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Legacy III
As filed with the Securities and Exchange Commission on May 17, 2000
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 [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 2 [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.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on June 1, 2000, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on _____________________ pursuant to paragraph (a)(i) of Rule 485
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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
www.lincolnlife-ny.com
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 Funds Insurance
Series (series) Class 2 Shares, also known as American Variable Insurance Se-
ries:
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), dated the
same date as this prospectus, about the contracts which has more information.
Its terms are made part of this Prospectus. 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.
June 1, 2000
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 6
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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 14
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Federal tax matters 15
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Voting rights 19
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Distribution of the contracts 19
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Return privilege 19
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State regulation 19
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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 20
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</TABLE>
Special terms
(We have italicized the terms that have special meaning throughout the Prospec-
tus)
Account or variable annuity account (VAA) -- The segregated investment account,
Lincoln Life & Annuity Variable Annuity, 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 to-
tal 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 guar-
anteed minimum death benefit is also available.
Free Amount -- First withdrawal in a contract year, equal to the greater of 10%
of the current contract value or 10% of the total purchase payments.
Lincoln Life -- The Lincoln National Life Insurance Company.
LNY (we, us, our) -- Lincoln Life & Annuity Company of New York.
Purchase payments -- Amounts paid into the contract.
Series -- American Funds Insurance Series (series), the funds to which purchase
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 trad-
ing.
Valuation period -- The period starting at the close of trading (currently 4:00
p.m. New York time) on each day that the NYSE is open for trading (valuation
date) and ending at the close of such trading on the next valuation date.
2
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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 for the funds as of December 31, 1999.
(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 .68% .25% .03% .96%
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2. Global Small Capitalization .78 .25 .03 1.06
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3. Growth .38 .25 .01 .64
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4. International .55 .25 .05 .85
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5. New World** .89 .25 .06 1.20
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6. Growth-Income .34 .25 .01 .60
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7. Asset Allocation .43 .25 .01 .69
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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 .51 .25 .01 .77
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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.
**These expenses are annualized. The fund began operations on June 17, 1999.
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 $124
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2. Global Small Capitalization 85 127
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3. Growth 81 114
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4. International 83 120
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5. New World 86 131
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6. Growth-Income 80 113
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7. Asset Allocation 81 115
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8. Bond 82 118
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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 $74
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2. Global Small Capitalization 25 77
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3. Growth 21 64
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4. International 23 70
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5. New World 26 81
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6. Growth-Income 20 63
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7. Asset Allocation 21 65
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8. Bond 22 68
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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
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Condensed financial information for the variable annuity account
Accumulation unit values
No condensed financial information for the VAA is presented because as of De-
cember 31, 1999, 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 statutory-basis financial statements of LNY are located in the Statement
of Additional Information (SAI). No financial statements are included for the
VAA because as of December 31, 1999, the account had not yet commenced opera-
tions. If you would like a free copy of the SAI, complete and mail the en-
closed card, or call 1-800-942-5500.
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 Investment Company Act of 1940. Accordingly, neither the general ac-
count 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 gen-
eral 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 generally intended to serve as a disclosure document only
for aspects of the contract involving the VAA, and therefore contains only se-
lected information regarding 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.
Investments of the variable annuity account
You decide the subaccount(s) to which you allocate purchase payments. There is
a separate subaccount which cor-
6
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responds to each class of each fund of the series. You may change your alloca-
tion 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 re-
quest. 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.
With respect to the series, the advisor and/or distributor, or an affiliate
thereof, may compensate LNY (or an affiliate) for administrative, distribu-
tion, or other services. It is anticipated that such compensation will be
based on assets of the particular Series attributable to the contracts along
with certain other variable contracts issued or administered by LNY (or an af-
filiate).
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 $1.5 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
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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, portfolio rebalancing and automatic
withdrawal services), maintaining records, administering annuity payouts, fur-
nishing accounting and valuation services (including the calculation and moni-
toring of daily subaccount values), reconciling and depositing cash receipts,
providing contract confirmations, providing toll-free inquiry services and fur-
nishing telephone 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
necessarily correspond to the costs associated with providing the services or
benefits indicated by the description of the charge. For example, the contin-
gent deferred sales load collected may not fully cover all of the sales and
distribution 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 the free amount, which is equal to the greater of 10%
of the current contract value or 10% of the total purchase payments;
3 Automatic withdrawals in total not in excess of the greater of 10% of of the
contract value or 10% of the purchase payments during a contract year, made
by non-trustee contractowners who are at least 59 1/2;
4. Electing an annuity option available within the contract;
5. 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.
6. When the surviving spouse assumes ownership of the contract as a result of
the death of the original owner;
7. A surrender of the contract as a result of the death of the contractowner or
annuitant. However, if an annuitant is changed for any reason other than
death, the surrender charge is not waived. See Death Benefit before annuity
commencement date.
8. A surrender of a contract or withdrawal of contract value of a contract is-
sued to employees of LNY (based upon the contractowner's status at the time
the contract was purchased).
For purposes of calculating the surrender charge on withdrawals on contracts
where the contractowner is not a Charitable Remainder Trust, LNY assumes that:
a. the free amount will be withdrawn from purchase payments on a "first in-
first out (FIFO)" basis.
b. Prior to the seventh anniversary of the contract, any amount withdrawn above
the free amount during a contract year will be withdrawn in the following
order:
1. from purchase payments (on a FIFO basis) until exhausted; then
2. from earnings.
c. On or after the seventh anniversary of the contract, any amount withdrawn
above the free amount during a contract year will be withdrawn in the
following order:
1. from purchase payments (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
9
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2. from earnings until exhausted; then
3. from purchase payments (on a FIFO basis) to which a surrender charge
still applies.
For purposes of calculating the surrender charge on withdrawals on contracts
where the contractowner is a Charitable Remainder Trust, LNY assumes that:
a. the free amount will be withdrawn from purchase payments on a "first in-
first out (FIFO)" basis.
b. Any amount withdrawn above the free amount during a contract year will be
withdrawn in the following order:
1. from purchase payments (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
2. from earnings until exhausted; then
3. from purchase payments (on a FIFO basis) to which a surrender charge
still applies.
The surrender charge is calculated separately for each contract year's pur-
chase payments to which a charge applies. 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.
If the contractowner is a corporation or other non-individual (non-natural
person), the annuitant or joint annuitant will be considered the contractowner
or joint owner for purposes of determining when a surrender charge does not
apply.
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 gen-
erally depend upon the law of your state of residence. The tax ranges from
zero to 3.5%. Currently there is no premium tax levied for New York residents.
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
The contract is available in New York. If you wish to purchase a contract, you
must apply for it through a sales representative authorized by us. The com-
pleted application is sent to us and we decide whether to accept or reject it.
If the application is accepted, a contract is prepared and executed by our le-
gally authorized officers. The contract 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 in New York where the con-
tracts may be lawfully sold and also be eligible to participate in any of the
qualified or nonqualified plans for which the contracts are designed. The
contractowner and annuitant cannot be older than age 89.
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
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$100 ($25 if transmitted electronically). Purchase payments in total may not
exceed $2 million. If you stop making purchase payments, the contract will re-
main 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 payment of any death benefit, whichever comes first.
Valuation date
Accumulation and annuity units will be valued once daily at the close of trad-
ing (currently, normally, 4:00 p.m., New York time) on each day the New York
Stock Exchange is open (valuation date). On any date other than a valuation
date, the accumulation unit value and the annuity unit value will not change.
Allocation of 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 allocated
to the VAA. The accumulation unit value for each subaccount was or will be es-
tablished at the inception of the subaccount. It may increase or decrease from
valuation period to valuation period. The accumulation unit value for a
subaccount for a later valuation period is determined as follows:
(1) The total value of the fund shares held in the subaccount is calculated by
multiplying the number of fund shares owned by the subaccount at the be-
ginning of the valuation period by the net asset value per share of the
fund at 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 $25 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 or by the LNY internet site. In order to prevent unautho-
rized or fraudulent telephone transfers, we may require the caller to provide
certain identifying information before we will act upon their instructions. We
may also assign the contractowner a Personal Identification Number (PIN) to
serve as identification. We will not be liable for following telephone in-
structions we reasonably believe are genuine. Telephone requests may be re-
corded and written confirmation of all transfer requests will be mailed to the
contractowner on the next valuation date. Telephone transfers will be proc-
essed on the valuation date that they are received when they are received at
our customer service center before 4 p.m. New York time.
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<PAGE>
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 $25
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.
Upon the death of the contractowner, a death benefit will be paid to the bene-
ficiary. Upon the death of a joint owner, the death benefit will be paid to
the surviving joint owner. Upon the death of an annuitant who is not the
contractowner or joint owner, a death benefit may be paid to the contractowner
(and joint owner, if applicable, in equal shares). If the contractowner is a
corporation or other non-individual (non-natural person), the death of the an-
nuitant will be treated as death of the contractowner. Death benefits are tax-
able. See Federal tax matters.
If the death occurs before the annuity commencement date and the enhanced
guaranteed minimum death benefit (EGMDB) is in effect, the death benefit paid
will be the greater of: (1) the contract value as of the day on which LNY ap-
proves the payment of the claim; or (2) the highest contract value which the
contract attains on any policy anniversary date (including the inception date)
on ages up to, and including, the deceased's age 80. The highest contract
value is increased by purchase payments and is decreased by partial withdraw-
als, partial annuitizations, and any premium taxes made, effected or incurred
subsequent to the anniversary date on which the highest contract value is ob-
tained. If the EGMDB is not in effect, the death benefit will be equal to the
greater of contract value or the guaranteed minimum death benefit (GMDB). The
GMDB is equal to the sum of all purchase payments minus any withdrawals, par-
tial annuitizations or premium taxes incurred.
If there are joint owners, upon the death of the first contractowner, LNY will
pay a death benefit to the surviving joint owner. The surviving joint owner
will be treated as the primary, designated beneficiary. Any other beneficiary
designation on record at the time of death will be treated as a contingent
beneficiary. If the surviving joint owner is the spouse of the deceased joint
owner he/she may continue the contract as sole contractowner. Upon the death
of the spouse who continues the contract, LNY will pay a death benefit to the
designated beneficiary(s).
Upon the death of a contractowner, joint owner or annuitant, if the surviving
spouse continues the contract, any portion of the death benefit that would
have been payable (if the contract had not been continued) that exceeds the
current contract value will be credited to the contract. This provision ap-
plies only one time for each contract.
If an annuitant who is not the contractowner or joint owner dies, then the
contingent annuitant, if named, becomes the annuitant and no death benefit is
payable on the death of the annuitant. If no contingent annuitant is named,
the contractowner (or younger of joint owners) becomes the annuitant. Alterna-
tively, a death benefit may be paid to the contractowner (and joint owner, if
applicable, in equal shares) if the annuitant named on this contract has not
been changed, except on death of a prior annuitant.
Notification of the election of this death benefit must be received by LNY
within 75 days of the death of the annuitant. If no contractowner is living on
the date of death of the annuitant, the death benefit will be available to the
beneficiary. The contract terminates when any death benefit is paid due to the
death of the annuitant. A death benefit payable on the death of the annuitant
will not be paid if the annuitant has been changed subsequent to the effective
date of this contract unless the change occurred because of the death of a
prior annuitant.
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If the beneficiary is the spouse of the contractowner, then the spouse may
elect to continue the contract as owner.
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 authoriza-
tion for payment; and (3) our receipt of all required claim forms, fully com-
pleted. 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,
joint owner or annuitant, who is age 80 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 Discontinu-
ance form and sending it to our servicing office. The benefit will be discon-
tinued as of the valuation date we receive the request, and we will stop de-
ducting the charge for the benefit as of that date. See Charges and other de-
ductions. If you discontinue the benefit, it cannot be reinstated.
The death benefit payable on the death of the annuitant, will be distributed
either in the form of a lump sum settlement or an annuity payout. The annuity
payout must be settled within 60 days after LNY has approved the death claim.
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, regulations and tax
code governing payment of death benefits. This payment may be postponed as
permitted by the 1940 Act.
Payment will be made in accordance with applicable laws and regulations gov-
erning payment of death benefits.
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.
Unless the contractowner has already selected a settlement option, the benefi-
ciary may choose the method of payment of the death benefit. The death benefit
payable to the beneficiary or joint owner 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.
Joint ownership
If a joint owner is named in the application, the joint owners shall be
treated as having equal undivided interests in the contract. Either owner, in-
dependently of the other, may exercise any ownership rights in this contract.
Not more than two owners (an owner and joint owner) may be named and contin-
gent owners are not permitted.
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 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. 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.
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.
Delay of Payments
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.
Reinvestment privilege
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal,
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<PAGE>
and we will recredit that portion of the surrender/withdrawal charges attrib-
utable to the amount returned. 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 de-
signed. The number of accumulation units which will be credited when the pro-
ceeds 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 request for reinvestment at the servicing office. You may utilize
the reinvestment privilege only once. For tax reporting purposes, we will
treat a surrender/withdrawal and a subsequent reinvestment purchase as sepa-
rate transactions. 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
6.00% of account annuitized and/or an annual continuing commission of up to
1.00% (or up to 1.10% 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.
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 Life and Two-Thirds Survivor Annuity. This option provides a periodic
payout during the joint lifetime of the annuitant and a designated joint annu-
itant. When one of the joint annuitants dies, the survivor receives two thirds
of the periodic payout made when both were alive.
14
<PAGE>
Joint Life and Two-Thirds Survivor Annuity with Guaranteed Period. This option
provides a periodic payout during the joint lifetime of the annuitant and a
joint annuitant. When one of the joint annuitants dies, the survivor receives
two thirds of the periodic payout made when both were alive. This option fur-
ther provides that should one or both of the annuitants dies during the
elected guaranteed period, usually 10 or 20 years, full benefit payment will
continue for the rest of the guaranteed period.
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 annuity options listed above, you may not make withdrawals. Other
options, with or without withdrawal features, may be made available by us. Op-
tions are only available to the extent they are consistent with the require-
ments of the contract as well as Sections 72(s) and 401(a)(9) of the tax code,
if applicable. The mortality and expense risk charge and the charge for admin-
istrative 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 mortality 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 proportional to the amount of such ex-
cess. Conversely, if the actual rate is less than 4%, annuity payments will
decrease. There is a more complete explanation of this calculation in the SAI.
Federal tax matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules
that may affect 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.
15
<PAGE>
Contracts not owned by the individual
If a contract is owned by an entity (rather than an individual) the tax code
generally does not treat it as an annuity contract for Federal income tax pur-
poses. This means that the entity owning the contract pays tax currently on the
excess of the contract value over the purchase payments for the contract. Exam-
ples of contracts where the owner pays current tax on the contract's earnings
are contracts issued to a corporation or a trust. Exceptions to this rule ex-
ist. For example, the tax code treats a contract as owned by an individual if
the named owner is a trust or other entity that holds the contract as an agent
for an individual. However, this exception does not apply in the case of any
employer that owns a contract to provide deferred compensation for its employ-
ees.
Investments in the VAA must be diversified
For a contract to be treated as an annuity for Federal income tax purposes, the
investments of the VAA must be "adequately diversified." IRS regulations define
standards for determining whether the investments of the VAA are adequately di-
versified. If the VAA fails to comply with these diversification standards, 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 underlying investment op-
tions 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 exist-
ing 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 pos-
sible that the tax law will not treat the contract as an annuity for Federal
income tax purposes. In that event, you would be currently taxable on the ex-
cess 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 un-
til 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 reduced by amounts received from your con-
tract 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.
16
<PAGE>
. 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 with-
drawals, 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 re-
ceived as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) any portion of your contract value, as a withdrawal of
such amount or portion.
Gifting a contract
If 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 ex-
tent it exceeds your purchase payments not previously received. The new own-
er's purchase 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 interest deduction
After June 8, 1997, if a contract is issued to a taxpayer that is not an indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should
consult a tax advisor.
Qualified retirement plans
We also designed the contracts for use in connection with certain types of re-
tirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called "quali-
fied contracts." We issue contracts for use with different types of qualified
plans. The Federal income tax rules applicable to those plans are complex and
varied. As a result, this Prospectus does not attempt to provide more than
general information about 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
17
<PAGE>
bound by the terms and conditions of qualified plans to the extent such terms
and conditions contradict the contract, unless we consent.
Tax treatment of qualified contracts
The Federal income tax rules applicable to qualified plans and qualified con-
tracts vary with the type of plan and contract. For example,
. Federal tax rules limit the amount of 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 distribution 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 & Annuity Company of New York
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
18
<PAGE>
Prospectus. However, Congress, The IRS and the courts may modify these author-
ities, 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 and the VAA, we will return the con-
tract 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 as-
sessed. 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.
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 LNY under 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.
19
<PAGE>
Legal proceedings. LNY may be involved in various pending or threatened legal
proceedings arising from the conduct of its business. Most of these proceedings
are routine and in the ordinary course of business.
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-5
- --------------------------------------
Advertising and sales literature B-5
- --------------------------------------
Financial statements B-7
</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 June 1, 2000.
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-5
Advertising and sales literature B-5
Financial statements B-7
</TABLE>
This SAI is not a Prospectus.
The date of this SAI is June 1, 2000.
<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 report also appearing elsewhere in this document
and in the Registration Statement. The financial statements audited by Ernst &
Young LLP have been included in this document in reliance on their report
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 seven-day yield is determined by calculating the change in unit value for
the base period (the 7-day period ended December 31, 1999); then dividing this
figure by the account value at the beginning of the period; then annualizing
this result by the factor of 365/7. This yield includes all deductions charged
to the contractowner's account, and excludes any realized gains and losses
from the sale of securities.
Standard investment results:
Standard performance is based on a formula to calculate performance that is
prescribed by the SEC. Under rules issued by the SEC, standard performance
must be included in any marketing material that discusses the performance of
the VAA and the subaccounts. This information represents past performance and
does not indicate or represent future performance.
B-2
<PAGE>
Average annual return for each period is determined by finding the average an-
nual 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 = ending 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, or 10-year period in question (or fractional period there-
of)
The formula assumes that: (1) all recurring fees have been charged to the
contractowner accounts; (2) all applicable non-recurring charges (includ-
ing any surrender charges) are deducted at the end of the period in ques-
tion; and (3) there will be a complete redemption upon the anniversary of
the 1-year, 5-year, or 10-year period in question.
In accordance with SEC guidelines, we will report standard performance back to
the first date that the Fund became available in the VAA. Because standard per-
formance reporting periods of less than one year could be misleading, we may
report "N/A's" for standard performance until one year after the option became
available in the Separate Account.
Standard performance data:
No figures are provided at this time since the subaccounts of the VAA do not
yet have an operating history.
Non-standard investment results:
The VAA may report its results over various periods--daily, monthly, three-
month, six-month, year-to-date, yearly (fiscal year), three, five, ten years or
more and lifetime--and compare its results to indices and other variable annui-
ties in sales materials including advertisements, brochures and reports. Per-
formance information for the periods prior to the date that a Fund became
available in the VAA will be calculated based on (1) the performance of the
Fund adjusted for Contract charges (ie: mortality and expense risk fees, any
applicable administrative charges, and the management and other expenses of the
fund) and (2) the assumption that the subaccounts were in existence for the
same periods as indicated for the Fund. It may or may not reflect charges for
any Riders (ie: EGMDB) that were in effect during the time periods shown. This
performance is referred to as non-standardized performance data. Such results
may be computed on a cumulative and/or annualized basis. We may also report
performance assuming you deposited $10,000 into a subaccount at inception of
the underlying fund or 10 years ago (whichever is less). This non-standard per-
formance may be shown as a graph illustrating how that deposit would have in-
creased or decreased in value over time based on the performance of the under-
lying fund adjusted for Contract charges. This information represents past per-
formance and does not indicate or represent future performance. The investment
return and value of a Contract will fluctuate so that contractowner's invest-
ment may be worth more or less than the original investment. Cumulative quota-
tions are arrived at by calculating the change in Accumulation Unit Value be-
tween 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 re-
flects the level rate of return, which if earned over the entire base period,
would produce the cumulative return.
B-3
<PAGE>
Non-Standard Performance Data (adjusted for contract expense charges):
Period Ending December 31, 1999
<TABLE>
<CAPTION>
1- 3- 5- 10- Since
YTD year year year year Inception
With With With With With With
EGMDB EGMDB EGMDB EGMDB EGMDB EGMDB
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Growth Subaccount 67.31% 67.31% N/A N/A N/A 36.14%
(commenced activity 4/30/97)
Global Small Capitalization Subaccount 88.71 88.71 N/A N/A N/A 47.37
(commenced activity 4/30/98)
Growth Subaccount 55.08 55.08 38.34% 31.09% 19.40% 17.99
(as if commenced activity 2/8/84)
International Subaccount 73.53 73.53 30.46 23.27 N/A 14.86
(as if commenced activity 5/1/90)
New World Subaccount N/A N/A N/A N/A N/A 17.43
(as if commenced activity 6/17/99)
Growth-Income Subaccount 9.65 9.65 16.49 19.29 12.78 13.97
(as if commenced activity 2/8/84)
Asset Allocation Subaccount 5.43 5.43 11.63 15.10 10.36 10.14
(as if commenced activity 8/1/89)
High-Yield Bond Subaccount 4.07 4.07 4.38 8.70 8.44 9.89
(as if commenced activity 2/8/84)
Bond Subaccount 1.13 1.13 4.00 N/A N/A 4.04
(as if commenced activity 1/2/96)
U.S. Gov't./AAA Subaccount (2.16) (2.16) 3.58 5.05 5.42 5.87
(as if commenced activity 12/1/85)
Cash Management Subaccount 3.12 3.12 3.34 3.44 3.18 4.10
(as if commenced activity 2/8/84)
</TABLE>
The performance figures shown reflect the cost of the Enhanced Guaranteed Mini-
mum Death Benefit rider. If contractholders had chosen to eliminate the En-
hanced Guaranteed Minimum Death Benefit, their returns would have been higher.
B-4
<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.
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-5
<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, cross-reinvest-
ment service, or portfolio rebalancing.
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-6
<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, cross-reinvestment service, or portfolio rebalancing.
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, the AWS or portfolio
rebalancing, if you are using this cross-reinvestment service.
Portfolio rebalancing -- Portfolio Rebalancing is an option which, if elected
by the contractowner, restores to a pre-determined level the percentage of
contract value allocated to each variable account subaccount (e.g., 20% Money
Market, 50% Growth, 30% Utilities). This predetermined level will be the allo-
cation initially selected when the contract was purchased, unless subsequently
changed. The portfolio rebalancing allocation may be changed at any time by
submitting a request to LNY.
If the portfolio rebalancing is elected, all purchase payments allocated to
the variable accounts subaccounts must be subject to portfolio rebalancing.
Portfolio rebalancing may take place on either a monthly, quarterly, semi-an-
nual or annual basis, as selected by the contractowner. Once the portfolio
rebalancing option is activated, any variable account subaccount transfers ex-
ecuted outside of the portfolio rebalancing option will terminate the portfo-
lio rebalancing option. Any subsequent purchase payment or withdrawal that
modifies the account balance within each variable account subaccount may also
cause termination of the portfolio rebalancing option. Any such termination
will be confirmed to the contractowner. The contractowner may terminate the
portfolio rebalancing option or re-enroll at any time by calling or writing
LNY.
The portfolio rebalancing program is not available following the annuity com-
mencement date. Currently, there is no charge for this service. However, we
reserve the right to impose one. This program is not available if you are
utilizing the DCA program, AWS, or cross-reinvestment service.
Lincoln Financial Group
Lincoln Financial Group is the marketing name for Lincoln National Corporation
(NYSE:LNC) and its affiliates. With headquarters in Philadelphia, Lincoln Fi-
nancial Group has consolidated assets of over $103 billion and annual consoli-
dated revenues of $6.8 billion. Through its wealth accumulation and protection
businesses, the company provides annuities, life insurance, 401(k) plans,
life-health reinsurance, mutual funds, institutional investment management and
financial planning and advisory services.
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
LNY serves. As of the date of this SAI, LNY was serving over 400 employer con-
tracts and more than 149,000 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 1999 LNY had statutory admitted assets of over $2 bil-
lion.
Financial Statements
The statutory-basis financial statements of LNY appear on the following pages.
B-7
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
BALANCE SHEETS -- STATUTORY BASIS
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------- --------------
<S> <C> <C>
ADMITTED ASSETS
CASH AND INVESTED ASSETS:
Bonds $1,482,592,831 $1,435,882,019
- ------------------------------------------------------------
Unaffiliated common stocks 161,005 155,039
- ------------------------------------------------------------
Mortgage loans on real estate 197,425,386 184,503,805
- ------------------------------------------------------------
Policy loans 177,437,149 170,372,567
- ------------------------------------------------------------
Cash and short-term investments 29,467,267 143,546,873
- ------------------------------------------------------------
Other invested assets 223,126 60,000
- ------------------------------------------------------------
Receivable for securities 1,313,866 3,477,120
- ------------------------------------------------------------ -------------- --------------
Total cash and invested assets 1,888,620,630 1,937,997,423
- ------------------------------------------------------------
Premiums and fees in course of collection 6,578,363 6,959,116
- ------------------------------------------------------------
Accrued investment income 29,296,814 25,925,055
- ------------------------------------------------------------
Other admitted assets 38,442,338 438,335
- ------------------------------------------------------------
Separate account assets 328,767,871 236,861,781
- ------------------------------------------------------------ -------------- --------------
Total admitted assets $2,291,706,016 $2,208,181,710
- ------------------------------------------------------------ ============== ==============
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits and claims $ 853,572,463 $ 851,746,596
- ------------------------------------------------------------
Other policyholder funds 951,347,964 962,725,311
- ------------------------------------------------------------
Other liabilities 25,045,378 44,824,520
- ------------------------------------------------------------
Federal income taxes recoverable -- (3,206,611)
- ------------------------------------------------------------
Asset valuation reserve 7,884,503 5,374,594
- ------------------------------------------------------------
Interest maintenance reserve 956,570 5,051,304
- ------------------------------------------------------------
Net transfers due from separate accounts (8,262,299) (6,915,063)
- ------------------------------------------------------------
Separate account liabilities 328,767,871 236,861,781
- ------------------------------------------------------------ -------------- --------------
Total liabilities 2,159,312,450 2,096,462,432
- ------------------------------------------------------------
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 384,128,481 384,128,481
- ------------------------------------------------------------
Unassigned surplus -- deficit (253,734,915) (274,409,203)
- ------------------------------------------------------------ -------------- --------------
Total capital and surplus 132,393,566 111,719,278
- ------------------------------------------------------------ -------------- --------------
Total liabilities and capital and surplus $2,291,706,016 $2,208,181,710
- ------------------------------------------------------------ ============== ==============
</TABLE>
See accompanying notes. S-1
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------ -------------- ------------
<S> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Premiums and deposits $172,708,594 $1,291,566,984 $184,112,330
- ------------------------------------------------------------
Net investment income 132,213,228 105,083,579 43,953,796
- ------------------------------------------------------------
Surrender and administrative charges 2,401,973 2,834,073 1,334,705
- ------------------------------------------------------------
Mortality and expense charges on deposit funds 2,937,632 1,980,728 1,548,722
- ------------------------------------------------------------
Amortization of the interest maintenance reserve 925,547 579,137 370,129
- ------------------------------------------------------------
Other revenues 2,127,634 536,698 183,048
- ------------------------------------------------------------ ------------ -------------- ------------
Total revenues 313,314,608 1,402,581,199 231,502,730
- ------------------------------------------------------------
BENEFITS AND EXPENSES:
Benefits and settlement expenses 207,985,159 1,320,787,190 72,475,389
- ------------------------------------------------------------
Commissions 17,665,459 274,529,390 2,459,308
- ------------------------------------------------------------
Underwriting, insurance and other expenses 32,297,064 28,064,172 8,012,925
- ------------------------------------------------------------
Net transfers to separate accounts 28,255,807 33,875,951 141,027,195
- ------------------------------------------------------------ ------------ -------------- ------------
Total benefits and expenses 286,203,489 1,657,256,703 223,974,817
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before dividends to
policyholders, federal income taxes (benefit) and net
realized loss on investments 27,111,119 (254,675,504) 7,527,913
- ------------------------------------------------------------
Dividends to policyholders 5,624,728 3,375,629 --
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before federal income taxes
(benefit) and net realized loss on investments 21,486,391 (258,051,133) 7,527,913
- ------------------------------------------------------------
Federal income taxes (benefit) (427,033) (4,561,826) 1,942,625
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before net realized loss on
investments 21,913,424 (253,489,307) 5,585,288
- ------------------------------------------------------------
Net realized loss on investments (2,012,331) (721,449) (73,398)
- ------------------------------------------------------------ ------------ -------------- ------------
Net income (loss) $ 19,901,093 $ (254,210,756) $ 5,511,890
- ------------------------------------------------------------ ============ ============== ============
</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 January 1, 1997 $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 service -- -- (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
Add (deduct):
Net income -- -- 19,901,093 19,901,093
- -------------------------------------------------
Increase in unrealized capital losses -- -- (939,080) (939,080)
- -------------------------------------------------
Decrease in nonadmitted assets -- -- 187,322 187,322
- -------------------------------------------------
Increase in asset valuation reserve -- -- (2,509,909) (2,509,909)
- -------------------------------------------------
Increase in liability for reinsurance in
unauthorized companies -- -- (605,340) (605,340)
- -------------------------------------------------
Gain on reinsurance transaction -- -- 4,640,202 4,640,202
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1999 $2,000,000 $384,128,481 $(253,734,915) $ 132,393,566
- ------------------------------------------------- ========== ============ ============= =============
</TABLE>
See accompanying notes. S-3
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------- -------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds and other considerations received $ 172,535,360 $1,284,669,810 $184,112,330
- ------------------------------------------------------------
Investment income received 138,850,106 96,331,551 43,781,378
- ------------------------------------------------------------
Benefits paid (204,263,171) (83,399,329) (85,008,691)
- ------------------------------------------------------------
Insurance expenses paid (96,041,640) (351,272,500) (154,355,904)
- ------------------------------------------------------------
Federal income taxes received (paid) (656,134) 1,703,193 (1,893,859)
- ------------------------------------------------------------
Dividends paid to policyholders (5,921,665) 2,651,237 --
- ------------------------------------------------------------
Other income received, less other expenses paid 1,653,592 39,064,672 1,613,631
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by (used in) operating activities 6,156,448 989,748,634 (11,751,115)
- ------------------------------------------------------------
INVESTING ACTIVITIES
Sale, maturity or repayment of investments 294,554,595 249,409,117 272,961,178
- ------------------------------------------------------------
Purchase of investments (369,356,711) (1,280,892,696) (265,700,363)
- ------------------------------------------------------------
Net decrease (increase) in policy loans (7,064,582) (131,317,640) 1,554,149
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by (used in) investing activities (81,866,698) (1,162,801,219) 8,814,964
- ------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Capital and surplus paid-in -- 156,721,000 158,407,481
- ------------------------------------------------------------
Other (38,369,356) (3,895,136) (11,032,743)
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by financing activities (38,369,356) 152,825,864 147,374,738
- ------------------------------------------------------------ ------------- -------------- ------------
Net increase (decrease) in cash and short-term investments (114,079,606) (20,226,721) 144,438,587
- ------------------------------------------------------------
Total cash and short-term investments at beginning of year 143,546,873 163,773,594 19,335,007
- ------------------------------------------------------------ ------------- -------------- ------------
Total cash and short-term investments at end of year $ 29,467,267 $ 143,546,873 $163,773,594
- ------------------------------------------------------------ ============= ============== ============
</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").
In 1996, the Company was organized under the laws of the state of New York
as a life insurance company and received approval from the New York
Insurance Department (the "Department") to operate as a licensed insurance
company in the State of New York.
The Company's principal business consists of underwriting annuities,
deposit-type contracts and life insurance sold through multiple distribution
channels. The Company conducts business only in the State of New York.
USE OF ESTIMATES
The nature of the insurance business 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") effective January 1, 2001. 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
state of New York must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Department. At this time, it is anticipated that New York
will adopt Codification, however, based on current guidance, management
believes that the impact of Codification will not be material to the
Company's statutory-basis financial statements.
Existing statutory accounting practices differ from accounting principles
generally accepted in the United States ("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 commitments 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 a NAIC prescribed
formula and is reported as a liability rather than a reduction to unassigned
surplus. Under GAAP, realized capital gains and losses
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)
are reported in the income statement on a pretax 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 furniture and
equipment, are excluded from the accompanying balance sheets and are charged
directly to unassigned surplus.
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.
PREMIUMS AND DEPOSITS
Premiums and deposits with respect to universal life policies and annuity
and other investment-type contracts consist of the entire premium received
and are reported as premium revenue. Under GAAP, premiums and deposits
received in excess of policy charges would not be recognized as premium
revenue.
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. 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. For traditional life and
disability income products, benefits and expenses are recognized when
incurred in a manner consistent with the related premium recognition
policies.
REINSURANCE
Commissions on business ceded are reported as income when received rather
than deferred and amortized with deferred policy acquisition costs as
required under GAAP. 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, policy benefits and contract liabilities
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 federal income taxes are not provided for differences between
financial statement amounts and tax bases of assets and liabilities.
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)
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
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.
STATEMENTS OF 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)
----------------------------------------------------------------------------
DECEMBER 31 YEAR ENDED DECEMBER 31
1999 1998 1999 1998 1997
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(IN THOUSANDS)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts as reported on a
statutory -- basis
$132,394 $111,719 $ 19,901 $(254,211) $ 5,512
-----------------------------------
GAAP adjustments:
Net unrealized gain (loss) on
investments (74,971) 27,851 -- -- --
-----------------------------------
Interest maintenance reserve (792) 5,051 458 (579) (370)
-----------------------------------
Net realized gain (loss) on
investments (1,951) (990) (6,348) 3,050 (240)
-----------------------------------
Asset valuation reserve 7,885 5,375 -- -- --
-----------------------------------
Policy and contract reserves (72,302) (85,875) 25,985 271,293 (3,667)
-----------------------------------
Present value of future profits,
deferred policy acquisition
costs and goodwill 369,032 336,568 (6,639) 6,091 524
-----------------------------------
Policyholders' share of earnings
and surplus on participating
business (9,325) (9,904) 1,071 (100) --
-----------------------------------
Deferred income taxes 17,505 35,280 (12,159) (12,696) 671
-----------------------------------
Nonadmitted assets 1,685 880 -- -- --
-----------------------------------
Other, net 4,304 (1,705) (2,096) (82) --
----------------------------------- -------- -------- -------- --------- -------
Net increase (decrease) 241,070 312,531 272 266,977 (3,082)
----------------------------------- -------- -------- -------- --------- -------
Amounts on a GAAP -- basis $373,464 $424,250 $ 20,173 $ 12,766 $ 2,430
----------------------------------- ======== ======== ======== ========= =======
</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 principal balances.
Mortgage loans on real estate are reported at unpaid principal 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, mortgage loans, and common stocks are credited or charged
directly in unassigned surplus.
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 disability 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 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 inforce, 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.
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 through December 31. 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 unpaid claims and claim adjustment
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)
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.
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 and universal life 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
statutory-basis 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.
2. INVESTMENTS
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, 1999:
Corporate $1,214,312,519 $ 908,731 $(65,599,479) $1,149,621,771
--------------------------------
U.S. government 25,736,299 11,711 (1,900,750) 23,847,260
--------------------------------
Foreign government 17,602,777 362,624 (1,070,496) 16,894,905
--------------------------------
Mortgage-backed 221,570,519 2,732 (9,530,799) 212,042,452
--------------------------------
State and municipal 3,370,717 -- (105,915) 3,264,802
-------------------------------- -------------- ----------- ------------ --------------
$1,482,592,831 $ 1,285,798 $(78,207,439) $1,405,671,190
============== =========== ============ ==============
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
============== =========== ============ ==============
</TABLE>
S-9
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The carrying amount of investments in bonds in the balance
sheet at December 31, 1999 and 1998 reflects adjustments of
$1,123,693 and $178,648, respectively, to decrease amortized
cost as a result of the Securities Valuation Office 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, 1999, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
COST OR
AMORTIZED FAIR
COST VALUE
-----------------------------------
<S> <C> <C>
Maturity:
In 2000 $ 64,699,324 $ 64,449,287
------------------------------------------------------------
In 2001-2004 360,685,026 351,609,953
------------------------------------------------------------
In 2005-2009 490,969,108 462,139,167
------------------------------------------------------------
After 2009 344,668,854 315,430,331
------------------------------------------------------------
Mortgage-backed securities 221,570,519 212,042,452
------------------------------------------------------------ -------------- --------------
Total $1,482,592,831 $1,405,671,190
------------------------------------------------------------ ============== ==============
</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.
Proceeds from sales of investments in bonds were $253,876,450, $203,748,028
and $274,742,319 in 1999, 1998 and 1997, respectively. Gross gains of
$842,229, $3,612,434 and $1,533,793, and gross losses of $6,968,975,
$1,529,149 and $1,922,165 during 1999, 1998 and 1997, respectively, were
realized on those sales. Net gains (losses) of ($186), $17,705 and ($26)
were realized on sales of short-term investments in 1999, 1998 and 1997,
respectively.
At December 31, 1999 and 1998, investments in bonds with an admitted asset
value of $500,078 and $500,129, respectively, were on deposit with the
Department to satisfy regulatory requirements.
During 1999, 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, 1999, 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.
S-10
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The major categories of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Income:
Bonds $106,590,150 $ 78,205,686 $42,237,959
--------------------------------------------------
Mortgage loans on real estate 13,522,104 14,304,385 --
--------------------------------------------------
Policy loans 11,018,423 7,981,377 1,990,613
--------------------------------------------------
Cash and short-term investments 2,391,977 5,893,453 315,328
-------------------------------------------------- ------------ ------------ -----------
Total investment income 133,522,654 106,384,901 44,543,900
----------------------------------------------------
Investment expenses 1,309,426 1,301,322 590,104
---------------------------------------------------- ------------ ------------ -----------
Net investment income $132,213,228 $105,083,579 $43,953,796
---------------------------------------------------- ============ ============ ===========
</TABLE>
Realized capital gains and losses are reported net of federal income taxes
of $437,941, $1,223,897 and $55,541 in 1999, 1998 and 1997, respectively,
and amounts transferred to the interest maintenance reserve of $3,169,187,
$3,035,887 and $239,459 in 1999, 1998 and 1997, respectively.
At December 31, 1999, 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 $80,156,000 was
incurred. The Company utilized $9,162,000 of the net operating loss to
recover taxes paid in prior years. In 1999, an additional $10,170,000 of net
operating loss was utilized to offset taxable income. The remaining portion
of the net operating loss at December 31, 1999 of $60,824,000 will be
available for use to offset taxable income in future years. The net
operating loss carryforward of $60,824,000 will expire in 2013.
The Company paid $3,675,000 in 1997 for federal income taxes. No federal
income tax payments were made in 1999 or 1998. The Company received a refund
of $3,196,000 in 1999 as a result of the utilization of the net operating
loss.
4. REINSURANCE
The Company cedes insurance to other companies, including affiliated
companies. The portion of risks exceeding the Company's retention limits 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 ("CIGNA"). 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 obligations. The Company also received assets, measured
on a historical statutory-basis, equal to the liabilities. Subsequent to the
CIGNA transaction, the
S-11
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
4. REINSURANCE (CONTINUED)
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 on January 2, 1998. This
sale closed on October 12, 1998 with an effective date of September 1, 1998.
During 1999, the Company received $5,800,000 from CIGNA as a result of the
final settlement of the statutory-basis values of assets and liabilities for
the reinsured business. The $5,800,000 is included in the statements of
operations line item "Other revenues." Additionally, on November 1, 1999,
the Company and Lincoln Life closed the previously announced agreement to
retrocede virtually 100% of the disability income business assumed from
CIGNA. This retrocession agreement was effective November 1, 1999. A gain on
the transaction of $4.6 million was recorded directly in unassigned surplus,
net of tax.
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.
The balance sheet caption, "Future policy benefits and claims" has been
reduced for insurance ceded by $97,457,160 and $54,411,763 at December 31,
1999 and 1998, respectively. The balance sheet caption, "Other policyholder
funds" has been reduced for insurance ceded by $2,290,826 and $2,722,404 at
December 31, 1999 and 1998, respectively.
The caption "Premiums and deposits" in the statements of operations includes
$140,394,771 and $1,276,884,778 of insurance assumed and $44,245,573 and
$52,443,264 of insurance ceded in 1999 and 1998, respectively.
The caption "Benefits and settlement expenses" in the statements of
operations is net of reinsurance recoveries of $71,763,962 and $47,526,681
for 1999 and 1998, respectively.
The regulatory required liability for unsecured reserves ceded to
unauthorized reinsurers was $1,287,400 and $682,060 at December 31, 1999 and
1998, respectively. Amounts payable or recoverable for reinsurance on policy
and contract liabilities are not subject to periodic or maximum limits. At
December 31, 1999, 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, 1999 and 1998, the Company had $1,149,964,000 and
$1,092,754,000, respectively, 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 $5,893,549 and $6,937,379 at December 31, 1999 and 1998,
respectively.
At December 31, 1999, 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 adjustment $ 338,886,028 26.5%
------------------------------------------------------------
At book value, less surrender charge 123,141,771 9.6
------------------------------------------------------------
At market value 319,140,374 24.9
------------------------------------------------------------
Subject to discretionary withdrawal without adjustment:
At book value with minimal or no charge or adjustment 487,578,243 38.1
------------------------------------------------------------
Not subject to discretionary withdrawal 10,884,302 .9
------------------------------------------------------------ -------------- ------
Total annuity reserves and deposit fund liabilities, before
reinsurance 1,279,630,718 100.0%
======
Less reinsurance 2,560,424
------------------------------------------------------------ --------------
Net annuity reserves and deposit fund liabilities, including
separate accounts $1,277,070,294
------------------------------------------------------------ ==============
</TABLE>
A reconciliation of the total net annuity reserves and deposit fund
liabilities to the amounts reported in the Company's 1999 Annual Statement
and the Company's Separate Accounts Annual Statement at December 31, 1999 is
as follows:
<TABLE>
<S> <C>
Per 1999 Annual Statement:
Exhibit 8, Section B -- Total (net) $ 10,029,253
------------------------------------------------------------
Exhibit 8, Section C -- Total (net) 1,122,910
------------------------------------------------------------
Exhibit 10, Column 1, Line 19 946,777,757
------------------------------------------------------------ --------------
957,929,920
------------------------------------------------------------
Per Separate Account Annual Statement:
------------------------------------------------------------
Exhibit 6, Column 2, Line 0299999 Page 3, Line 3 319,140,374
------------------------------------------------------------ --------------
319,140,374
--------------
Total net annuity reserves and deposit fund liabilities $1,277,070,294
------------------------------------------------------------ ==============
</TABLE>
Details underlying the balance sheet caption "Other policyholder funds" are
as follows:
<TABLE>
<S> <C> <C>
DECEMBER 31
1999 1998
------------ ------------
Premium deposit funds $920,665,883 $931,230,214
------------------------------------------------------------
Undistributed earnings on participating business 30,544,045 30,772,519
------------------------------------------------------------
Other 138,036 722,578
------------------------------------------------------------ ------------ ------------
$951,347,964 $962,725,311
============ ============
</TABLE>
6. CAPITAL AND SURPLUS
The Company received additional paid-in surplus from Lincoln Life of
$158,407,481 and $156,721,000 in 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,
1999, the Company exceeds the RBC requirements.
S-13
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
6. CAPITAL AND SURPLUS (CONTINUED)
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, 1999, 27,534 shares of LNC common stock were subject to
options granted to Company employees under the stock option incentive plans
of which 8,934 were exercisable on that date. The exercise prices of the
outstanding options range from $21.32 to $50.83. During 1999 and 1998, 3,740
and 137 options, respectively, were exercised. During 1999, 2,400 options
were forfeited.
8. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES
VULNERABILITY FROM CONCENTRATIONS
At December 31, 1999, 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 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
effect 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
S-14
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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 prices; 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.
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.
S-15
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
<S> <C> <C> <C> <C>
-------------------------------------------------------------
<CAPTION>
DECEMBER 31
1999 1998
---------------------------------------------------------------
(IN THOUSANDS)
---------------------------------------------------------------
ASSETS (LIABILITIES)
<S> <C> <C> <C> <C>
-----------------------------------------------
Bonds $1,482,593 $1,405,671 $1,435,882 $1,462,743
-----------------------------------------------
Unaffiliated common stocks 161 161 155 155
-----------------------------------------------
Mortgage loans on real estate 197,425 189,179 184,504 185,694
-----------------------------------------------
Policy loans 177,437 190,667 170,373 183,408
-----------------------------------------------
Cash and short-term investments 29,467 29,467 143,547 143,547
-----------------------------------------------
Other invested assets 223 223 60 60
-----------------------------------------------
Investment-type insurance contracts (951,348) (910,752) (962,725) (938,191)
-----------------------------------------------
Separate account assets 328,768 328,768 236,862 236,862
-----------------------------------------------
Separate account liabilities (328,768) (328,768) (236,862) (236,862)
-----------------------------------------------
</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 $22,675,891, $18,504,450 and $3,454,014 in 1999, 1998 and
1997, 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 $1,359,279, $273,952 and $578,003 in
1999, 1998 and 1997, 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 $1,309,426,
$1,501,592 and $558,011 in 1999, 1998 and 1997, 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 $6,269,272 and
$2,095,019 for premiums paid on these contracts in 1999 and 1998,
respectively. The caption "Future policy benefits and claims" has been
reduced by $2,323,435 and $2,583,702 related to reserve credits taken on
these contracts as of December 31, 1999 and 1998, respectively.
11. SEPARATE ACCOUNTS
Separate account premiums, deposits and other considerations amounted to
$109,574,216 and $73,993,993 in 1999 and 1998, respectively. Reserves for
separate accounts with assets at fair value were $320,413,080 and
$229,940,273 at December 31, 1999 and 1998, 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 contractholder.
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 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
------------------------------
<S> <C> <C>
Transfers as reported in the Summary of Operations of
various Separate Accounts:
Transfers to separate accounts $109,574,216 $ 73,993,993
------------------------------------------------------------ ------------ ------------
Transfers from separate accounts (81,318,409) (40,118,042)
------------------------------------------------------------ ------------ ------------
Net transfer to separate accounts as reported in the
Company's NAIC Annual Statement -- Summary of Operations $ 28,255,807 $ 33,875,951
------------------------------------------------------------ ============ ============
</TABLE>
12. CENTURY COMPLIANCE (UNAUDITED)
The Year 2000 issue was complex and affected many aspects of the Company's
business. The Company was particularly concerned with Year 2000 issues that
related to the Company's computer systems and interfaces with the computer
systems of vendors, suppliers, customers and business partners. From 1996
through 1999 the Company redirected a large portion of internal Information
Technology ("IT") efforts and contracted with outside consultants to update
systems to address Year 2000 issues. Experts were engaged to assist in
developing work plans and cost estimates and to complete remediation
activities.
For the year ended December 31, 1999, the Company identified expenditures of
$124,000 to address this issue. This brings the expenditures for 1996
through 1999 to $208,000. Because updating systems and procedures is an
integral part of the Company's on-going operations, most of the expenditures
shown above are expected to continue after all Year 2000 issues have been
resolved. All Year 2000 expenditures have been funded from operating cash
flows.
The scope of the overall Year 2000 program included 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 Company
completed these projects prior to year-end.
The Company's businesses have not identified any major problems in their
business processing. Minor problems have been resolved quickly. The
Company's businesses have not experienced any significant interruption in
service to clients or business partners or in reporting to regulators.
S-17
<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, 1999 and 1998, and the related statutory-basis
statements of operations, changes in capital and surplus, and
cash flows for each of the three years in the period ended
December 31, 1999. 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 auditing standards
generally accepted in the United States. 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 accounting principles
generally accepted in the United States. The variances between
such practices and accounting principles generally accepted in
the United States 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 accounting
principles generally accepted in the Untied States, the
financial position of Lincoln Life & Annuity Company of New York
at December 31, 1999 and 1998, or the results of its operations
or its cash flows for each of the three years in the period
ended December 31, 1999.
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, 1999 and 1998, the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting practices
prescribed or permitted by the New York Insurance Department.
March 10, 2000
S-18
<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, 1999 and 1998
Statements of Operations Statutory-Basis--Years ended December 31, 1999,
1998 and 1997
Statements of Changes in Capital and Surplus Statutory-Basis--Years ended
December 31, 1999, 1998 and 1997.
Statements of Cash Flows Statutory-Basis--Years ended December 31, 1999, 1998,
and 1997.
Notes to Statutory-Basis Financial Statements--December 31, 1999
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 incorporated herein by reference to
Registration Statement on Form N-4 (333-38007) filed on October 12, 1999.
(3)(b) Form of Selling Group Agreement incorporated herein by reference to
Registration Statement on Form N-4 (333-38007) filed on October 12, 1999.
(4) Variable Annuity Contract.
(5) Application incorporated herein by reference to Registration Statement on
Form N-4 (333-38007) filed on October 12, 1999.
(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 incorporated herein by reference
to Registration Statement on Form N-4 (333-38007) filed on October 12,
1999.
(8)(b) Form of Fund Participation Agreement incorporated herein by reference to
Registration Statement on Form N-4 (333-38007) filed on October 12, 1999.
(8)(c) Amended and Restated Service Agreement between The Lincoln National Life
Insurance Company and Lincoln Life & Annuity Company of New York
incorporated herein by reference to Registration Statement on Form N-4
(333-38007) filed on October 12, 1999.
(9) Opinion and consent of Robert O. Sheppard, Counsel of Lincoln Life &
Annuity Company of New York as to legality of securities being issued
incorporated herein by reference to Registration Statement on Form N-4
(333-38007) filed on October 12, 1999.
(10) Consent of Ernst & Young LLP, Independent Auditors
(11) Not applicable.
(12) Not applicable.
(13) Schedule for Computation for Performance Quotations incorporated herein
by reference to Registration Statement on Form N-4 (333-38007) filed on
October 12, 1999.
(14) Not applicable.
(15) 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 H 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
1301 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
Robert O. Sheppard*.............................. Assistant Vice President
Richard C. Vaughan***............................ Director
C. Suzanne Womack***............................. 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, Section 2, 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(a)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements of,
New York 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., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., New World Fund, 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.
Lincoln National Variable Annuity Account E, and Lincoln National Flexible
Premium Variable Life Accounts F and J (all registered as investment companies
under the 1940 Act) and Lincoln National Flexible Premium Group Variable Annuity
Accounts 50, 51 and 52 are all segregated investment accounts of Lincoln Life
which also invests in the series. The series also offers shares of the funds to
other segregated investment accounts.
(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
1501 N. University,
Suite 227A
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 80301-3508
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
29003 Colonial Drive
Georgetown, TX 78628
Alan Brown Regional Vice President
4129 Laclede Avenue
St. Louis, MO 63108
B 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
--------------------- ---------------------
H Carlo O. Cordasco Assistant Vice President
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
William Daugherty Regional Vice President
1216 Highlander Way
Mechanicsburg, PA 17055
Daniel 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
100 Merrick Road, Suite 216W
Rockville Centre, NY 11570
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 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
------------------ ----------------------
Daniel B. Frick Regional Vice President
845 Western Avenue
Glen Ellyn, IL 60137
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
H Mary Pat Harris Assistant Vice President
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
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
Gary A. Peace Regional Vice President
291 Kaanapali Drive
Napa, CA 94558
Samuel W. Perry Regional Vice President
6133 Calle del Paisano
Scottsdale, AZ 85251
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 Vice President
Steven J. Reitman Senior Vice President
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President
244 Lambeau Lane
Glenville, NC 28736
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
Brad W. Short Regional Vice President
306 15th Street
Seal Beach, CA 90740
David W. Short Chairman of the Board and
1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer
Pittsburgh, PA 15238
William P. Simon Senior Vice President
912 Castlehill Lane
Devon, PA 91333
L John C. Smith Vice President-Institutional
Investment Services
Rodney G. Smith Vice President
100 N. Central Expressway,
Suite 1214
Richardson, TX 75080
S Sherrie L. Snyder-Senft Assistant Vice President
Anthony L. Soave Regional Vice President
8831 Morning Mist Drive
Clarkston, MI 48348
Therese L. Souiller Assistant Vice President
2652 Excaliber Court
Virginia Beach, VA 23454
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
LW Eric H. Stern Director
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 J. Wenzel Regional Vice President
3406 Shakespeare Drive
Troy MI 48084
J.D. Wiedmaier Assistant Vice President
3513 Riverstone Way
Chesapeake, VA 23325
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, Senior 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 15(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 certifies that it meets the requirements of Securities
Rule 485(b) for effectiveness of this Amendment and has caused this Amendment to
the Registration Statement to be signed on its behalf, in the City of Syracuse,
and State of New York on this 17th day of May, 2000.
Lincoln Life & Annuity Variable
Annuity Account H - Legacy III
(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 Amendment to the
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 May 17, 2000
- --------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
/s/ Troy D. Panning Second Vice President and May 17, 2000
- --------------------------------------- Chief Financial Officer
Troy D. Panning (Principal Financial Officer
and Principal Accounting
Officer)
- --------------------------------------- Director May 17, 2000
Roland C. Baker
/s/ J. Patrick Barrett
- --------------------------------------- Director May 17, 2000
J. Patrick Barrett
- --------------------------------------- Director May 17, 2000
Thomas D. Bell, Jr.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jon A. Boscia
- --------------------------------------- Director May 17, 2000
Jon A. Boscia
- --------------------------------------- Director May 17, 2000
John H. Gotta
/s/ Barbara S. Kowalczyk
- --------------------------------------- Director May 17, 2000
Barbara S. Kowalczyk
- --------------------------------------- Director May 17, 2000
M. Leanne Lachman
/s/ Louis G. Marcoccia
- --------------------------------------- Director May 17, 2000
Louis G. Marcoccia
- --------------------------------------- Director May 17, 2000
John M. Pietruski
- --------------------------------------- Director May 17, 2000
Lawrence T. Rowland
/s/ Robert D. Bond
- --------------------------------------- Director May 17, 2000
Robert D. Bond
/s/ Richard C. Vaughan
- --------------------------------------- Director May 17, 2000
Richard C. Vaughan
</TABLE>
<PAGE>
Exhibit 4
Lincoln Abraham Lincoln
- -------
Financial Group XX-0123456
Lincoln Life & Annuity Company of New York
Home Office Location. 120 Madison St, Suite 1700
Syracuse, New York 13202
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 representative through whom it was purchased, or to the Servicing Office
of LL&A at 1300 S. Clinton Street, P.O. Box 2348, Fort Wayne, Indiana 46801-
2348. When the Contract is received at the Servicing Office, LL&A will return
the value of the Variable Account and/or the value of the Fixed Account of the
Contract as of the date of cancellation where permitted by law. If this Contract
is issued as an IRA, then the entire amount of Purchase Payments made shall be
returned.
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 1.25%, the smallest rate of investment return
required to ensure that the dollar amount of variable annuity payments does not
decrease is 5.25% 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.
PRESIDENT ASSISTANT SECRETARY
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Article Page
<S> <C> <C>
I Definitions................................................... 4
2 Purchase Payments, Options and Benefits....................... 6
3 Annuity Payment Option Benefits............................... 13
4 Beneficiary................................................... 16
5 General Provisions............................................ 17
6 Annuity Purchase Rates Under a Variable Payment Option........ 19
7 Annuity Purchase Rates Under A Fixed Payment Option........... 20
8 Guaranteed Values for Fixed Allocations....................... 21
</TABLE>
<PAGE>
CONTRACT DATA
Contract 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
FIXED ACCOUNT
Current Interest Rate: [X%]
Minimum Guaranteed Interest Rate: 3%
VARIABLE ACCOUNT
There are currently [eleven] 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.
Page 3
<PAGE>
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.
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.
Page 3.1
<PAGE>
ARTICLE I
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
Data Page 3 to the anniversary of the Contract in the following year.
1.14
DEATH BENEFIT -- The amount payable upon death of the Owner or Annuitant.
Page 5
<PAGE>
1.15
EARNINGS -- The excess of the Contract Value over Purchase Payments which have
not yet been Withdrawn from this Contract.
1.16
FUND -- Underlying investment options available in the Series.
1.17
FIXED ACCOUNT -- The fixed portion of this Contract which is invested in the
general account of LL&A.
1.18
HOME OFFICE -- The principal office of LL&A located at 120 Madison Street, Suite
1700, Syracuse, New York, 13202.
1.19
LL&A -- Lincoln Life & Annuity Company of New York.
1.20
MATURITY DATE -- The date specified on Page 3 of this Contract. The Maturity
Date may not be deferred past the Annuitant's age 90.
1.21
OWNER -- The individual or entity who exercises rights of ownership under this
contract.
1.22
PURCHASE PAYMENTS - Amounts paid into this Contract.
1.23
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.
1.24
SERIES -- American Variable Insurance Series, the mutual fund into which
Purchase Payments allocated to the Variable Account are invested.
1.25
SERVICING OFFICE -- The Servicing Office of LL&A is located at 1300 S. Clinton
Street, P. 0. Box 2348, Fort Wayne, Indiana 46801.
1.26
SUB-ACCOUNT -- That portion of the Variable Account which pertains to
investments in the Accumulation Units and Annuity Units of a particular Fund.
1.27
VALUATION DATE -- Close of the market of each day that the New York Stock
Exchange is open for business.
1.28
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.
1.29
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.
Page 6
<PAGE>
ARTICLE 2
PURCHASE PAYMENTS, OPTIONS, AND BENEFITS
2.01 WHERE PAYABLE
All Purchase Payments must be made to LL&A or to its designated agent(s).
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.
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 Subaccount 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
Page 7
<PAGE>
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% on 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,
termination of Contract upon 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.
Page 8
<PAGE>
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 of the
Valuation Date the transfer 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 $25 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 Contingent Deferred Sales Charge (CDSC) outlined under Surrender Option
(see Section 2.10). However, the Owner may withdraw up to the Free Amount during
a Contract Year, in up to four withdrawals, without incurring a CDSC. The Free
Amount is equal to the greater of:
a. 10% of the Contract Value, where the percentages are based upon the Contract
Value at the time of the current withdrawal, to the extent that the sum of
the percentages of the Contract Value withdrawn does not exceed the 10%
maximum; or
b. 10% of the total Purchase Payments, where the percentages are based upon the
total Purchase Payments to the Contract at the time of the current
withdrawal, to the extent that the sum of the percentages of the Purchase
Payments withdrawn does not exceed the 10% maximum.
This 10% withdrawal exemption from the CDSC does not apply to a surrender of
this Contract.
For purposes of calculating the CDSC on withdrawals, LL&A assumes that:
a. The Free Amount will be withdrawn from Purchase Payments on a "first in-first
out (FIFO)" basis.
b. Prior to the seventh anniversary of the Contract Date, any amount withdrawn
above the Free Amount during a Contract Year will be withdrawn in the
following order:
1. from Purchase Payments (on a FIFO basis) until exhausted; then
2. from Earnings.
c. On or after the seventh anniversary of the Contract Date, any amount
withdrawn above the Free Amount during a Contract Year will be withdrawn in
the following order:
1. from Purchase Payments (on a FIFO basis) to which a CDSC no longer applies
until exhausted; then
2. from Earnings until exhausted; then
3. from Purchase Payments (on a FIFO basis) to which a CDSC still applies.
A withdrawal will be effective on the Valuation Date on which LL&A receives a
written request for withdrawal at its Home 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.
Page 9
<PAGE>
The Withdrawal Option is not available after the Annuity Commencement Date.
A partial withdrawal will result in a decrease in the Annuity Account Value by
an amount with an aggregate dollar value equal to the dollar amount of the cash
withdrawal payment, plus or minus any applicable with-drawal charge and premium
taxes. This will also result in a pro rata reduction in any Death Benefit
payable under this Contract.
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:
Number of complete CDSC as a percentage
Contract Years that of the surrendered
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%
A CDSC will be waived under certain circumstances (see Section 2.13 for
details).
2.12 DEATH BENEFITS
Before the Annuity Commencement Date
Entitlement
If there is a single Owner, upon the death of the Owner LL&A will pay a Death
Benefit to the designated Beneficiary(s) in accordance with the terms of Article
4. If the designated Beneficiary of the Death Benefit is the surviving spouse of
the deceased Owner, the spouse may elect to continue the contract as the new
Owner. If there are no designated beneficiaries, LL&A will pay a Death Benefit
to the Owner's estate. Upon the death of the spouse 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 the new Owner in accordance with Article 4.
If there are Joint Owners, upon the death of the first Joint Owner, LL&A will
pay a Death Benefit to the surviving Joint Owner. If the surviving Joint Owner
is the spouse of the deceased Joint Owner, then the spouse may elect to continue
the Contract as sole Owner. Upon the death of the Joint Owner who continues the
Contract, LL&A will pay a Death Benefit to the designated Beneficiary(s) in
accordance with Article 4.
If the Annuitant is also the Owner or a Joint Owner, then the Death Benefit paid
on the death of the Annuitant will be subject to the Contract provisions
regarding death of Owner. If the surviving spouse of the Owner/Annuitant 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 Owner or a Joint Owner dies, then the Contingent
Annuitant, if named, becomes the Annuitant and no Death Benefit is payable on
the death of the Annuitant. If no Contingent Annuitant is named, the Owner (or
younger of Joint Owners) becomes the Annuitant. In lieu of continuing the
Contract, a Death Benefit may be paid to the Owner and Joint Owner (in equal
shares if applicable) if the Annuitant named on this Contract has not been
changed, except on death of a prior Annuitant, and notification of the election
of the Death Benefit is received by LL&A with 75 days of the death of the
Annuitant. If no Owner is living on the date of death of the Annuitant, the
Death Benefit will be paid to the Beneficiary in accordance with Article 4. This
Contract will terminate when any Death Benefit is paid due to the death of the
Annuitant. A Death Benefit payable on the death of the Annuitant will not be
paid if the Annuitant has been changed subsequent to the effective date of this
Contract unless the change occurred because of the death of a prior Annuitant.
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 Death Benefit will be paid if LL&A is in receipt of: (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 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, the payment of
Death Benefits provided under this Contract must be made in compliance with 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 called the Enhanced Guaranteed Minimum
Death Benefit (EGMDB), if in effect. If the EGMDB was not available at issue or
was terminated, then the Death Benefit is equal to 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) prior to the 81st birthday
of the deceased and prior to the death of the deceased.
The highest Contract Value is increased by Purchase Payments subsequent to such
anniversary date on which the highest Contract Value is obtained. The highest
Contract Value 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.
Upon the death of an Owner or Joint Owner of this Contract, if a surviving
spouse continues the Contract, the EGMDB payable on the death of the deceased
spouse is equal to the excess of "b." over "a." (if "a." is greater than "b.",
then no Death Benefit is payable on the first death). This EGMDB will be
credited into the Contract and will only apply one time for each Contract. This
Contract option is not available upon the death of the Annuitant.
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
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b. the sum of all Purchase Payments decreased by partial withdrawals, partial
annuitizations, and premium tax made, effected or incurred subsequent to the
inception date.
Upon the death of an Owner or Joint Owner of this Contract, if the surviving
spouse continues the Contract and if the EGMDB is not in effect, the Guarantee
of Principal payable on the death of the deceased spouse is equal to the excess
of "b." over "a." (if "a." is greater than "b.", then no Death Benefit is
payable on the first death). This Guarantee of Principal is credited into the
Contract and will only apply one time for each Contract. This Contract option is
not available upon the death of the Annuitant.
The EGMDB will not be in effect if this Contract is issued to an Owner, Joint
Owner if applicable, and Annuitant with attained ages of 80 or greater at issue.
Under these circumstances, there will be no EGMDB provided and the Death Benefit
is equal to the Guarantee of Principal.
The EGMDB will only be in effect, unless terminated by the Owner, for Non-
Qualified Contracts and Contracts sold as Individual Retirement Annuities (IRA)
under Code Section 408(b) and Roth Individual Retirement Annuities under Code
Section 408A. For all other Contracts the EGMDB will not be in effect and the
Death Benefit is equal to the Guarantee of Principal.
If the Contract is continued by the surviving spouse, the EGMDB will continue,
if it was in effect at the time of death of the original Owner, unless
subsequently terminated by the surviving spouse. A surviving spouse who
continues the Contract cannot add the EGMDB to the Contract.
At any time prior to the Annuity Commencement Date, an Owner may choose to
terminate the EGMDB by giving written notice to LL&A, 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. After the termination of the EGMDB by the Owner,
the EGMDB may not be re-selected.
Payment of Amounts
The Death Benefit payable on the death of the Owner, or after the death of the
first Joint 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 later than one year after the
Owner's date of death.
The Death Benefit payable on the death of the Annuitant will be distributed to
the Owner and Joint Owner if applicable in either the form of a lump sum or an
Annuity Payment Option. An Annuity Payment Option must be selected within 60
days after LL&A approves the death claim as discussed previously.
If a lump sum settlement is elected, the proceeds will be mailed within seven
days of approval by LL&A of the claim. This payment may be postponed as
permitted by the Investment Company Act of 1940.
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 Joint Owner, if any; otherwise 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.
On receipt of due proof of death, as described above, 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 at the time of death of the
Annuitant(s); otherwise, to the Beneficiary. If there is no Beneficiary, any
remaining benefit payments will continue to the Annuitant's estate.
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2.13 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 Free Amount as (defined in Section 2.09); (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 payment of a Death Benefit on the death of the Owner or a Joint
Owner or the Annuitant; (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 2.13.
2.14 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.
2.15 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.
. The minimum balance in the holding account to establish a dollar cost
averaging program is $10,000.
. Any time frame between 6 to 60 months may be selected for the dollar cost
averaging 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.
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2.16 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 Subaccounts ("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.
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.
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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. In addition, the Owner may select an Annuity Payment
Option as a method of paying the Death Benefit to a Beneficiary. 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. If any Annuity Payment Option with a period certain provides
for installment payments of the same amounts at some ages for different periods
certain, LL&A will deem an election to have been made for the longest period
certain which could have been elected for such age and amount.
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 shown 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.
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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 Article 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.
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 Subaccount 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.
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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). If there is a single Owner, the
designated Beneficiary(s) will receive the Death Benefit proceeds upon the death
of the Owner.
If there are Joint Owners, upon the death of the first Joint Owner, the
surviving Joint Owner will receive the Death Benefit proceeds. The surviving
Joint Owner will be treated as the primary, designated Beneficiary. Any other
Beneficiary designation on record at the time of death will be treated as a
contingent Beneficiary.
If the surviving Joint Owner is the spouse of the deceased Joint Owner and
continues the Contract as the sole Owner, then the designated Beneficiary(s)
move up, in the order of their original designation, to replace the spouse as
original Beneficiary, unless the Beneficiary designation is subsequently changed
by the surviving spouse as the new Owner.
Unless otherwise stated in the Beneficiary designation, if there is more than
one Beneficiary they are presumed to share equally.
If the Annuitant dies and a Death Benefit is paid, the Owner (and Joint Owner if
applicable) will be treated as primary Beneficiary(s). Any other Beneficiary
designation on record at the time of death will be treated as a contingent
Beneficiary.
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 as of the date it was
signed by the Owner 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.
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.
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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 LUA, 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.
The Owner may name a Joint Owner. Joint Owner(s) shall be treated as having
equal, undivided interests in the Contract, including rights of survivorship.
Either Joint Owner, independently of the other, may exercise any ownership
rights in the Contract.
Any transfer of Ownership, or a revocation of transfer, must be in writing to
LL&A at its Servicing Office. A transfer or a revocation will not take effect
until received in writing at LL&A's Servicing Office. When a transfer or
revocation has been received, it will take effect as of the effective date
specified by the Owner. Any payment made or any action taken or allowed by the
Company before the transfer or the revocation is recorded will be without
prejudice to the Company.
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 nonnatural 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 by LL&A
shall be charged against the annuity payments failing 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.
Page 17
<PAGE>
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 report 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. Any other information required
by law will also be included in the report. 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 Owner at least once in each 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
The Owner, Joint Owner, and Annuitant must be under the age of 90 when this
Contract is issued.
Page 18
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Age Male Female Male Female Male Female Male Female
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
<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 ????? 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
<CAPTION>
Age Adjustment Table
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>
19
<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 4.03 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
<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
<CAPTION>
Age Adjustment Table
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>
20
<PAGE>
ARTICLE 8
GUARANTEED ACCUMULATED VALUES AND SURRENDER VALUES
FOR FIXED ALLOCATIONS*
<TABLE>
<CAPTION>
$1,000 Annual Contribution
Guaranteed Guaranteed
End of Accumulated Surrender
Year Value Value
<S> <C> <C>
1 $ 1,030.00 $ 970.00
2 2,090.90 1,970.90
3 3,183.63 3,013.63
4 4,309.14 4,099.14
5 5,468.41 5,228.41
6 6,662.46 6,402.46
7 7,892.34 7,622.34
8 9,159.11 8,889.11
9 10,463.88 10,193.88
10 11,807.80 11,537.80
11 13,192.03 12,922.03
12 14,617.79 14,347.79
13 16,086.32 15,816.32
14 17,598.91 17,328.91
15 19,156.88 18,886.88
16 20,761.59 20,491.59
17 22,414.44 22,144.44
18 24,116.87 23,846.87
19 25,870.37 25,600.37
20 27,676.49 27,406.49
21 29,536.78 29,266.78
22 31,452.88 31,182.88
23 33,426.47 33,156.47
24 35,459.26 35,189.26
25 37,553.04 37,283.04
26 39,709.63 39,439.63
27 41,930.92 41,660.92
28 44,218.85 43,948.85
29 46,575.42 46,305.42
30 49,002.68 48,732.68
31 51,502.76 51,232.76
32 54,077.84 53,807.84
33 56,730.18 56,460.18
34 59,462.08 59,192.08
35 62,275.94 62,005.94
36 65,174.22 64,904.22
37 68,159.45 67,889.45
38 71,234.23 70,964.23
39 74,401.26 74,131.26
40 77,663.30 77,393.30
41 81,023.20 80,753.20
42 84,483.89 84,213.89
43 88,048.41 87,778.41
44 91,719.86 91,449.86
45 95,501.46 95,231.46
<CAPTION>
$100 Monthly Contribution
Guaranteed Guaranteed
End of Accumulated Surrender
Year Value Value
<S> <C> <C>
1 $ 1,219.41 $ 1,147.41
2 2,475.41 2,331.41
3 3,769.08 3,565.08
4 5,101.56 4,849.56
5 6,474.02 6,186.02
6 7,887.66 7,575.66
7 9,343.70 9,019.70
8 10,843.42 10,519.42
9 12,388.14 12,064.14
10 13,979.19 13,655.19
11 15,617.98 15,293.98
12 17,305.93 16,981.93
13 19,044.52 18,720.52
14 20,835.27 20,511.27
15 22,679.74 22,355.74
16 24,579.54 24,255.54
17 26,536.34 26,212.34
18 28,551.84 28,227.84
19 30,627.81 30,303.81
20 32,766.06 32,442.06
21 34,968.45 34,644.45
22 37,236.91 36,912.91
23 39,573.43 39,249.43
24 41,980.05 41,656.05
25 44,458.86 44,134.86
26 47,012.04 46,688.04
27 49,641.81 49,317.81
28 52,350.48 52,026.48
29 55,140.41 54,816.41
30 58,014.03 57,690.03
31 60,973.86 60,649.86
32 64,022.49 63,698.49
33 67,162.58 66,838.58
34 70,396.87 70,072.87
35 73,728.18 73,404.18
36 77,159.44 76,835.44
37 80,693.64 80,369.64
38 84,333.86 84,009.86
39 88,083.29 87,759.29
40 91,945.20 91,621.20
41 95,922.96 95,598.96
42 100,020.07 99,696.07
43 104,240.08 103,916.08
44 108,586.69 108,262.69
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 take into
consideration premium taxes (if any), or any withdrawals and/or transfers of
assets from the fixed account.
21
<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 I-L&A.
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
Home Office:
120 Madison Street
Suite 1700
Syracuse, New York 13202
800-893-7168
Servicing Office:
1300 S. Clinton Street
P. 0. Box 2348
Fort Wayne, IN 46801-2348
800-942-5500
22
<PAGE>
This page intentionally
left blank.
23
<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 Post 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 24, 2000, with
respect to the statutory-basis financial statements of Lincoln Life & Annuity
Company of New York.
Fort Wayne, Indiana
May 15, 2000
<PAGE>
PC Docs 12752 3/8/99
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 Jersey - Insurance Agency |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| |
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
|
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
|
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (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 |
<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-MutualFund 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 |
<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 |
<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 |
<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 |
<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 10% owned by Old Fort Ins. Co. Ltd.) |
| |
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
|
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
|
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Allied Westminster & Company Limited |
| | | (fka One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| |
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| |
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| |
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| |
| |--| Lincoln Financial Advisers Limited |
| | | (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 |
<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 |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| |
| |--|Lincoln Assurance Limited |
| | | 100% ** - England/Wales - Life Assurance |
| | | |
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | |
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | |
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | |
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment
| | | | |(Inactive) |
| | | |
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | |
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | |
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension |
| | | | | Fund (Inactive) |
| | | |
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| | |
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | |
| |--| LIV Limited (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.
<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)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act ast Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (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.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Southwest Financial Group, Inc. -- company's term of
existence expired July 18, 1998.
<PAGE>
Exhibit 15(b)
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.
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
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
</TABLE>
(b) Every registered investment company shall maintain and keep current the
following books, accounts, and other documents:
Type of Record
- --------------
(1) Journals (or other records of original entry) containing an itemized daily
record in detail of all purchases and sales of securities (including sales and
redemptions of its own securities), all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash and all other debits and
credits. Such records shall show for each such transaction the name and quantity
of securities, the unit and aggregate purchase or sale price, commission paid,
the market on which effected, the trade date, the settlement date, and the name
of the person through or from whom purchased or received or to whom sold or
delivered.
<TABLE>
<S> <C> <C> <C>
Purchases and Sales Journals
- --------------------------------
Daily reports CSRM Nancy Alford Permanently, the first two
of securities Finance Eric Jones years in an easily accessible
transactions place
Portfolio Securities
- ----------------------
C--Port Purchase/ Finance Eric Jones Permanently, the first two
Sales Reports years in an easily accessible
place
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
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 Rept) place
</TABLE>
(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>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
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
daily reports accessible place
of securities
transactions
</TABLE>
(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>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
Trial Balance
- -------------
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
</TABLE>
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio securities
to named brokers or dealers and the division of brokerage commissions or other
compensation on such purchase and sale orders among named persons were made
during such quarter. The record shall indicate the consideration given to (a)
sales of shares of the investment company by brokers or dealers, (b) the
supplying of services or benefits by brokers or dealers to the investment
company, its investment advisor or principal underwriter or any persons
affiliated therewith, and (c) any other considerations other than the technical
qualifications of the brokers and the dealers as such. The record shall show the
nature of their services or benefits made available, and shall describe in
detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sales orders and such
division of brokerage commissions or other compensation. The record shall also
include the identifies of the person responsible for the determination of such
allocation and such division of brokerage commissions or other compensation.
Not Applicable.
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph are
applicable to the extent they are not met by compliance with the requirements of
paragraph 4 of this Rule 31a1(b).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Advisory Legal Products and Distribution, Six years, the first two
Agreements LNL Law Division years in an easily accessible
place
</TABLE>
(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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Correspondence CSRM Nancy Alford Six years, the first two
years in an easily accessible
place
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
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 years
ments in an easily accessible place
</TABLE>
March 16, 2000
