard P. Prior Assistant Vice President
Steven J. Reitman Senior Vice President
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President
P O Box 472245
Charlotte, NC 28247
George S. Ross Senior Vice President
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President
L James F. Rothenberg Director
Douglas F. Rowe Vice President
414 Logan Ranch Road
Georgetown, TX 78628
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
Christopher S. Rowey Regional Vice President
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director
David W. Short Director, Chairman of the Board, and
1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer
Pittsburgh, PA 15238-2941
William P. Simon Senior Vice President
912 Castlehill Lane
Devon, PA 91333
L John C. Smith Assistant Vice President-
Institutional Investment
Services
Rodney G. Smith Vice President
100 N. Central Expressway,
Suite 1214
Richardson, TX 75080
Anthony L. Soave Regional Vice President
8831 Morning Mist Drive
Clarkston, MI 48348
Nicholas D. Spadaccini Regional Vice President
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
Daniel S. Spradling Senior Vice President
181 Second Avenue, Suite 228
San Mateo, CA 94401
B Max D. Stites Vice President
Thomas A. Stout Regional Vice President
1004 Ditchley Road
Virginia Beach, VA 23451
Craig R. Strauser Vice President
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President
S James P. Toomey Vice President
I Christopher E. Trede Vice President
George F. Truesdail Vice President
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President
60 Reedland Woods Way
Tiburon, CA 94920
J. David Viale Regional Vice President
7 Gladstone Lane
Laguna Niguel, CA 92677
Thomas E. Warren Regional Vice President
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, Treasurer
and Controller
<PAGE>
<TABLE>
<CAPTION>
(b) (1) (2)
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
Gregory J. Weimer Vice President
206 Hardwood Drive
Venetia PA 15367
B Timothy W. Weiss Director
George Wenzel Regional Vice President
3406 Shakespeare Drive
Troy MI 48084
Timothy J. Wilson Vice President
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President
H Marshall D. Wingo Director, Senior Vice President
L Robert L. Winston Director, Sr. Vice President
William R. Yost Vice President
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President
2887 Player Lane
Tustin Ranch, CA 92782
</TABLE>
- -------------
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles,
CA 90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78230
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) Name of Principal Underwriter: American Funds Distributors, Inc.; Net
Underwriting Discounts and Commissions: Not Applicable.
Item 30. Location of Accounts and Records
Exhibit 14(b) is hereby incorporated herein by reference.
Item 31. Management Services
Not Applicable.
Item 32
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual 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 a similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information.
(c) Registrant undertakes 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 to Lincoln Life at the address or
phone number listed in the Prospectus.
(d) Lincoln Life & Annuity Company of New York hereby represents that the fees
and charges deducted under the contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by Lincoln Life & Annuity Company of New York.
(e) Registrant hereby represents that it is relying on the American Council of
Life Insurance (avail. Nov. 28, 1988) no-action letter with respect to
Contracts used in connection with retirement plans meeting the requirements
of Section 403(b) of the Internal Revenue Code, and represents further that
it will comply with the provisions of paragraphs (1) through (4) set forth
in that no-action letter.
<PAGE>
SIGNATURES
(a) As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this Pre-Effective Amendment No. 1 to its
Registration Statement to be signed on its behalf, in the City of Syracuse, and
State of New York on this day of September, 1999.
Lincoln Life & Annuity Variable
Annuity Account H
(Registrant)
By: Lincoln Life & Annuity Company of New York
By: /s/ Joanne B. Collins
-------------------------------------------
Joanne B. Collins, President
Lincoln Life & Annuity Company of New York
(Depositor)
By: /s/ Joanne B. Collins
-------------------------------------------
Joanne B. Collins, President
(b) As required by the Securities Act of 1933, this Pre-Effective Amendment
No. 1 to its Registration Statement has been signed for the Depositor by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Joanne B. Collins President, Treasurer and October 7, 1999
- --------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
/s/ Troy D. Panning Second Vice President and October 7, 1999
- --------------------------------------- Chief Financial Officer
Troy D. Panning (Principal Financial Officer
and Principal Accounting
Officer)
/s/ Roland C. Baker
- --------------------------------------- Director October 7, 1999
Roland C. Baker
/s/ J. Patrick Barrett
- --------------------------------------- Director October 7, 1999
J. Patrick Barrett
- --------------------------------------- Director October 7, 1999
Thomas D. Bell, Jr.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jon A. Boscia
- --------------------------------------- Director October 7, 1999
Jon A. Boscia
/s/ John H. Gotta
- --------------------------------------- Director October 7, 1999
John H. Gotta
/s/ Barbara S. Kowalczyk
- --------------------------------------- Director October 7, 1999
Barbara S. Kowalczyk
/s/ M. Leanne Lachman
- --------------------------------------- Director October 7, 1999
M. Leanne Lachman
/s/ Louis G. Marcoccia
- --------------------------------------- Director October 7, 1999
Louis G. Marcoccia
/s/ John M. Pietruski
- --------------------------------------- Director October 7, 1999
John M. Pietruski
/s/ Lawrence T. Rowland
- --------------------------------------- Director October 7, 1999
Lawrence T. Rowland
/s/ Gabriel L. Shaheen
- --------------------------------------- Director October 7, 1999
Gabriel L. Shaheen
/s/ Richard C. Vaughan
- --------------------------------------- Director October 7, 1999
Richard C. Vaughan
</TABLE>
<PAGE>
LOCATION OF ACCOUNTS AND RECORDS
Exhibit 15(b) is hereby expressly incorporated herein by this reference. (TO
BE FILED BY AMENDMENT.)
Item 31.
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are never
more than 16 months old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual 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) Registrant undertakes to deliver any Statement of Additional Information
and any financial statement required to be made available under this
Form promptly upon written or oral request to Lincoln Life at the
address or phone number listed in the Prospectus.
(d) The Lincoln Life & Annuity Co. of NY hereby represents that the fees and
charges deducted under the contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by LNY.
(e) Registrant hereby represents that it is relying on the American Council
of Life Insurance (avail. Nov. 28, 1988) no-action letter with respect
to Contracts used in connection with retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code, and
represents further that it will comply with the provisions of paragraphs
(1) through (4) set forth in that no-action letter.
<PAGE>
Exhibit 3a
PRINCIPAL UNDERWRITING AGREEMENT
--------------------------------
THIS AGREEMENT is effective on the __th day of __________ among LINCOLN
LIFE & ANNUITY COMPANY OF NEW YORK ("LNY"), a life insurance company organized
under the laws of the State of New York on behalf of itself and LINCOLN LIFE &
ANNUITY VARIABLE ANNUITY ACCOUNT H OF LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
("Separate Account"), a separate account established by LNY pursuant to the
New York Insurance Law and AMERICAN FUNDS DISTRIBUTORS, INC. ("AFD"), a
corporation organized under the laws of the State of California. WITNESSETH:
WHEREAS, LNY proposes to issue to the public certain variable annuity
contracts ("Contracts") and has, by resolution of its Board of Directors on July
24, 1996, and by directive of its President on July 24, 1996, authorized the
creation of a segregated investment account in connection therewith; and
WHEREAS, LNY has established the Separate Account for the purpose of
issuing the Contracts and has registered the Separate Account with the
Securities and Exchange Commission ("Commission") as a unit investment trust
under the Investment Company Act of 1940; and
WHEREAS, the Contracts to be issued by LNY are registered with the
Commission for offer and sale to the public, and otherwise are in compliance
with all applicable laws; and
WHEREAS, AFD is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities Dealers,
Inc., and proposes to form a selling group for the distribution of said
Contracts; and
WHEREAS, LNY desires to obtain the services of AFD as principal
underwriter of the Contracts issued by LNY through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, LNY, the Separate Account and AFD hereby agree as follows:
Duties of AFD
1. AFD will form a selling group consisting of broker-dealers appointed
by LNY to distribute the Contracts which are issued by LNY through the Separate
Account and are registered with the Commission for offer and sale to the
public.
1
<PAGE>
2. AFD will enter into and maintain a dealer agreement with each broker-
dealer joining such selling group ("member"); an executed copy of each will be
provided to LNY. Any such dealer agreement expressly will be made subject to
this Agreement. Any such dealer agreement will provide: (i) that each member
will distribute the Contracts only in those jurisdictions in which the Contracts
are registered or qualified for sale and only through duly licensed registered
representatives of members who are fully licensed with LNY to sell the
Contracts in the applicable jurisdiction(s); (ii) that all applications and
initial and subsequent payments under the Contracts collected by the member will
be remitted promptly by the member to LNY at such address as it may from time
to time designate; and (iii) that each member will comply with all applicable
federal and state laws, rules and regulations.
3. AFD will use reasonable efforts to provide information and marketing
assistance to the members, including preparing and providing members with
advertising materials and sales literature, and providing members with current
Prospectuses of the Contracts and of American Variable Insurance Series (the
"Series"). AFD will use reasonable efforts to ensure that members deliver only
the currently effective Prospectuses of the Contracts and the Series. AFD and
LNY will cooperate in the development of advertising and sales literature, as
requested. AFD will deliver to members, and use reasonable efforts to ensure
that members use, only sales literature and advertising material which conforms
to the requirements of federal and state laws and regulations and which has been
authorized by LNY and AFD. AFD will be responsible for filing sales literature
and advertising material, where necessary, with appropriate securities
regulatory authorities, including the National Association of Securities
Dealers, Inc. AFD will not distribute any Prospectus, sales literature,
advertising material or any other printed matter or material relating to the
contracts or the Series if, to its knowledge, any of the foregoing misstates the
duties, obligations or liabilities of LNY or AFD.
4. AFD shall not be responsible for (i) taking or transmitting
applications for the Contracts; (ii) examining or inspecting risks or approving,
issuing or delivering Contracts; (iii) receiving, collecting or transmitting
premium payments; (iv) assisting in the completion of applications for
contracts; (v) paying sales commissions to licensed broker-dealers and insurance
agents; and (vi) otherwise offering and selling Contracts directly to the
public.
5. AFD will bear all its expenses of providing services under this
Agreement, including the cost of preparing, printing and mailing advertising and
sales literature, and the cost of printing and mailing Series and Contract
Prospectuses which are used for sales purposes, except that AFD shall not bear
the expenses of registering and qualifying shares for Contracts for sale under
federal and state laws and expenses of preparing, printing and mailing
Prospectuses, proxies and shareholder reports to the extent authorized by law.
It is understood that LNY will not be required to bear the cost of preparing,
printing and mailing Series Prospectuses.
6. AFD will furnish to LNY such information with respect to the Series
in such form and signed by such of its officers as LNY may reasonably request,
and will warrant that the statements therein contained when so signed will be
true and correct. AFD will advise LNY immediately of (a) any request by the
Commission (i) for amendment of the registration statement relating to the
Contracts or the Series or (ii) for additional information; (b) the issuance
2
<PAGE>
by the commission of any stop order suspending the effectiveness of the
registration statement of the Contracts or the Series or the initiation of any
proceedings for that purpose; (c) the institution of any proceeding,
investigation or hearing involving the offer or sale of the Contracts or the
Series of which it becomes aware; or (d) the happening of any material event, if
known, which makes untrue any statement made in the registration statement of
the Contracts or the Series or which requires the making of a change therein in
order to make any statement made therein not misleading.
7. AFD will use reasonable efforts to have the Series register for sale
under the Securities Act of 1933 and, as required, under state securities laws,
from time to time as necessary, such additional shares of the Series as may
reasonably be necessary for use as the funding vehicle for the Contracts.
Duties of LNY
- -------------
8. LNY or its agent will receive and process applications and premium
payments in accordance with the terms of the Contracts and the current
Prospectuses. All applications for Contracts are subject to acceptance or
rejection by LNY in its sole discretion. LNY will inform AFD of any such
rejection and the reason therefor.
9. LNY will be responsible for filing the Contracts, applications,
forms, sales literature and advertising material, where necessary, with
appropriate insurance regulatory authorities.
10. LNY will furnish to AFD such information with respect to the
Separate Account and the Contracts in such form and signed by such of its
officers as AFD may reasonably request, and will warrant that the statements
therein contained when so signed will be true and correct. LNY will advise AFD
immediately of: (a) any request by the Commission (i) for amendment of the
registration statement relating to the Contracts or the Series or (ii) for
additional information; (b) the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement of the Contracts or
the Series or the initiation of any proceedings for that purpose; (c) the
institution of any proceeding, investigation, hearing or other action involving
the offer or sale of the Contracts or the Series of which it becomes aware; (d)
the happening of any material event, if known, which makes untrue any statement
made in the registration statement of the Contracts or the Series or which
requires the making of a change therein in order to make any statement made
therein not misleading.
11. LNY will use reasonable efforts to register for sale, from time to
time as necessary, additional dollar amounts of the Contracts under the
Securities Act of 1933, and, should it ever be required, under state securities
laws and to file for approval under state insurance laws when necessary and will
maintain the Investment Company Act of 1940 registration of the Separate
Account.
3
<PAGE>
12. LNY will pay to members of the selling group such commissions as are
from time to time approved by LNY set forth in dealer agreements. Such dealer
agreements shall provide for the return of sales commissions by the members to
LNY if the Contracts are tendered for redemption to LNY in accordance with the
"free look" provision in the Contract.
13. LNY will bear its expenses of providing services under this Agreement,
including the cost of preparing (including typesetting costs), printing and
mailing Prospectuses of the Contracts to Contract owners, expenses and fees of
registering or qualifying the Contracts and the Separate Account under federal
or state laws, and any direct expenses incurred by its employees in assisting
AFD in performing its duties hereunder. LNY will pay to AFD such remuneration
for its services and for the services of its salaried employees, and such
reimbursement for its charges and expenses, as may be contained in such schedule
of remuneration as may be adopted and appended to this Agreement from time to
time. (See Schedule A - Commissions to Members and Remuneration to AFD.) Said
Schedule A may be amended from time to time by the mutual written consent of the
undersigned parties; except that AFD may alter the ratio of commissions paid to
dealers and remuneration paid to AFD as set forth in paragraph 26 of this
Agreement. LNY will be responsible for paying all state appointing fees and
associated renewal fees incurred to enable members to sell the Contracts, except
with respect to paying appointment fees for "non-producers." In the event LNY
determines to stop paying the appointment fees for a non-producer, AFD shall be
given the opportunity to pay such fees.
14. Compensation shall be paid in accordance with Schedule A which is
attached to, and hereby incorporated into, this Agreement; provided, however,
that LNY shall not be obligated to pay servicing fees or trail commissions to
members in the event that LNY has not received, or is no longer eligible to
receive, payments under the plan of distribution adopted by the Class 2 Shares
of the Funds of the American Variable Insurance Series pursuant to rule 12b-1
under the Investment Company Act of 1940.
Warranties
- ----------
15. LNY represents and warrants to AFD that: (i) a registration statement
under the Securities Act of 1933 (File No. 333-38007) and under the Investment
Company Act of 1940 (File No. 811-08441) on Form N-4 with respect to the
Contracts and Separate Accounts has been filed with the Commission in the form
previously delivered to AFD, and copies of any and all amendments thereto will
be forwarded to AFD at the time that they are filed with the Commission; (ii)
the registration statement and any further amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the Investment Company Act of
1940, and the rules and regulations of the Commission thereunder, and will not
contain any untrue statement of a material fact or omit to state a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statement or omission made in
reliance upon and in conformity with information furnished in writing to LNY by
AFD expressly for use therein; (iii) LNY is validly existing as a stock life
insurance company under the laws of the State of New York, with power (corporate
or other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified for the transaction
4
<PAGE>
of business under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification; (iv)
the Contracts to be issued through the Separate Account have been duly and
validly authorized and, when issued and delivered against payment therefor as
provided in the Prospectuses and in the Contracts, will be duly and validly
issued and will conform to the description of such Contracts contained in the
Prospectuses relating thereto; (v) LNY will not pay commissions to persons who,
to the best of LNY's knowledge, are not appropriately licensed in a manner as to
comply with the state insurance laws; (vi) the performance of this Agreement and
the consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which LNY is a party or by which
LNY is bound, LNY's Charter as a stock life insurance company or By-Laws, or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over LNY or any of its properties; and no consent, approval,
authorization or order of any court or governmental agency or body which has not
been obtained by the effective date of this Agreement is required for the
consummation by LNY of the transactions contemplated by this Agreement; (vii)
there are no material legal or governmental proceedings pending to which LNY or
the Separate Account is a party or of which any property of LNY or the Separate
Account is the subject, other than as set forth in the Prospectus relating to
the Contracts, and other than litigation incident to the kind of business
conducted by LNY which, if determined adversely to LNY, would not individually
or in the aggregate have a material adverse effect on the financial position,
surplus or operations of LNY; and (viii) any information furnished in writing by
LNY to AFD for use in the registration statement of the Series will not result
in the registration statement's failing to conform in all respects to the
requirements of the Securities Act of 1933 and the rules and regulations
thereunder or containing any untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
16. AFD represents and warrants to LNY that: (i) a registration
statement under the Securities Act of 1933 (File No. 2-86838), and under the
Investment Company Act of 1940 (File No. 811-3857) with respect to American
Variable Insurance Series has been filed with the Commission in the form
previously delivered to LNY, and copies of any and all amendments thereto will
be forwarded to LNY at the time that they are filed with the Commission; (ii)
the Series' registration statement and any further amendments or supplements
thereto will, when they become effective, conform in all material respects to
the requirements of the Securities Act of 1933 and the Investment Company Act of
1940, and the rules and regulations of the Commission thereunder, and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to AFD by LNY expressly for use therein;
(iii) the performance of its duties under this Agreement by AFD will not result
in a breach or violation of any of the terms or provisions or constitute a
default under any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which AFD is a party or by which
AFD is bound, the Certificate of Incorporation or By-Laws of AFD, or any order,
rule or regulation of any court or governmental
5
<PAGE>
agency or body having jurisdiction over AFD or its property; and (iv) any
information furnished in writing by AFD to LNY for use in the registration
statement for the Contracts will not result in the registration statement's
failing to conform in all respects to the requirements of the Securities Act of
1933 and the rules and regulations thereunder or containing any untrue statement
of a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (v) it is a
broker-dealer duty registered with the Commission pursuant to the Securities
Exchange Act of 1934 and a member in good standing of the National Association
of Securities Dealers, Inc. and is in compliance with the securities laws in
those states in which it conducts business as a broker-dealer; (vi) it will use
reasonable efforts to ensure that no offering, sale or other disposition of the
Contracts will be made until it has been notified by LNY that the subject
registration statements have been declared effective and the Contracts have been
released for sale by LNY, and that such offering, sale or other disposition
shall be limited to those jurisdictions that have approved or otherwise permit
the offer and sale of the Contracts by LNY; and (vii) it will comply with the
requirements of state broker-dealer regulations and the Securities Exchange Act
of 1934 as each applies to AFD and shall conduct its affairs in accordance with
the Conduct Rules of the National Association of Securities Dealers, Inc.
Miscellaneous
- -------------
17. AFD makes no representation or warranty regarding the number of
Contracts to be sold by licensed broker-dealers and insurance agents or the
amount to be paid thereunder. AFD does, however, represent that it will actively
engage in its duties under this Agreement on a continuous basis while the
Agreement is in effect and there is an effective registration of the Contracts
and of the Series, or its successor, with the Commission.
18. AFD may act as principal underwriter, sponsor, distributor or dealer
for issuers other than LNY or its affiliates in connection with mutual funds
or insurance products.
LNY may issue through any broker-dealer any insurance contract; however,
LNY will not enter into any agreement with any other organization for the
purpose of distributing the Contracts.
It is understood that shares of American Variable Insurance Series may be
sold to fund insurance contracts of issuers other than LNY or its affiliates
or to other shareholders in accordance with Internal Revenue Code Section 817(h)
and the regulations thereunder.
19. Nothing in this Agreement shall obligate LNY to appoint any member
or registered representative of a member its agent for purposes of the
distribution of the Contracts. Nothing in this Agreement shall be construed as
requiring AFD to effect sales of the Contracts directly to the public or to act
as an insurance agent or insurance broker on behalf of LNY for purposes of
state insurance laws.
20. AFD agrees to indemnify LNY (or any control person, shareholder,
director, officer or employee of LNY) for any liability incurred (including
costs relating to defense of
6
<PAGE>
any action) arising out of any AFD act or omission relating to (i) rendering
services under this Agreement or (ii) the purchase, retention or surrender of
a Contract by any person or entity; provided, however that indemnification will
not be provided hereunder for any such liability that results from the willful
misfeasance, bad faith or gross negligence of LNY or from the reckless
disregard by LNY of the duties and obligations arising under this Agreement.
21. LNY agrees to indemnify AFD (or any control person, shareholder,
director, officer or employee of AFD) for any liability incurred (including
costs relating to defense of any action) arising out of any LNY act or
omission relating to (i) rendering services under this Agreement or (ii) the
purchase, retention or surrender of a Contract by any person or entity;
provided, however, that indemnification will not be provided hereunder for any
such liability that results from the willful misfeasance, bad faith or gross
negligence of AFD or from the reckless disregard by AFD of the duties and
obligations arising under this Agreement.
22. This Agreement will terminate automatically upon its assignment, as
that term is defined in the Investment Company Act of 1940. The parties
understand that there is no intention to create a joint venture in the subject
matter of this Agreement. Accordingly, the right to terminate this Agreement and
to engage in any activity not inconsistent with this Agreement is absolute. This
Agreement will terminate, without the payment of any penalty by either party:
(a) at the option of LNY upon six months' advance written notice to AFD; or
(b) at the option of AFD upon six months' advance written notice to LNY; or
(c) at the option of LNY upon institution of formal proceedings against AFD by
the National Association of Securities Dealers, Inc. or by the Commission; or
(d) at the option of AFD upon the institution of formal proceedings against
LNY by the Department of Insurance of a State; or (e) as otherwise provided in
the Investment Company Act of 1940.
23. Each notice required by this Agreement shall be given in writing and
delivered by certified mail-return receipt requested to the following
addresses:
LNY:
Troy D. Panning
Second Vice President
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, New York 13202
AFD:
John O. Post, Jr.
Vice President
American Funds Distributors, Inc.
333 South Hope Street, 55/th/ Floor
Los Angeles, CA 90071
24. This Agreement shall be subject to the laws of the State of New York
and construed so as to interpret the Contracts as insurance products written
within the business operation of LNY.
25. This Agreement covers and includes all agreements, oral and written
(expressed or implied) between LNY and AFD with regard to the marketing and
distribution of the Contracts, and supersedes any and all Agreements between the
parties with respect to the subject matter of this Agreement; except that this
Agreement shall not affect the operation of any previous agreements entered into
between LNY and AFD unrelated to the subject matter of this Agreement.
26. This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to time by the mutual
agreement and consent of the undersigned parties, provided such amendment be in
writing and duly executed; except that with respect to any Schedule A, AFD in
its sole discretion, may alter upon written notice to LNY the ratio of member
commissions paid to remuneration paid to AFD. AFD agrees to reimburse
7
<PAGE>
LNY any remuneration previously received to the extent necessary to pay
additional commissions to members due to a retroactive change of this ratio.
27. LNY shall make available to AFD for distribution through an AFD-
formed selling group, at AFD's option, any variable contract type or variable
contract feature issued by LNY through broker-dealers on the same terms and
conditions. LNY shall make available to AFD any proposed variable contract
type to be issued through broker-dealers prior to introduction. AFD shall use
its best efforts to provide wholesaler support for the Contract and any
successor contracts as long as this Agreement, as amended, or similar agreement
is in effect that is at least comparable to the level of support provided by AFD
for non-Lincoln contracts.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed and attested as follows:
Lincoln Life & Annuity Company of New York
on behalf of itself and Lincoln Life &
Annuity Variable Annuity Account H of
Lincoln Life & Annuity Company of New York
Attest:
- --------------------------------- -------------------------------------
American Funds Distributors, Inc.
Attest:
- --------------------------------- -------------------------------------
8
<PAGE>
SCHEDULE A
COMMISSIONS TO MEMBERS AND REMUNERATION TO AFD
1. All Sales of the Contracts
A. Commissions with Service Fees to Members other than LFA
The standard commission schedule pays to dealers 4.75% of each purchase payment
and a 0.25% annual service fee (on all contract purchase payments beginning in
the second contract year which increases to 0.40% after 84 months). The
additional following choices are also available:
Schedule (1) 6.00% of each purchase payment, 0.25% annual service fee
after 84 months
Schedule (2) 5.10% of each purchase payment, 0.25% annual service fee
Schedule (3) 0.75% of each purchase payment, 0.75% annual continuing
commission, 0.25% annual service fee
AFD will give up a portion of its remuneration in order to provide an extra
sales volume allowance of 0.25% of Purchase Payments to be paid to dealers
maintaining a sales volume of at least $7,500,000 in each calendar year. LNY,
upon notification from AFD, will deduct enough from AFD's remuneration to pay
this additional allowance to that dealer on all sales for that calendar year.
Payment will be made to qualifying dealers every quarter after notification from
AFD is received by LNY. The above options do not affect the 0.25% sales volume
allowance paid to dealers maintaining a sales volume of at least $7,500,000 in
the American Legacy III variable annuity in each calendar year.
Commission options can be chosen on a contract by contract basis by the
individual registered representative. Once a commission option is chosen for a
contract, it may not be changed. The commission option chosen must be indicated
on the application. If no selection is made, the default will be our standard
commission schedule.
Service fees for schedule (1) will be paid to dealers on the value of all
contract purchase payments beginning in the eighth contract year. The service
fee will be paid at the end of each calendar quarter on the quarter ending
account value less purchase payments made in the previous 84 months. Service
fees for schedules (2) and (3) and the schedule (3) continuing commissions will
be paid to dealers on the value of all contract purchase payments beginning in
the second contract year. These service fees and continuing commissions will be
paid at the end of each calendar quarter on the quarter ending account value
less purchase payments made in the previous 15 months. Service fees and
continuing commissions will continue to be paid on a particular contract until
the contract is surrendered or annuity benefits begin to be paid under an
annuity option.
9
<PAGE>
Service fee payments are subject to the continuation of the plan of distribution
adopted by American Variable Insurance Series, which serves as the investment
vehicle for American Legacy III, and such service fee payments may be varied or
discontinued at any time.
Additional Deposits Made At or After Age 81 and Before Age 86 to Contracts
Issued Before Age 81.
If the contract is issued to an owner under age 81, any deposit received
at or after the owner attains age 81 and before the owner attains age 86 will
receive the same annual service fee and same annual continuing commission
according to the commission schedule selected, but a different commission on
additional purchase payments. This commission will depend on the original
schedule chosen.
If the standard schedule was chosen, then a commission of 2.25% of each
purchase payment will be paid on purchase payments made at or after age 81 and
before age 86.
If schedule (1) had been chosen, the commission is 3.00% of each
purchase payment made at or after age 81 and before age 86.
If schedule (2) had been chosen, the commission is 2.25% of each
purchase payment made at or after age 81 and before age 86.
If schedule (3) had been chosen, the commission is 0.65% of each
purchase payment made at or after age 81 and before age 86.
The service fee and continuing commission will be paid at the end of
each calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules (2)
and (3).
Newly-Established Contracts with Owner Issue Age At or After Age 81 and Before
Age 86.
All purchase payments made to contracts with owner issue age at or after
age 81 and before age 86 will receive one of the following commission schedules.
In addition to the standard commission schedule (which pays 2.25% of each
purchase payment made at or after age 81 and before age 86 plus a continuing
0.25% annual service fee), the following choices are available:
(1) 3.00% of each purchase payment, 0.25% annual service fee after 84
months
(2) 2.25% of each purchase payment, 0.25% annual service fee
(3) 0.65% of each purchase payment, 0.65% annual continuing
commission, 0.25% annual service fee.
The service fee and continuing commission will be paid at the end of
each calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules (2)
and (3).
Additional Deposits Made At or After Age 86 to Contracts Issued Before Age 86
If the contract is issued to an owner under age 86, any deposit received
at or after the owner attains age 86 will receive the same annual service fee
and the same annual continuing commission according to the commission schedule
selected, but a different commission on additional purchase payments. This
commission will depend on the original schedule chosen.
If the standard schedule was chosen, then a commission of 1.60% of
each purchase payment will be paid on purchase payments made at or after age 86.
If schedule (1) had been chosen, the commission is 2.00% of each
purchase payment made at or after age 86.
If schedule (2) had been chosen, the commission is 1.60% of each
purchase payment made at or after age 86.
If schedule (3) had been chosen, no initial commission is paid on
additional purchase payments made at or after age 86. The schedule (3)
continuing commission and service fee will apply to these purchase payments.
The service fee and continuing commission will be paid at the end of
each calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules (2)
and (3).
Additional Commissions
For dealers reaching certain sales levels set by AFD and LNY from time to
time, and additional 0.10% continuing commission will be paid to dealers on the
value of all Contract purchase payments beginning in the second Contract year.
This compensation will be paid at the end of each calendar quarter and will be
calculated as follows: At the end of each calendar quarter, LNY will calculate
and pay, for all eligible Contracts which have been in force for 15 months or
more as of the last day of the quarter, an amount equal to 0.025% of an amount
equal to the quarter ending account value less any deposits made in the
previous 15 months.
B. Commissions and Service Fees to LFA
Cash flow expressed as a percent of purchase payment received and includes a
sales volume allowance of 0.25% which represents a reduction in AFD's
remuneration; trails 2-7 are expressed as a percent of account value less
purchase payments made in the previous 15 months; trails 8+ are expressed as a
percent of account value less purchase payments made in the previous 84 months.
These continuing commissions are not paid on Contracts that have been
annuitized.
Commission options can be chosen on a contract by contract basis by the
individual registered representative. Once a commission option is chosen for a
contract, it may not be changed. The commission option chosen must be indicated
on the application. If no selection is made, the default will be Option 1.
1. Purchase Payments made before age 81 to contracts issued before age 81.
<TABLE>
<CAPTION>
Option 1 Option 2 Option 3
-------- -------- --------
<S> <C> <C> <C>
Cash flow 6.50% 4.60% 1.00%
Trails 2-7 0.0% 0.35% 1.00%
Trails 8+ 0.0% 0.55% 1.00%
</TABLE>
2. Purchase Payments made between ages 81-85 to contracts issued before age 81.
<TABLE>
<CAPTION>
Option 1 Option 2 Option 3
-------- -------- --------
<S> <C> <C> <C>
Cash flow 3.25% 2.60% 0.90%
Trails 2-7 0.0% 0.35% 1.00%
Trails 8+ 0.0% 0.55% 1.00%
</TABLE>
3. Purchase Payments made after age 85 to contracts issued before age 81.
<TABLE>
<CAPTION>
Option 1 Option 2 Option 3
-------- -------- --------
<S> <C> <C> <C>
Cash flow 2.25% 1.60% 0.30%
Trails 2-7 0.0% 0.35% 1.00%
Trails 8+ 0.0% 0.55% 1.00%
</TABLE>
4. Purchase Payments made between ages 81-85 to contracts issued between ages
81-85.
<TABLE>
<CAPTION>
Option 1 Option 2 Option 3
-------- -------- --------
<S> <C> <C> <C>
Cash flow 3.25% 2.60% 0.90%
Trails 2-7 0.0% 0.35% 0.90%
Trails 8+ 0.0% 0.40% 0.90%
</TABLE>
5. Purchase Payments over age 85 to contracts issued between ages 81-85.
<TABLE>
<CAPTION>
Option 1 Option 2 Option 3
-------- -------- --------
<S> <C> <C> <C>
Cash flow 2.25% 1.60% 0.30%
Trails 2-7 0.0% 0.35% 0.90%
Trails 8+ 0.0% 0.40% 0.90%
</TABLE>
C. Remuneration to AFD for sales of the contracts
AFD shall receive 0.90% of each purchase payment made. AFD will give up a
portion of its remuneration in order to provide a sales volume allowance of
0.25% of purchase payments to be paid to dealers (including LFA) maintaining a
sales volume of $7.5 million in each calendar year. LNY, upon notification from
AFD, will deduct enough from AFD's remuneration to pay this additional allowance
to that dealers on all sales for that calendar year. Payments will be made to
qualifying dealers every quarter after notification from AFD is received by LNY.
2. Annuitization
Upon annuitization of a Contract to which no surrender charges apply: (1) a
continuing commission of 0.80% annually will be paid to dealers on statutory
reserves for that portion of the Contract which has been annuitized on a
variable basis and which remains annuitized on a variable basis (i.e. excluding
any statutory reserves associated with post-annuitization transfers from a
variable payout status to fixed payout status). This amount will be based on the
calendar quarter end reserve amount and paid to dealers each calender quarter;
and/or (2) a one time commission of 3.00% will be paid to dealers on Contract
value which has been annuitized on a fixed basis.
Upon annuitization of a Contract to which no surrender charges apply,
AFD will receive remuneration of 0.90% on Contract value which has been
annuitized on a fixed and/or variable basis.
10
<PAGE>
Exhibit 3b
American
Funds American Funds Distributors
Distributors/SM/ ----------------------------------------------------------
333 South Hope Street . Los Angeles, California 90071
Telephone 800/421-9900, ext. 11
AMERICAN LEGACY III--SEPARATE ACCOUNT H
OF LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
SELLING GROUP AGREEMENT
Gentlemen:
We have entered into a Principal Underwriting Agreement with Lincoln Life &
Annuity Company of New York ("LNY") and Separate Account H of Lincoln Life under
which we are appointed to form a selling group of duly registered and licensed
brokers or dealers to distribute Individual Variable Annuity Contracts (the
"Contracts") issued by ("LNY") through Separate Account H. The Contracts are
considered securities under the Securities Act of 1933. This Agreement is
subject to all provisions of the Principal Underwriting Agreement among the
parties mentioned above. This Agreement on your part runs to us and to LNY and
Separate Account H and is for the benefit of and enforceable by each party. The
terms "you" and "your" as used herein refer to the firm actually signing this
Agreement as well as the signing firm's insurance agency subsidiaries, if any.
You are authorized to offer and sell the Contracts subject to the following
conditions:
1. You represent that you are a properly registered and licensed broker
or dealer under applicable federal and state securities laws and regulations and
a member in good standing of the National Association of Securities Dealers
("NASD") and agree to notify us immediately if you cease to be so registered or
licensed or a member in good standing of the NASD. (The provisions of the
preceding sentence do not apply to a broker or dealer located in a foreign
country and doing business outside the jurisdiction of the United States.)
2. You agree to abide by all rules and regulations of the NASD, including
its Conduct Rules, and to comply with all applicable federal and state laws,
rules and regulations (all of which shall control and override any provision
to the contrary in this Agreement).
You are responsible for such supervision of your registered representatives
and other associated persons which will enable you to ensure that your
registered representatives and associated persons are in compliance with
applicable securities laws, rules, regulations and statements of policy
promulgated thereunder.
Your authority under this Agreement extends only to the Contracts described
herein.
3. You represent that you will not sell any Contracts until you are a
properly licensed insurance agent duly appointed by LNY.
4. You will distribute the Contracts only in those jurisdictions in which
the Contracts are registered or qualified for sale and only through your duly
licensed registered representatives (in accordance with the rules of the NASD)
who are fully licensed with LNY to sell the Contracts in the applicable
jurisdictions (in accordance with the insurance regulations and laws of such
jurisdictions).
5. All applications and initial and subsequent payments under the
Contracts collected by you will be remitted promptly by you to LNY at such
address as LNY may from time to time designate.
6. You agree to indemnify and hold LNY harmless from any liabilities (and
reasonable attorney fees and court costs) that may result from your actions or
omissions or those of your registered representatives and other associated
persons.
1
<PAGE>
7. All applications are subject to acceptance or rejection by LNY at its
sole discretion. LNY will make payment of commissions directly to you with
respect to the sale of the Contracts according to the schedule set forth below
except that no commissions will be paid on Contracts that are not initially
subject to the contingent deferred sales charge. Any commission paid on a
Contract that is cancelled under the Contract's review provisions will be repaid
to LNY or charged against your account.
American Legacy III
Variable Annuity
The standard commission schedule pays to dealers 4.75% of each purchase
payment and a 0.25% annual service fee (on all contract purchase payments
beginning in the second contract year which increases to 0.40% after 84
months). The additional following choices are also available:
Schedule (1) 6.00% of each purchase payment, 0.25% annual service fee
after 84 months
Schedule (2) 5.10% of each purchase payment, 0.25% annual service fee
Schedule (3) 0.75% of each purchase payment, 0.75% annual continuing
commission, 0.25% annual service fee
AFD will give up a portion of its remuneration in order to provide an extra
sales volume allowance of 0.25% of Purchase Payments to be paid to dealers
maintaining a sales volume of at least $7,500,000 in each calendar year.
LNY, upon notification from AFD, will deduct enough from AFD's remuneration
to pay this additional allowance to that dealer on all sales for that
calendar year. Payments will be made to qualifying dealers every quarter
after notification from AFD is received by LNY. The above options do not
affect the 0.25% sales volume allowance paid to dealers maintaining a sales
volume of at least $7,500,000 in the American Legacy III variable annuity
in each calendar year.
Commission options can be chosen on a contract by contract basis by the
individual registered representative. Once a commission option is chosen
for a contract, it may not be changed. The commission option chosen must be
indicated on the application. If no selection is made, the default will be
our standard commission schedule.
Service fees for schedule (1) will be paid to dealers on the value of all
contract purchase payments beginning in the eighth contract year. The
service fee will be paid at the end of each calendar quarter on the quarter
ending account value less purchase payments made in the previous 84 months.
Service fees for schedules (2) and (3) and the schedule (3) continuing
commissions will be paid to dealers on the value of all contract purchase
payments beginning in the second contract year. These service fees and
continuing commissions will be paid at the end of each calendar quarter on
the quarter ending account value less purchase payments made in the
previous 15 months. Service fees and continuing commissions will continue
to be paid on a particular contract until the contract is surrendered or
annuity benefits begin to be paid under an annuity option.
Service fee payments are subject to the continuation of the plan of
distribution adopted by American Variable Insurance Series, which serves as
the investment vehicle for American Legacy III, and such service fee
payments may be varied or discontinued at any time.
Additional Deposits Made At or After Age 81 and Before Age 86 to Contracts
--------------------------------------------------------------------------
Issued Before Age 81.
---------------------
If the contract is issued to an owner under age 81, any deposit
received at or after the owner attains age 81 and before the owner attains
age 86 will receive the same annual service fee and same annual continuing
commission according to the commission schedule selected, but a different
commission on additional purchase payments. The commission will depend on
the original schedule chosen.
If the standard schedule was chosen, then a commission of 2.25%
of each purchase payment will be paid on purchase payments made at or after
age 81 and before age 86.
If schedule (1) had been chosen, the commission is 3.00% of each
purchase payment made at or after age 81 and before age 86.
If schedule (2) had been chosen, the commission is 2.25% of each
purchase payment made at or after age 81 and before age 86.
If schedule (3) had been chosen, the commission is 0.65% of each
purchase payment made at or after age 81 and before age 86.
The service fee and continuing commission will be paid at the end
of each calendar quarter on the quarter ending account value less purchase
payments made in the previous 84 months for schedule (1) and 15 months for
schedules (2) and (3).
Newly-Established Contracts with Owner Issue Age At or After Age 81 and
-----------------------------------------------------------------------
Before Age 86.
--------------
All purchase payments made to contracts with owner issue age at
or after age 81 and before age 86 will receive one of the following
commission schedules. In addition to the standard commission schedule
(which pays 2.25% of each purchase payment made at or after age 81 and
before age 86 plus a continuing 0.25% annual service fee), the following
choices are available:
(1) 3.00% of each purchase payment, 0.25% annual service fee
after 84 months
(2) 2.25% of each purchase payment, 0.25% annual service fee
(3) 0.65% of each purchase payment, 0.65% annual continuing
commission, 0.25% annual service fee.
The service fee and continuing commission will be paid at the end of each
calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules
(2) and (3).
Additional Deposits Made At or After Age 86 to Contracts Issued Before
----------------------------------------------------------------------
Age 86
------
If the contract is issued to an owner under age 86, any deposit
received at or after the owner attains age 86 will receive the same annual
service fee and the same annual continuing commission according to the
commission schedule selected, but a different commission on additional
purchase payments. The commission will depend on the original schedule
chosen.
If the standard schedule was chosen, then a commission of 1.60%
of each purchase payment will be paid on purchase payments made at or after
age 86.
If schedule (1) had been chosen, the commission is 2.00% of each
purchase payment made at or after age 86.
If schedule (2) had been chosen, the commission is 1.60% of each
purchase payment made at or after age 86.
If schedule (3) had been chosen, no initial commission is paid on
additional purchase payments made at or after age 86. The schedule (3)
continuing commission and service fee will apply to these purchase
payments.
The service fee and continuing commission will be paid at the end
of each calendar quarter on the quarter ending account value less purchase
payments made in the previous 84 months for schedule (1) and 15 months for
schedules (2) and (3).
1. Annuitization
-------------
Upon annuitization of a Contract to which no surrender charges apply: (1) a
continuing commission of 0.80% annually will be paid to dealers on
statutory reserves for that portion of the Contract which has been
annuitized on a variable basis and which remains annuitized on a variable
basis (i.e. excluding any statutory reserves associated with post-
annuitization transfers from a variable payout status to fixed payout
status). This amount will be based on the calendar quarter end reserve
amount and paid to dealers each calendar quarter; and/or (2) a one time
commission of 3.00% will be paid to dealers on Contract value which has
been annuitized on a fixed basis.
8. We will use reasonable efforts to provide information and marketing
assistance to you, including providing you without charge reasonable
quantities of advertising materials, sales literature, reports, current
Prospectuses of the Contracts and of the underlying variable funding vehicle,
the American Variable Insurance Series.
9. In making all offers of the Contracts you will deliver the applicable
currently effective Prospectuses.
10. You are to offer and sell the Contracts only at the regular public
offering price currently determined by Separate Account H in the manner
described in the current Prospectus or Contract and will make no
representation not included in the Prospectus or Contract or in any authorized
supplemental material. This Agreement is in all respects subject to all
provisions of the current Prospectuses.
11. We will deliver and you will use only sales literature and advertising
material which conforms to the requirements of federal and state laws and
regulations and which have been authorized by LNY and us.
12. The signing of this Agreement does not obligate LNY to license any
particular registered representative as a salesman of Contracts. All licensing
matters under any applicable state insurance law shall be handled directly by
you and the registered representative involved, but LNY must be furnished all
required proof of state insurance licensing before commission payments may be
made.
13. You understand that with respect to American Funds Distributors, Inc.
you are acting in the capacity of an independent contractor.
2
<PAGE>
14. Any party to this Agreement may cancel at any time upon written notice
to all other parties, effective upon receipt.
15. All communications to us should be sent to the above address. All
communications to Lincoln Life should be sent to their address, which is
listed below. Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified by you below.
Three originals of this Agreement should be executed. Two of the originals
should be returned to us for our files. The Agreement shall be effective as of
the date of acceptance by you, but only upon receipt by us of the two
originals. This Agreement may be amended by notification from us and orders
received following such notification shall be deemed to be an acceptance of
such amendments. This Agreement shall be construed in accordance with the laws
of the State of California.
Very truly yours,
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071
By:________________________________________
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, New York 13202
By:________________________________________
Accepted:
- -----------------------------------
Firm
By: _______________________________
Signature of Officer or Partner
- -----------------------------------
Print Name of Officer or Partner
Address: __________________________
--------------------------
Date: _____________________________
3
<PAGE>
Exhibit 4
American Legacy III
[Lincoln New York Logo & Letterhead]
ANNUITY CONTRACT
Flexible Premium Deferred Variable Annuity or Variable and Fixed Annuity
Benefit Payment Options
Nonparticipating
The Lincoln Life & Annuity Company of New York (LL&A) agrees to provide the
benefits and other rights described in this Contract in accordance with the
terms of this Contract.
NOTICE OF 10-DAY RIGHT TO EXAMINE CONTRACT. Within 10 days after this Contract
is first received, it may be cancelled for any reason without penalty (e.g., no
contingent deferred sales charge will be deducted) by delivering or mailing it
to the Servicing Office of LL&A at 1300 S. Clinton Street, P. O. Box 2348, Fort
Wayne, Indiana 46801-2348. Upon cancellation, LL&A will return any Purchase
Payments paid under the fixed portion of the Contract and/or the value of any
payments made to the Variable Account on the appropriate Valuation Date as
follows: If the contract is personally delivered to LL&A's Servicing Office or
authorized representative, such Valuation Date will be the date of delivery. If
the contract is mailed to LL&A's Servicing Office, such Valuation Date will be
the date the contract is mailed.
All payments and values provided by this Contract, when based on investment
experience of a separate account, are variable (the amount may increase or
decrease) and are not guaranteed as to fixed dollar amount. See pages 5 and 10.
With a Sub-account charge of 1.40%, the smallest rate of investment return
required to ensure that the dollar amount of variable annuity payments does not
decrease is 5.40% for variable annuity options based on an assumed rate of
return of 4% per year.
Signed for Lincoln Life & Annuity Company of New York at its Servicing Office.
/s/ Joanne B. Collins /s/ Kathleen A. Gorman
- ----------------------- -----------------------
PRESIDENT ASSISTANT SECRETARY
Form NY28618 1/98
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Article Page
<S> <C>
1 Definitions............................................... 4
2 Purchase Payments, Options and Benefits................... 5
3 Annuity Payment Option Benefits........................... 10
4 Beneficiary............................................... 12
5 General Provisions........................................ 13
6 Annuity Purchase Rates Under a Variable Payment Option.... 15
7 Annuity Purchase Rates Under a Fixed Payment Option....... 16
8 Guaranteed Values for Fixed Allocations................... 17
</TABLE>
Form NY28618 1/98
<PAGE>
CONTRACT DATA
Contact Number XX-0123456
Annuitant Abraham Lincoln
Age at Issue 35
Contract Date April 1, 1989
Initial Purchase Payment $1,500.00
Purchase Payment Frequency Monthly
Maturity Date April 1, 2044
Owner
Abraham Lincoln
Mary Lincoln
Todd Lincoln
Beneficiary Designation
BENEFICIARY INFORMATION AVAILABLE ON THE NEXT PAGE
VARIABLE ACCOUNT
There are currently [ten] Sub-accounts in the Variable Account available to the
Owner. The Owner may direct Purchase Payments under the Contract to any of the
available Sub-accounts, subject to limitations. The amounts allocated to each
Sub-account will be invested at net asset value in the shares of one of the
Funds of the American Variable Insurance Series (Series). The Funds are:
1. [Growth Fund]
2. [International Fund]
3. [Global Growth Fund]
4. [Growth-Income Fund]
5. [Asset Allocation Fund]
6. [High-Yield Bond Fund]
7. [Bond Fund]
8. [U.S. Government/AAA-Rated Securities Fund]
9. [Cash Management Fund]
10. [Global Small Cap Fund]
11. [New World Fund]
See Section 2.03 for provisions governing any limitations, substitution or
elimination of Funds.
Sub-Account Charges (as also noted on front page of this Contract):
Mortality and Expense Risk and Administrative Charge: 1.40% on an annual basis,
or 1.25% on an annual basis in any period in which the Enhanced Guaranteed
Minimum Death Benefit is not in effect, of the daily value of the Sub-account
assets.
Form NY28618 Page 3 1/98
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
Number of complete CDSC as a percentage
Contract Years that of the surrendered
a Purchase Payment or withdrawn
has been invested Purchase Payments
Less than
2 Years 6%
At least
2 Years 5%
At least
3 Years 4%
At least
4 Years 3%
At least
5 Years 2%
At least
6 Years 1%
At least
7+ Years 0%
PREMIUM TAX
State and local government premium tax, if applicable, will be deducted from
Purchase Payments or Contract Value. This will be deducted when incurred by LL&A
or at another time of LL&A's choosing.
BENEFICIARY INFORMATION
BENEFICIARY NAME RELATIONSHIP* PRIMARY/CONTINGENT* %*
---------------- ------------ ------------------ ----
SUSAN A. JONES DAUGHTER P
* Information
Not Required
Form NY28618 Page 3.1 1/98
<PAGE>
ARTICLE 1
DEFINITIONS
1.01
ACCOUNT or VARIABLE ACCOUNT - The segregated investment account into which
Lincoln Life & Annuity Company of New York sets aside and invests the variable
assets attributable to this Variable Annuity Contract.
1.02
ACCUMULATION UNIT - A unit of measure used to calculate the variable Contract
Value during the accumulation period.
1.03
ANNUITANT - The person upon whose life the annuity benefit payments made after
the Annuity Commencement Date will be based.
1.04
ANNUITY COMMENCEMENT DATE - The Valuation Date when the funds are withdrawn for
payment of annuity benefits under the Annuity Payment Option selected.
1.05
ANNUITY PAYMENT OPTION - An optional form of payment of the annuity provided for
under this Contract.
1.06
ANNUITY UNIT - A unit of measure used after the Annuity Commencement Date to
calculate the amount of variable annuity payments.
1.07
BENEFICIARY - The person or entity designated by the Owner to receive the Death
Benefit, if any, payable upon the death of the Owner.
1.08
CODE - The Internal Revenue Code (IRC) of 1986, as amended.
1.09
CONTINGENT ANNUITANT - The person named by the Owner that may become the
Annuitant in the event the Annuitant dies prior to the Annuity Commencement
Date.
1.10
CONTINGENT DEFERRED SALES CHARGE (CDSC) - Charges assessed on premature
surrender of the Contract, calculated according to the Contract provisions.
1.11
CONTRACT - The agreement, between LL&A and the Owner, providing a variable
annuity.
1.12
CONTRACT VALUE - The sum of the values of all the Accumulation Units
attributable to this Contract at a given time and the value of monies in the
Fixed Account.
1.13
CONTRACT YEAR - The period from the anniversary of the date on your Contract
Date page 3 to the anniversary of the Contract in the following year.
1.14
DEATH BENEFIT - The amount payable to the Owner's designated Beneficiary upon
death of the Owner.
1.15
FUND - Underlying investment options available in the Series.
1.16
FIXED ACCOUNT - The fixed portion of this Contract which is invested in the
general account of LL&A.
1.17
HOME OFFICE - The principal office of LL&A located at 120 Madison Street, Suite
1700, Syracuse, New York, 13202.
1.18
LL&A - Lincoln Life & Annuity Company of New York.
1.19
MATURITY DATE - The date specified on Page 3 of this Contract. The Maturity Date
may not be deferred past the Annuitant's age 90.
1.20
OWNER - The individual or entity who exercises rights of ownership under this
contract.
1.21
PURCHASE PAYMENTS - Amounts paid into this Contract.
1.22
QUALIFIED PLAN - A retirement plan qualified for special tax treatment under the
Internal Revenue Code of 1986, as amended, including Sections 401, 403 and 408.
All other plans are considered Non-Qualified.
Form NY28618 Page 4 1/98
<PAGE>
1.23
SERIES -- American Variable Insurance Series, the mutual fund into which
Purchase Payments allocated to the Variable Account are invested.
1.24
SERVICING OFFICE -- The Servicing Office of LL&A is located at 1300 S. Clinton
Street, P.O. Box 2348, Fort Wayne, Indiana 46801.
1.25
SUB-ACCOUNT -- That portion of the Variable Account which pertains to
investments in the Accumulation Units and Annuity Units of a particular Fund.
1.26
VALUATION DATE -- Close of the market of each day that the New York Stock
Exchange is open for business.
1.27
VALUATION PERIOD -- The period commencing at the close of business on a
particular Valuation Date and ending at the close of business on the next
succeeding Valuation Date.
1.28
VARIABLE ACCOUNT -- Lincoln Life & Annuity Variable Account H is a segregated
investment account into which LL&A sets aside and invests the assets
attributable to this variable annuity contract.
ARTICLE 2
PURCHASE PAYMENTS, OPTIONS,
AND BENEFITS
2.01 WHERE PAYABLE
All Purchase Payments must be made to LL&A at its Servicing Office.
2.02 AMOUNT AND FREQUENCY
Purchase Payments are made in an amount and at the frequency shown on page 3.
The Owner may change the frequency or amount of Purchase Payments subject to
LL&A's rules described below. No Purchase Payments after the Initial Purchase
Payment are required.
The minimum initial Purchase Payment is $1,500 for Non-Qualified Plans and
$1,000 for Qualified Plans. The minimum annual amount of subsequent Purchase
Payments is $300 for either Non-Qualified Plans or Qualified Plans. The minimum
payment to the Contract at any one time must be at least $25.00 if transmitted
electronically; otherwise the minimum amount is $100.00. LL&A reserves the right
to limit aggregate Purchase Payments to $2 million.
Purchase Payments may be made until the earliest of the Annuity Commencement
Date, the surrender of the Contract, Maturity Date or payment of any Death
Benefit.
2.03 VARIABLE ACCOUNT
Purchase Payments under the Contract may be allocated to the Lincoln Life &
Annuity Variable Annuity Account H (Variable Account) and/or to the Fixed
Account of the Contract. The Variable Account is for the exclusive benefit of
persons entitled to receive benefits under variable annuity contracts. The
Variable Account will not be charged with the liabilities arising from any other
part of LL&A's business. The Owner may direct Purchase Payments under the
Contract to any of the available Sub-accounts subject to the following
limitations. A minimum payment to any one Sub-account must be at least $20. If
the Owner elects to direct Purchase Payments to a new Sub-account not previously
selected, the election must be in writing to LL&A at its Servicing Office. The
amounts allocated to each Sub-account will be invested at net asset value in
the shares of one of the Funds of the American Variable Insurance Series
(Series). The Funds are shown on Page 3 of the Contract.
LL&A reserves the right to eliminate the shares of any Fund and substitute the
securities of a different Fund or investment company or mutual fund if the
shares of a Fund are no longer available for investment, or, if in the judgment
of LL&A, further investment in any Fund should become inappropriate in view of
the purposes of the Contract. LL&A may add a new Sub-account in order to invest
the assets of the Variable Account into a Fund. LL&A shall give the Owner
written notice of the elimination and substitution of any Fund within fifteen
days after such substitution occurs. None of these changes shall take effect
without the prior approval of the New York Superintendent of Insurance.
LL&A shall use each Purchase Payment allocated to the Variable Account by the
Owner to buy Accumulation Units in the Sub-account(s) selected by the Owner. The
number of Accumulation Units bought shall be determined by dividing the amount
directed to the Sub-account by the dollar value of an Accumulation Unit in such
Sub-account as of the point of the next valuation of such Sub-account
immediately following receipt of the Purchase Payment at the Servicing Office of
LL&A. The number of Accumulation Units held for the Variable Account of an Owner
shall not be changed by any change in the dollar value of Accumulation Units in
any Sub-account.
Form NY28618 Page 5 1/98
<PAGE>
2.04 VALUATION OF ACCUMULATION UNITS
The variable Contract Value of an Owner's Contract at any time prior to the
Annuity Commencement Date equals the sum of the values of the Accumulation Units
credited in the variable Account under the Contract.
The value of a Sub-account is the number of units in the Sub-account multiplied
by the value of an Accumulation Unit in the sub-account.
Accumulation Units for each Sub-account are valued separately. The Accumulation
Unit value for each Sub-account was or will be arbitrarily established at the
inception of the Sub-account. Thereafter, the value of an Accumulation Unit in
any Sub-account on any Valuation Date equals the value of an Accumulation Unit
in that Sub-account as of the immediately preceding Valuation Date, multiplied
by the "Net Investment Factor" of that Sub-account for the current Valuation
Period.
The Net Investment Factor is an index which measures the Investment performance
of a Sub-account from one Valuation Period to the next. The Net Investment
Factor for any Sub-account for any Valuation Period is equal to (1) divided by
(2) and subtracting (3) from the result, where:
1. Is the result of:
a. the net asset value per share of the Fund held in the Sub-account,
determined at the end of the current Valuation Date; plus
b. the per share amount of any dividend or capital gain distribution made
by the Fund in the Sub-account, if the "ex-dividend" date occurs
during the Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for;
2. Is the net asset value per share of the Fund held in the Sub-account,
determined at the end of the prior Valuation Date;
3. is a daily factor representing the mortality and expense risk and
administrative charge deducted from the Sub-account adjusted for the number
of days in the Valuation Period. On an annual basis, this charge will not
exceed 1.40%. For any period in which the Enhanced Guaranteed Minimum Death
Benefit (see Section 2.12) is not in effect, this charge will not exceed
1.25% of an annual basis.
The Accumulation Unit value and Annuity Unit value may increase or decrease the
dollar value of benefits under the Contract. The dollar value of benefits will
not be adversely affected by expenses incurred by LL&A/
2.05 FIXED ALLOCATIONS
Purchase Payments under the contract may be allocated to the Variable Account
and/or to the fixed account of the Contract. A minimum allocation to the Fixed
Account must be at least $20.
2.06 CREDITING OF INTEREST ON FIXED ALLOCATIONS
Interest shall be credited daily on all Purchase Payments that are allocated to
the Fixed Account of this Contract.
Prior to: the Maturity Date; the Annuity Commencement Date; payment of any
Death Benefit; or surrender of this Contract; whichever occurs first, LL&A
guarantees that it will credit interest on fixed allocations at an effective
annual rate not less than 3.0% during all years. A table of guaranteed values
for the fixed allocations may be found in Article 8.
LL&A may credit interest at rates in excess of the guaranteed rates at any time.
2.07 AUTOMATIC NONFORFEITURE OPTION
In the event that Purchase Payments are stopped, this Contract will continue as
a paid-up Contract until the earlier of; the Maturity Date, surrender of the
Contract, payment of any Death Benefit, or the Annuity Commencement Date.
Purchase Payments may be resumed at any time prior to: the Maturity Date,
surrender of the Contract, payment of any Death Benefit, or the Annuity
Commencement Date. LL&A reserves the right to surrender this Contract for its
Contract Value in the event that Purchase Payments have stopped for a period of
three full years, and the Contract Value is less than $2,000. By payment of the
Contract Value, LL&A shall be relieved of any further obligation under this
Contract.
2.08 TRANSFERS
Prior to the earlier of; the Maturity Date; surrender of the Contract; payment
of any Death Benefit; or the Annuity Commencement Date, the Owner may direct a
transfer of assets from one Sub-account to another Sub-account or to the Fixed
Account of the Contract. The Owner may also direct a transfer of assets from the
Fixed Account of the Contract to one or more Sub-accounts of the Variable
Account, subject to the limitations described below. Such a transfer request
must be in writing to LL&A at its Servicing Office. Amounts transferred to the
Sub-account(s) will purchase Accumulation Units as described in Section 2.03.
A transfer will result in the purchase of Accumulation Units in one Sub-account
and the redemption of Accumulation Units in the other Sub-account. Such a
transfer will be accomplished at relative Accumulation Unit values as of the
Valuation Date the transfer
Form NY28618 Page 6 1/98
<PAGE>
request is received. The valuation of Accumulation Units is described in Section
2.04.
LL&A reserves the right to impose a charge in the future for transfers between
Sub-accounts. This charge will not exceed $50 per transfer.
The minimum transfer amount is $300 or the entire amount in the
Sub-account/Fixed Account, whichever is less. If, after the transfer, the amount
remaining under this Contract in the Sub-account/Fixed Account from which the
transfer is taken is less than $300, the entire amount held in that
Sub-account/Fixed Account will be transferred with the transfer amount.
For transfers between Sub-accounts and from the Sub-account(s) to the Fixed
Account of the Contract, there are no restrictions on the maximum amount which
may be transferred. For transfers from the Fixed Account of the Contract to the
Variable Account, the sum of the percentages of fixed value transferred will be
limited to 25% in any 12 month period.
2.09 WITHDRAWAL OPTION
The Owner may withdraw a part of the surrender value of this Contract, subject
to the charges outlined under Surrender Option (see Section 2.10). The first
four partial withdrawals of Contract Value during a Contract Year will be free
of Contingent Deferred Sales Charges to the extent that the sum of the
percentages of the Contract Value withdrawn, where the percentages are based
upon the Contract Value at the time of the current withdrawal, does not exceed
10%. This 10% withdrawal exemption from CDSC does not apply to a surrender of a
Contract. Withdrawals will be treated as "first in-first out (FIFO)" for
purposes of calculating the Contingent Deferred Sales Charge (see Section 2.11).
Withdrawal will be effective on the Valuation Date on which LL&A receives a
written request at its Servicing Office.
The remaining value will be subject to the charges as provided under Surrender
Option (see Section 2.10). The request should specify from which sub-account the
withdrawal will be made. If no Sub-account is specified, LL&A will withdraw, on
a pro-rata basis from each Sub-account, the amount requested.
Any cash payment will be mailed from LL&A's Servicing Office within seven days
after the date of withdrawal; however, LL&A may be permitted to defer such
payment under the Investment Company Act of 1940, as in effect at the time such
request for withdrawal is received in the Servicing Office. The previous
sentence will only apply to any payments from the Variable Account of the Owner.
Any payments made from the Fixed Account of the Owner can be deferred for a
period not to exceed six months after a request is received.
For purposes of this Section, the Fixed Account of the Contract is considered a
Sub-account.
The Withdrawal Option is not available after the Annuity Commencement Date.
The minimum withdrawal is $300. LL&A reserves the right to surrender this
Contract for its Contract Value if any withdrawal reduces the Contract Value to
less than $2,000, and Purchase Payments have stopped for a period of three full
years. By payment of the Contract Value, LL&A shall be relieved of any further
obligation under this Contract.
2.10 SURRENDER OPTION
The Owner may surrender this Contract for its surrender value. On surrender,
this Contract terminates. Surrender will be effective on the Valuation Date on
which LL&A receives a written request at its Servicing Office. The surrender
value will be the total Contract Value on the Valuation Date, less a Contingent
Deferred Sales Charge.
Any cash payment will be mailed from LL&A's Servicing Office within seven days
after the date of withdrawal; however, LL&A may be permitted to defer such
payment under the Investment Company Act of 1940, as in effect at the time such
request for withdrawal is received in its Servicing Office. The previous
sentence will only apply to any payments from the Variable Account of the Owner.
Any payments made from the Fixed Account of the Owner can be deferred for a
period not to exceed six months after a request is received.
The Surrender Option is not available after the Annuity Commencement Date.
2.11 CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge (CDSC) is calculated separately for each
Contract Year's Purchase Payments to which a charge applies. Charges are applied
as follows:
<TABLE>
<CAPTION>
Number of complete CDSC as a percentage
Contract Years that of the surrendered
a Purchase Payment or withdrawn
has been invested Purchase Payments
<S> <C>
Less than
2 Years 6%
At least
2 Years 5%
At least
3 Years 4%
At least
4 Years 3%
At least
5 Years 2%
At least
6 Years 1%
At least
7+ Years 0%
</TABLE>
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A CDSC will be waived under certain circumstances (see Section 2.14 for
details).
For purposes of calculating CDSC, LL&A assumes that Purchase Payments are
withdrawn on a "first in-first out (FIFO)" basis, and that all Purchase Payments
are withdrawn before any earnings are withdrawn.
2.12 DEATH BENEFITS
Before the Annuity Commencement Date
Etitlement
Upon the death of the Owner LL&A will pay a Death Benefit to the designated
Beneficiary(s). If the designated Beneficiary of the Death Benefit is the
surviving spouse of the deceased Owner, the designated Beneficiary may elect to
continue the Contract as the new Owner in lieu of receiving the Death Benefit.
If there are no designated Beneficiaries, LL&A will pay a Death Benefit to the
Owner's estate. Upon the death of the designated spousal Beneficiary who
continues the Contract as the new Owner, LL&A will pay a Death Benefit to the
designated Beneficiary(s) named by the spouse as new Owner.
If the Owner is a corporation or other non-individual (non-natural person), the
death of the Annuitant will be treated as the death of the Owner. The EGMDB, if
applicable, will apply on the death of the Annuitant only in this situation.
(See Determination of Amounts.)
The Death Benefit will be paid if LL&A is in receipt of the following at its
Servicing Office: (1) proof, satisfactory to LL&A, of the death; (2) written
authorization for payment; and (3) all claim forms, fully completed.
Due proof of death may be a certified copy of a death certificate, a certified
copy of the statement of death from the attending physician, a certified copy of
a decree of a court of competent jurisdiction as to the findings of death, or
any other proof of death acceptable to LL&A.
All Death Benefit payments will be subject to the laws and regulations governing
death benefits.
Notwithstanding any provision of this Contract to the contrary, no payment of
Death Benefits provided under the Contract will be allowed that does not satisfy
the requirements of Code Section 72(s) or 401(a)(9) as applicable, as amended
from time to time.
Determination of Amounts
This Contract provides a Death Benefit equal to an Enhanced Guaranteed Minimum
Death Benefit (EGMDB) or the Guarantee of Principal.
The EGMDB is equal to the greater of:
a. the current Contract Value as of the date on which the death claim is
approved by LL&A for payment;
or
b. the highest Contract Value at the time of Fund valuation on any policy
anniversary date (including the inception date) on ages up to, and
including, the Owner's age 75. The highest Contract Value is increased by
Purchase Payments and is decreased by partial withdrawals, partial
annuitizations, and premium tax made, effected, or incurred subsequent to
such anniversary date on which the highest Contract Value is obtained.
The Guarantee of Principal is equal to the greater of:
a. the current Contract Value as of the date on which the death claim is
approved by LL&A for payment;
or
b. the sum of all Purchase Payments minus withdrawals, partial annuitizations,
and premium tax incurred.
The EDMDB will not be in effect if this Contract is issued to an Owner with an
attained age of 75 or greater at issue. Under these circumstances, there will be
no EGMDB provided and the Death Benefit is equal to the Guarantee of Principal.
If the designated Beneficiary, as the surviving spouse of the deceased Owner,
continues the Contract as the new Owner in lieu of receiving the Death Benefit,
then upon the death of the new Owner this Contract will provide a Death Benefit
of an EGMDB, if still in effect.
At any time prior to the Annuity Commencement Date, an Owner may choose to
terminate the EGMDB by giving written notice to LL&A at its Servicing Office,
and will then have no EGMDB. The EGMDB will terminate on the next Valuation Date
following receipt of the written notice in the LL&A Servicing Office and the
Death Benefit will then be the Guarantee of Principal. Termination of the EGMDB
by the Owner will be permanent and final.
Payment of Amounts
The Death Benefit payable on the death of the Owner, or upon the death of the
spouse who continues the Contract, will be distributed to the designated
Beneficiary(s) as follows:
a. the Death Benefit must be completely distributed within five years of the
Owner's date of death; or
b. the designated Beneficiary may elect, within the one year period after the
Owner's date of death, to receive the Death Benefit in substantially equal
installments over the life of such designated Beneficiary or over a period
not extending beyond the life expectancy of such designated Beneficiary;
provided that such distributions begin not
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later than one year after the Owner's date of death.
If a lump sum settlement from the Variable Account is elected, the proceeds will
be mailed within seven days of approval by LL&A of the claim. Payments from the
Variable Account may be postponed as permitted by the Investment Company Act of
1940, Payments from the Fixed Account may be deferred for a period not to exceed
six months.
On or After the Annuity Commencement Date
If the Owner dies on or after the Annuity Commencement Date, any remaining
benefits payable will continue to be distributed under the Annuity Payment
Option then in effect. All of the Owner's rights granted by the Contract will
pass to the Beneficiary.
If there is no named Beneficiary at the time of the Owner's death, then the
Owner's rights will pass to the Annuitant, if still living; otherwise to the
Joint Annuitant, if applicable. If no named Beneficiary, Annuitant, or Joint
Annuitant survives the Owner, any remaining annuity benefit payments will
continue to the Owner's estate.
2.13 DEATH OF ANNUITANT
Before the Annuity Commencement Date
If the Annuitant is also the Owner and dies, then the Death Benefit will be paid
in accordance with the Death Benefit provisions in the event of the death of the
Owner. If the designated Beneficiary is the surviving spouse, and the surviving
spouse elects to continue the Contract in lieu of receiving the Death Benefit,
then the Contingent Annuitant becomes the Annuitant. If no Contingent Annuitant
is named, the surviving spouse will become the Annuitant. If the spouse is the
designated Beneficiary and choses not to continue the Contract, or if the spouse
is not the designated Beneficiary, the Contingent Annuitant will have no rights
under the Contract.
If an Annuitant who is not the Owner dies, then the Contingent Annuitant, if
any, becomes the Annuitant. If no Contingent Annuitant is named, the Owner
becomes the Annuitant.
On or After the Annuity Commencement Date
On receipt of due proof of death, as described in Section 2.12, of the Annuitant
or both Joint Annuitants, any remaining annuity benefit payments under the
Annuity Payment Option will be paid to the Owner if living; otherwise, to the
Beneficiary. If there is no Beneficiary, any remaining benefit payments will
continue to the Annuitant's estate.
2.14 WAIVER OF CONTINGENT DEFERRED SALES
CHARGES
A surrender of this Contract or withdrawal of Contract Value prior to the
Annuity Commencement Date may be subject to a Contingent Deferred Sales Charge
as described in Sections 2.09 and 2.10, except that such charges do not apply
to: (1) the first four withdrawals of Contract Value during a Contract Year to
the extent that the sum of the percentages of the Contract Value withdrawn by
the first four withdrawals, where the percentages are based on the Contract
Value at the time of the current withdrawal, does not exceed 10% (this 10%
withdrawal exemption from CDSC does not apply to a surrender of a Contract); (2)
a surrender of the Contract as a result of "permanent and total disability" of
the Owner that prevents the Owner from engaging in any occupation for
remuneration or profit and which has existed continuously for a period of 12
months and begins prior to the 65th birthday of the Owner provided that written
proof of total disability is sent to LL&A at its Servicing Office; (3) a
surrender of the Contract as a result of the death of the Owner; (4)
annuitization.
The Contingent Deferred Sales Charge will only be waived if LL&A is in receipt
of proof, satisfactory to LL&A, of the exception.
If a non-natural person is the Owner of the Contract, the Annuitant will be
considered the Owner of the Contract for purposes of this Section 2.14.
2.15 STATE STATUTES
Any benefits paid under this Contract for surrender, withdrawal, or death will
not be less than the minimum benefits required by any statute of the state in
which this Contract is delivered.
2.16 DOLLAR COST AVERAGING PROGRAM
During the lifetime of the Annuitant, the Owner may elect a dollar cost
averaging program by selecting it on the application or by filing a written
request in a form acceptable to LL&A at its Servicing Office. Dollar cost
averaging is the transferring of a designated amount from one of the holding
accounts (Cash Management, U.S. Government/AAA-Rated Securities, or the DCA
Fixed Account) to another Sub-account(s) within the Contract on a monthly
basis. If a dollar cost averaging program is elected, the following provisions
apply:
. Only one dollar cost averaging program may exist at any time.
. An Owner currently participating in the cross reinvestment program (See
Section 2.17) may not participate in the dollar cost averaging program.
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. The minimum balance in the holding account to establish a dollar cost average
program is $10,000.
. Any time frame between 6 to 60 months may be selected for the dollar cost
average program.
. The Sub-account selected as the holding account may not be a receiving Sub-
account. Once selected, the holding account cannot be changed unless a new
program is started.
. Statements will be sent to the Owner confirming each dollar cost averaging
transfer.
. A new program does not need to be started if the Owner is changing the
receiving Sub-account(s), or the amounts or percentages to be transferred to
the receiving Sub-account(s), as long as new money is not being added to the
program.
. If additional money is added to the Contract to be dollar cost averaged or
changing the time frame, a new program must be started. Purchase Payments to
the holding account will not automatically be added to the dollar cost
averaging program. Instructions must accompany these additional Purchase
Payments.
. The dollar cost averaging program will be cancelled prematurely if the value
of the holding account drops below the amount required for the transfer.
. The dollar cost averaging program will continue for the specified duration,
or until the Owner terminates the program by sending LL&A, at its Servicing
Office, written notice of such termination.
. The Owner may establish or change a dollar cost averaging program by sending
written notice, in a form acceptable to LL&A, at its Servicing Office.
2.17 CROSS REINVESTMENT PROGRAM
During the lifetime of the Annuitant, the Owner may elect a cross reinvestment
program by filing a written request, in a form acceptable to LL&A, at its
Servicing Office. A cross reinvestment program is the transferring, at a
designated frequency (monthly, quarterly, semi-annually or annually), of a
Sub-account value that exceeds a designated baseline amount selected by the
Owner, from the Fixed Account or any of the Variable Sub-accounts ("originating
Sub-account") to other investment options within the Contract. If a cross
reinvestment program is elected, the following provisions apply:
. Only one cross reinvestment program may exist at any time.
. Cross reinvestment is not available to those currently participating in:
. Dollar cost averaging,
. Automatic withdrawal service,
. Automatic bank draft deposit,
. Automatic clearinghouse deposit.
. The minimum baseline amount in the originating Sub-account is $10,000.
. The minimum amount that can be transferred is $50.
. At the selected frequency, any Sub-account Value that exceeds the baseline
amount by $50 or more will automatically be transferred to one or more
specified Sub-accounts.
. Transfers will occur on the 20th of the month. If the stock market is closed
on that day, the transfer will occur on the next business day. In order to be
effective by the 20th, a request to establish, change or terminate a cross
reinvestment program must be received by LL&A at its Servicing Office by the
15th of the month.
. Statements will be sent to the Owner confirming each transaction.
. The cross reinvestment program will continue until the Owner authorizes LL&A
to terminate the program.
. The Owner may establish, change or terminate the cross reinvestment program
by sending written notice, in a form acceptable to LL&A, to its Servicing
Office.
. The baseline amount selected will be increased by any additional Purchase
Payments or transfers into the specified originating Sub-account.
ARTICLE 3
ANNUITY PAYMENT OPTION
BENEFITS
3.01 ANNUITY PAYMENTS
An election to receive payments under an Annuity Payment Option must be made by
the Maturity Date.
If an Annuity Payment Option is not chosen prior to the Maturity Date,
payments will commence to the Owner on the Maturity Date under the Annuity
Payment Option providing a Life Annuity with annuity payments guaranteed for 10
years. If no election is made, the value of the Owner's Variable Account shall
be used to provide a variable annuity payment, and the value of the Owner's
Fixed Account shall be used to provide a fixed annuity payment.
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The Maturity Date is set forth on Page 3. Upon written request by the Owner and
any Beneficiary who cannot be changed, the Maturity Date may be deferred.
However, the Maturity Date may not be deferred past the Annuitant's age 90.
Purchase Payments may be made until the new Maturity Date.
3.02 CHOICE OF ANNUITY PAYMENT OPTION
By Owner
Prior to the Annuity Commencement Date, the Owner may choose or change any
Annuity Payment Option. For a 100% fixed annuity payment, the Annuity
Commencement Date must be at least thirty days prior to the time annuity
payments are to begin.
By Beneficiary
At the time proceeds are payable to a Beneficiary, a Beneficiary may choose or
change any Annuity Payment Option that meets the requirements of Code Section
72(s) or 401(a)(9) if proceeds are available to the Beneficiary in a lump sum.
The Beneficiary then becomes the Annuitant.
A choice or change must be in writing to LL&A at its Servicing Office.
After the Annuity Commencement Date, the Annuity Payment Option may not be
changed.
3.03 ANNUITY PAYMENT OPTIONS
a. Life Annuity / Life Annuity with Guaranteed Period -- Payments will be made
for the lifetime of the Annuitant with no certain period, or life and a 10
year certain period, or life and a 20 year certain period.
b. Unit Refund Life Annuity -- Payments will be made for the lifetime of the
Annuitant with the guarantee that upon death a payment will be made of the
value of the number of Annuity Units equal to the excess, if any, of (a)
over (b) where (a) is the total amount applied under the option divided by
the Annuity Unit Value at the Annuity Commencement Date and (b) is the
product of the number of Annuity Units represented by each payment and the
number of payments paid prior to death.
c. Joint Life Annuity / Joint Life Annuity with Guaranteed Period -- Payments
will be made during the joint life of the Annuitant and a Joint Annuitant of
the Owner's choice. Payments will be made for life with no certain period,
or life and a 10 year certain period, or life and a 20 year certain period.
Payments continue for the life of the survivor at the death of the Annuitant
or Joint Annuitant.
d. Other options may be available as agreed upon in writing by LL&A.
At the time an Annuity Payment Option is selected under the provisions of this
Contract, the Owner may elect to have the total Contract Value applied to
provide a variable annuity payment, a fixed annuity payment, or a combination
fixed and variable annuity payment. If no election is made, the value of the
Owner's Variable Account shall be used to provide a variable annuity payment,
and the value of the Owner's Fixed Account shall be used to provide a fixed
annuity payment.
At the time annuity payments commence, they will not be less than those that
would be provided by a specific amount for any single premium immediate annuity
contract offered by LL&A at the time to the same class of annuitants. The
specific amount is the greater of the surrender value or 95% of the accumulation
value.
The amount of annuity payment will depend on the age and sex (except in cases
where unisex rates are required) of the Annuitant as of the Annuity Commencement
Date. A choice may be made to receive payments once each month, four times each
year, twice each year, or once each year. The Contract Value and Annuity Unit
value used to effect benefit payments will be calculated as of the Annuity
Commencement Date.
Article 6 of this Contract illustrates the minimum payment amounts and the age
adjustments which will be used to determine the first monthly payment under a
variable annuity payment option. The tables show the dollar amount of the first
monthly payment which can be purchased with each $1,000 of Contract Value, after
deduction of any applicable premium taxes. Amounts shows in Article 6 use an
individual Annuity Mortality Table on file with the New York Superintendent of
Insurance, with an assumed rate of return of 4% per year.
Article 7 of this Contract illustrates the minimum payment amounts and the age
adjustments which will be used to determine the monthly payments under a fixed
annuity payment option. The tables show the dollar amount of the guaranteed
monthly payments which can be purchased with each $1,000 of Contract Value,
after deduction of any applicable premium taxes. Amounts shown in Article 7 use
an individual Annuity Mortality Table on file with the New York Superintendent
of Insurance, with an interest rate of 2.75% per year.
The minimum payment amounts shown for Joint and Survivor Annuities under both
Article 6 and 7 are for Joint Ages; that is, for a male and a female both of the
same age. Minimum payment amounts for other age and sex combinations on Joint
and Survivor Annuities are available, but are not illustrated in Article 6 and
Article 7.
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3.04 DETERMINATION OF THE AMOUNT OF VARIABLE ANNUITY PAYMENTS AFTER THE FIRST
PAYMENT
The first variable annuity payment is sub-divided into components each of which
represents the product of: (a) the percentage elected by the Contract Owner of a
specific Sub-account the performance of which will determine future variable
annuity payments, and (b) the entire first variable annuity payment. Each
variable annuity payment after the first payment attributable to a specific Sub-
account will be determined by multiplying the Annuity Unit value for that Sub-
account for the date each payment is due by a constant number of Annuity Units.
This constant number for each specific Sub-account is determined by dividing the
component of the first payment attributable to such Sub-account as described
above by the Annuity Unit value for that Sub-account on the Annuity Commencement
Date. The total variable annuity payment will be the sum of the payments
attributable to each Sub-account.
The Annuity Unit value for any Valuation Period for any Sub-account is
determined by multiplying the Annuity Unit value for the immediately preceding
Valuation Period by the product of (a) 0.9998926 raised to a power equal to the
number of days in the current Valuation Period and (b) the Net Investment Factor
of the Sub-account for the Valuation Period for which the Annuity Unit value is
being determined.
The valuation of all assets in the Sub-account shall be determined in accordance
with the provisions of applicable laws, rules, and regulations. The method of
determination by LL&A of the value of an Accumulation Unit and of an Annuity
Unit will be conclusive upon the Owner and any Beneficiary.
LL&A guarantees that the dollar amount of each installment after the first shall
not be affected by variations in mortality experience from mortality assumptions
on which the first installment is based nor by expenses actually incurred, other
than taxes on investment income.
After the Annuity Commencement Date, if any portion of the annuity payment is a
variable annuity payment, the Owner may direct a transfer of assets from one
Sub-account to another Sub-account or to a fixed annuity payment. Such transfers
will be limited to three (3) times per Contract Year. Assets may not be
transferred from a fixed annuity payment to a variable annuity payment.
A transfer from one Sub-account to another Sub-account will result in the
purchase of Annuity Units in one Sub-account and the redemption of Annuity Units
in the other Sub-account. Such a transfer will be accomplished at relative
Annuity Unit values as of the Valuation Date the transfer request is received.
The valuation of Annuity Units is described above.
A transfer from one Sub-account to a fixed annuity payment will result in the
redemption of Annuity Units in one Sub-account and the purchase of a minimum
fixed annuity payment based on the tables in Article 7.
3.05 PROOF OF AGE
Payment will be subject to proof of age that LL&A will accept such as a
certified copy of a birth certificate.
3.06 MINIMUM ANNUITY PAYMENT REQUIREMENTS
If the Annuity Payment Option chosen results in payments of less than $50 per
Sub-account, the frequency will be changed so that payments will be at least
$50.
For the purposes of this Section, the fixed annuity payment of the Contract is
considered a Sub-account.
3.07 EVIDENCE OF SURVIVAL
LL&A has the right to ask for proof that the person on whose life the payment is
based is alive when each payment is due.
3.08 CHANGE IN ANNUITY PAYMENT OPTION
The Annuity Payment Option may not be changed after the Annuity Commencement
Date.
ARTICLE 4
BENEFICIARY
4.01 DESIGNATION
The Owner may designate a Beneficiary(s). The designated Beneficiary(s) will
receive the Death Benefit proceeds upon the death of the Owner.
Unless otherwise stated in the Beneficiary designation, if there is more than
one Beneficiary they are presumed to share equally.
4.02 CHANGE
The Owner may change any Beneficiary unless otherwise provided in the previous
designation.
A change of Beneficiary will revoke any previous designation.
A change may be made by filing a written request, in a form acceptable to LL&A,
at its Servicing Office. The change will become effective upon receipt of the
written request by LL&A at its Servicing Office.
LL&A reserves the right to request the Contract for endorsement of the change.
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4.03 DEATH OF BENEFICIARY
Unless otherwise provided in the Beneficiary designation, if any Beneficiary
dies before the Owner, that Beneficiary's interest will go to any other
Beneficiaries named, according to their respective interests. If there are no
Beneficiaries, the Beneficiary's interest will pass to a Contingent
Beneficiary(s), if any. Prior to the Annuity Commencement Date, if no
Beneficiary or Contingent Beneficiary survives the Owner, the Death Benefits
will be paid to the Owner's estate.
Once a Beneficiary is entitled to Death Benefits or other payments, the
Beneficiary may name his or her own Beneficiary(s) to receive any remaining
benefits due under the Contract, should the original Beneficiary die prior to
receipt of all benefits. If no Beneficiary is named or the named Beneficiary
predeceases the original Beneficiary, any remaining benefits will continue to
the original Beneficiary's estate. This designation must be made to the LL&A
Servicing Office.
ARTICLE 5
GENERAL PROVISIONS
5.01 THE CONTRACT
The Contract, and any riders attached, together with the application therefor if
a copy of such application is attached to the Contract when issued, constitute
the entire Contract. Only the President, a Vice President, the Secretary or an
Assistant Secretary of LL&A has the power, on behalf of LL&A, to change, modify,
or waive any provisions of this Contract.
LL&A reserves the right to unilaterally change the Contract for the purpose of
keeping the Contract in compliance with federal or state law, subject to the
prior approval of the Insurance Department where the Contract was delivered.
Any changes, modifications, or waivers must be in writing. No representative or
person other than the above named officers has authority to change or modify
this Contract or waive any of its provisions. All terms used in this Contract
will have their usual and customary meaning except when specifically defined.
5.02 OWNERSHIP
The Owner is the person who has the ability to exercise the rights within this
Contract.
Prior to the Annuity Commencement Date, the Owner has the right to change the
Annuitant at any time by notifying LL&A in writing of the change. The Annuitant
may not be changed in a Contract owned by a non-natural person. The Owner may
also name a Contingent Annuitant by notifying LL&A in writing.
The Contingent Annuitant designation is no longer applicable after the Annuity
Commencement Date.
5.03 ASSIGNMENTS
During the lifetime of the Annuitant, this Contract may be assigned. LL&A will
not be bound by any assignment unless it is received in writing at LL&A's
Servicing Office in a form acceptable to LL&A. The effective date of the
assignment will be the date it is received by LL&A. LL&A will not be responsible
for the validity of any assignment.
5.04 INCONTESTABILITY
This Contract will not be contested by LL&A.
5.05 MISSTATEMENT OF AGE AND/OR SEX
If the age and/or sex of the Annuitant has been misstated, the benefits
available under this Contract will be those which the Purchase Payments would
have purchased using the correct age and/or sex. Any underpayment already made
by LL&A shall be made up immediately and any overpayments already made up by
LL&A shall be charged against the annuity payments falling due after the
correction is made. Any amounts so paid or charged will be adjusted based on an
interest rate of 6% per annum.
5.06 NONPARTICIPATING
The Contract is nonparticipating and will not share in the surplus earnings of
LL&A.
5.07 VOTING RIGHTS
The Owner shall have a right to vote at the meetings of the Series. Ownership of
this Contract shall not entitle any person to vote at any meeting of
shareholders of LL&A. Votes attributable to the Contract shall be cast in
conformity with applicable law.
5.08 OWNERSHIP OF THE ASSETS
LL&A shall have exclusive and absolute ownership and control of its assets,
including all assets in the Variable Account.
5.09 REPORTS
Prior to the Annuity Commencement Date, at least once each Contract Year LL&A
shall mail a retort to the Owner. The report shall be mailed to the last address
known to LL&A. The report shall include a statement of the number of
Accumulation Units credited to the Variable Account under this Contract and the
dollar value of such units as well as a statement of the value of the Fixed
Account of this Contract. The report will also include the total account value,
the cash surrender value and the Death Benefit. The information in the report
shall be as of a date not more than two months prior to the date of mailing the
report. LL&A shall also mail to the
Form NY28618 Page 13 1/98
<PAGE>
Owner at least once in every Contract Year a report of the investments held in
the Sub-accounts under this Contract.
5.10 PREMIUM TAX
State and local government premium tax. If applicable, will be deducted from
Purchase Payments or Contract Value. This will be deducted when incurred by LL&A
or at another time of LL&A's choosing.
5.11 MAXIMUM ISSUE AGE
This Contract will not be issued to Owners over the age of 85.
Form NY28618 Page 14 1/98
<PAGE>
ARTICLE 6
ANNUITY PURCHASE RATES UNDER A VARIABLE PAYMENT OPTION
- --------------------------------------------------------------------------------
DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS
PURCHASED WITH EACH $1,000 APPLIED
- --------------------------------------------------------------------------------
SINGLE LIFE ANNUITIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
No Period Certain 120 Months Certain 240 Months Certain Cash Refund
Age Male Female Male Female Male Female Male Female
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 $5.29 $4.78 $5.18 $4.73 $4.83 $4.56 $4.88 $4.56
61 5.41 4.87 5.28 4.81 4.89 4.63 4.96 4.63
62 5.54 4.97 5.39 4.90 4.95 4.69 5.05 4.71
63 5.68 5.07 5.50 5.00 5.01 4.75 5.14 4.78
64 5.82 5.19 5.63 5.10 5.06 4.82 5.23 4.87
65 5.98 5.30 5.75 5.21 5.12 4.88 5.32 4.95
66 6.15 5.43 5.88 5.32 5.17 4.95 5.42 5.04
67 6.33 5.57 6.02 5.44 5.22 5.01 5.53 5.14
68 6.53 5.72 6.16 5.56 5.27 5.08 5.64 5.24
69 6.74 5.88 6.31 5.70 5.32 5.14 5.75 5.34
70 6.96 6.05 6.46 5.84 5.36 5.20 5.87 5.46
71 7.19 6.23 6.61 5.99 5.40 5.26 5.99 5.57
72 7.44 6.44 6.77 6.14 5.44 5.31 6.12 5.69
73 7.71 6.66 6.93 6.30 5.47 5.36 6.25 5.82
74 7.99 6.89 7.09 6.47 5.50 5.40 6.39 5.96
75 8.30 7.15 7.25 6.65 5.53 5.44 6.53 6.10
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
JOINT AND SURVIVOR ANNUITIES
- -----------------------------------------------------------------------------------------
Joint and Full to Survivor Joint and Two-Thirds Survivor
- -----------------------------------------------------------------------------------------
Certain Period Certain Period
- -----------------------------------------------------------------------------------------
Joint
None 120 240 Age None 120 240
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$4.37 $4.37 $4.34 60 $4.78 $4.74 $4.57
4.44 4.44 4.40 61 4.88 4.82 4.63
4.52 4.51 4.46 62 4.97 4.91 4.69
4.60 4.59 4.53 63 5.08 5.00 4.76
4.68 4.68 4.60 64 5.19 5.10 4.82
4.77 4.77 4.67 65 5.31 5.21 4.88
4.87 4.86 4.74 66 5.44 5.32 4.95
4.98 4.96 4.82 67 5.57 5.44 5.01
5.09 5.07 4.89 68 5.72 5.56 5.08
5.21 5.19 4.96 69 5.87 5.69 5.14
5.34 5.31 5.04 70 6.04 5.83 5.20
5.47 5.44 5.11 71 6.22 5.97 5.25
5.62 5.58 5.18 72 6.42 6.12 5.31
5.78 5.73 5.24 73 6.62 6.28 5.36
5.96 5.88 5.30 74 6.85 6.44 5.40
6.14 6.05 5.36 75 7.09 6.61 5.44
- -----------------------------------------------------------------------------------------
</TABLE>
Age Adjustment Table
<TABLE>
<CAPTION>
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
------------- ----------------- ------------- -----------------
<S> <C> <C> <C>
Before 1920 +2 1970-1979 -4
1920-1929 +1 1980-1989 -5
1930-1939 0 1990-1999 -6
1940-1949 -1 2000-2009 -7
1950-1959 -2 2010-2019 -8
1960-1969 -3 After 2019 -9
</TABLE>
Form NY28618 Page 15 1/98
<PAGE>
ARTICLE 7
ANNUITY PURCHASE RATES UNDER A FIXED PAYMENT OPTION
- --------------------------------------------------------------------------------
DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS
PURCHASED WITH EACH $1,000 APPLIED
- --------------------------------------------------------------------------------
SINGLE LIFE ANNUITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No Period Certain 120 Months Certain 240 Months Certain Cash Refund
Age Male Female Male Female Male Female Male Female
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.91 $4.37 $4.81 $4.33 $4.47 $4.17 $4.47 $4.13
61 5.03 4.47 4.92 4.42 4.53 4.24 4.56 4.21
62 5.17 4.58 5.04 4.52 4.60 4.31 4.65 4.29
63 5.32 4.69 5.16 4.62 4.67 4.38 4.75 4.38
64 5.48 4.81 5.30 4.73 4.73 4.46 4.85 4.46
65 5.64 4.94 5.43 4.85 4.80 4.53 4.95 4.56
66 5.82 5.08 5.58 4.97 4.86 4.61 5.06 4.66
67 6.01 5.22 5.72 5.10 4.92 4.68 5.18 4.76
68 6.22 5.38 5.88 5.24 4.97 4.75 5.30 4.87
69 6.44 5.55 6.04 5.39 5.03 4.82 5.43 4.98
70 6.68 5.73 6.20 5.54 5.08 4.89 5.56 5.11
71 6.92 5.93 6.37 5.70 5.12 4.95 5.70 5.23
72 7.18 6.14 6.54 5.87 5.16 5.02 5.84 5.37
73 7.47 6.38 6.72 6.04 5.20 5.07 6.00 5.51
74 7.77 6.63 6.90 6.23 5.23 5.12 6.16 5.66
75 8.09 6.90 7.08 6.42 5.26 5.17 6.32 5.82
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JOINT AND SURVIVOR ANNUITIES
- --------------------------------------------------------------------------------
Joint and Full to Survivor Joint and Two-Thirds Survivor
- --------------------------------------------------------------------------------
Certain Period Certain Period
- --------------------------------------------------------------------------------
Joint
None 120 240 Age None 120 240
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$3.96 $3.95 $3.98 60 $4.38 $4.34 $4.22
4.03 4.08 4.05 61 4.48 4.47 4.29
4.12 4.16 4.12 62 4.58 4.57 4.36
4.21 4.25 4.19 63 4.69 4.67 4.43
4.30 4.34 4.26 64 4.81 4.78 4.50
4.40 4.43 4.34 65 4.94 4.89 4.57
4.51 4.54 4.42 66 5.08 5.01 4.64
4.62 4.64 4.50 67 5.22 5.13 4.71
4.74 4.76 4.58 68 5.38 5.27 4.78
4.87 4.88 4.66 69 5.55 5.41 4.85
5.01 5.01 4.74 70 5.73 5.55 4.91
5.16 5.15 4.82 71 5.92 5.70 4.98
5.32 5.30 4.89 72 6.12 5.86 5.03
5.49 5.45 4.96 73 6.34 6.03 5.09
5.68 5.62 5.03 74 6.58 6.20 5.14
5.88 5.79 5.09 75 6.84 6.38 5.18
- --------------------------------------------------------------------------------
</TABLE>
Age Adjustment Table
<TABLE>
<CAPTION>
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
------------- ----------------- ------------- -----------------
<S> <C> <C> <C>
Before 1920 +2 1970-1979 -4
1920-1929 +1 1980-1989 -5
1930-1939 0 1990-1999 -6
1940-1949 -1 2000-2009 -7
1950-1959 -2 2010-2019 -8
1960-1969 -3 After 2019 -9
</TABLE>
Form NY28618 Page 16 1/98
<PAGE>
ARTICLE 8
GUARANTEED ACCUMULATED VALUES AND SURRENDER VALUES
FOR FIXED ALLOCATIONS*
<TABLE>
<CAPTION>
- --------------------------------- ----------------------------------
$1,000 Annual Contribution $100 Monthly Contribution
- --------------------------------- ----------------------------------
Guaranteed Guaranteed Guaranteed Guaranteed
End of Accumulated Surrender End of Accumulated Surrender
Year Value Value Year Value Value
- --------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
1 $ 1,030.00 $ 970.00 1 $ 1,219.41 $ 1,147.41
2 2,090.90 1,970.90 2 2,475.41 2,331.41
3 3,183.63 3,013.63 3 3,769.08 3,565.08
4 4,308.14 4,099.14 4 5,101.56 4,849.56
5 5,468.41 5,228.41 5 6,474.02 6,186.02
6 6,662.46 6,402.46 6 7,887.66 7,575.66
7 7,892.34 7,622.34 7 9,343.70 9,019.70
8 9,159.11 8,889.11 8 10,843.42 10,519.42
9 10,463.88 10,193.88 9 12,388.14 12,064.14
10 11,807.80 11,537.80 10 13,979.19 13,655.19
11 13,192.03 12,922.03 11 15,617.98 15,293.98
12 14,617.79 14,347.79 12 17,305.93 16,981.93
13 16,086.32 15,816.32 13 19,044.52 18,720.52
14 17,598.91 17,328.91 14 20,835.27 20,511.27
15 19,156.88 18,886.88 15 22,679.74 22,355.74
16 20,761.59 20,491.59 16 24,579.54 24,255.54
17 22,414.44 22,144.44 17 26,536.34 26,212.34
18 24,116.87 23,846.87 18 28,551.84 28,227.84
19 25,870.37 25,600.37 19 30,627.81 30,303.81
20 27,676.49 27,406.49 20 32,766.06 32,442.06
21 29,536.78 29,266.78 21 34,968.45 34,644.45
22 31,452.88 31,182.88 22 37,236.91 36,912.91
23 33,426.47 33,156.47 23 39,573.43 39,249.43
24 35,459.26 35,189.26 24 41,980.05 41,656.05
25 37,553.04 37,283.04 25 44,458.86 44,134.86
26 39,709.63 39,439.63 26 47,012.04 46,688.04
27 41,930.92 41,660.92 27 49,641.81 49,317.81
28 44,218.85 43,948.85 28 52,350.48 52,026.48
29 46,575.42 46,305.42 29 55,140.41 54,816.41
30 49,002.68 48,732.68 30 58,014.03 57,690.03
31 51,502.76 51,232.76 31 60,973.86 60,649.86
32 54,077.84 53,807.84 32 64,022.49 63,698.49
33 56,730.18 56,460.18 33 67,162.58 66,838.58
34 59,462.08 59,192.08 34 70,396.87 70,072.87
35 62,275.94 62,005.94 35 73,728.18 73,404.18
36 65,174.22 64,904.22 36 77,159.44 76,835.44
37 68,159.45 67,889.45 37 80,693.64 80,369.64
38 71,234.23 70,964.23 38 84,333.86 84,009.86
39 74,401.26 74,131.26 39 88,083.29 87,759.29
40 77,663.30 77,393.30 40 91,945.20 91,621.20
41 81,023.20 80,753.20 41 95,922.96 95,598.96
42 84,483.89 84,213.89 42 100,020.07 99,696.07
43 88,048.41 87,778.41 43 104,240.08 103,916.08
44 91,719.86 91,449.86 44 108,586.69 108,262.69
45 95,501.46 95,231.46 45 113,063.71 112,739.71
- --------------------------------- ----------------------------------
</TABLE>
* Guaranteed Values are based on the guaranteed interest rate of 3.0%.
Guaranteed Accumulated Values and Guaranteed Surrender Values may be more or
less than shown in the table because of the variable of the day of receipt of
the Purchase Payment at the Servicing Office from period to period and the
crediting of interest to the Annuitant's account on a daily basis. Values shown
are based upon contributions equally spaced with interest occurring at the
beginning of the year. These values do not provide for premium tax, if any.
Form NY28618 Page 17 1/98
<PAGE>
ANNUITY
CONTRACT
Deferred Variable Annuity or Variable and Fixed Annuity
Benefit Payment Options
Nonparticipating
If you have any questions concerning
this Contract, please
contact your LL&A
representative or the Servicing Office of LL&A.
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
120 Madison Street
Suite 1700
Syracuse, New York 13202
800-893-7168
Servicing Office:
1300 S. Clinton Street
P.O. Box 2348
Fort Wayne, IN 46801-2348
[800-942-5500]
Form NY28618 1/98
<PAGE>
IRA CONTRACT AMENDMENT
Made a part of the Contract to which it is
attached ("this Contract")
1. This amendment shall be controlling and overrides any contradictory
provision in the Contract.
2. The Contract will not be transferable except to the Company on surrender or
settlement. It may not be sold, assigned, discounted or pledged as
collateral for a loan or as security for the performance of an obligation or
for any other purpose.
3. The entire interest of the Owner/Annuitant in this Contract shall be
nonforfeitable. The Owner shall be the Annuitant.
4. The annual purchase payment under a flexible premium contract will not
exceed the lesser of:
100% of the Owner/Annuitant's gross compensation (earned income)
for the taxable year or $2,000 for an Owner/Annuitant under an
Individual Retirement Annuity (IRA).
15% of the Owner/Annuitant's gross compensation for the taxable
year or $30,000 under a Simplified Employee Pension (SEP).
15% of the Owner/Annuitant's gross compensation for the taxable
year or $7,000 (as adjusted) under a Salary Reduction SEP.
5. This Contract may not require fixed premiums.
6. No contribution will be accepted under a SIMPLE plan established by any
employer pursuant to Code section 408(p). No transfer or rollover of funds
attributable to contributions made by a particular employer under its
SIMPLE plan will be accepted from a SIMPLE IRA, that is, an IRA used in
conjunction with a SIMPLE plan, prior to the expiration of the 2-year period
beginning on the date the individual first participated in that employer's
SIMPLE plan.
7. Purchase payments made pursuant to this Contract shall be from
"compensation" of the Owner/Annuitant. "Compensation" means wages, salaries,
professional fees, or other amounts derived from or received for personal
service actually rendered (including, but not limited to commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, and bonuses) and includes earned
income, as defined in section 401(c)(2) (reduced by the deduction the self-
employed individual takes for contributions made to KEOGH plan).
Compensation does not include amounts derived from or received as earnings
or profits from property (including, but not limited to, interest and
dividends) or amounts not includible in gross income. Compensation also does
not include any amount received as a pension or annuity or as deferred
compensation. The term "compensation" shall include any amount includible in
the individual's gross income under section 71 with respect to a divorce or
separation instrument described in subparagraph (A) of section 71(b)(2). For
purposes of this definition, section 401(c)(2) shall be applied as if the
term trade or business for purposes of section 1402 included service
described in subsection (c)(6).
8. The entire interest (value of the annuity) of the individual for whose
benefit the annuity is maintained (Owner/Annuitant) will be distributed or
commence to be distributed, no later than the first day of April following
the calendar year in which such individual attains age 70 1/2 (required
beginning date), in equal or substantially equal amounts, over (a) the life
of the Owner/Annuitant, or the lives of such individual (Owner/Annuitant)
and his or her designated beneficiary, or (b) a period not extending beyond
the life expectancy of such individual (Owner/Annuitant), or the joint and
last survivor expectancy of such individual (Owner/Annuitant) and his or her
designated beneficiary. Payments must be made in periodic payments at
intervals of no longer than one year. In addition, payments must be either
nonincreasing or they may increase only as provided in Q&A F-3 of section
1.401(a)(9)-1 of the Proposed Income Tax Regulations.
9. All distributions made hereunder shall be made in accordance with the
requirements of section 401(a)(9) of the Code, including the incidental
death benefit requirements of section 401(a)(9)(G) of the Code, and the
regulations thereunder, including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
10. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the individual by the time distributions are required
to begin, life expectancies shall be recalculated annually. Such election
shall be irrevocable by the individual and shall apply to all subsequent
years. The life expectancy of a non-spouse beneficiary may not be
recalculated and may result in payments not continuing for life. Instead,
life expectancy will be calculated using the attained age of such
beneficiary during the calendar year in which the individual attains
Form NY28677 2/98
<PAGE>
ages 70 1/2, and payments for subsequent years shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
11. Before distributing an amount from the contract, the Company shall receive
from the Owner/Annuitant a declaration in writing of the Owner/Annuitant's
intention as to the disposition of the amount distributed, except in the
case of the Owner/Annuitant's death or disability or attainment of age
59 1/2.
12. With respect to any amount which becomes payable under this Contract, no
provision of this Contract shall be applicable to the extent that it
permits or provides for settlement of such amount in a manner other than as
set forth in a, b, c, or d below:
a. To the Owner/Annuitant in one sum;
b. To the Owner/Annuitant as a life annuity (which may provide for a term
certain not extending beyond the life expectancy of the
Owner/Annuitant);
c. To the Owner/Annuitant and his/her designated beneficiary as a joint
and survivor annuity (which may provide for a term certain not
extending beyond the joint life and last survivor expectancy of the
Owner/Annuitant and his/her designated beneficiary);
d. To the Owner/Annuitant as an annuity certain not extending beyond the
life expectancy of the Owner/Annuitant, or, if the Owner/Annuitant has
a living designated beneficiary, the joint life and last survivor
expectancy of the Owner/Annuitant and his/her designated beneficiary.
13. Any payment made under b, c, or d above shall be in equal or substantially
equal amounts or units except for joint and survivor annuities which
provide for reduced payments to a survivor.
14. If the Owner/Annuitant dies before the entire interest is distributed, the
following distributions provisions shall apply:
a. If the Owner/Annuitant dies after distribution of his or her interest
has commenced, the remaining portion of such interest will continue to
be distributed at least as rapidly as under the method of distribution
being used prior to the Owner/Annuitant's death.
b. If the Owner/Annuitant dies before distribution of his or her interest
begins, distribution of the Owner/Annuitant's entire interest shall be
completed by December 31 of the calendar year containing the fifth
anniversary of the Owner/Annuitant's death except to the extent that an
election is made to receive distributions in accordance with 1) or 2)
below:
1) The Owner/Annuitant's interest is payable to a designated
beneficiary, then the entire interest of the Owner/Annuitant may be
distributed over the life or over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or
before December 31 of the calendar year immediately following the
calendar year in which the Owner/Annuitant died.
2) If the designated beneficiary is the Owner/Annuitant's surviving
spouse, the date distributions are required to begin in accordance
with 1) above shall not be earlier than the later of: A) December 31
of the calendar year immediately following the calendar year in
which the Owner/Annuitant died or B) December 31 of the calendar
year in which the Owner/Annuitant would have attained age 70 1/2.
c. If the designated beneficiary is the Owner/Annuitant's surviving
spouse, the spouse may treat the Contract as his or her own individual
retirement arrangement (IRA). This election will be deemed to have been
made if such surviving spouse makes a regular IRA contribution to the
Contract, makes a rollover to or from such Contract, or fails to elect
any of the above provisions.
d. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the individual's death,
unless otherwise elected by the surviving spouse by the time
distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by the
surviving spouse and shall apply to all subsequent years. In the case
of any other designated beneficiary, life expectancies shall be
calculated using the attained age of such beneficiary during the
calendar year in which distributions are required to begin pursuant to
this section, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy
was first calculated. Non-recalculation of the life expectancy for the
non-spouse beneficiary may result in payments not continuing for life.
e. Distributions under this section are considered to have begun if
distributions are made on account of the individual reaching his or her
required beginning date or if prior to the required beginning date
distributions irrevocably commence to an individual over a period
permitted and in an annuity form acceptable under section 1.401(a)(9)
of the Regulations.
15. If the Owner/Annuitant discontinues payments the Contract will remain in
full force and effect. Any accrued interest on fixed Contracts will be
applied to the Contract Value and any increases or decreases in the value
Form NY28877 2/98
<PAGE>
of units under variable Contracts will be applied to the Contract Value.
LL&A does not impose a penalty upon the Owner/Annuitant if the
Owner/Annuitant resumes making purchase payments.
16. This Contract is for the exclusive benefit of the Owner/Annuitant and
his/her beneficiary.
17. This Endorsement shall be amended from time to time if required to reflect
any changes in the Internal Revenue Code, Internal Revenue Service
regulations, or published revenue rulings. Such amendments shall be subject
to the prior approval of the Insurance Department where the Contract and
this Endorsement were delivered.
18. LL&A may not surrender this Contract in the event that Purchase Payments
stop.
19. At least once each Contract Year, it is hereby agreed that LL&A shall mail
to the Owner/Annuitant of this Contract a report which shall include a
statement of the dollar value of such Contract. The report shall be mailed
to the last address known to LL&A. The information in the report shall be
as of a date not more than two months previous to the date of mailing the
report.
20. A Contingent Owner or a Joint Owner may not be named.
Lincoln Life & Annuity Company of New York
[LOGO for Kathleen A Gorman]
Kathleen Gorman, Assistant Secretary
Form NY28877 2/98
<PAGE>
ROTH IRA ENDORSEMENT
Made a part of the Contract to which it is
attached ("this Contract")
This Amendment is made a part of this annuity contract. Notwithstanding any
other specific provisions in the contract to the contrary, the contract is
amended to restrict the rights of the Owner or Annuitant and any beneficiary,
and to limit the contributions, as follows:
1. The Owner may not transfer ownership of the contract, sell the contract, or
assign or pledge the contract as collateral for a loan or as security for
the performance of an obligation or for any other purpose, to any person
other than the Company or a former spouse of the Owner under a divorce
decree or under a written instrument incident to that divorce.
2. The contract is established for the exclusive benefit of the Owner and the
Owner's beneficiaries.
3. The interest of the Owner in the contract is nonforfeitable.
4. Dividends, if applicable, will not be paid in cash but will be applied as
contributions to the contract.
5. At least once each calendar year, the Company shall furnish the Owner or
payee a report concerning the status of the contract.
6. The contract will accept contributions only as follows:
A. Contributions to this contract must be paid in cash and, except in the
case of a trustee-to-trustee transfer from another Roth IRA, or in the
case of a qualified rollover contribution, may not exceed the excess
of the Owner's contribution limit for the taxable year over the
aggregate contributions made during the taxable year to all other Roth
IRAs and IRAs held by the Owner. Contributions may be made without
respect to the age of the Owner.
The contribution limit for the taxable year is either (1) the lesser
of $2,000 or 100% of compensation of the Owner for the taxable year,
or (2) where the Owner files a joint return and receives less
compensation for the taxable year than the Owner's spouse, the lesser
of $2,000 or 100% of the compensation of the Owner and the Owner's
spouse for the taxable year less the spouse's contribution to a Roth
IRA or IRA for the taxable year (if any).
When the Owner's adjusted gross income (AGI) exceeds the applicable
dollar limit (ADL; see description below), the annual contribution
limit is reduced by the following amount --
Annual
Contribution x Owner's AGI - ADL
-----------------
Limit $15,000 ($10,000 if the Owner is married)
For purposes of this section, AGI does not include any amount included
in gross income as a result of a rollover of an IRA to a Roth IRA and
is reduced by any deduction under section 219 of the Code.
The ADL is $150,000 for an Owner filing a joint return, $95,000 for an
Owner filing a single return, and $-0- for a married Owner filing a
separate return.
B. A qualified rollover contribution described in section 408A(e) can be
made only from (1) another Roth IRA or (2) another IRA, which is not a
Roth IRA, and can be made from an IRA other than a Roth IRA only if
the Owner's adjusted gross income for the taxable year of the rollover
does not exceed $100,000.
Form NY29022 0598
<PAGE>
7. The Owner's entire interest will be distributed in accordance with one of
the following provisions, as elected:
A.
1) The Owner's entire interest will be paid by December 31 following the
fifth anniversary of the Owner's death.
2) If any portion of the Owner's interest is payable to a designated
beneficiary and such beneficiary has not elected (1) above, then the
entire interest which is payable to the beneficiary will be
distributed in substantially equal installments over a period not
exceeding the life or life expectancy of the designated beneficiary,
commencing by December 31 following the first anniversary of the
Owner's death. The designated beneficiary may elect at any time to
receive greater payments if otherwise permitted under the terms of
the contract.
3) In applying the requirements of A(2) to any portion of the Owner's
interest which is payable to the Owner's surviving spouse, the date
on which the payments must commence is the later of (a) December 31
following the date the deceased Owner would have attained age 70 1/2
or (b) December 31 following the first anniversary of the Owner's
death.
4) If the designated beneficiary of the Owner is the Owner's surviving
spouse, the spouse may treat the contract as the spouse's own Roth
IRA. This election will be deemed to have been made if the surviving
spouse makes a rollover or other contribution into this contract or
if the surviving spouse has failed to satisfy one or more
requirements described in (1) or (2). If the Owner's surviving spouse
dies before distributions are required to begin under this section,
the Owner's surviving spouse will be treated as having elected to
make the Roth IRA his or her own Roth IRA.
B. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the individual's death, unless
otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable by the surviving spouse and shall apply to
all subsequent years. In the case of any other designated beneficiary,
life expectancies shall be calculated using the attained age of such
beneficiary during the calendar year in which distributions are required
to begin pursuant to this section, and payments for any subsequent
calendar year shall be calculated based on such life expectancy reduced
by one for each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
8. This Endorsement may be amended from time to time to comply with the
Internal Revenue Code in order to maintain its tax-qualified status as a
Roth IRA.
Lincoln Life & Annuity Company of New York
[LOGO for Kathleen A. Gorman]
Kathleen Gorman, Assistant Secretary
Form NY29022 0598
<PAGE>
Exhibit 5
[LOGO OF AMERICAN LEGACY III APPEARS HERE]
(NY) Variable Annuity Application
Lincoln Life & Annuity Company of New York
Home office Syracuse, New York
================================================================================
Instructions: Please type or print.
ANY ALTERATIONS TO THIS APPLICATION MUST BE INITIALED BY THE CONTRACT OWNER.
================================================================================
1 Contract Owner
-----------------------------------------------------------------------------
Full legal name or trust name*
-----------------------------------------------------------------------------
Street address
-----------------------------------------------------------------------------
City State Zip
-----------------------------------------------------------------------------
Trustee name*
Social Security number/TIN - -
------------
Home telephone number -
------------
Date of birth [_] Male [_] Female
-------------------------
Month Day Year
Date of trust* is trust revocable?*
------------------------ [_] Yes [_] No
Month Day Year
Note: Maximum age of Contract Owner is 85.
*This information is required for trusts
================================================================================
2a Annuitant (if no Annuitant is specified, the Contract Owner will be the
Annuitant)
-----------------------------------------------------------------------------
Full legal name
-----------------------------------------------------------------------------
Street address
-----------------------------------------------------------------------------
City State Zip
Social Security number - -
------------
Home telephone number -
-----------------
Date of birth [_] Male [_] Female
-------------------------
Month Day Year
Note: Maximum age of Annuitant is 85.
================================================================================
2b Contingent Annuitant
-----------------------------------------------------------------------------
Full legal name
Social Security number - -
-------------
Note: Maximum age of Contingent Annuitant is 85.
================================================================================
3 Beneficiary(ies) of Contract Owner (List additional beneficiaries on
separate sheet. If listing children, use full legal names.)
------------------------------------------ ---------------------------------
Primary: Full legal name or trust name* Relationship to Contract Owner
-------------------------- --------------
SSN/TIN %
------------------------------------------ ---------------------------------
Primary: Full legal name Relationship to Contract Owner
-------------------------- --------------
SSN/TIN %
------------------------------------------ ---------------------------------
Contingent: Full legal name or trust name Relationship to Contract Owner
-------------------------- --------------
SSN/TIN %
------------------------------------------
Executor/Trustee name*
Date of trust*
----------------------------
Month Day Year
Is trust revocable?* [_] Yes [_] No
*This information is required for trusts.
================================================================================
4 Type of Contract
Nonqualified [_] Initial Contribution, OR [_] 1035 Exchange
Tax Qualified (must complete plan type):
[_] Initial Contribution, Tax Year 19__ OR [_] Transfer OR [_] Rollover
Plan Type (check one): [_] Roth IRA [_] Traditional IRA
Form 28617NY 0198 Page 1 Litho in USA XXXXXXX
(C) 1998 American Funds Distribution
Lit. No. LECIIIAP-001-0
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------
5a Allocation (this section must be completed)
Initial minimums:
Nonqualified $1,500
Qualified $1,000
The current allocation will apply to future contributions unless otherwise
specified.
If no allocations are specified, the entire amount will be allocated to the Cash
Management Fund pending instructions from the Contract Owner.
- ----------------------------------------------------------
Please allocate my contribution of:
$____________________________ OR $________________________
Initial contribution Approximate amount from
previous carrier
- ----------------------------------------------------------
INTO THE FUND(S) BELOW
- ----------------------------------------------------------
Use whole percentages
____________% [Global Growth Fund]
____________% [Global Small Capitalization Fund]
____________% [Growth Fund]
____________% [International Fund]
____________% [Growth-Income Fund]
____________% [Asset Allocation Fund]
____________% [High-Yield Bond Fund]
____________% [Bond Fund]
____________% [U.S. Govt./AAA-Rated Securities Fund]
____________% [Cash Management Fund]
____________% [New World Fund]
____________% Fixed Account
============% Total (must = 100%)
- ----------------------------------------------------------
5b Dollar Cost Averaging (complete only if electing DCA)
$10,000 minimum required in the Holding Account
- ----------------------------------------------------------
Total amount to DCA: $ _____________
OR
MONTHLY amount to DCA: $ _____________
- ----------------------------------------------------------
OVER THE FOLLOWING PERIOD: _____________
MONTHS (6-60)
- ----------------------------------------------------------
FROM THE FOLLOWING HOLDING ACCOUNT (check one)
[ ] DCA Fixed Account*
[ ] Cash Management Fund
[ ] U.S. Govt./AAA-Rated Securities Fund*
- ----------------------------------------------------------
INTO THE FUND(S) BELOW
- ----------------------------------------------------------
Use whole percentages *The DCA holding account
and the DCA fund elected
cannot be the same.
____________% [Global Growth Fund]
____________% [Global Small Capitalization Fund]
____________% [Growth Fund]
____________% [International Fund]
____________% [Growth-Income Fund]
____________% [Asset Allocation Fund]
____________% [High-Yield Bond Fund]
____________% [Bond Fund]
____________% [U.S. Govt./AAA-Rated Securities Fund*]
____________% [Cash Management Fund*]
____________% [New World Fund]
____________% Fixed Account*
============% Total (must = 100%)
- ----------------------------------------------------------
=====================================================================================================================
6 Automatic Bank Draft
To: ___________________________________________________________________________________________ ATTACH VOIDED CHECK
Bank name ABA number
___________________________________________________________________________________________________________________
Bank street address City State Zip
Automated bank draft start date: [ ][ ] [ ][ ] [ ][ ] ____________________________ $ ____________________
Month Day (1-28) Year Checking account number Monthly amount
</TABLE>
I/We hereby request and authorize you to pay and change to my/our account
checks or electronic fund transfer debits processed by and payable to the
order of Lincoln Life & Annuity Company of New York, P.O. Box 2348, Fort
Wayne, IN 46801-2348, provided there are sufficient collected funds in said
account to pay the same upon presentation, it will not be necessary for any
officer or employee of Lincoln Life & Annuity Company of New York to sign such
checks. I/We agree that your rights in respect to each such check shall be the
same as if it were a check drawn and signed personally by me/us. This
authority is to remain in effect until revoked by me/us, and until you
actually receive such notice. I/we agree that you shall be fully protected in
honoring any such check or electronic fund transfer debit. I/We further agree
that if any such check or electronic fund transfer debit be dishonored,
whether with or without cause and whether intentionally or inadvertently, you
shall be under no liability whatsoever even though such dishonor results in
the forfeiture of insurance or investment loss to me/us.
<TABLE>
<CAPTION>
<S> <C>
_________________________________________ ________________________________ Date [ ][ ] [ ][ ] [ ][ ]
Signature(s) EXACTLY as shown on bank records Month Day Year
_________________________________________ ________________________________
Print full legal name(s)
</TABLE>
Page 2
<PAGE>
- --------------------------------------------------------------------------------
7 Automatic Withdrawal $10,000 minimum account balance required.
Note: Withdrawals may no exceed 10% of total
contract value per year.
<TABLE>
<S> <C>
----------------------------------------------------------- -----------------------------------------------------------
[_] Please provide me with automatic withdrawals [_] Please provide me with automatic withdrawals
based on 10% of total contract value of $ ____________________________
[_] Monthly [_] Quarterly [_] Semiannually [_] Annually OR [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
Begin withdrawals in [_____________] [______] Begin withdrawals in [_____________] [______]
Month Year Month Year
----------------------------------------------------------- -----------------------------------------------------------
ELECT ONE: [_] Do withhold taxes [_] Do not withhold taxes
ELECT ONE: [_] Send check to address of record OR [_] Send check to the following alternate address:
Note: If no tax withholding selection is made,
taxes will be withheld. -----------------------------------------------------------
For direct deposit into your bank account, -----------------------------------------------------------
an electronic fund transfer form must be completed
and submitted with a voided check. -----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
8 Cross-Reinvestment
To elect this option, please complete the appropriate form (available from
your broker or financial planner).
- --------------------------------------------------------------------------------
9 Replacement Will the proposed contract replace any existing annuity or life
insurance contract?
ELECT ONE: [_] No [_] Yes If yes, complete the 1035 Exchange or Qualified
Retirement Account Transfer form.
(Attach a replacement form.)
------------------------------------------------------
Company name
------------------------------------------------------ -------------------
Plan name Year issued
- --------------------------------------------------------------------------------
10 Signatures
All statements made in this application are true to the best of my knowledge
and belief, and I agree to all terms and conditions as shown. I acknowledge
receipt of current prospectuses for American Legacy III and American Variable
Insurance Series and verify my understanding that all payments and values
provided by the contract, when based on investment experience of the funds in
the Series, are variable and not guaranteed as to dollar amount. Under
penalty of perjury, the Contract Owner certifies that the Social Security (or
taxpayer identification) number(s) is correct as it appears in this
application.
I understand and agree that acceptance of the annuity contract will mean
acceptance of all of its terms and ratification of any changes noted on the
Home Office Corrections and Additions endorsement to the application. Changes
to items which may affect the benefits applied for must be agreed to by me in
writing.
------------------------------------- -----------
Signed at (city) State Date:[_____] [___] [____]
Month Day Year
--------------------------------------------------
Signature of Contract Owner
------------------------------------- -----------
Signed at (city) State Date:[_____] [___] [____]
Month Day Year
--------------------------------------------------
Signature of Annultant (Annultant must sign
if Contract Owner is a trust custodian)
Page 3
<PAGE>
- --------------------------------------------------------------------------------
THE FOLLOWING SECTIONS MUST BE COMPLETED BY THE SECURITIES DEALER OR FINANCIAL
ADVISER. Please type or print.
- --------------------------------------------------------------------------------
11 Insurance in Force Will the proposed contract replace any existing annuity
or life insurance contract?
ELECT ONE: [_] No [_] Yes If yes, please list the insurance in force on
the life of the proposed Contract Owner and Annuitant(s):
(Attach a replacement form.)
$
----------------------------------------- ----------------- -----------
Company name Year issued Amount
- --------------------------------------------------------------------------------
12 Additional Remarks
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13 Dealer Information Note: Licensing appointment with Lincoln Life & Annuity
Company of New York is required for this
application to be processed. If more than one
representative, please indicate names and
percentages in Section 12.
------------------------------------------- [_][_][_] [_][_][_]-[_][_][_][_]
Registered representative's name Registered representative's
(print as it appears on NASD licensing) telephone number
------------------------------------------- [_][_][_]-[_][_][_]-[_][_][_][_]
Client account number at dealer Registered representative's SSN
(if applicable)
-----------------------------------------------------------------------------
Dealer's name
--------------------------------------- ----------- ---------- ----------
Branch address City State ZIP
[_] CHECK IF BROKER CHANGE OF ADDRESS
- --------------------------------------------------------------------------------
14 REPRESENTATIVE'S SIGNATURE
The representative hereby certifies that he/she witnessed the signature(s) in
section 10 and that all information contained in this application is true to
the best of his/her knowledge and belief.
----------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Send completed application - with a check made payable to Lincoln Life & Annuity
Company of New York - to your investment dealer's
home office or to:
<TABLE>
<CAPTION>
<S> <C> <C>
By Express Mail:
[LOGO OF Lincoln Life & Annuity Company of New York Lincoln Life & Annuity Company of New York
AMERICAN Servicing Office Attention: American Legacy Operations
LEGACY III P.O. Box 2348 1300 South Clinton Street
APPEARS HERE] Fort Wayne, IN 46801-2348 Fort Wayne, IN 46802
800-942-5500
</TABLE>
Page 4
<PAGE>
Exhibit 8a
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement") is made as of ____________ by and
among Delaware Management Holdings, Inc., a Delaware corporation ("Holdings"),
Delaware Service Company, Inc., a Delaware corporation and a wholly owned
subsidiary of Holdings ("Delaware"), Lincoln Life & Annuity Company of New York,
a New York insurance corporation "Lincoln Life").
The parties hereto, in consideration of the mutual covenants hereinafter
expressed, agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Definitions. The following terms shall have the respective
meanings set forth in this Section 1.1 for all purposes of this Agreement except
where the application of such definitions is limited by reference in this
Section 1. 1 to a specific Article of this Agreement (such definitions to be
equally applicable to both the singular and plural forms of the terms herein
defined):
"Accounting Schedule" means Schedule 1.1 (a) hereto, which sets forth the
accounting services to be rendered pursuant to this Agreement, as such Schedule
may be amended from time to time pursuant to Section 15.1.
"Accounting Services" means the services listed in the Accounting Schedule
with respect to the Accounts.
"Accounts" means the Separate Accounts.
"Affiliate" means, with respect to any entity, any other entity
controlling, controlled by or under common control with such entity.
"Business Day" means a day on which the New York Stock Exchange is open for
trading.
"Calculation Losses" means any losses suffered by a Contractowner, Third
Party Administrator, or Separate Account directly caused by an error in a Unit
Value, or by the delivery to Lincoln Life of a or Unit Value after the
applicable deadline provided for in Section 2.1; provided, however, that such
losses shall not include any consequential damages.
"Contractowner" means the present or former owner of an insurance or
annuity contract supported by a Separate Account, or any beneficiary or
annuitant thereof.
"Delaware" has the meaning set forth in the preamble to this Agreement.
1
<PAGE>
"Delaware Affiliate" means Holdings and any entity that is directly or
indirectly controlled by Holdings.
"Fee Schedule" means Schedule 5.1 hereto, as such Schedule may be amended
from time to time pursuant to Section 15.1.
"Holdings" has the meaning set forth in the preamble to this Agreement.
"Lincoln Affiliate" means any Affiliate of Lincoln Life other than a
Delaware Affiliate.
"Lincoln Life" has the meaning set forth in the preamble to this Agreement.
"Renewal Term" means each successive one-year term occurring after the
expiration of the initial term of this Agreement as described in Section 10.1.
"Separate Account" means a separate account of Lincoln Life identified as
such on the Accounting Schedule, and any additional separate account or sub-
account of Lincoln Life or any Lincoln Affiliate (or of any other person if
Lincoln Life or any Lincoln Affiliate has administrative responsibilities with
respect to such separate account or sub-account pursuant to any reinsurance
agreement or otherwise) designated in accordance with Section 4.1.
"Third Party Administrator" means an administrator of insurance or annuity
contracts acting on behalf of Contractowners.
"Unit Value" means the daily unit value per unit of the respective Separate
Accounts or sub-accounts thereof for each Business Day, all determined in
accordance with the terms of the Cutover Schedule and with any applicable
prospectus or regulatory requirement.
"Value Calculation Services" means those Accounting Services consisting of
or incidental to the calculation and communication of Unit Values in accordance
with the terms of this Agreement.
ARTICLE 2
SCOPE OF SERVICES
-----------------
Section 2.1 Scope of Services. Delaware shall provide the Accounting
Services to Lincoln Life with respect to each of the Separate Accounts, all in
accordance with the terms of this Agreement. Without limiting the generality of
the foregoing, Delaware, no later than 6:00 p.m. (New York City time) on each
Business Day, shall in accordance with the terms of this Agreement provide to
Lincoln Life the Value Calculation Services for each of the Accounts. In the
event of any error in the Value Calculation Services, the parties hereto will
follow the procedures set forth in Schedule 2.1, without prejudice to any other
rights described in this Agreement.
2
<PAGE>
ARTICLE 3
LINCOLN LIFE'S SUPPORT OBLIGATIONS
----------------------------------
Section 3.1 Provision of Data. Lincoln Life shall use its best efforts to
provide or cause to be provided to Delaware the data identified in Schedule 3.1
during the periods and in accordance with the procedures identified in such
Schedule, it being understood that Delaware shall not be responsible for any
Calculation Losses or other claims, suits, hearings, actions, damages,
liabilities, fines, penalties, costs, losses or expenses, including reasonable
attorney's fees, which any party may sustain or incur, directly or indirectly,
in each case to the extent caused by or arising from Lincoln Life's failure to
provide such data in accordance with such Schedule 3.1.
Section 3.2 Data to Be Provided by Third Parties. With respect to each of
the mutual funds identified in Schedule 3.2 as an available investment of one or
more of the Separate Accounts and each third party service provider identified
in such Schedule, Lincoln Life shall direct each of the managers of such funds
or such service provider, as the case may be, to provide or cause to be provided
to Delaware the data identified in Schedule 3.2 in accordance with the
procedures and time deadlines identified in such Schedule.
ARTICLE 4
NEW ACCOUNTS; NEW INVESTMENT MANAGERS
-------------------------------------
Section 4.1 Additional Accounts. Lincoln Life may from time to time
designate (i) one or more additional separate accounts to constitute Separate
Accounts for all purposes of this Agreement, or (ii) one or more newly
established sub-accounts of any Separate Account. Such designation shall be:
(a) subject to Delaware's consent, which shall not be unreasonably
withheld; provided, that such consent shall be considered to be
unreasonably withheld if Delaware does not make reasonable
efforts to accept such new separate accounts and sub-accounts,
which efforts shall include, but not be limited to, reasonable
consideration of the expansion of Delaware's infrastructure to
handle such new separate accounts and sub-accounts; and
(b) evidenced by a writing executed by Lincoln Life and Delaware
setting forth the name of such separate account or new sub-
account, the applicable rate under the Fee Schedule that shall
apply to the Accounting Services for such separate account or new
sub-account, the effective date of the designation thereof as a
Separate Account or new sub-account, and any other matters the
parties wish to include.
Notwithstanding clause (b) of the preceding sentence, if Delaware's performance
of the Accounting Services for such additional Separate Accounts or sub-accounts
of such Separate Accounts would, in Delaware's reasonable opinion, result in
higher costs than the costs Delaware incurs for providing the Accounting
Services to the current Accounts, then the affected parties hereto shall
negotiate in good faith an addendum to the Fee Schedule for such additional
3
<PAGE>
Separate Accounts and sub-accounts and Delaware shall not be deemed to have
unreasonably withheld its consent under clause (b) of this Section 5.1 until
such addendum has been agreed to. Except as otherwise specified in such writing,
Delaware shall provide to Lincoln Life with respect to a Separate Account or new
sub-account, the same Accounting Services as are specified in the Accounting
Schedule with respect to the other Separate. Accounts or sub-account of a
Separate Account, as the case may be.
Section 4.2 New Investment Managers. If new investment managers are added
to provide investment advisory services to any of the Accounts, and Delaware's
performance of the Accounting Services is, as a result thereof, significantly
more costly to Delaware, the affected parties shall negotiate in good faith an
addendum to the Fee Schedule for such Accounts.
ARTICLE 5
FEES
----
Section 5.1 Accrual of Fees. Lincoln Life shall pay fees for the
Accounting Services for each of the Separate Accounts at the respective rates
per annum determined in accordance with the Fee Schedule. Fees accrued pursuant
to this Section 5.1 shall be payable in arrears on a monthly basis.
Section 5.2 Payment of Fees by Lincoln Life. Delaware shall submit to
Lincoln Life an invoice for each month for all of the fees payable pursuant to
Section 5.1 with respect to each of the Separate Accounts, which invoice shall
be itemized to show the portion of such fees allocable to each of the Separate
Accounts in accordance with the Fee Schedule. Subject to the terms of this
Agreement, invoices for such fees shall be payable within 30 days of receipt.
ARTICLE 6
STANDARD OF CARE, INDEMNIFICATION
---------------------------------
Section 6.1 Standard of Care. Delaware shall provide the Accounting
Services with a level of care equal to or greater than the level of care at
which it performs similar functions for mutual funds that are sponsored or
managed by any Delaware Affiliate, and in any event, Delaware shall always
exercise reasonable care in performing the Accounting Services.
Section 6.2 Indemnification
(a) Indemnification by Lincoln Life. Lincoln Life shall indemnify, defend
and hold harmless Delaware and any Delaware Affiliate, and the directors,
officers and employees of the foregoing (each individually, a "Delaware
Indemnified Party"), against any and all claims, suits, hearings, actions,
damages, liabilities, fines, penalties, costs, losses or expenses, including
reasonable attorney's fees, which any Delaware Indemnified Party may sustain or
incur, directly or indirectly, in each case to the extent caused by or arising
from (i) the negligence, recklessness or intentional misconduct of Lincoln Life
or any Lincoln Affiliate, or any director, officer or employee thereof, in the
performance of this Agreement; or (ii) the failure of Lincoln Life to comply
with the terms of this Agreement.
4
<PAGE>
(b) Indemnification by Delaware. Subject to Section 3.1, Delaware shall
indemnify, defend and hold harmless Lincoln Life, the Lincoln Affiliates and the
directors, officers and employees of the foregoing (each individually, a
"Lincoln Indemnified Party") against any and all claims, suits, hearings,
actions, damages, liabilities, fines, penalties, costs, losses (including but
not limited to (a) Calculation Losses reimbursed by Lincoln Life and (b) any
market fluctuation losses incurred by Lincoln Life in effecting such
reimbursement) or expenses, including reasonable attorney's fees, which any
Lincoln Indemnified Party may sustain or incur, directly or indirectly, in each
case to the extent caused by or arising from (i) the negligence, recklessness or
intentional misconduct of Delaware or any Delaware Affiliate, or any director,
officer or employee thereof, in the performance of this Agreement; or (ii) the
failure of Delaware to comply with the terms of this Agreement.
(c) Procedures. Subject to the provisions of Section 6.2(d), promptly
after receipt by a Delaware Indemnified Party or a Lincoln Indemnified Party
(each, an "Indemnified Party") of notice of the commencement of any action,
proceeding, investigation or claim by any Contractowner or other third party (a
"Proceeding"), the Indemnified Party shall, if a claim in respect thereof is to
be made pursuant to this Section 6.2 against another party to this Agreement
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof, but the failure so to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability under this Section 6.2,
except to the extent that such failure to notify actually prejudices the
Indemnifying Party. In case any such Proceeding shall be brought against an
Indemnified Party, the Indemnifying Party shall be entitled to participate in
and to assume the defense thereof, with counsel satisfactory to the Indemnified
Party, and after notice from the Indemnifying Party to the Indemnified Party of
the Indemnifying Party's election to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if, in the reasonable judgment of the Indemnified Party, it is
advisable for the Indemnified Party to be represented by separate counsel other
than counsel for the Indemnifying Party, the Indemnified Party shall have the
right to employ a single counsel to represent the Indemnified Party, in which
event the reasonable fees and expenses of such separate single counsel shall be
borne by the Indemnifying Party, and (ii) in the case of any Proceeding brought
by any governmental authority, the Indemnifying Party shall have the right to
participate in, but not to assume the defense of, such Proceeding. The
Indemnifying Party shall not be obligated under any settlement agreement
relating to any Proceeding under this Section 6.2 to which it has not consented
in writing, which consent shall not be unreasonably withheld.
(d) Preserving Rights with Respect to Calculation Losses. Notwithstanding
Section 6.2(c), Lincoln Life may in its sole discretion elect to reimburse a
Contractowner, Third Party Administrator or Separate Account for Calculation
Losses out of Lincoln Life's own funds and such reimbursement shall have no
effect on the respective indemnification obligations of the parties pursuant to
Section 6.2(a) and (b).
(e) Overpayments. The parties agree that there may be circumstances in
which it would not be commercially reasonable for Lincoln Life to seek
reimbursement from one or more
5
<PAGE>
Contractowners of overpayments made them, taking into account relevant factors
such as industry practice; the amount of such overpayments; the number of
Contractowners overpaid; the cost of seeking reimbursement; and the implications
for customer relations of seeking reimbursement. In the event of any overpayment
to a Contractowner for which Lincoln Life intends to seek indemnification from
Delaware pursuant to Section 6.2(b) without seeking reimbursement from the
Contractowner, the parties shall negotiate in good faith as to what effect, if
any, the determination not to seek such reimbursement should have under the
circumstances on the rights of Lincoln Life to indemnification for the amounts
overpaid.
ARTICLE 7
INSURANCE COVERAGE
------------------
Section 7.1 Insurance. Delaware and Holdings shall maintain insurance
coverage at a level at least equal to the insurance coverage held by each of
them at the time this Agreement becomes effective.
ARTICLE 8
FORCE MAJEURE AND DISASTER RECOVERY PLAN
----------------------------------------
Section 8.1 Force Majeure; Disaster Recovery Plan. No party shall be
liable to any other party for any damages caused by delays beyond its reasonable
control, including, without limitation, those delays occasioned by fire, strike,
labor dispute, acts of the other party, acts of any common carrier, pricing
service, corporate action service, or telephone network, acts of the power
supply company or its networks, restrictions by civil or military authorities,
acts of nature, or unforeseen transportation failures. In the event of any such
delay, the hindered party shall promptly notify the other parties and, upon the
giving of such notice, the period of time for performance of obligations
hereunder affected by such delays will be extended by the same number of days as
the delay. Notwithstanding the foregoing, Delaware shall maintain and implement
a customary disaster recovery plan and such plan shall be reasonably acceptable
to Lincoln Life. This Article 8 shall not excuse any failure to perform, or
extend the time for performance of, any obligation of Delaware under this
Agreement to the extent that such failure or delay would have been avoided by
compliance with such disaster recovery plan, or by the use of reasonable,
readily available alternatives.
ARTICLE 9
EFFECTIVENESS
-------------
Section 9.1 Effectiveness.
This Agreement shall become effective upon the date first set forth
above ("Effective Date").
6
<PAGE>
ARTICLE 10
TERM AND TERMINATION
--------------------
Section 10.1 Term. The initial term of this Agreement shall end on the
fourth anniversary of the Effective Date and this Agreement shall be
automatically renewed for subsequent Renewal Terms thereafter unless sooner
terminated under Section 10.2.
Section 10.2 Termination. Subject to the procedures set forth in Article
11 and to Section 10.3, this Agreement may be terminated as follows:
(a) by Lincoln Life or Delaware in each case upon notice to each of
the other parties at least 180 days prior to the expiration of
the initial term or any Renewal Term, with such termination to
become effective upon such expiration; and
(b) by Lincoln Life or Delaware upon 30 days notice to each of the
other parties, for any material breach of this Agreement unless
such breach is cured within such notice period.
For the purpose of this Section 10.2(b) only, a "material breach" shall include,
but not be limited to, the failure by Delaware to provide Accounting Services
hereunder of a quality reasonably determined by Lincoln Life to be consistent
with a superior level of service in the industry.
ARTICLE 11
PROCEDURES UPON TERMINATION
---------------------------
Section 11.1 Obligations Upon Termination. Upon termination of this
Agreement by any party under Article 10, each party shall be obligated to
cooperate with each other party to provide for the transfer of all
responsibilities, duties and obligations of this Agreement as may be necessary
to ensure the orderly, undisrupted business of each party. Such cooperation
shall include, but not be limited to, returning all papers, documents, materials
or equipment to the party owning such materials. In the event that this
Agreement is terminated by Lincoln Life under Section 10.2(b), Lincoln Life
shall have the right to require Delaware to continue performing all or any part
of its responsibilities, duties and obligations under this Agreement until the
earlier of (a) 210 days following the date notice of such termination was
given, or (b) the date that is 30 days after notice from Lincoln Life that
Delaware shall cease such performance. For this purpose, (a) the terms of this
Agreement (including without limitation the obligation of Lincoln Life to pay
Delaware's fees under Article 5, and the obligation of Delaware to continue to
exercise the standard of care required under Section 6.1 shall remain in effect
with respect to the period in which Delaware is obligated to continue such
performance, and (b) if any portion of Delaware's responsibilities, duties and
obligations during such period are not so extended as required by Lincoln Life,
the parties shall mutually agree in good faith on a reduction of fees which
reflects the termination of such responsibilities, duties and obligations.
7
<PAGE>
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
------------------------------
Each party represents and warrants to the other parties as follows:
Section 12.1 Organization and Authority. Such party is duly organized,
validly existing and in good standing as a corporation under the laws of the
state indicated on the first page of this Agreement, with the requisite
authority and power, in conformity with applicable laws, rules and regulations,
to execute and deliver this Agreement and to perform its obligations hereunder.
Such party has taken all necessary action to authorize such execution, delivery
and performance.
Section 12.2 No Conflict with Laws. The execution, delivery and
performance of this Agreement by such party do not conflict with or violate any
laws applicable to such party, any provision of its constituent documents, any
order or judgment of any court or governmental agency applicable to it or any of
its assets or any contractual restriction binding on it or its assets.
Section 12.3 Obligation. This Agreement constitutes a legal, valid and
binding obligation of such party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to the enforcement of creditors' rights generally and
subject to principles of equity.
ARTICLE 13
PARENT GUARANTY
---------------
Section 13.1 Parent Guaranty. Holdings hereby unconditionally guarantees
the full and punctual performance of the covenants, agreements and obligations
of Delaware under this Agreement, including but not limited to the payment when
due of all amounts that may from time to time be payable by Delaware pursuant to
Section 6.2(b) (the "Guaranteed Obligations").
Section 13.2 Guaranty Unconditional. The obligations of Holdings hereunder
shall be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released or discharged by:
(a) any extension, settlement, compromise, waiver or release in
respect of any obligation of Delaware under this Agreement;
(b) any modification or amendment of or supplement to this Agreement;
(c) any change in the corporate existence, structure or ownership of
Delaware, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Delaware or its assets; or
(d) any other act or omission to act or delay of any kind by Delaware,
Lincoln Life, any Fund or any other person which would, but for the
provisions of
8
<PAGE>
this paragraph (d), constitute a legal or equitable discharge of Holding's
obligations hereunder;
provided, however, that in the event of any extension, settlement, compromise,
waiver or release of any obligation of Delaware under this Agreement, or any
modification or amendment of or supplement to this Agreement, the guaranty
provided for in this Article 13 shall apply to the obligations of Delaware as so
extended, settled, compromised, waived, released, modified, amended or
supplemented.
Section 13.3 Discharge Only Upon Payment or Performance in Full;
Reinstatement in Certain Circumstances. Holding's obligations hereunder shall
remain in full force and effect until the Guaranteed Obligations shall have been
paid or performed in full. If at any time any payment of Guaranteed Obligations
by Delaware under this Agreement is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of Delaware or
otherwise, Holding's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
Section 13.4 Waiver by Holdings. Holdings irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any person
against Delaware or any other person.
Section 13.5 Subrogation. Upon making any payment with respect to
Delaware hereunder, Holdings shall be subrogated to the rights of the payee
against Delaware with respect to such payment; provided that Holdings shall not
enforce payment by way of subrogation until, all Guaranteed Obligations have
been paid or performed in full.
ARTICLE 14
DISPUTE RESOLUTION
------------------
Before commencing litigation of any dispute arising out of or relating to
this Agreement, the parties shall attempt in good faith to resolve the dispute
by the following means:
Section 14.1 Negotiation. The parties shall in good faith attempt to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy. A
party may give the other parties written notice of any dispute not resolved in
the normal course of business. Within 20 days after delivery of that notice,
executives of the affected parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the matter has
not been resolved within 60 days of the disputing party's notice, or if the
parties fail to meet within 20 days, either party may initiate mediation of the
controversy or claim as provided in Section 14.2. If a negotiator intends to be
accompanied at a meeting by an attorney, the other negotiator shall be given at
least 3 Business Days' notice of that intention and may also be accompanied by
an attorney.
Section 14.2 Mediation. If the dispute has not been resolved by
negotiation as provided in Section 14.1, the parties shall endeavor for an
additional period of 60 days to settle the dispute
9
<PAGE>
by mediation under the then-current Center for Public Resources (CPR) Model
Procedure for Mediation of Business Disputes. The neutral third party will be
selected from the CPR Panel of Neutrals. If the parties encounter difficulty
in agreeing on a neutral, they will seek the assistance of CPR in the selection
process.
Section 14.3 Confidentiality. All activities under this Article 14 are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
ARTICLE 15
MISCELLANEOUS
-------------
Section 15.1 Amendment. This Agreement, including any Exhibits or
Schedules, may be amended, modified or supplemented only in writing signed by
Delaware, Holdings, and Lincoln Life. This Agreement shall be binding upon all
successors, assigns or transferees of the parties to this Agreement.
Section 15.2 Assignment. This Agreement and the rights, duties and
obligations of the parties hereto shall not be assignable by any party, except
assignment to successors in the case of mergers, sales of all or substantially
all of the assets of such party or transfer of ownership by reorganization or
similar restructuring to a successor in interest to the business of such party,
without the prior written consent of the other parties, and any purported
assignment in the absence of such consent shall be void.
Section 15.3 Notices. All notices given or submitted pursuant to this
Agreement shall be made in writing and shall be deemed given when (a) deposited
with the United States Postal Service, postage prepaid, registered or certified
mail, return receipt requested; (b) deposited with a nationally recognized
overnight mail delivery service; (c) sent by facsimile with electronic
confirmation of delivery or with a copy sent by mail as described in (a) or (b)
above; or (d) delivered in person; all to the last address of record of each
party being notified.
Any notice under this Agreement to Lincoln Life shall be given to:
ATTN: Troy D. Panning
2nd Vice President and Chief Financial Officer
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Phone: (315) 428-8411
Facsimile: (315) 428-8419
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With a copy to:
Robert O. Sheppard, Esq.
Corporate Counsel
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Phone: (315) 428-8420
Facsimile: (315) 428-8419
Any notice under this Agreement to Delaware or Holdings shall be given to:
ATTN: Michael P. Bishof
Senior Vice President and Treasurer
Delaware Management Company
1818 Market Street; 13th Floor
Philadelphia, PA 19103
Phone: (215) 255-2852
Facsimile: (215) 255-1645
With a copy to:
Richard J. Flannery
Senior Vice President, Corporate & International Affairs
Delaware Management Company
2005 Market Street
Philadelphia, PA 19103
Phone: (215) 255-1244
Facsimile: (215) 255-2822
Any party may, by means of written notice in compliance with this Section
15.3, change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
Section 15.4 Severability. If any provision of this Agreement, as applied
to any party or to any circumstances, shall be found by a court of competent
jurisdiction to be void, invalid or unenforceable, the same shall in no way
affect any other provision of this Agreement, the application of any such
provision in any other circumstances, or the validity or enforceability of this
Agreement; provided, however, that nothing in this Section 15.4 shall adversely
affect the fundamental benefits received by the parties under this Agreement.
Section 15.5 Waiver. A waiver by any party of any of the terms and
conditions of this Agreement in any one instance shall not be deemed or
construed to be waiver of any such term or condition for the future, or of any
subsequent breach thereof, nor shall it be deemed a waiver of performance of any
other obligation hereunder. No waiver of any provision of this Agreement
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<PAGE>
shall be valid unless agreed to in writing by the party or parties against whom
such waiver is sought to be enforced.
Section 15.6 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter of this
Agreement and supersedes all prior and collateral agreements, understandings,
statements and negotiations of the parties.
Section 15.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of law provisions thereof.
Section 15.8 Section and Paragraph Headings. The titles of the sections
and paragraphs of this Agreement are for convenience only and shall not in any
way affect the interpretation of any provision or condition of this Agreement.
Section 15.9 Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute the whole of the Agreement as between
the parties.
[The remainder of this page is left blank intentionally.]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
LINCOLN LIFE:
LINCOLN LIFE & ANNUITY COMPANY OF NEW
YORK
By: __________________________
Philip L. Holstein
Title: President and Treasurer
Date: ________________________
HOLDINGS:
DELAWARE MANAGEMENT HOLDINGS, INC.
By: __________________________
Title:________________________
Date: ________________________
DELAWARE:
DELAWARE SERVICE COMPANY, INC.
By: __________________________
Title:________________________
Date: ________________________
13
<PAGE>
SCHEDULE 1.1 (a)
----------------
ACCOUNTING SCHEDULE
1
<PAGE>
Exhibit 8b
FUND PARTICIPATION AGREEMENT
----------------------------
THIS AGREEMENT, effective this ___th day of _________, 1998 among LINCOLN
LIFE & ANNUITY COMPANY OF NEW YORK ("LNY") a life insurance company organized
under the laws of the State of New York, on its own behalf and on behalf of
LINCOLN LIFE & ANNUITY VARIABLE ANNUITY ACCOUNT H OF LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK (the "Account"), a separate account established by LNY in
accordance with the laws of the State of New York, and AMERICAN VARIABLE
INSURANCE SERIES (the "Series"), an open-end management investment company
organized under the laws of the State of Massachusetts.
WITNESSETH:
WHEREAS, the Account has been established by LNY pursuant to the New York
Insurance Law in connection with certain variable annuity contracts
("Contracts") proposed to be issued to the public by LNY; and
WHEREAS, the Account has been registered as a unit investment trust under
the Investment Company Act of 1940; and
WHEREAS, the income, gains and losses, whether or not realized, from assets
allocated to the Account are, in accordance with the applicable Contracts, to be
credited to or charged against the Account without regard to other income, gains
or losses of LNY; and
WHEREAS, the Account is subdivided into various subaccounts ("Subaccounts")
under which income, gains and losses, whether or not realized, from assets
allocated to each such Subaccount are, in accordance with the applicable
Contracts, to be credited to or charged against such Subaccounts without regard
to other income, gains, or losses of other Subaccounts or of LNY; and
WHEREAS, the Series is divided into various funds ("Funds"), each Fund
being subject to certain fundamental investment policies and restrictions which
may not be changed without a majority vote of the shareowners of such Fund; and
WHEREAS, certain Funds will serve as the underlying investment medium for
certain Subaccounts; and
WHEREAS, American Funds Distributors, Inc., the principal underwriter for
the Contracts to be funded by the Account, is a broker-dealer registered as such
under the Securities Exchange Act of 1934;
<PAGE>
NOW THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
LNY, the Account and the Series, hereby agree as follows:
1. The Contracts funded through the Account will provide for the
allocation of net amounts among certain Subaccounts for investment in such
shares of the Funds as may be offered from time to time in the prospectus of the
Contracts. The selection of the particular Subaccount is to be made by the
contract owner and such selection may be changed in accordance with the terms of
the Contracts.
2. Fund shares to be made available to certain Subaccounts shall be sold
by the respective Funds and purchased by LNY for the corresponding Subaccount
at the net asset value (without the imposition of a sales load) next computed
after receipt of each order, as established in accordance with the provisions of
the then current prospectus of the Series. Shares of particular Funds shall be
ordered in such quantities and at such times as determined by LNY to be
necessary to meet the requirements of the Contracts. Orders or payments for
shares purchased will be sent promptly to the Series and will be made in the
manner established from time to time by the Series.
The Series reserves the right to delay transfer of its shares until the
payment check has cleared. The Series reserves the right to suspend sales if the
Board of Trustees of the Series deems it appropriate and in the best interests
of the Series or in response to the order of an appropriate regulatory
authority.
3. Transfer of the Series' shares will be by book entry only. No stock
certificates will be issued to the Account. Shares ordered from a particular
Fund will be recorded in an appropriate title for the corresponding Subaccount
by LNY.
4. The Series shall furnish notice promptly to LNY of any dividend or
distribution payable on any shares underlying Subaccounts. All of such dividends
and distributions as are payable on shares of a Fund recorded in the title for
the corresponding Subaccount shall be automatically reinvested in additional
shares of that Fund. The Series shall notify LNY of the number of shares so
issued. LNY will provide the Series a list of contract owners upon written
notice from the Series' Board.
5. The Series shall pay all expenses incidental to its performance under
this Agreement. The Series shall see to it that all of its shares are registered
and authorized for issue in accordance with applicable federal and state laws
prior to their purchase for the Subaccount. The Series shall bear the expenses
for the cost of registration of its shares, preparation of its prospectuses,
proxy materials and reports, the printing and distribution of such items to each
contract owner who has allocated net amounts to any Subaccount, the preparation
of all statements and notices required by any federal or state law, or taxes on
the issue or transfer of the Series' shares subject to this Agreement.
<PAGE>
6. LNY shall make no representations concerning the Series' shares
except those contained in the then current prospectus of the Series and in
printed information subsequently issued on behalf of the Series as supplemental
to such prospectus.
7. Shares of the Series may be offered to separate accounts of various
insurance companies in addition to LNY. The parties to this Agreement
recognize that, due to differences in tax treatment or other considerations, the
interests of various Contract (or policy) owners participating in one or more
Funds might, at some time, be in conflict.
Each party shall report to the other party any potential or existing
conflict of which it becomes aware. The Board of Trustees of the Series shall
promptly notify LNY of the existence of an irreconcilable material conflict
and its implications. If such a conflict exists, LNY will, at its own expense,
take whatever action is deemed necessary to remedy such conflict; in any case,
contract owners will not be required to bear such expenses.
8. LNY shall be responsible for assuring that the Account calculates
pass-through voting privileges of contract owners in a manner consistent with
the method of calculating pass-through voting privileges set forth in the
current Contract prospectuses.
9. The Series agrees to comply with the diversification requirements of
IRC 817(h) and any regulations therefor.
10. This Agreement shall terminate:
a. at the option of LNY or of the Series upon six months'
advance written notice to the other;
b. at the option of LNY upon institution of formal
proceedings against the Series by the Securities and
Exchange Commission;
c. upon requisite vote of the contract owners having an
interest in a particular Subaccount to substitute the shares
of another investment company for the corresponding Series
shares in accordance with the terms of the Contracts for
which those Series shares had been selected to serve as the
underlying investment medium. LNY will give 30 days' prior
written notice to the Series for the date of any proposed
vote to replace Series shares; and
d. in the event the Series' shares are not registered, issued
or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as an
underlying investment for the Contracts issued or to be
issued by LNY; in such event prompt notice shall be given
by LNY or the Series to the other.
11. If this Agreement terminates, any provision of this Agreement
necessary to the orderly windup of business under it will remain in effect as to
that business, after termination.
<PAGE>
12. The obligations of the Series under this Agreement are not binding
upon any of the Trustees, officers, employees or shareholders of the Series
individually, but bind only the Series' assets. When seeking satisfaction for
any liability of the Series in respect of this Agreement, LLANY and the Account
agree not to seek recourse against said Trustees, officers, employees or
shareholders, or any of them, or any of their personal assets for such
satisfaction.
13. This Agreement shall be construed in accordance with the laws of the
State of California.
14. The Series shall take all necessary and appropriate actions to ensure
that the plan of distribution adopted by the Class 2 shares of the Funds
pursuant to rule 12b-1 under the Investment Company Act of 1940 is administered
and operated in accordance with all applicable rules and regulations promulgated
by the Commission which are either currently in effect or which may be adopted
from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the date first above written.
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK for itself and on behalf of Lincoln Life
& Annuity Variable Annuity Account H
Attest:
By:
- -------------------------- ----------------------------------------------
AMERICAN VARIABLE INSURANCE SERIES
Attest:
By:
- -------------------------- ----------------------------------------------
<PAGE>
SCHEDULE A
----------
Lincoln Life & Annuity
Variable Annuity Account H
<PAGE>
Exhibit 8c
AMENDED AND RESTATED
SERVICE AGREEMENT
for
services rendered to
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
by
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
This Administrative Services Agreement ("Agreement") is made effective as of
12:01 a.m. Eastern Standard Time, on the lst day of January, 1998 ("Effective
Date") by and between The Lincoln National Life Insurance Company, an Indiana
corporation with offices at 1300 South Clinton Street, Fort Wayne, Indiana
46802 ("Lincoln") and Lincoln Life & Annuity Company of New York, a New York
corporation with offices at 120 Madison Street, Suite 1700, Syracuse, New York,
13202 ("LLANY").
WHEREAS, Lincoln has extensive experience in the operation of the life insurance
and annuity business; and
WHEREAS, Lincoln and LLANY are currently parties to other administrative
services agreements; and
WHEREAS, Lincoln and LLANY desire to terminate those other services agreements
and have this Agreement supersede them; and
WHEREAS, pursuant to an Administrative Services Agreement between Connecticut
General Life Insurance Company ("Seller") and LLANY that is being executed
concurrently with this Agreement (the "Administrative Services Agreement"),
LLANY has agreed to provide all
1
<PAGE>
administrative services with respect to the Coinsured Contracts as that term is
defined in the Administrative Services Agreement ("CG Services"); and
WHEREAS, LLANY has previously underwritten and sold and desires to underwrite
and sell in the future insurance policies and annuity contracts including the
types of policies and contracts for which LLANY is providing CG Services
(the "LLANY Business"); and
WHEREAS, LLANY desires Lincoln to perform LLANY's CG Services and to provide
services to LLANY with respect to the LLANY Business (collectively, the
"services") and desires further to make use in its day-to-day operations of
certain property, equipment and facilities (collectively, the "facilities") of
Lincoln as LLANY may request with respect to the services; and
WHEREAS, Lincoln and LLANY contemplate that such an agreement for services will
achieve certain operating economies and improve services to the benefit of both
of the companies and with respect to the CG Services to Seller's policyholders,
and with respect to the LLANY Business to LLANY's policyholders; and
WHEREAS, Lincoln and LLANY wish to assure that all charges for services and the
use of facilities incurred hereunder are reasonable and in accordance with all
applicable legal requirements, including New York Insurance Department
Regulation No. 33, and to the extent practicable reflect actual costs and are
arrived at in a fair and equitable manner, and that estimated costs, whenever
used, are adjusted periodically, to bring them into alignment with actual costs;
and
2
<PAGE>
WHEREAS, Lincoln and LLANY wish to identify the services to be rendered to LLANY
by Lincoln and the facilities to be used by LLANY, and to provide a method of
fixing bases for determining the charges to be made to LLANY;
NOW, THEREFORE, in consideration of the premises and of the mutual promises set
forth herein, and intending to be legally bound hereby, Lincoln and LLANY agree
as follows:
1. PERFORMANCE OF SERVICES AND USE OF FACILITIES. Subject to the terms,
conditions and limitations of this Agreement, Lincoln agrees to the extent
requested by LLANY to perform diligently and in a professional manner such
services as set forth in this Agreement as LLANY determines to be
reasonably necessary in the conduct of its insurance and annuity
operations.
Subject to the terms, conditions and limitations of this Agreement, Lincoln
agrees to the extent requested by LLANY to make available to LLANY such of
its facilities as LLANY may determine to be reasonably necessary in the
conduct of its insurance and annuity operations, including data processing
equipment, business property (whether owned or leased) and communications
equipment.
Lincoln agrees at all times to maintain sufficient facilities and trained
personnel of the kind necessary to perform this Agreement.
3
<PAGE>
(a) CAPACITY OF PERSONNEL AND STATUS OF FACILITIES. Whenever Lincoln utilizes
its personnel to perform services for LLANY pursuant to this Agreement,
such personnel shall at all times remain employees of Lincoln subject
solely to its direction and control, and Lincoln shall alone retain full
liability to such employees for their welfare, salaries, fringe benefits,
legally required employer contributions and tax obligations.
No facility of Lincoln used in performing services for or subject to use by
LLANY shall be deemed to be transferred, assigned, conveyed or leased by
performance or use pursuant to this Agreement.
(b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any services
hereunder which require the exercise of judgment by Lincoln, Lincoln shall
perform any such service in accordance with any standards and guidelines
LLANY develops and communicates to Lincoln. In performing any services
hereunder, Lincoln shall at all times act in a manner reasonably calculated
to be in or not opposed to the best interests of LLANY.
(c) CONTROL. The performance of services by Lincoln for LLANY pursuant to this
Agreement shall in no way impair the absolute control of the business and
operations of Lincoln or LLANY by their respective Boards of Directors.
Lincoln shall act hereunder so as to assure the separate operating identity
of LLANY.
4
<PAGE>
2. SERVICES. The performance of Lincoln under this Agreement with respect to
the business and operation of LLANY shall at all times be subject to the
direction and control of the Board of Directors of LLANY. In providing
services with respect to this Agreement, Lincoln agrees that any and all
personal contact or communication, both oral and written, with LLANY's or
Seller's policyholders and beneficiaries will be done in the name of and on
behalf of LLANY or Seller, as the case may be. No mention of Lincoln will
be made in any such personal contact or communication with LLANY's or
Seller's policyholders and beneficiaries. Lincoln agrees to use LLANY's
letterhead for all written communication with LLANY's policyholders and
beneficiaries. Lincoln further agrees to use LLANY's letterhead for all
written communication with Seller's policyholders and beneficiaries and
such communication will (i) show the name, address and telephone number of
Seller, (ii) disclose in the letterhead of such correspondence that LLANY
is acting as the administrative agent of Seller in connection with the
Coinsured Contracts, as, that term is defined in the Administrative
Services Agreement, and (iii) confirm that Seller remains as their insurer
and is responsible for the payment of all benefits under the Coinsured
Contracts. Lincoln further agrees that if any of its employees who have
direct contact with LLANY's or Seller's policyholders and beneficiaries
perform such services from a location outside the State of New York-,
Lincoln will establish and maintain a toll-free 800 telephone number for
use by LLANY's or Seller's policyholders and beneficiaries.
5
<PAGE>
Subject to the foregoing and to the terms, conditions and limitations of
this Agreement, Lincoln shall perform on LLANY's behalf the CG Services and
in particular shall perform on LLANY's behalf, all of LLANY's obligations
and duties to Seller as those duties and obligations are specified in the
Administrative Services Agreement.
Subject to the foregoing and to the terms, conditions and limitations of
this Agreement, Lincoln shall also provide to LLANY, at LLANY's request,
insurance related services typically performed by a life insurance company,
including the services set forth below with respect to the LLANY Business.
(a) ACCOUNTING, DATA PROCESSING, TAX AND AUDITING. Under the general
supervision of the Board of Directors and management of LLANY, and provided
that (i) the records and transactions are reviewed by LLANY, (ii) the final
product is verified by LLANY and (iii) Lincoln shall cause LLANY's Chief
Administrative Officer or his designee to be familiar with all of the
details of the Services provided, including accounting and adjusting
entries, Lincoln shall provide accounting services including but not
limited to the following: (x) preparation of the financial statements and
reports, including annual statements, on both statutory and GAAP bases, and
tax returns, (y) maintenance of the related financial records, and (z)
processing financial transactions of LLANY. Lincoln shall also provide such
assistance as may be required with respect to tax and auditing services.
Such auditing services shall include not only review of financial records
but may also include review of specific functions and activities in order
to ensure compliance with LLANY's established policies. This auditing
provision shall
6
<PAGE>
not apply to LLANY's audit of Lincoln's services pursuant to this
Agreement.
(b) FUNCTIONAL SUPPORT SERVICES. Lincoln, when requested by LLANY, shall
provide functional support services including but not limited to: (i)
actuarial services, including rate and profit share analysis, product
research and development, counseling on reserving requirements, work
required for or in support of rate and/or form submissions, actuarial
certifications and advice with respect to reinsurance, (ii) services
associated with the establishment, maintenance, registration with
appropriate government agencies, and administration of separate accounts,
including calculation of the net asset value of units of the separate
accounts, (iii) services associated with the generation and mailing of Form
1099, (iv) services in support of the ERISA, 403(b) and 401 (k) plans, (v)
services in connection with the management of bank accounts, (vi)
telecommunications services and electronic data processing services,
facilities and integration, including software programming and
documentation and hardware utilization, (vii) legal services, including
representation of LLANY in the prosecution or defense of actions and in the
negotiation and preparation of contracts and other documents, product
development and drafting and filing of policies and forms, governmental
relations and advising on regulatory compliance and rendering opinions on
various legal matters, (viii) purchasing, (viv) printing, forms management,
distribution, mailings and bulk handling, (x) employee relations services,
including payroll processing, employee benefit plan design and
administration, compensation design and administration, and recruiting of
personnel other than agents, (xi) reinsurance administration services, and
(xii) other corporate services including but not limited to escheat
processing, property and casualty insurance
7
<PAGE>
evaluation and procurement, office design services and lease negotiation.
(c) POLICYHOLDER SERVICE. Lincoln, when requested by LLANY, shall provide
policyholder services including but not limited to activities involving
personal contact or communication with a policyholder or beneficiary,
activities relating to policy loan applications and payments, surrender
requests including computation of benefits payable, policy conversions,
beneficiary changes, policy changes, requests for general information,
preparation and mailing of disbursements, preparation and mailing of
periodic reports and statements, dividend computations, premium payments,
policy lapses, expires, nonforfeitures, reinstatements, consumer complaints
and other related policyholder services.
In addition, when requested by LLANY, Lincoln shall provide advice on
unique or complex policyholder services issues with respect to insurance
and annuity products transacted by LLANY.
(d) COLLECTION SERVICES. With regard to the collection of premiums, deposits
and other remittances from policyholders (including payments of principal
or interest on contract loans) and from any collection facility, including
Intermediaries and other persons or institutions that receive remittances
with respect to LLANY Business, LLANY shall either perform these services
on its own behalf or shall establish a lock-box bank arrangement in its
name for the deposit of amounts collected. If a lock-box arrangement is
used, LLANY may authorize Lincoln to disburse funds from the lock-box
8
<PAGE>
arrangement.
(e) UNDERWRITING AND ISSUE SUPPORT. Lincoln, when requested by LLANY, shall
provide underwriting functions and services including but not limited to
review of applications for policies and policy amendments, MIB review,
medical review, review of rates, advice regarding issuance of policies and
amendments and other related services.
In addition, when requested by LLANY, Lincoln shall provide to LLANY advice
with respect to complex or unique underwriting and risk management issues
and issues concerning issuing insurance and annuity contracts in accordance
with the terms of their respective applications.
With respect to any underwriting services that are provided to LLANY by
Lincoln pursuant to this Agreement, it is understood that: (i) Lincoln
shall provide such services in accordance with the underwriting guidelines
and procedures of LLANY; and (ii) LLANY shall retain all final underwriting
authority.
(f) CLAIMS ASSISTANCE. Lincoln, when requested by LLANY, shall assist LLANY by
processing, examining and investigating claims. In addition, when requested
by LLANY, Lincoln shall provide advice to LLANY concerning LLANY's claims.
It is understood that: (i) Lincoln shall provide such services in
accordance with the claims guidelines and procedures of LLANY; and (ii)
LLANY shall retain final approval authority for all claims. In performing
claims services for LLANY pursuant to this
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<PAGE>
agreement, Lincoln shall obtain and maintain all necessary licenses and
permits required in order to comply with applicable laws and regulations.
(g) PUBLIC RELATIONS, ADVERTISING, SALES AND MARKETING PROMOTIONAL SERVICES.
Lincoln, when requested by LLANY, shall provide marketing assistance and
services, including sales aids, rate guides, sales brochures, solicitation
materials and such other promotional materials, information, assistance and
advice as shall assist the sales, public relations and advertising efforts
of LLANY, as well as services in connection with and in support of broker
and distributor licensing, contracts and compensation. In addition, when
requested by LLANY, Lincoln shall provide to LLANY advice with respect to
issues regarding public relations, advertising, sales and marketing.
3. CHARGES. LLANY agrees to reimburse Lincoln for services and facilities
provided by Lincoln to LLANY pursuant to this Agreement. The charge to
LLANY for such services and facilities shall be at cost and shall include
all direct and directly allocable expenses, reasonably and equitably
determined to be attributable to LLANY by Lincoln, plus a reasonable charge
for direct overhead, the amount of such charge for overhead to be agreed
upon by the parties from time to time.
Subject to New York Insurance Department Regulation 3, the bases for
determining such charges to LLANY shall be those used by Lincoln for
internal cost distribution including, where appropriate, time records
prepared at least annually for this purpose.
10
<PAGE>
Such bases shall be modified and adjusted by mutual agreement where
necessary or appropriate to reflect fairly and equitably the actual
incidence of cost incurred by Lincoln on behalf of LLANY.
Cost analyses will be made at least annually by Lincoln to determine, as
closely as possible, the actual cost of services rendered and facilities
made available to LLANY hereunder. Lincoln shall forward to LLANY the
information developed by these analyses, and such information shall be used
to develop bases for the distribution of expenses which more currently
reflect the actual incidence of cost incurred by Lincoln on behalf of
LLANY.
Lincoln's determination of charges hereunder shall be in accordance with
New York Insurance Department Regulation 33 to the extent applicable and
shall be presented to LLANY, and if LLANY objects to any such
determination, it shall so advise Lincoln within thirty (30) days of
receipt of notice of said determination. Unless the parties can reconcile
any such objection, they shall agree to the selection of a firm of
independent certified public accountants which shall determine the charges
properly allocable to LLANY and shall, within a reasonable time, submit
such determination, together with the basis therefor, in writing to Lincoln
and LLANY, whereupon such determination shall be binding. The expenses of
such a determination by a firm of independent certified public accountants
shall be borne equally by Lincoln and LLANY.
11
<PAGE>
4. PAYMENT. Lincoln shall submit to LLANY within thirty (30) days of the
end of each calendar month a written statement of the amount estimated to
be owed by LLANY for services and the use of facilities pursuant to this
Agreement in that calendar month, and LLANY shall pay to Lincoln within
thirty (30) days following receipt of such written statement the amount set
forth in the statement.
Within thirty (30) days after the end of each calendar quarter, Lincoln
will submit to LLANY a detailed written statement of the charges due from
LLANY to Lincoln in the preceding calendar quarter, including charges not
included in any previous statements, and any balance payable or to be
refunded as shown in such statement shall be paid or refunded within
fifteen (15) days following receipt of such written statement by LLANY.
5. STANDARD OF CARE. The parties shall use that degree of ordinary care and
reasonable diligence in the performance of services hereunder that an
experienced and qualified provider of similar services under a similar
services agreement would use acting in like circumstances and familiar with
such matters and in accordance with such additional standards as may be
adopted by LLANY from time to time and communicated to Lincoln, including
industry standards and applicable laws. Furthermore, the parties agree to
maintain backup systems and contingency plans to assure that work
stoppages, fires, riots, equipment, utility or transmission failures,
shortage or damage, acts of God or other similar occurrences do not
jeopardize the integrity of the data maintained on behalf
12
<PAGE>
of the other party. Each party warrants it will maintain such systems in
conformity with corporate and prudent business standards.
6. ACCOUNTING RECORDS AND DOCUMENTS. Lincoln shall be responsible for
maintaining full and accurate accounts and records of all services rendered
and facilities used pursuant to this Agreement and such additional
information as LLANY may reasonably request for purposes of its internal
bookkeeping and accounting operations. Lincoln shall keep copies of such
accounts and records insofar as they pertain to the computation of charges
hereunder available at its principal offices for audit, inspection and
copying by LLANY and persons authorized by it or any governmental agency
having jurisdiction over LLANY during all reasonable business hours.
With respect to accounting and statistical records prepared by Lincoln by
reason of its performance under this Agreement, such records shall be
delivered to LLANY within thirty (30) days from the end of the month to
which the records pertain.
7. OTHER RECORDS AND DOCUMENTS. All books, records, and files established and
maintained by Lincoln by reason of its performance under this Agreement
which, absent this Agreement, would have been held by LLANY, shall: (i) be
deemed the property of LLANY; (ii) be maintained in accordance with
applicable law and regulation, including, but not limited to, New York
Insurance Department Regulation 152 (11 NYCRR Part 243); and (iii) be
subject to examination at all times by LLANY and persons authorized
13
<PAGE>
by it or any governmental agency having jurisdiction over LLANY.
With respect to original documents which would otherwise be held by LLANY
and which may be obtained by Lincoln in performing under this Agreement,
Lincoln shall deliver such documents to LLANY within thirty (30) days of
their receipt by Lincoln, except where continued custody of such original
documents is necessary to perform hereunder.
8. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed to
grant Lincoln an exclusive right to provide services to LLANY, and LLANY
retains the right to contract with any third party, affiliated or
unaffiliated, for the performance of services or for the use of facilities
as are available to or have been requested by LLANY pursuant to this
Agreement.
9. CONTACT PERSON(S). LLANY and Lincoln each shall appoint one or more
individuals who shall serve as contact person(s) for the purpose of
carrying out this Agreement. Such contact person(s) shall be authorized to
act on behalf of their respective parties as to the matters pertaining to
this Agreement. Effective upon execution of this Agreement, the initial
contact person(s) shall be those set forth in Appendix A. Each party shall
notify the other, in writing, as to the name, address and telephone number
of any replacement for any such designated contact person.
14
<PAGE>
10. TERMINATION. This Agreement shall remain in effect until terminated by
either Lincoln or LLANY upon giving thirty (30) days or more advance
written notice, provided that LLANY shall have the right to elect to
continue to receive data processing services and/or to continue to utilize
data processing facilities and related software for up to one year from the
date of such notice. Upon termination, Lincoln shall promptly deliver to
LLANY all books and records that are, or are deemed by this Agreement to be
the property of LLANY.
Application software and all copies thereof developed by Lincoln for
LLANY's use shall become, and that developed by LLANY and provided to
Lincoln for LLANY's exclusive use shall remain, the property of LLANY in
perpetuity. To the extent allowed by applicable law, LLANY shall have the
same rights as Lincoln in any other software or copies thereof obtained by
Lincoln under license from third party vendors. LLANY may purchase other
software or copies thereof from third party vendors for its exclusive use
on Lincoln's equipment if LLANY so desires. Lincoln agrees that any
software or copies thereof purchased by LLANY and used by Lincoln in
connection with this Agreement shall remain the property of LLANY.
11. SETTLEMENT ON COMPLETE TERMINATION. No later than thirty (30) days after
the effective date of Complete Termination of this Agreement, Lincoln shall
deliver to LLANY a detailed written statement for all charges incurred and
not included in any previous statement to the effective date of
termination. The amount owed or to be
15
<PAGE>
refunded hereunder shall be due and payable within thirty (30) days of
receipt of such statement.
12. ASSIGNMENT. This Agreement and any rights pursuant hereto shall not be
assignable by either party hereto, except as set forth herein or by
operation of law. Except as and to the extent specifically provided in this
Agreement, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto, or their respective
legal successors, any rights, remedies, obligations or liabilities, or to
relieve any person other than the parties hereto, or their respective legal
successors, from any obligations or liabilities that would otherwise be
applicable. The representations, warranties, covenants and agreements
contained in this Agreement shall be binding upon, extend to and inure to
the benefit of the parties hereto, their, and each of their, successors
and assigns respectively.
13. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed in that State without
regard to principles of conflict of laws.
14. ARBITRATION. Any unresolved dispute or difference between the parties
arising out of or relating to this Agreement, or the breach thereof, except
as provided in Section 3, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association and the Expedited Procedures thereof. The award
16
<PAGE>
rendered by the Arbitrator shall be final and binding upon the parties, and
judgment upon the award rendered by the Arbitrator may be entered in any
Court having jurisdiction thereof. The arbitration shall take place in New
York, New York.
15. INDEMNIFICATION. LLANY and Lincoln agree to hold each other harmless and to
indemnify each other against any and all extra-contractual liability and
any related loss, damage, expense, costs, cause of action, demand, penalty,
fine or claim (including cost of litigation or administrative proceeding
and counsel fees) arising out of or related to any of the services provided
hereunder to the extent the same are caused by the act or failure to act of
the indemnifying party.
16. NOTICE. All notices, statements or requests provided for hereunder shall be
deemed to have been duly given when delivered by hand to an officer of the
other party, or when deposited with the U.S. Postal Service, as first class
certified or registered mail, postage prepaid, overnight courier service,
telex or telecopier, addressed:
(a) If to Lincoln, to:
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46802
(b) If to LLANY, to:
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, New York 13202
17
<PAGE>
or to such other persons or places as each party may from time to time
designate by written notice sent as aforesaid.
17. ENTIRE AGREEMENT. This Agreement, together with such amendments as may from
time to time be executed in writing by the parties, constitutes the entire
agreement and understanding between the parties in respect of the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof. For
the avoidance of doubt, all previous administrative services agreements
between LLANY and Lincoln are hereby terminated and superseded in their
entirety by this Agreement.
18. SECTION HEADINGS. Section headings contained herein are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
19. COUNTERPARTS. This Agreement may be executed in separate counterparts, each
of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
18
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate by their respective officers duly authorized to do so, as of the date
and year first above written.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By /s/ Keith J. Ryan
-------------------------------------------
Keith J. Ryan
Vice President and Chief Financial Officer
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By /s/ Philip L. Holstein
-------------------------------------------
Philip L. Holstein
President
19
<PAGE>
APPENDIX A
----------
CONTACT PERSON(S) FOR Lincoln
President
CONTACT PERSON(S) FOR LLANY
President
20
<PAGE>
[LINCOLN LOGO APPEARS HERE]
Lincoln
- -------
Financial Group
Lincoln Life & Annuity
Company of New York
Robert O. Sheppard
Corporate Counsel
October 7, 1999
Lincoln Life & Annuity
Company of New York
120 Madison St., Suite 1700
Exhibit 9 Syracuse, NY 13202-2802
phone 315 428-8420
toll free 888 ABE-1860
fax 315 428-8419
VIA EDGAR [email protected]
- ---------
Securities and Exchange Commission
Division of Investment Management
Office of Insurance Products
450 Fifth Street, N.W.
Washington, DC 20549
Re: Lincoln Life & Annuity Flexible Premium Variable Life Account H
File Nos. 333-38007; 811-08441
Opinion and Consent of Counsel
Ladies and Gentlemen:
I have recently made such examination of law and have examined such records
and documents as I have deemed necessary to render the opinion expressed below.
I am of the opinion that upon acceptance by Lincoln Life & Annuity Flexible
Premium Variable Life Account H (the "Account"), a segregated account of Lincoln
Life & Annuity Company of New York ("LNY"), of contributions from a person
pursuant to an annuity contract issued in accordance with the prospectus
contained in this amended Registration Statement on Form N-4, and upon
compliance with applicable law, such person will have a legally issued interest
in his or her individual account with the Account, and the securities issued
will represent binding obligations of LNY.
I consent to the filing of this Opinion as an exhibit to the Account's
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4.
Very truly yours,
/s/ Robert O. Sheppard
Robert O. Sheppard
ROS/jlk
<PAGE>
Exhibit 10
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Pre-Effective Amendment No. 1 to the Registration Statement
(Form N-4 No. 333-38007) and the related Statement of Additional Information
appearing therein and pertaining to Lincoln Life & Annuity Company Variable
Annuity Account H, and to the use therein of our report dated March 18, 1999,
with respect to the statutory-basis financial statements of Lincoln Life &
Annuity Company of New York.
Fort Wayne, Indiana
October 7, 1999
<PAGE>
Exhibit 13
Lincoln Life & Annuity Account H
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
A. STANDARDIZED PERFORMANCE
The Average Annual Total Return for each period will be determined by
finding the average annual compounded rate of return over each period that would
equate the initial amount invested to the ending redeemable value for that
period, according to the following formula:
n
P * ( 1 + T ) = ERV
Where:
P = a hypothetical initial purchase payment of $1,000
T = average annual total return for the period in question
n = number of years
ERV = redeemable value (as of the end of the period in question) of a
hypothetical $1,000 purchase payment made at the beginning of the
1-year, 5-year, 10-year period in question, or lifetime of subaccount.
The formula assumes that : 1) all recurring fees have been charged to
Contract Owner accounts; 2) all applicable non-recurring charges are deducted at
the end of the period in questions; 3) there will be a complete redemption at
the end of the period in question. The performance figures shown in the table
above relate to the contract form containing the highest level of charges.
<PAGE>
B. NON-STANDARDIZED QUOTATIONS
This schedule present the formulas and calculation employed in producing
the performance quotations set out in the SAI, under the heading, OTHER
NON-STANDARDIZED INVESTMENT RESULTS. Amount and Compound Growth Rate
calculations are shown for all base periods disclosed.
The formula for calculating the current Amount of an originally invested
$10,000 for a particular base period is:
CP = ( X / Y ) * $10,000
where:
CP = Amount at End of Base Period
X = Accumulation Unit Value at End of Base Period
Y = Accumulation Unit Value at Beginning of Base Period
The formula for calculating the Compound Growth Rate for a particular base
period is:
( 1 / N )
GR = ( X / Y ) - 1
where:
GR = Annualized Return
X = Accumulation Unit Value at End of Base Period
Y = Accumulation Unit Value at Beginning of Base Period
N = Number of Years of Fund Performance Being Evaluated
<PAGE>
Separate Account H - Standardized 1 Year Return Example
With EGMDB
One Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
High
Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fund Value 1,269.60 1,333.64 1,192.45 1,164.49 1,113.68 1,026.65 988.72
Surr Charge 60.00 60.00 60.00 60.00 60.00 60.00 60.00
Final Value 1,209.60 1,273.64 1,132.45 1,104.49 1,053.68 966.65 928.72
Annual Return 20.96% 27.36% 13.24% 10.45% 5.37% -3.33% -7.13%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
US Gov't Cash
AAA-Rated Management
Securities
- -------------------------------------------------
<S> <C> <C>
Fund Value 1,064.27 1,034.40
Surr Charge 60.00 60.00
Final Value 1,004.27 974.40
Annual Return 0.43% -2.56%
- -------------------------------------------------
</TABLE>
Calculation of Annual Return
Final Value = 1,000 (31-Dec-98 Unit Value/31-Dec-97 Unit Value) - Surrender
Charge
Annual Return = (Final Value/1,000) - 1
Unit Values
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
High
Date Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-97 1.073230050 1.254520145 1.023856913 1.185976516 1.139399850 1.079698278 1.094937905
31-Dec-98 1.362574086 1.673072162 1.220898099 1.381058055 1.268926797 1.108474569 1.082586273
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
US Gov't Cash
AAA-Rated Management
Securities
- -------------------------------------------------
<S> <C> <C>
31-Dec-97 1.065778203 1.023456910
31-Dec-98 1.134272567 1.058664780
- -------------------------------------------------
</TABLE>
Without EGMDB
One Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
High
Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fund Value 1,271.50 1.335.64 1,194.24 1.166.24 1,115.35 1,028.19 990.20
Surr Charge 60.00 60.00 60.00 60.00 60.00 60.00 60.00
Final Value 1,211.50 1,275.64 1,134.24 1,106.24 1,055.35 968.19 930.20
Annual Return 21.15% 27.56% 13.42% 10.62% 5.54% -3.18% -6.98%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
US Gov't Cash
AAA-Rated Management
Securities
- -------------------------------------------------
<S> <C> <C>
Fund Value 1,065.86 1,035.95
Surr Charge 60.00 60.00
Final Value 1,005.86 975.95
Annual Return 0.59% -2.40%
- -------------------------------------------------
</TABLE>
Calculation of Annual Return
Final Value = 1,000 (31-Dec-98 Unit Value/31-Dec-97 Unit Value) - Surrender
Charge
Annual Return = Final Value/1,000 - 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
High
Date Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-97 1.075085687 1.255793394 1.024897513 1.187163460 1.140533901 1.080792688 1.096022236
31-Dec-98 1.366976385 1.677282264 1.223971568 1.384513945 1.272095151 1.111263292 1.085284866
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
US Gov't Cash
AAA-Rated Management
Securities
- -------------------------------------------------
<S> <C> <C>
31-Dec-97 1.066851467 1.024484643
31-Dec-98 1.137118483 1.061318287
- -------------------------------------------------
</TABLE>
<PAGE>
Separate Account H - Standardized 5 Year Return Examples
With EGMDB
Five Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
High
Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
<S> <C> <C> <C> <C> <C> <C> <C>
Fund Value NA 2,467.81 1,644.34 2,212.45 1,879.35 NA 1,340.35
Surr Charge 20.00 20.00 20.00 20.00 20.00 20.00 20.00
Final Value NA 2,447.81 1,624.34 2,192.45 1,859.35 NA 1,320.35
Annual Return NA 19.61% 10.19% 17.00% 13.21% NA 5.72%
</TABLE>
<TABLE>
<CAPTION>
US Gov't Cash
AAA-Rated Management
Securities
<S> <C> <C>
Fund Value 1,230.24 1,173.74
Surr Charge 20.00 20.00
Final Value 1,210.24 1,153.74
Annual Return 3.89% 2.90%
</TABLE>
Calculation of Annual Return
Final Value = 1,000 (31-Dec-98 Unit Value/31-Dec-93 Unit Value) - Surrender
Charge
Annual Return = (Final Value/1,000) . (1/5) - 1
Unit Values
<TABLE>
<CAPTION>
High
Date Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-93 NA 0.677957857 0.742485694 0.624221688 0.675195032 NA 0.807690406
31-Dec-98 1.362574086 1.673072162 1.220898099 1.381058055 1.268926797 1.108474569 1.082586273
</TABLE>
<TABLE>
<CAPTION>
US Gov't Cash
AAA-Rated Management
Securities
<S> <C> <C>
31-Dec-93 0.921995635 0.901961461
31-Dec-98 1.134272567 1.058664780
</TABLE>
Without EGMDB
Five Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
High
Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
<S> <C> <C> <C> <C> <C> <C> <C>
Fund Value NA 2,486.38 1,656.72 2,229.07 1,893.45 NA 1,350.40
Surr Charge 20.00 20.00 20.00 20.00 20.00 20.00 20.00
Final Value NA 2,466.38 1,636.72 2,209.07 1,873.45 NA 1,330.40
Annual Return NA 19.79% 10.36% 17.18% 13.38% NA 5.88%
</TABLE>
<TABLE>
<CAPTION>
US Gov't Cash
AAA-Rated Management
Securities
<S> <C> <C>
Fund Value 1,239.49 1,182.56
Surr Charge 20.00 20.00
Final Value 1,219.49 1,162.56
Annual Return 4.05% 3.06%
</TABLE>
Calculation of Annual Return
Final Value = 1,000 (31-Dec-98 Unit Value/31-Dec-93 Unit Value) - Surrender
Charge
Annual Return = (Final Value/1,000) . (1/5) - 1
<TABLE>
<CAPTION>
High
Date Global Growth International Growth Asset Bond Yield
Growth Income Allocation Bond
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-93 NA 0.674587192 0.738794210 0.621118187 0.671838103 NA 0.803674738
31-Dec-98 1.366976385 1.677282264 1.223971568 1.384513945 1.272095151 1.111263292 1.085284866
</TABLE>
<TABLE>
<CAPTION>
US Gov't Cash
AAA-Rated Management
Securities
<S> <C> <C>
31-Dec-93 0.917411665 0.897477097
31-Dec-98 1.137118483 1.061318287
</TABLE>
<PAGE>
With EGMDB
Ten Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Value NA 4,900.69 NA 3,747.35 NA NA 2,348.56 1,888.48 1,419.66
Surr Charge -- -- -- -- -- -- -- -- --
Final Value NA 4,900.69 NA 3,747.35 NA NA 2,348.56 1,888.48 1,419.66
Annual Return NA 17.23% NA 14.12% NA NA 8.91% 6.56% 3.57%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Calculation of Annual Return
Final Value=1,000 (31-Dec-98 Unit Value/31-Dec-88 Unit Value) - Surrender
Charge
Annual Return=(Final Value/1,000) . (1/10)-1
Unit Values
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Dec-88 NA 0.341395191 NA 0.368542262 NA NA 0.460957924 0.600627913 0.745715812
31-Dec-98 1.362574086 1.673072162 1.220898099 1.381058055 1.268926797 1.108474569 1.082586273 1.134272567 1.058664780
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Without EGMDB
Ten Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Value NA 4,974.68 NA 3,803.88 NA NA 2,383.96 1,916.98 1,441.08
Surr Charge -- -- -- -- -- -- -- -- --
Final Value NA 4,974.68 NA 3,803.88 NA NA 2,383.96 1,916.98 1,441.08
Annual Return NA 17.40% NA 14.29% NA NA 9.08% 6.72% 3.72%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Calculation of Annual Return
Final Value=1,000 (31-Dec-98 Unit Value/31-Dec-88 Value) - Surrender Charge
Annual Return=(Final Value/1,000) (1/10)-1
Unit Values
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Dec-88 NA 0.337163512 NA 0.363974088 NA NA 0.455244235 0.593182980 0.736472478
31-Dec-98 1.366976385 1.677282264 1.223971568 1.384513945 1.272095151 1.111263292 1.085284866 1.137118483 1.061318287
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
With EGMDB
Life of Fund Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yeild AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 5/1/97 2/8/84 5/1/90 2/8/84 8/1/89 1/2/96 2/8/84 11/19/85 2/8/84
Fund Value 1.362.57 #DIV/0! 2,201.93 #DIV/0! 2,595.57 1,158.34 #DIV/0! 1,888.48 1,419.66
Surr Charge -- -- -- -- -- -- -- -- --
Final Value 1,362.57 NA 2,201.93 NA 2,595.57 1,158.34 NA 1,888.48 1,419.66
Annual Return 20.34% NA 9.53% NA 10.66% 5.03% NA 4.97% 2.38%
Life of Fund (yrs) 1.671 14.893 8.671 14.893 9.419 2.997 14.893 13.115 14.893
</TABLE>
Calculation of Annual Return
Final Value=1,000 (31-Dec-98 Unit Value/Inception Date Unit Value) - Surrender
Charge
Annual Return=(Final Value/1,000) (1/Life of Fund)-1
Unit Values
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 5/1/97 2/8/84 5/1/90 2/8/84 8/1/89 1/2/96 2/8/84 11/19/85 2/8/84
Inception Date 1.000000000 0.000000000 0.554467270 0.000000000 0.488881222 0.956954000 0.000000000 0.600627913 0.745715812
31-Dec-98 1.362574086 1.673072162 1.220898099 1.381058055 1.268926797 1.108474569 1.082586273 1.134272567 1.058664780
</TABLE>
Without EGMDB
Ten Year Returns Period Ending 12/31/1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 5/1/97 2/8/84 5/1/90 2/8/84 8/1/89 1/2/96 2/8/84 11/19/85 2/8/84
Fund Value NA 4,974.68 NA 3,803.88 NA NA 2,383.96 1,916.98 1,441.08
Surr Charge -- -- -- -- -- -- -- -- --
Final Value NA 4,974.68 NA 3,803.88 NA NA 2,383.96 1,916.98 1,441.08
Annual Return NA 11.37% NA 9.39% NA NA 6.01% 5.09% 2.48%
Life of Fund (yrs) 1.671 14.893 8.671 14.893 9.419 2.997 14.893 13.115 14.893
</TABLE>
Calculation of Annual Return
Final Value=1,000 (31-Dec-98 Unit Value/Inception Date Unit Value) - Surrender
Charge
Annual Return=(Final Value/1,000) (1/Life of Fund)-1
Unit Values
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Global Growth International Growth Asset Bond High US Gov't Cash
Growth Income Allocation Yield AAA-Rated Management
Bond Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 5/1/97 2/8/84 5/1/90 2/8/84 8/1/89 1/2/96 2/8/84 11/19/85 2/8/84
Inception Date NA 0.337163512 NA 0.363974088 NA NA 0.455244235 0.593182980 0.736472478
31-Dec-98 1.366976385 1.677282264 1.223971568 1.384513945 1.272095151 1.111263292 1.085284866 1.137118483 1.061318287
</TABLE>
<PAGE>
Subaccount performance adjusted for contract expense charges
The examples in Paragraph (B) below show, for the various subaccounts of the
VAA, annual total return as of the stated periods, based upon a hypothetical
initial purchase payment of $1,000, calculated according to the formula provided
after the examples. The annual total return has been calculated to show the
annual total return for a hypothetical contract with the enchanced guaranteed
minimum death benefit (EGMDB) and without EGMDB. Although the subaccounts have
not yet commenced activity, these figures are calculated as if the subaccounts
had commenced activity at the same time as the underlying funds.
Further, since the class of shares of the funds in which the subaccounts invest
was not created until 1997, the figures below are based on the performance of
the class of shares of the funds issued since the funds commenced operations in
1989, as adjusted to reflect the fees and expenses chargeable against assets
attributable to shares of Class 2.
(B) Subaccount performance (adjusted for contract expense charges)
Period Ending December 31, 1998
<TABLE>
<CAPTION>
1-year period 5-year period 10-year period
With Without With Without With Without
EGMDB EGMDB EGMDB EGMDB EGMDB EGMDB
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Growth Subaccount 26.96% 27.15% 20.34%* 20.57%* N/A N/A
(as if commenced activity 4/30/97)
Global Small Capitalization Subaccount 1.31%* 1.41%* N/A N/A N/A N/A
(as if commenced activity 4/30/98)
Growth Subaccount 33.36% 33.56% 19.80% 19.98% 17.23% 17.40%
(as if commenced activity 2/8/84)
International Subaccount 19.24% 19.42% 10.46% 10.62% 9.53%* 9.69%*
(as if commenced activity 5/1/90)
Growth-Income Subaccount 16.45% 16.62% 17.21% 17.39% 14.12% 14.29%
(as if commenced activity 2/8/84)
Asset Allocation Subaccount 11.37% 11.54% 13.45% 13.62% 10.65% 10.82%
(as if commenced activity 8/1/89)
Bond Subaccount 2.67% 2.82% 5.02%* 5.18%* N/A N/A
(as if commenced activity 1/2/96)
High-Yield Bond Subaccount -1.13% -0.98% 6.03% 6.19% 8.91% 9.08%
(as if commenced activity 2/8/84)
U.S. GOVERNMENT/AAA-Rated 6.43% 6.59% 4.23% 4.39% 6.56% 6.72%
Securities Subaccount
(as if commenced activity 12/1/85)
Cash Management Subaccount 3.44% 3.60% 3.26% 3.41% 3.57% 3.72%
(as if commenced activity 2/8/84)
</TABLE>
*The lifetime of this subaccount is less than the complete period indicated.
See the date the subaccount commenced activity under its name.
There is a New World subaccount but it is not in the chart because it did not
begin activity until 1999.
The length of the periods and the last day of each period used in the above
table are set out in the table heading and in the footnotes above.
<PAGE>
(D) Other Non-standardized investment results:
The VAA may illustrate its results over various periods and compare its results
to indices and other variable annuities in sales materials including
advertisements, brochures and reports. Such results may be computed on a
cumulative and/or annualized basis.
Cumulative quotations are arrived at by calculating the change in the
Accumulation Unit Value between the first and last day of the base period being
measured, and expressing the difference as a percentage of the unit value at the
beginning of the base period.
Annualized quotations are arrived at by applying a formula which determines the
level rate of return which, if earned over the entire base period, would produce
the cumulative return.
Non-standardized investment results
subaccounts of Account H
$10,000 invested in
this fund through
American Legacy III
this many years ago...
...would have grown to this amount on December 31, 1998
<TABLE>
<CAPTION>
With EGMDB
--------------------------------------------------------------------------------------------
Growth Growth-Income High-Yield Bond Cash Management
- -----------------------------------------------------------------------------------------------------------------------------------
Number Compound Compound Compound Compound
of Growth Growth Growth Growth
Years Periods Amount Rate Amount Rate Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $13,336.35 33.36% $11,644.90 16.45% $ 9,887.19 -1.13% $10,344.01 3.44%
2 12/31/96-12/31/98 17,069.98 30.65% 14,415.89 20.06% 10,928.01 4.54% 10,701.76 3.45%
3 12/31/95-12/31/98 19,037.42 23.94% 16,838.04 18.97% 12,170.30 6.76% 11,062.71 3.42%
4 12/31/94-12/31/98 24,946.43 25.70% 22,033.67 21.53% 14,580.18 9.89% 11,486.82 3.52%
5 12/31/93-12/31/98 24,678.07 19.79% 22,124.49 17.20% 13,403.48 6.02% 11,737.35 3.25%
Lifetime of fund 02/08/84-12/31/98 89,590.77 15.85% 72,968.21 14.27% 43,079.28 10.31% 18,367.64 4.16%
<CAPTION>
Without EGMDB
--------------------------------------------------------------------------------------------
Growth Growth-Income High-Yield Bond Cash Management
- -----------------------------------------------------------------------------------------------------------------------------------
Number Compound Compound Compound Compound
of Growth Growth Growth Growth
Years Periods Amount Rate Amount Rate Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $13,356.36 33.56% $11,662.37 16.62% $ 9,902.04 -0.98% $10,359.53 3.60%
2 12/31/96-12/31/98 17,121.36 30.85% 14,459.08 20.24% 10,960.48 4.69% 10,734.07 3.60%
3 12/31/95-12/31/98 19,123.54 24.11% 16,913.99 19.15% 12,225.07 6.92% 11,112.65 3.57%
4 12/31/94-12/31/98 25,114.83 25.89% 22,166.11 22.04% 14,667.67 10.04% 11,555.89 3.68%
5 12/31/93-12/31/98 24,863.82 19.97% 22,290.62 17.39% 13,504.02 6.19% 11,825.60 3.41%
Lifetime of fund 02/08/84-12/31/98 91,611.48 16.03% 74,613.74 14.44% 44,049.84 10.46% 18,781.92 4.32%
<CAPTION>
With EGMDB Without EGMDB
----------------------------- ------------------------------
U.S. Govt/AAA U.S. Govt/AAA
- --------------------------------------------------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $10,642.67 6.43% $10,658.64 6.59%
2 12/31/96-12/31/98 11,356.00 6.56% 11,390.24 6.73%
3 12/31/95-12/31/98 11,517.74 4.82% 11,569.77 4.98%
4 12/31/94-12/31/98 13,074.46 6.92% 13,153.11 7.08%
5 12/31/93-12/31/98 12,302.32 4.23% 12,394.88 4.38%
Lifetime of fund 02/08/84-12/31/98 22,882.32 6.52% 23,336.11 6.67%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
With EGMDB Without EGMDB
--------------------------- ----------------------------
Asset Allocation Asset Allocation
- ---------------------------------------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $11,136.80 11.37% $11,153.51 11.54%
2 12/31/96-12/31/98 13,195.08 14.87% 13,234.53 15.04%
3 12/31/95-12/31/98 15,030.00 14.58% 15,097.73 14.71%
4 12/31/94-12/31/98 19,153.79 17.65% 19,274.86 17.83%
5 12/31/93-12/31/98 18,793.48 13.44% 18,934.54 13.61%
Lifetime of fund 08/01/89-12/31/98 25,955.90 10.66% 26,324.21 10.82%
<CAPTION>
With EGMDB Without EGMDB
-------------------------- ----------------------------
International International
- ---------------------------------------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $11,924.50 19.24% $11,942.37 19.42%
2 12/31/96-12/31/98 12,795.10 13.12% 12,834.05 13.29%
3 12/31/95-12/31/98 14,795.14 13.95% 14,862.08 14.11%
4 12/31/94-12/31/98 16,400.57 13.17% 16,499.35 13.36%
5 12/31/93-12/31/98 16,443.41 10.45% 16,567.19 10.62%
Lifetime of fund 04/30/90-12/31/98 22,020.29 9.53% 22,308.28 9.69%
<CAPTION>
With EGMDB Without EGMDB
------------------------- -----------------------------
Bond Bond
- ---------------------------------------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $10,266.52 2.67% $10,281.93 2.82%
2 12/31/96-12/31/98 11.124.29 5.47% 11,157.87 5.64%
Lifetime of fund 01/02/96-12/31/98 11,583.36 5.03% 11,635.57 5.19%
<CAPTION>
With EGMDB Without EGMDB
-------------------------- ----------------------------
Global Growth Global Growth
- ---------------------------------------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 12/31/97-12/31/98 $10,696.01 26.96% $12,715.04 27.15%
Lifetime of fund 04/30/97-12/31/98 13,618.84 20.35% 13,662.77 20.58%
<CAPTION>
With EGMDB Without EGMDB
----------------------------- ----------------------------
Global Small Capitalization Global Small Capitalization
- ---------------------------------------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
Years Periods Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lifetime of fund 04/30/98-12/31/98 $10,130.63 1.31% $10,140.84 1.41%
</TABLE>
There is also a New World subaccount but it is not in this chart because it did
not begin activity until 1999.
<PAGE>
Non-standardized Performance-Separate Account H
Amount
[COPY TO COME LATER]
<PAGE>
Exhibit 14a
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.
(fka Financial Services Department, Inc.)
100% - Indiana - Insurance Agency
------------------------------------------
-------------------------------------------
Financial Investments, Inc.
(fka 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 Jesey - 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.
(fka Lincoln Financial Group, Inc.)
100% - Indiana - Insurance Agency
-------------------------------------------
--------------------------------------
Lincoln Financial Advisors Corporation
(fka 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
-------------------------------------------
2
<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 - Mktg & Admin Services
--------------------------------------
-------------------------------------
Delaware International Advisers, Ltd.
18.9% - England - Investment Advisor
-------------------------------------
----------------------------------
Delvoy, Inc.
100% - Minnesota - Holding Company
----------------------------------
---------------------------------
Delaware Management Company, Inc.
100% - Delaware - Holding Company
---------------------------------
----------------------------------------
Delaware Management Business Trust
100% - Delaware - Investment Advisor
consists of:
Delaware Management Company Series
and Delaware Investment Advisers Series
----------------------------------------
-------------------------------------------------
Delaware Distributors, L.P.
98%-Delaware-Mutual Fund Distrib. & Broker/Dealer
1% Equity-Delaware Capital Management, Inc.
1% Equity-Delaware Distributors, Inc. (G.P.)
-------------------------------------------------
---------------------------------
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
-----------------------------------------
3
<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. (G.P.)
----------------------------------------------------
------------------------------------------
Delaware Capital Management, Inc.
(fka 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
---------------------------------------------------
-----------------------------------------------------
Retirement Financial Services, Inc.
(fka Delaware Investment & Retirement Services, Inc.)
100% - Delaware - Registered Transfer Agent & I/A
-----------------------------------------------------
-----------------------------------
Lynch & Mayer, Inc.
100% - Indiana - Investment Adviser
-----------------------------------
-----------------------------------
Lynch & Mayer Securities Corp.
100% - Delaware - Securities Broker
-----------------------------------
----------------------------------------------
Vantage Global Advisors, Inc.
(fka Modern Portfolio Theory Associates, Inc.)
100% - Delaware - Investment Adviser
----------------------------------------------
4
<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.
(fka 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.
(fka 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.
(fka Lincoln National Putnam Master Fund, Inc.)
100% - Maryland - Mutual Fund
---------------------------------------------------
5
<PAGE>
- ----------------------------
Lincoln National Corporation
Indiana -- Holding Company
- ----------------------------
-------------------------------------------
The Lincoln National Life Insurance Company
100% -- Indiana
-------------------------------------------
---------------------------------------------
Lincoln National Growth and Income Fund, Inc.
(fka 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
-------------------------------------------------------
6
<PAGE>
- ----------------------------------
Lincoln National Corporation
Indiana - Holding Company
- ----------------------------------
----------------------------------------------
-- Lincoln National Reinsurance Company Limited
(fka Heritage Reinsurance, Ltd.)
100% ** - Bermuda
----------------------------------------------
--------------------------------------------------------
-- Lincoln National Underwriting Services, Ltd.
90% - England/Wales - Life/Accident/Health Underwriter
(Remaining 49% 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
(fka One Olympia 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
(fka: Laurentian Financial Advisers Ltd.)
100% - England/Wales - Sales Company
-------------------------------------------
-------------------------------------------
-- Lincoln Financial Group PLC
(fka: Laurentian Financial Group PLC)
100% - England/Wales - Holding Company
-------------------------------------------
----------------------------------------------
-- Lincoln ISA Management Limited
(fka Lincoln Unit Trust Management Limited;
Laurentian Unit Trust Management Limited)
100% - England/Wales - Unit Trust Management
----------------------------------------------
7
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| ----------------------------------------------
---| Lincoln National (UK) PLC |
| 100% - England/Wales - Holding Company |
----------------------------------------------
|
| --------------------------------------------
|--| Lincoln Financial Group PLC |
| | (fka: Laurentian Financial Group PLC) |
| | 100% - England/Wales - Holding Company |
| --------------------------------------------
| |
| | ------------------------------------------
| |--| Lincoln Milldon Limited |
| | | (fka: Laurentian Milldon Limited) |
| | | 100% - England/Wales - Sales Company |
| | ------------------------------------------
| |
| | --------------------------------------------------------------
| |--| Laurtrust Limited |
| | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | --------------------------------------------------------------
| |
| | ---------------------------------------------------
| ---| Lincoln Management Services Limited |
| | (fka: 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 |
----------------------------------------------
8
<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
----------------------------------
9
<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 (fka Lincoln Investment Management Ltd.)
100% - England/Wales - Investment Management Services
------------------------------------------------------
---------------------------------------------
CL CR Management Ltd.
50% - England/Wales - Administrative Services
---------------------------------------------
-----------------------------------------------------
Lincoln Independent Limited
(fka: Laurentian Independent Financial Planning Ltd.)
100% - England/Wales - Independent Financial Adviser
-----------------------------------------------------
--------------------------------------------
Lincoln Investment Management Limited
(fka: 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
(fka 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
(fka 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
----------------------------------------
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.
11
<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.
(fka: 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. (fka: John J. Moore & Associates,
Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (fka: Resources/Financial, Inc. (Albuquerque,
NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, UT)
12
<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 dormant 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 dormant 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 name to Lincoln
National Investments, Inc. effective January 24, 1997.
13
<PAGE>
January 1997 con't
- ------------------
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (fka Laurentian
Financial Group PLC); Lincoln Milldon Limited (fka Laurentian Milldon
Limited); Lincoln Management Services Limited (fka 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.
14
<PAGE>
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on
June 30, 1997.
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.
15
<PAGE>
June 1998
- ---------
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.
16
<PAGE>
February 1999
- -------------
Removal of Lincoln Southwest Financial Group, Inc. -- company's term of
existence expired July 18, 1998.
17
<PAGE>
Exhibit 14b
BOOKS AND RECORDS
LINCOLN LIFE & ANNUITY VARIABLE ANNUITY ACCOUNT H
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.
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Annual Reports Finance Eric Jones Permanently, the first two
To Shareholders years in an easily accessible
place
Semi-Annual Finance Eric Jones Permanently, the first two
Reports years in an easily accessible
place
Form N-SAR Finance Eric Jones Permanently, the first two
years in an easily accessible
place
(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
- ----------------------------
Daily reports CSRM Nancy Alford Permanently, the first two
of securities years in an easily accessible
transactions Finance Eric Jones place
Portfolio Securities
- --------------------
C--Port Purchase/ Finance Eric Jones Permanently, the first two
Sales Reports years in an easily accessible
place
<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 Nancy Alford Permanently, the first two
Finance Eric Jones 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 two
Balance (5000 years in an easily accessible
series) place
Securities in Transfer
- ----------------------
Not Applicable.
Securities in Physical Possession
- ---------------------------------
Not Applicable.
Securities Borrowed and Loaned
- ------------------------------
Not Applicable.
Monies Borrowed and Loaned
- --------------------------
Not Applicable.
Dividends and Interest Received
- -------------------------------
LNL trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Dividends Receivable and Interest Accrued
- -----------------------------------------
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) 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 two
of Securities years in an easily accessible
transactions (Daily) 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 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 Record Finance Eric Jones Permanently, the first two
(Daily Trade File CSRM Nancy Alford years in an easily accessible
& Leg. Syst. Client place
Rept)
(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 Nancy Alford Six years, the first two
tions and Finance Eric Jones years in an easily accessible
daily reports 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 two
Balance (5000 years in an easily accessible
series) 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 31al(b).
Advisory Legal Janet Lindenberg Six years, the first two
Agreements 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 Nancy Alford Six years, the first two
years in an easily accessible
place
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Proxy State- CSRM Nancy Alford Six years, the first two
ments and years in an easily accessible
Proxy Cards 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 two
ments years in an easily accessible
place
March 16, 1999
