<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1997
1933 Act Registration No. 333-
1940 Act Registration No. 811-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. / /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. / /
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
(EXACT NAME OF REGISTRANT)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1300 South Clinton Street, P.O. Box 1110, Fort Wayne, Indiana 46802
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE
(219) 455-2000
<TABLE>
<S> <C>
COPY TO:
Jack D. Hunter, Esquire Kimberly J. Smith, Esquire
200 East Berry Street Sutherland, Asbill & Brennan LLP
P.O. Box 1110 1275 Pennsylvania Ave., N.W.
Fort Wayne, Indiana 46802 Washington, D.C. 20004
(NAME AND ADDRESS OF
AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
Title of Securities: Interests in a separate account under individual flexible
payment deferred variable annuity contracts.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND
PART B (STATEMENT OF ADDITIONAL INFORMATION)
OF REGISTRATION STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ----------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
1. Cover Page...................................... Cover Page
2. Definitions..................................... Definitions
3. Synopsis........................................ Highlights; Fees and Expenses
4. Condensed Financial Information................. Condensed Financial Information
5. General.........................................
(a) Depositor................................... Lincoln Life and the Variable Account
(b) Registrant.................................. Lincoln Life and the Variable Account
(c) Portfolio Company The Funds
(d) Fund Prospectus The Funds
(e) Voting Rights............................... The Funds -- Voting Rights
6. Deductions and Expenses
(a) General..................................... Charges and Deductions
(b) Sales Load %................................ Charges and Deductions -- Contingent Deferred Sales
Charge (Sales Load)
(c) Special Purchase Plan....................... N/A
(d) Commissions................................. Distribution of the Contracts
(e) Fund Expenses............................... Fees and Expenses -- Fund Portfolio Annual Expenses
(f) Organizational Expenses..................... N/A
7. Contracts
(a) Persons with Rights......................... Other Contract Features (Ownership, Assignment,
Beneficiary, Change of Beneficiary, Annuitant,
Surrenders and Partial Withdrawals, Death of Owner,
Death of Annuitant); Annuity Provisions; Voting Rights
(b) (i) Allocation of Premium Payments.......... Premium Payments and Contract Value -- Allocation of
Premium Payments
(ii) Transfers.................................. Transfer of Contract Values Between Sub-Accounts
(iii) Exchanges................................. N/A
(c) Changes..................................... Modification; Substitution of Securities; Change in
Operation of Variable Account
(d) Inquiries................................... Cover Page; Highlights
8. Annuity Period.................................. Annuity Provisions
9. Death Benefit................................... Death of the Owner; Death of the Annuitant
10. Purchase and Contract Values
(a) Purchases................................... Premium Payments
(b) Valuation................................... Contract Value; Accumulation Unit;
(c) Daily Calculation........................... Accumulation Unit; Allocation of Premium Payments
(d) Underwriter................................. Distribution of the Contracts
11. Redemptions
(a) By Owners................................... Surrenders
By Annuitant.................................... Annuity Provisions -- Variable Options
(b) Texas ORP................................... N/A
(c) Check Delay................................. Delay of Payments and Transfers
(d) Lapse....................................... Premium Payments
(e) Free Look................................... Highlights
12. Taxes........................................... Tax Matters
13. Legal Proceedings............................... Legal Proceedings
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ----------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
14. Table of Contents for the Statement of
Additional Information......................... Table of Contents of the Statement of Additional
Information
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ----------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
15. Cover Page...................................... Cover Page
16. Table of Contents............................... Table of Contents
17. General Information and History................. a) N/A
b) N/A
c) (Prospectus) Lincoln Life and the Variable Account;
the Fixed Account
18. Services
(a) Fees and Expenses of Registrant............. N/A
(b) Management Contracts........................ N/A
(c) Custodian................................... Custody of Assets
Independent Accountant.......................... Experts
(d) Assets of Registrant........................ N/A
(e) Affiliated Person........................... N/A
(f) Principal Underwriter....................... Distribution of the Contracts
19. Purchase of Securities Being Offered............ Distribution of the Contracts
Offering Sales Load............................. Distribution of the Contracts; (Prospectus) Charges and
Deductions -- Contingent Deferred Sales Charge (Sales
Load)
20. Underwriters.................................... Distribution of the Contracts; (Prospectus) Distribution
of the Contracts
21. Calculation of Performance Data................. Investment Experience; Historical Performance Data
22. Annuity Payments................................ (Prospectus) Annuity Provisions
23. Financial Statements............................ Financial Statements
</TABLE>
PART C -- OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART C CAPTION
- ----------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
24. Financial Statements and Exhibits............... Financial Statements and Exhibits
(a) Financial Statements........................ Financial Statements
(b) Exhibits.................................... Exhibits
25. Directors and Officers of the Depositor......... Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant............... Persons Controlled By or Under Common Control with the
Depositor or Registrant
27. Number of Owners................................ Number of Owners
28. Indemnification................................. Indemnification
29. Principal Underwriters.......................... Principal Underwriter
30. Location of Accounts and Records................ Location of Accounts and Records
31. Management Services............................. Management Services
32. Undertakings.................................... Undertakings
Signature Page.................................. Signatures
</TABLE>
ii
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
HOME OFFICE: ADMINISTRATIVE OFFICE:
1300 S. CLINTON STREET
FORT WAYNE, IN 46802
- --------------------------------------------------------------------------------
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
The Flexible Payment Deferred Variable Annuity Contracts (the "Contracts")
described in this prospectus provide for accumulation of Contract Values and
eventual payment of monthly annuity payments on a fixed or variable basis. The
Contracts are designed to aid individuals in long term planning for retirement
or other long term purposes. The Contracts are available for retirement plans
which do not qualify for the special federal tax advantages available under the
Internal Revenue Code ("Non-Qualified Plans") and for retirement plans which do
qualify for the federal tax advantages available under the Internal Revenue Code
("Qualified Plans"). (See "Tax Matters -- Qualified Plans.") Premium payments
for the Contracts will be allocated to a segregated investment account of The
Lincoln National Life Insurance Company ("Lincoln Life"), designated Lincoln
Life Variable Annuity Account N (the "Variable Account"), or to the Fixed
Account, or some combination of them, as selected by the owner of the Contract.
The following funding options are available under a Contract: Through the
Variable Account, Lincoln Life offers twenty-one diversified open-end management
investment companies (commonly called mutual funds), each with a different
investment objective: Alger American Fund -- Alger American Small Capitalization
Portfolio, Alger American Leveraged AllCap Portfolio, Alger American MidCap
Growth Portfolio and Alger American Growth Portfolio; Lincoln National Money
Market Fund; Fidelity Variable Insurance Products Fund -- Equity-Income
Portfolio, High Income Portfolio and Overseas Portfolio; Fidelity Variable
Insurance Products Fund II -- Investment Grade Bond Portfolio and Contra Fund
Portfolio; Fidelity Variable Insurance Products Fund III -- Growth Opportunities
Portfolio; MFS-Registered Trademark- Variable Insurance Trust -- MFS Total
Return Series, MFS Utilities Series, MFS Emerging Growth Series, MFS Research
Series and MFS Growth With Income Series; Neuberger & Berman Advisers Management
Trust -- Limited Maturity Bond Portfolio and Partners Portfolio; OCC
Accumulation Trust -- Global Equity Portfolio, Managed Portfolio and Small Cap
Portfolio. The fixed interest option offered under a Contract is the Fixed
Account. Premium payments or transfers allocated to the Fixed Account, and 3%
interest per year thereon, are guaranteed, and additional interest may be
credited, with certain withdrawals subject to a Market Value Adjustment and
withdrawal charges. Unless specifically mentioned, this prospectus only
describes the variable investment options.
This entire prospectus, and those of the Funds, should be read carefully before
investing to understand the Contracts being offered. The "Statement of
Additional Information" dated , 1998, has been filed with the
Securities and Exchange Commission and is incorporated by reference to this
Prospectus. It is available at no charge by calling or writing Lincoln Life's
Administrative Office as shown above, provides further information. Its Table of
Contents is at the end of this prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE MUTUAL FUNDS AVAILABLE AS FUNDING OPTIONS FOR THE CONTRACTS OFFERED BY THIS
PROSPECTUS. ALL PROSPECTUSES SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED: , 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
DEFINITIONS.................................... 3
HIGHLIGHTS..................................... 5
FEES AND EXPENSES.............................. 7
CONDENSED FINANCIAL INFORMATION................ 11
LINCOLN LIFE AND THE VARIABLE ACCOUNT.......... 11
THE FUNDS...................................... 12
General...................................... 15
Substitution of Securities................... 15
Voting Rights................................ 15
PREMIUM PAYMENTS AND CONTRACT VALUE............ 16
Premium Payments............................. 16
Allocation of Premium Payments............... 16
Optional Variable Account Sub-Account
Allocation Programs......................... 17
Dollar Cost Averaging...................... 17
Automatic Rebalancing...................... 18
Contract Value............................... 18
Accumulation Unit............................ 18
CHARGES AND DEDUCTIONS......................... 19
Contingent Deferred Sales Charge (Sales
Load)....................................... 19
Mortality and Expense Risk Charge............ 20
Administrative Expense Charge................ 20
Account Fee.................................. 20
Premium Tax Equivalents...................... 21
Income Taxes................................. 21
Fund Expenses................................ 21
Transfer Fee................................. 21
DEATH BENEFITS................................. 21
Death Benefits Provided by the Contract...... 21
Amount of Death Benefit...................... 22
Election and Effective Date of Election...... 22
Death of the Annuitant before the Annuity
Date........................................ 23
Death of the Annuitant after the Annuity
Date........................................ 23
OTHER CONTRACT FEATURES........................ 23
Ownership.................................... 23
Assignment................................... 24
Beneficiary.................................. 24
Change of Beneficiary........................ 24
Annuitant.................................... 24
Transfer of Contract Values between Sub-
Accounts.................................... 24
Procedures for Telephone Transfers........... 25
<CAPTION>
CONTENTS PAGE
<S> <C>
Surrenders and Partial Withdrawals........... 26
Delay of Payments and Transfers.............. 26
Change in Operation of Variable Account...... 27
Modification................................. 27
Discontinuance............................... 27
ANNUITY PROVISIONS............................. 27
Annuity Date; Change in Annuity Date and
Annuity Option.............................. 27
Penalty-Free Annuitization................... 28
Annuity Options.............................. 28
Fixed Options................................ 28
Variable Options............................. 29
Evidence of Survival......................... 30
Endorsement of Annuity Payments.............. 30
THE FIXED ACCOUNT.............................. 30
Market Value Adjustment...................... 32
DISTRIBUTION OF THE CONTRACTS.................. 33
PERFORMANCE DATA............................... 33
Money Market Sub-Account..................... 33
Other Variable Account Sub-Accounts.......... 34
Performance Ranking or Rating................ 34
TAX MATTERS.................................... 35
General...................................... 35
Diversification.............................. 35
Distribution Requirements.................... 36
Multiple Contracts........................... 37
Tax Treatment of Assignments................. 37
Withholding.................................. 37
Section 1035 Exchanges....................... 37
Tax Treatment of Withdrawals -- Non-Qualified
Contracts................................... 37
Qualified Plans.............................. 38
Section 403(b) Plans......................... 38
Individual Retirement Annuities.............. 39
Corporate Pension and Profit-Sharing Plans
and H.R. 10 Plans........................... 39
Deferred Compensation Plans.................. 39
Tax Treatment of Withdrawals -- Qualified
Contracts................................... 39
FINANCIAL STATEMENTS........................... 40
LEGAL PROCEEDINGS.............................. 40
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION........................ 41
</TABLE>
2
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD: The period from the Effective Date to
the Annuity Date, the date on which the Death Benefit
becomes payable or the date on which the Contract is
surrendered or annuitized, whichever is earliest.
ACCUMULATION UNIT: A measuring unit used to calculate the
value of the Owner's interest in each funding option used in
the variable portion of the Contract prior to the Annuity
Date.
ADMINISTRATIVE OFFICE: The administrative office of Lincoln
National Life Insurance Company, located at .
ANNUITANT: A person designated by the Owner in writing upon
whose continuation of life any series of payments for a
definite period or involving life contingencies depends. If
the Annuitant dies before the Annuity Date, the Owner
becomes the Annuitant until naming a new Annuitant.
ANNUITY ACCOUNT VALUE: The value of the Contract at any
point in time.
ANNUITY DATE: The date on which annuity payments commence.
ANNUITY OPTION: The arrangement under which annuity payments
are made.
ANNUITY PERIOD: The period starting on the Annuity Date.
ANNUITY UNIT: A measuring unit used to calculate the portion
of annuity payments attributable to each funding option used
in the fixed and variable portion of the Contract on and
after the Annuity Date.
BENEFICIARY: The person entitled to the Death Benefit, who
must also be the "Designated Beneficiary", for purposes of
Section 72(s) of the Code, upon the Owner's death.
CERTIFICATE: The document which evidences the participation
of an Owner in a group contract.
CODE: The Internal Revenue Code of 1986, as amended.
CONTRACT: The Variable Annuity Contract described in this
prospectus (or the certificate evidencing the Owner's
participation in a group contract).
CONTRACT ANNIVERSARY, CONTRACT YEAR, EFFECTIVE DATE: The
Contract's Effective Date is the date it is issued. It is
also the date on which the first Contract Year, a 12-month
period, begins. Subsequent Contract Years begin on each
Contract Anniversary, which is the anniversary of the
Effective Date.
CONTRACT MONTH: The period from one Monthly Anniversary Date
to the next.
CONTRACT OWNER (OR OWNER): The person(s) initially
designated in the application or order to purchase or
otherwise, unless later changed, as having all ownership
rights under the Contract; is the Certificate Owner under a
group contract.
FIXED ACCOUNT: Those Sub-Accounts associated with Guaranteed
Periods and Guaranteed Rates. Fixed Account Assets are
maintained in Lincoln Life's General Account and not
allocated to the Variable Account.
FIXED ANNUITY: An annuity with payments which do not vary as
to dollar amount.
FUND(S): One or more of Alger American Fund -- Alger
American Small Capitalization Portfolio, Alger American
Leveraged AllCap Portfolio, Alger American MidCap Growth
Portfolio and Alger American Growth Portfolio; Lincoln
National Money Market Fund; Fidelity Variable Insurance
Products Fund -- Fund Equity-Income Portfolio, High Income
3
<PAGE>
Portfolio and Overseas Portfolio; Fidelity Variable
Insurance Products Fund II -- Investment Grade Bond
Portfolio and Contra Fund Portfolio; Fidelity Variable
Insurance Products Fund III -- Growth Opportunities
Portfolio; MFS-Registered Trademark- Variable Insurance
Trust -- MFS Total Return Series, MFS Utilities Series, MFS
Emerging Growth Series, MFS Research Series and MFS Growth
with Income Series; Neuberger & Berman Advisers Management
Trust -- Limited Maturity Bond Portfolio and Partners
Portfolio; OCC Accumulation Trust -- Global Equity
Portfolio, Managed Portfolio and Small Cap Portfolio. Each
is an open-end management investment company (mutual fund)
whose shares are available to fund the benefits provided by
the Contract.
GUARANTEED INTEREST RATE: The rate of interest credited by
Lincoln Life on a compound annual basis during a Guaranteed
Period.
GUARANTEED PERIOD: The period for which interest, at either
an initial or subsequent Guaranteed Interest Rate, will be
credited to any amounts which an Owner allocates to a Fixed
Account Sub-Account. In most states in which these Contracts
are issued, this period may be one, five or ten years, as
elected by the Owner.
GUARANTEED PERIOD AMOUNT: Any portion of a Purchaser's
Annuity Account Value allocated to a specific Guaranteed
Period with a specified Expiration Date (including credited
interest thereon).
INDEX RATE: An index rate based on the Treasury Constant
Maturity Series published by the Federal Reserve Board.
IN WRITING: In a written form satisfactory to Lincoln Life
and received by Lincoln Life at its Administrative Office.
LINCOLN LIFE: Lincoln National Life Insurance Company.
MONTHLY ANNIVERSARY DATE: The monthly anniversary of the
Effective Date, as shown on the specifications page of the
Contract.
NON-QUALIFIED CONTRACTS: A Contract used in connection with
a retirement plan which does not receive favorable federal
income tax treatment under Code Section 401, 403, 408, or
457. The owner of a Non-Qualified Contract must be a natural
person or an agent for a natural person in order for the
Contract to receive favorable income tax treatment as an
annuity.
PAYEE: A recipient of payments under the Contract.
PREMIUM PAYMENT: Any amount paid to Lincoln Life cleared in
good funds as consideration for the benefits provided by the
Contract. Includes the initial Premium Payment and
subsequent Premium Payments.
QUALIFIED CONTRACT: A Contract used in connection with a
retirement plan which receives favorable federal income tax
treatment under Code Section 401, 403, 408 or 457.
SHARES: Shares of a Fund.
SUB-ACCOUNT: That portion of the Fixed Account associated
with specific Guaranteed Period(s) and Guaranteed Interest
Rate(s) and that portion of the Variable Account which
invests in shares of a specific Fund.
SURRENDER (OR WITHDRAWAL): When a lump sum amount
representing all or part of the Annuity Account Value (minus
any applicable withdrawal charges, contract fees and premium
tax equivalents and adjusted by any Market Value Adjustment)
is paid to the Owner. After a full surrender, all of the
Owner's rights under the Contract are terminated. In this
prospectus, the terms "surrender" and "withdrawal" are used
interchangeably.
4
<PAGE>
SURRENDER DATE: The date Lincoln Life processes the Owner's
election to surrender the Contract or to receive a partial
withdrawal.
VALUATION DATE: Every day on which Accumulation Units are
valued, which is each day on which the New York Stock
Exchange ("NYSE") is open for business, except any day on
which trading on the NYSE is restricted, or on which an
emergency exists, as determined by the Securities and
Exchange Commission ("Commission"), so that valuation or
disposal of securities is not practicable.
VALUATION PERIOD: The period of time beginning on the day
following the Valuation Date and ending at the close of
business on the next Valuation Date. A Valuation Period may
be more than one day in length.
VARIABLE ACCOUNT: Lincoln Life Variable Annuity Account N, a
separate account of Lincoln Life under Indiana law, in which
the assets of the Sub-Account(s) funded through shares of
one or more of the Funds are maintained. Assets of the
Variable Account attributable to the Contracts are not
chargeable with the general liabilities of Lincoln Life.
VARIABLE ACCUMULATION UNIT: A unit of measure used in the
calculation of the value of each variable portion of the
Owner's Annuity Account Value during the Accumulation
Period.
VARIABLE ANNUITY UNIT: A unit of measure used in the
calculation of the value of each variable portion of the
Owner's Annuity Account Value during the Annuity Period, to
determine the amount of each variable annuity payment.
HIGHLIGHTS
Premium Payments attributable to the variable portion of the
Contracts will be allocated to a segregated asset account of
Lincoln Life which has been designated Lincoln Life Variable
Annuity Account N (the "Variable Account"). The Variable
Account invests in shares of one or more of the Funds
available to fund the Contract as selected by the Owner.
Contract Owners bear the investment risk for all amounts
allocated to the Variable Account. The Contract's provisions
may vary in some states. Inquiries about the Contracts may
be made to Lincoln Life's Administrative Office.
Procedures for purchasing a Contract are described at
"Premium Payments and Contract Value -- Premium Payments."
The Contract may be returned within 10 days after it is
received, longer in some states. It can be mailed or
delivered to either Lincoln Life or the agent who sold it.
Return of the Contract by mail is effective on being
postmarked, properly addressed and postage prepaid. Lincoln
Life will promptly refund the Contract Value in states where
permitted. This may be more or less than the Premium
Payment. In states where required, Lincoln Life will
promptly refund the Premium Payment, less any partial
surrenders. Lincoln Life has the right to allocate initial
Premium Payments to the Money Market Sub-Account until the
expiration of the right-to-examine period. If Lincoln Life
does so allocate an initial Premium Payment, it will refund
the greater of the Premium Payment, less any partial
surrenders, or the Contract Value. It is Lincoln Life's
current practice to directly allocate the initial Premium
Payment to the Fund(s) designated in the application or
order to purchase, unless state law requires a refund of
Premium Payments rather than of Annuity Account Value.
Procedures for making surrenders and partial withdrawals are
described at "Other Contract Features -- Surrenders and
Partial Withdrawals." A Contingent Deferred Sales Charge
(sales load) may be deducted in the event of a full
surrender or partial withdrawal. The Contingent Deferred
Sales Charge is imposed on Premium Payments within seven (7)
years after their being made. Contract Owners may, during
each Contract Year, withdraw up to fifteen percent (15%) of
Premium Payments made, or any
5
<PAGE>
remaining portion thereof, ("the Fifteen Percent Free")
without incurring a Contingent Deferred Sales Charge. The
Contingent Deferred Sales Charge will vary in amount,
depending upon the Contract Year in which the Premium
Payment being surrendered or withdrawn was made. For
purposes of determining the applicability of the Contingent
Deferred Sales Charge, surrenders and withdrawals are deemed
to be on a first-in, first-out basis.
The Contingent Deferred Sales Charge is found in the fee
table (See "Charges and Deductions -- Contingent Deferred
Sales Charge (Sales Load)"). The maximum Contingent Deferred
Sales Charge is 7% of Premium Payments. There may also be a
Market Value Adjustment on surrenders, withdrawals or
transfers from the Fixed Account portion of the Contract.
There is a Mortality and Expense Risk Charge which is equal,
on an annual basis, to 1.25% of the average daily net assets
of the Variable Account. This Charge compensates Lincoln
Life for assuming the mortality and expense risks under the
Contract (See "Charges and Deductions -- Mortality and
Expense Risk Charge").
There is an Administrative Expense Charge which is equal, on
an annual basis, to 0.15% of the average daily net assets of
the Variable Account (See "Charges and Deductions --
Administrative Expense Charge").
There is an annual Account Fee of $35 which is waived if the
Annuity Account Value equals or exceeds $100,000 at the end
of the Contract Year (See "Charges and Deductions -- Account
Fee").
Premium tax equivalents or other taxes payable to a state or
other governmental entity will be charged against Annuity
Account Value (See "Charges and Deductions -- Premium Tax
Equivalents").
Under certain circumstances there may be assessed a $10
transfer fee when a Contract Owner transfers Annuity Account
Values from one Sub-Account to another (See "Charges and
Deductions -- Transfer Fee").
There is a ten percent (10%) federal income tax penalty
applied to the income portion of any premature distribution
from Non-Qualified Contracts. However, the penalty is not
imposed on amounts distributed:
(a) after the Payee reaches age 59 1/2; (b) after the death
of the Contract Owner (or, if the Contract Owner is not a
natural person, the Annuitant); (c) if the Payee is totally
disabled (for this purpose, disability is as defined in
Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy)
of the Payee or for the joint lives (or joint life
expectancies) of the Payee and his or her beneficiary; (e)
under an immediate annuity; or (f) which are allocable to
Premium Payments made prior to August 14, 1982. For federal
income tax purposes, distributions are deemed to be on a
last-in, first-out basis. Different tax withdrawal penalties
and restrictions apply to Qualified Contracts issued
pursuant to plans qualified under Code Section 401, 403(b),
408 or 457. (See "Tax Matters -- Tax Treatment of
Withdrawals -- Qualified Contracts.") For a further
discussion of the taxation of the Contracts, see "Tax
Matters."
MARKET VALUE ADJUSTMENT. In certain situations, a surrender
or transfer of amounts from the Fixed Account will be
subject to a Market Value Adjustment. The Market Value
Adjustment will reflect the relationship between a rate
based on an index published by the Federal Reserve Board as
to current yields on U.S. government securities of various
maturities at the time a surrender or transfer is made
("Index Rate"), and the Index Rate at the time that the
Premium Payments being surrendered or transferred were made.
Generally, if the Index Rate at the time of surrender or
transfer is lower than the Index
6
<PAGE>
Rate at the time the Premium Payment was allocated, then the
application of the Market Value Adjustment will result in a
higher payment upon surrender or transfer. Similarly, if the
Index Rate at the time of surrender or transfer is higher
than the Index Rate at the time the Premium Payment was
allocated, the application of the Market Value Adjustment
will generally result in a lower payment upon surrender or
transfer. It is not applied against a surrender or transfer
taking place at the end of the Guaranteed Period.
FEES AND EXPENSES
CONTRACT OWNER TRANSACTION FEES
Contingent Deferred Sales Charge (as a percentage of Premium
Payments):
<TABLE>
<CAPTION>
YEARS
SINCE
PAYMENT CHARGE
---------- ------
<S> <C> <C> <C>
0-1 7%
1-2 7%
A Contract Owner may, during each Contract Year, withdraw up to
2-3 7% 15% of Premium Payments made, or any remaining portion
3-4 6% thereof, without incurring a Contingent Deferred Sales Charge.
4-5 6%
5-6 5%
6-7 4%
7+ 0
</TABLE>
<TABLE>
<S> <C> <C>
Transfer Fee........ $10
- Not imposed on the first twelve transfers during a Contract
Year. Pre-scheduled automatic dollar cost averaging or
automatic rebalancing transfers are not counted.
Account Fee......... $35 per Contract Year
- Waived if Annuity Account Value at the end of the Contract
Year is $100,000 or more.
</TABLE>
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge......... 1.25%
Administrative Expense Charge............. 0.15%
---
Total Variable Account Annual Expenses.... 1.40%
</TABLE>
7
<PAGE>
EXPENSE DATA
The purpose of the following Table is to help Purchasers and prospective
purchasers understand the costs and expenses that are borne, directly and
indirectly, by Purchasers assuming that all Premium Payments are allocated to
the Variable Account. The table reflects expenses of the Variable Account as
well as of the individual Funds underlying the Variable Sub-Accounts.
FEE TABLE
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
--------------------------------------------
ALGER ALGER ALGER
ALGER AMERICAN AMERICAN AMERICAN
AMERICAN LEVERAGED MIDCAP SMALL
GROWTH ALLCAP GROWTH CAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- ----------- -------- --------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge....... 1.25% 1.25% 1.25% 1.25%
Administrative Expense Charge........... 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual
Expenses............................... 1.40% 1.40% 1.40% 1.40%
FUND PORTFOLIO ANNUAL EXPENSES
Management Fees......................... % % % %
Other Expenses.......................... % % % %
Total Fund Portfolio Annual Expenses.... % %(1) % %
<CAPTION>
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
-----------------------------------------------------------------------------
VIP II
VIP II INVESTMENT VIP III
CONTRA VIP EQUITY GRADE VIP HIGH VIP GROWTH
FUND INCOME BOND INCOME OVERSEAS OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO FUND PORTFOLIO PORTFOLIO
----------- ----------- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge....... 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Administrative Expense Charge........... 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual
Expenses............................... 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
FUND PORTFOLIO ANNUAL EXPENSES
Management Fees......................... % % % % % %
Other Expenses.......................... % % % % % %
Total Fund Portfolio Annual Expenses.... %(2) %(2) % % %(2) %(2)
</TABLE>
- ------------------------------
(1) Included in Other Expenses of the Alger American Leveraged AllCap Portfolio
is % of interest expense.
(2) A portion of the brokerage commissions the certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest earned
on uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, Total Fund Portfolio Annual Expenses
would have been % for the VIP Equity-Income Portfolio, % for the VIP
Overseas Portfolio, % for the VIP II Contrafund Portfolio and VIP III
Growth Opportunities Portfolio.
8
<PAGE>
The table does not reflect the deductions for the annual $35 Account Fee or
premium tax equivalents. The information set forth should be considered together
with the information provided in this Prospectus under the heading "Fees and
Expenses", and in each Fund's Prospectus. All expenses are expressed as a
percentage of average account value.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
ADVISERS MANAGEMENT
MFS VARIABLE INSURANCE TRUST LINCOLN
- --------------------------------------------------------- TRUST(5) FUNDS
MFS --------------------- --------- OCC ACCUMULATION TRUST
MFS MFS GROWTH LIMITED LN ---------------------------------
TOTAL MFS EMERGING MFS WITH MATURITY MONEY GLOBAL
RETURN UTILITIES GROWTH RESEARCH INCOME PARTNERS BOND MARKET EQUITY MANAGED SMALL CAP
SERIES SERIES SERIES SERIES SERIES PORTFOLIO PORTFOLIO FUND PORTFOLIO PORTFOLIO PORTFOLIO
- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.30%
% % % % % % %(6) % % % %
%(4) %(4) %(4) %(4) %(4) % % % % % %
%(3) %(3) %(3) %(3) %(3) % % % %(7) %(7) %(7)
</TABLE>
- ------------------------------
(3) The Adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses" shall
not exceed 0.25% of the average daily net assets of the Series during the
current fiscal year. Otherwise, "Other Expenses" for the Emerging Growth
Series, Research Series, Growth With Income Series, Total Return Series and
Utilities Series would be %, %, %, % and % respectively, and
"Total Fund Portfolio Expenses" would be %, %, %, % and %
respectively, for these Series. See "Information Concerning Shares of Each
Series--Expenses."
(4) Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses".
(5) Neuberger&Berman Advisers Management Trust is divided into portfolios
("Portfolios"), each of which invests all of its net investable assets in a
corresponding series ("Series") of Advisers Management Trust.
(6) The figures reported here are "Investment Management and Administration
Fees" which include the aggregate of the administration fees paid by the
Portfolio and the management fees paid by its corresponding Series.
Similarly, "Other Expenses" includes all other expenses of the Portfolio and
its corresponding Series.
(7) The annual expenses of OCC Accumulation Trust Portfolios (the "Portfolios")
as of December 31, 1997 have been restated to reflect new management fee and
expense limitation arrangements in effect as of [May 1, 1996.] Additionally,
Other Expenses are shown gross of certain expense offsets afforded the
Portfolios which effectively lowered overall custody expenses. Effective
[May 1, 1996,] the expenses of the Portfolios were contractually limited by
OpCap Advisors so that their respective annualized operating expenses (net
of any expense offsets) do not exceed 1.25% of their respective average
daily net assets. Furthermore, through [December 31, 1997,] the annualized
operating expenses of the Managed and Small Cap Portfolios will be
voluntarily limited by OpCap Advisors so that annualized operating expenses
(net of any expense offsets) of these Portfolios do not exceed 1.00% of
their respective average daily net assets. Without such contractual and
voluntary expense limitations and without giving effect to any expense
offsets, the Management Fees, Other Expenses and Total Portfolio Annual
Expenses incurred for the fiscal year ended December 31, 1997 would have
been: %, % and %, respectively, for the Global Equity Portfolio;
%, % and %, respectively, for the Managed Portfolio; and %, %
and %, respectively, for the Small Cap Portfolio.
9
<PAGE>
EXAMPLES
The Contract Owner would pay the following expenses on a
$1,000 investment, assuming a 5% annual return on assets,
and assuming all Premium Payments are allocated to the
Variable Account:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------- -----------
<S> <C> <C> <C> <C>
1. IF THE CONTRACT IS SURRENDERED AT THE END OF THE APPLICABLE TIME PERIOD:
Alger Small Capitalization Portfolio.....................
Alger Leveraged AllCap Portfolio.........................
Alger MidCap Growth Portfolio............................
Alger Growth Portfolio...................................
Lincoln National Money Market Fund.......................
Fidelity VIP Equity-Income Portfolio.....................
Fidelity VIP High Income Portfolio.......................
Fidelity VIP Overseas Portfolio..........................
Fidelity VIP II Investment Grade Bond Portfolio..........
Fidelity VIP II Contra Fund Portfolio....................
Fidelity VIP III Growth Opportunities Portfolio..........
MFS Total Return Series..................................
MFS Utilities Series.....................................
MFS Emerging Growth Series...............................
MFS Research Series......................................
MFS Growth With Income Series............................
AMT Limited Maturity Bond Portfolio......................
AMT Partners Portfolio...................................
OCC Global Equity Portfolio..............................
OCC Managed Portfolio....................................
OCC Small Cap Portfolio..................................
2. IF THE CONTRACT IS NOT SURRENDERED OR IF IT IS ANNUITIZED:
Alger Small Capitalization Portfolio.....................
Alger Leveraged AllCap Portfolio.........................
Alger MidCap Growth Portfolio............................
Alger Growth Portfolio...................................
Lincoln National Money Market Fund.......................
Fidelity VIP Equity-Income Portfolio.....................
Fidelity VIP High Income Portfolio.......................
Fidelity VIP Overseas Portfolio..........................
Fidelity VIP II Investment Grade Bond Portfolio..........
Fidelity VIP II Contra Fund Portfolio....................
Fidelity VIP III Growth Opportunities Portfolio..........
MFS Total Return Series..................................
MFS Utilities Series.....................................
MFS Emerging Growth Series...............................
MFS Research Series......................................
MFS Growth With Income Series............................
AMT Limited Maturity Bond Portfolio......................
AMT Partners Portfolio...................................
OCC Global Equity Portfolio..............................
OCC Managed Portfolio....................................
OCC Small Cap Portfolio..................................
</TABLE>
The preceding tables are intended to assist the Owner in
understanding the costs and expenses borne, directly or
indirectly, by Premium Payments allocated to the Variable
Account. These include the expenses of the Funds, certain of
which are subject to
10
<PAGE>
expense reimbursement arrangements which may be subject to
change. See the Funds' Prospectuses. In addition to the
expenses listed above, charges for premium tax equivalents
may be applicable.
These examples reflect the annual $35 Account Fee as an
annual charge of .07% of assets, based upon an anticipated
average Annuity Account Value of $50,000.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION
Because the Sub-Accounts which are available under the
Contracts did not begin operation before the date of this
Prospectus, financial information for the Sub-Accounts is
not included in this prospectus or the Statement of
Additional Information.
LINCOLN LIFE AND THE VARIABLE ACCOUNT
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY. Lincoln Life is
a stock life insurance company incorporated under the laws
of Indiana on June 12, 1905. Lincoln Life is principally
engaged in offering life insurance policies and annuity
policies, and ranks among the largest United States stock
life insurance companies in terms of assets and life
insurance in force. Lincoln Life is also one of the leading
life reinsurers in the United States. Lincoln Life is
licensed in all states (except New York) and the District of
Columbia, Guam, and the Virgin Islands.
Lincoln Life is wholly owned by Lincoln National Corporation
("LNC"), a publicly held insurance holding company
incorporated under Indiana law on January 5, 1968. The
principal offices of both Lincoln Life and LNC are located
at 1300 South Clinton Street, Fort Wayne, Indiana 46801.
Through subsidiaries, LNC engages primarily in the issuance
of life insurance and annuities, property-casualty
insurance, and other financial services. Administrative
services necessary for the operation of the Variable Account
and the Contracts are currently provided by Lincoln Life.
THE VARIABLE ACCOUNT. The Variable Account was established
by Lincoln Life as a separate account on November 3, 1997
pursuant to a resolution of its Board of Directors. Under
Indiana insurance law, the income, gains or losses of the
Variable Account are credited to or charged against the
assets of the Variable Account without regard to the other
income, gains, or losses of Lincoln Life. These assets are
held in relation to the Contracts described in this
Prospectus, to the extent necessary to meet Lincoln Life's
obligations thereunder. Although that portion of the assets
maintained in the Variable Account equal to the reserves and
other contract liabilities with respect to the Variable
Account will not be charged with any liabilities arising out
of any other business conducted by Lincoln Life, all
obligations arising under the Contracts, including the
promise to make annuity payments, are general corporate
obligations of Lincoln Life.
The Variable Account is registered with the Commission as a
unit investment trust under the 1940 Act and meets the
definition of a separate account under the federal
securities laws. Registration with the Commission does not
involve supervision of the management or investment
practices or policies of the Variable Account or of Lincoln
Life by the Commission.
The assets of the Variable Account are divided into
Sub-Accounts. Each Sub-Account invests exclusively in shares
of a specific Fund. All amounts allocated to the Variable
Account will be used to purchase Fund shares as designated
by the Owner at their net asset value. Any and all
distributions made by the Fund with respect to the shares
held by the Variable Account will be reinvested to purchase
additional shares at their net asset value. Deductions from
the Variable Account for cash withdrawals, annuity
11
<PAGE>
payments, death benefits, account fees, mortality and
expense risk charges, administrative expense charges and any
applicable taxes will, in effect, be made by redeeming the
number of Fund shares at their net asset value equal in
total value to the amount to be deducted. The Variable
Account will purchase and redeem Fund shares on an aggregate
basis and will be fully invested in Fund shares at all
times.
THE FUNDS
Each of the twenty-one Sub-Accounts of the Variable Account
is invested solely in shares of one of the twenty-one Funds
available as funding vehicles under the Contracts. Each of
the Funds is a series of one of eight Massachusetts or
Delaware business trusts or a Maryland corporation,
collectively referred to herein as the "Trusts", each of
which is registered as an open-end, diversified management
investment company under the 1940 Act.
The Trusts and their investment advisers and distributors
are:
Alger American Fund ("Alger Trust"), managed by Fred
Alger Management, Inc., 75 Maiden Lane, New York, NY
10038; and distributed by Fred Alger & Company,
Incorporated, 30 Montgomery Street, Jersey City, NJ
07302;
Lincoln National Money Market Fund, Inc., managed by
Lincoln Investment Management, Inc. 200 East Berry St.,
Fort Wayne, IN 46802;
Variable Insurance Products Fund ("Fidelity VIP"),
Variable Insurance Products Fund II ("Fidelity VIP II")
and Variable Insurance Products Fund III ("Fidelity VIP
III"), managed by Fidelity Management & Research Company
and distributed by Fidelity Distribution Corporation, 82
Devonshire Street, Boston, MA 02103;
MFS-Registered Trademark- Variable Insurance Trust ("MFS
Trust"), managed by Massachusetts Financial Services
Company and distributed by MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116;
Neuberger & Berman Advisers Management Trust ("AMT
Trust"), managed and distributed by Neuberger & Berman
Management Incorporated, 605 Third Avenue, 2nd Floor New
York, NY 10158-0006;
OCC Accumulation Trust ("OCC Trust") (formerly Quest for
Value Accumulation Trust), managed by OpCap Advisors
(formerly Quest for Value Advisors) and distributed by
OCC Distributors (formerly Quest for Value
Distributors), One World Financial Center, New York, NY
10281.
Four Funds of ALGER Trust are available under the Contracts:
Alger American Growth Portfolio;
Alger American Leveraged AllCap Portfolio;
Alger American MidCap Growth Portfolio;
Alger American Small Capitalization Portfolio.
One Lincoln National Money Market Fund is available under
the Contracts.
Three Funds of FIDELITY VIP are available under the
Contracts:
Equity-Income Portfolio ("Fidelity VIP Equity-Income
Portfolio");
High Income Portfolio ("Fidelity VIP High Income
Portfolio");
Overseas Portfolio ("Fidelity VIP Overseas Portfolio").
12
<PAGE>
Two Funds of FIDELITY VIP II are available under the
Contracts:
Contra Fund Portfolio ("Fidelity VIP II Contra Fund
Portfolio");
Investment Grade Bond Portfolio ("Fidelity VIP II
Investment Grade Bond Portfolio").
One Fund of FIDELITY VIP III is available under the
Contracts:
Growth Opportunities Portfolio ("Fidelity VIP III Growth
Opportunities Portfolio").
Five Funds of MFS Trust are available under the Contracts:
MFS Total Return Series;
MFS Utilities Series;
MFS Emerging Growth Series;
MFS Research Series;
MFS Growth with Income Series.
Two Funds of AMT Trust are available under the Contracts:
Limited Maturity Bond Portfolio;
Partners Portfolio.
Three Funds of OCC Trust are available under the Contracts:
Global Equity Portfolio;
Managed Portfolio;
Small Cap Portfolio.
The investment advisory fees charged the Funds by their
advisers are shown in the Fee Table under Fees and Expenses
in this Prospectus.
There follows a brief description of the investment
objective and program of each Fund, which are described more
fully in the attached Fund prospectuses. There can be no
assurance that any of the stated investment objectives will
be achieved.
ALGER AMERICAN GROWTH PORTFOLIO (Large Cap Stocks): Seeks
long-term capital appreciation by investing in a
diversified, actively managed portfolio of equity
securities, primarily of companies with total market
capitalization of $1 billion or greater.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO (Large Cap
Stocks): Seeks long-term capital appreciation by investing
in a diversified, actively managed portfolio of equity
securities, with the ability to engage in leveraging (up to
one-third of assets) and options and futures transactions.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO (Mid Cap Stocks):
Seeks long-term capital appreciation by investing in a
diversified, actively managed portfolio of equity
securities, primarily of companies whose total market
capitalization lies within the range of companies included
in the S & P MidCap 400 Index.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO (Small Cap
Stocks): Seeks long-term capital appreciation by investing
in a diversified, actively managed portfolio of equity
securities, primarily of companies whose total market
capitalization lies within the range of companies included
in the Russell 2000 Growth Index or the S&P SmallCap 600
Index.
LINCOLN NATIONAL MONEY MARKET FUND (Money Market): Seeks
maximum current income consistent with the preservation of
capital. The Fund invests in short-term obligations issued
by U.S. corporations; the U.S. Government; and
federally-charted banks and U.S. branches of foreign banks.
13
<PAGE>
FIDELITY VIP II CONTRAFUND PORTFOLIO (Large Cap Stocks)
Seeks capital appreciation by investing primarily in equity
securities of companies that are undervalued or
out-of-favor.
FIDELITY VIP II INVESTMENT GRADE BOND PORTFOLIO (Fixed
Income-Intermediate Term Bonds): Seeks as high a level of
current income as is consistent with the preservation of
capital by investing in a broad range of investment-grade
fixed-income securities.
FIDELITY VIP EQUITY-INCOME PORTFOLIO (Large Cap Stocks):
Seeks reasonable income by investing primarily in
income-producing equity securities, with some potential for
capital appreciation, seeking a yield that exceeds the
composite yield on the securities comprising the Standard
and Poor's Composite Index of 500 Stocks.
FIDELITY VIP HIGH INCOME PORTFOLIO (High Yield Bonds): Seeks
high current income by investing mainly in high yielding
debt securities, with an emphasis on lower quality
securities.
FIDELITY VIP OVERSEAS PORTFOLIO (International Equity):
Seeks long term growth of capital by investing mainly in
foreign securities.
FIDELITY VIP III GROWTH OPPORTUNITIES PORTFOLIO (Large Cap
Stocks): Seeks capital growth by investing primarily in
common stocks and securities convertible into common stocks.
MFS EMERGING GROWTH SERIES (Large Cap Stocks): Seeks
long-term growth of capital by investing primarily in common
stocks of companies management believes to be early in their
life cycle but which have the potential to become major
enterprises.
MFS GROWTH WITH INCOME SERIES (Large Cap Stocks): Seeks
reasonable current income and long-term growth of capital
and income.
MFS RESEARCH SERIES (Large Cap Stocks): Seeks to provide
long-term growth of capital and future income.
MFS TOTAL RETURN SERIES (Balanced or Total Return): Seeks
primarily to obtain above-average income, (compared to a
portfolio invested entirely in equity securities) consistent
with the prudent employment of capital, and secondarily to
provide a reasonable opportunity for growth of capital and
income.
MFS UTILITIES SERIES (Specialty): Seeks capital growth and
current income (income above that available from a portfolio
invested entirely in equity securities) by investing, under
normal circumstances, at least 65% of its assets in equity
and debt securities of utility companies.
NEUBERGER&BERMAN AMT LIMITED MATURITY BOND PORTFOLIO (Short
to Intermediate Term Bonds): Seeks the highest current
income consistent with low risk to principal and liquidity;
and secondarily, total return.
NEUBERGER&BERMAN AMT PARTNERS PORTFOLIO (Large Cap Stocks):
Seeks capital growth. Invests principally in common stocks
of medium to large capitalization established companies,
using the value-oriented investment approach. The Portfolio
seeks capital growth through an investment approach that is
designed to increase capital with reasonable risk. The
portfolio manager seeks securities believed to be
undervalued based on strong fundamentals such as low
price-to-earnings ratios, consistent cash flow, and support
from asset values.
OCC GLOBAL EQUITY PORTFOLIO (International Stocks): Seeks
long-term capital appreciation through a global investment
strategy primarily involving equity securities.
OCC MANAGED PORTFOLIO (Balanced or Total Return): Seeks
growth of capital over time through investment in a
portfolio of common stocks, bonds and cash equivalents, the
percentage of which will vary based on management's
assessments of relative investment values.
14
<PAGE>
OCC SMALL CAP PORTFOLIO (Small Cap Stocks): Seeks capital
appreciation through investments in a diversified portfolio
of equity securities of companies with market
capitalizations of under $1 billion.
The Neuberger&Berman AMT Partners Portfolio,
Neuberger&Berman Limited Maturity Bond Portfolio, Fidelity
VIP Equity-Income Portfolio, Fidelity VIP II Contra Fund
Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP
Overseas Portfolio, MFS Emerging Growth Series, MFS Research
Series, MFS Total Return Series, MFS Utilities Series, OCC
Global Equity Portfolio, OCC Managed Portfolio, and the OCC
Small Cap Portfolio funds may invest in non-investment
grade, high yield, high-risk debt securities (commonly
referred to as "junk bonds"), as detailed in the individual
Fund prospectuses.
With respect to a Trust, the adviser and/or the distributor,
or an affiliate thereof, may compensate Lincoln Life (or an
affiliate) for administrative, distribution, or other
services. It is anticipated that such compensation would be
based on assets of the particular Trust attributable to the
Contracts along with certain other variable contracts issued
or administered by Lincoln Life (or an affiliate).
GENERAL
There is no assurance that the investment objective of any
of the Funds will be met. Contract Owners bear the complete
investment risk for Annuity Account Values allocated to a
Variable Account Sub-Account. Each such Sub-Account involves
inherent investment risk, and such risk varies significantly
among the Sub-Accounts. Contract Owners should read each
Fund's prospectus carefully and understand the Funds'
relative degrees of risk before making or changing
investment choices. Additional Funds may, from time to time,
be made available as investments to underlie the Contracts.
However, the right to make such selections will be limited
by the terms and conditions imposed on such transactions by
Lincoln Life (See "Premium Payments and Contract Value-
Allocation of Premium Payments").
The Funds' shares are issued and redeemed only in connection
with variable annuity contracts and variable life insurance
policies issued through separate accounts of Lincoln Life
and other life insurance companies. The Trusts do not
foresee any disadvantage to Contract Owners arising out of
the fact that shares may be made available to separate
accounts which are used in connection with both variable
annuity and variable life insurance products. Nevertheless,
the Trusts' Boards intend to monitor events in order to
identify any material irreconcilable conflicts which may
possibly arise and to determine what action, if any, should
be taken in response thereto. If such a conflict were to
occur, one of the separate accounts might withdraw its
investment in a Fund. This might force a Fund to sell
portfolio securities at disadvantageous prices.
SUBSTITUTION OF SECURITIES
If the shares of any Fund should no longer be available for
investment by the Variable Account or if, in the judgment of
Lincoln Life, further investment in such shares should
become inappropriate in view of the purpose of the Contracts
or in view of legal regulatory or federal income tax
restrictions, Lincoln Life may substitute shares of another
Fund. No substitution of securities in any Sub-Account may
take place without prior approval of the Commission and
under such requirements as it may impose.
VOTING RIGHTS
In accordance with its view of present applicable law,
Lincoln Life will vote the shares of each Fund held in the
Variable Account at special meetings of the shareholders of
the particular Trust in accordance with written instructions
received from persons having the voting interest in the
Variable Account. Lincoln Life will vote shares for which it
has not received instructions, as well as shares
attributable to it, in the same proportion as it
15
<PAGE>
votes shares for which it has received instructions. The
Trusts do not hold regular meetings of shareholders.
Shareholder votes take place whenever state law or the 1940
Act so require, for example on certain elections of Board of
Trustees, the initial approval of investment advisory
contracts and changes in investment objectives and
fundamental investment policies.
The number of shares which a person has a right to vote will
be determined as of a date to be chosen by Lincoln Life not
more than sixty (60) days prior to the meeting of the
particular Trust. Voting instructions will be solicited by
written communication at least fourteen (14) days prior to
the meeting.
PREMIUM PAYMENTS AND CONTRACT VALUE
PREMIUM PAYMENTS
The Contracts may be purchased under a flexible premium
payment plan. Premium Payments are payable in the frequency
and in the amount selected by the Contract Owner. The
initial Premium Payment is due on the Effective Date. It
must be at least $2,000. Subsequent Premium Payments must be
at least $100. These minimum amounts are not waived for
Qualified Plans. Lincoln Life reserves the right to decline
any application or order to purchase or Premium Payment. A
Premium Payment in excess of $1 million requires preapproval
by the Lincoln Life.
Lincoln Life may, at its sole discretion, offer special
premium payment programs and/or waive the minimum payment
requirements.
The Contract Owner may elect to increase, decrease or change
the frequency of Premium Payments.
If no Premium Payments have been made for three consecutive
years and the Annuity Account Value decreases to less than
$1,000 during that period, or if any partial withdrawal
decreases the Annuity Account Value to less than $1,000,
Lincoln Life reserves the right to cancel the Contract and
pay the Owner an adjusted Annuity Account Value. Lincoln
Life will provide the Owner at least 30 days advance notice
of its intended action. During the notification period, the
Owner may make an additional Premium Payment to meet the
minimum value requirements and avoid cancellation of the
Contract.
ALLOCATION OF PREMIUM PAYMENTS
Premium Payments are allocated to one or more of the
appropriate Sub-Accounts within the Variable Account and
Fixed Account as selected by the Contract Owner. For each
Variable Account Sub-Account, the Premium Payments are
converted into Accumulation Units. The number of
Accumulation Units credited to the Contract is determined by
dividing the Premium Payment allocated to the Sub-Account by
the value of the Accumulation Unit for the Sub-Account.
Lincoln Life will allocate the initial Premium Payment
directly to the Sub-Account(s) selected by the Owner unless
state law requires, during the right-to-examine period, a
refund of Premium Payments rather than Annuity Account
Value.
In such cases, the initial Premium Payment will be allocated
to the money market account until the right-to-examine
period has expired.
Transfers do not necessarily affect the allocation
instructions for payments. Subsequent payments will be
allocated as directed by the Owner; if no direction is
given, the allocation will be that which has been most
recently directed for payments by the Owner. The Owner may
change the allocation of future payments without fee,
penalty or other charge upon written notice to Lincoln
Life's Administrative Office. A change will be effective for
payments received on or after receipt of the notice of
change.
16
<PAGE>
Any Premium Payment at the time of any allocation may be
allocated to a single or multiple sub-accounts in whole
percentages (e.g., 12%). No allocation can be made which
would result in a Variable Account Sub-Account of less than
$50 or a Fixed Account Sub-Account value of less than
$2,000. Further, at this time, no more than 18 Fixed Account
and Variable Account Sub-Accounts may be opened during the
life of the Contract. Lincoln Life may expand this number at
a future date.
Lincoln Life may, at its sole discretion, waive minimum
premium allocation requirements or minimum Variable Account
Sub-Account requirements.
For initial Premium Payments, if the application for or
order to purchase a Contract is in good order, Lincoln Life
will apply the Premium Payment to the Variable Account and
credit the Contract with Accumulation Units within two
business days of receipt at the Accumulation Unit Value for
the Valuation Period during which the Premium Payment is
accepted unless state law requires, during the
right-to-examine period, a refund of Premium Payments rather
than Annuity Account Value.
If the application or order to purchase for a Contract is
not in good order, Lincoln Life will attempt to get it in
good order or Lincoln Life will return the application or
order to purchase and the Premium Payment within five
business days. Lincoln Life will not retain a Premium
Payment for more than five business days while processing an
incomplete application or order to purchase unless it has
been so authorized by the purchaser.
For each subsequent Premium Payment, Lincoln Life will apply
such payment to the Variable Account and credit the Contract
with Accumulation Units at the Accumulation Unit Value for
the Valuation Period during which each such payment was
received in good order.
OPTIONAL VARIABLE ACCOUNT SUB-ACCOUNT ALLOCATION PROGRAMS
The Contract Owner may elect to enroll in either of the
following programs. However, both programs cannot be in
effect at the same time.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected by the
Contract Owner, systematically allocates specified dollar
amounts from the Money Market Sub-Account or the One-Year
Fixed Account Sub-Account to one or more of the Contract's
Variable Account Sub-Accounts at regular intervals as
selected by the Contract Owner. By allocating on a regularly
scheduled basis as opposed to allocating the total amount at
one particular time, an Owner may be less susceptible to the
impact of market fluctuations.
Dollar Cost Averaging may be selected by establishing a
Money Market Sub-Account of at least $1,000 or a One-Year
Fixed Account Sub-Account with a value of at least $2,000.
The minimum amount per month to allocate is $50 (subject to
the 18 Sub-Account limitation described under "Allocation of
Premium Payments" above). Enrollment in this program may
occur at any time by calling or writing Lincoln Life's
Administrative Office or by providing the information
requested on the Dollar Cost Averaging election form to
Lincoln Life and ensuring that sufficient value is in the
Money Market Sub-Account or the One-year Fixed Account
Sub-Account. Transfers to any Fixed Account Sub-Account or
from a Fixed Account Sub-Account other than the One-Year
Fixed Account Sub-Account are not permitted under Dollar
Cost Averaging. Lincoln Life may, at its sole discretion,
waive Dollar Cost Averaging minimum deposit and transfer
requirements.
Dollar Cost Averaging will terminate when any of the
following occurs: (1) the number of designated transfers has
been completed; (2) the value of the Money Market Sub-
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Account or the One-Year Fixed Sub-Account is insufficient to
complete the next transfer; (3) the Owner requests
termination by telephone or in writing and such request is
received at least one week prior to the next scheduled
transfer date to take effect that month; or (4) the Contract
is surrendered.
The Dollar Cost Averaging program is not available following
the Annuity Date. There is no current charge for Dollar Cost
Averaging but Lincoln Life reserves the right to charge for
this program.
Dollar Cost Averaging will not assure a profit or protect
against a declining market.
AUTOMATIC REBALANCING
Automatic Rebalancing is an option which, if elected by the
Contract Owner, periodically restores to a pre-determined
level the percentage of Contract Value allocated to each
Variable Account Sub-Account (e.g. 20% Money Market, 50%
Growth, 30% Utilities). This pre-determined level will be
the allocation initially selected when the Contract was
purchased, unless subsequently changed. The Automatic
Rebalancing allocation may be changed at any time by
submitting a request to Lincoln Life.
If Automatic Rebalancing is elected, all Net Premium
Payments allocated to the Variable Account Sub-Accounts must
be subject to Automatic Rebalancing. The Fixed Account
Sub-Account is not available for Automatic Rebalancing.
Automatic Rebalancing may take place on either a quarterly,
semi-annual or annual basis, as selected by the Owner. Once
the rebalancing option is activated, any Variable Account
Sub-Account transfers executed outside of the rebalancing
option will terminate the Automatic Rebalancing option. Any
subsequent premium payment or withdrawal that modifies the
net account balance within each Variable Account Sub-Account
may also cause termination of the Automatic Rebalancing
option. Any such termination will be confirmed to the Owner.
The Owner may terminate the Automatic Rebalancing option or
re-enroll at any time by calling or writing Lincoln Life's
Administrative Office.
The Automatic Rebalancing program is not available following
the Annuity Date. There is no current charge for Automatic
Rebalancing but Lincoln Life reserves the right to charge
for this program.
CONTRACT VALUE
The value of the Contract is the sum of the values
attributable to the Contract for each Fixed and Variable
Sub-Account. The value of each Variable Sub-Account is
determined by multiplying the number of Accumulation Units
attributable to the Contract in the Sub-Account by the value
of an Accumulation Unit for the Sub-Account.
ACCUMULATION UNIT
Premium Payments allocated to the Variable Account are
converted into Accumulation Units. This is done by dividing
each Premium Payment by the value of an Accumulation Unit
for the Valuation Period during which the Premium Payment is
allocated to the Variable Account. The Accumulation Unit
value for each Sub-Account was or will be arbitrarily
established at the inception of the Sub-Account. It may
increase or decrease from Valuation Period to Valuation
Period. The Accumulation Unit value for a Sub-Account for
any later Valuation Period is determined as follows:
(1)The total value of Fund shares held in the Sub-Account
is calculated by multiplying the number of Fund shares
owned by the Sub-Account at the beginning 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 Valuation
Period; minus
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(2)The liabilities of the Sub-Account at the end of the
Valuation [Period]; such liabilities include daily
charges imposed on the Sub-Account, and may include a
charge or credit with respect to any taxes paid or
reserved for by Lincoln Life that Lincoln Life
determines result from the operations of the Variable
Account; and
(3)The result of (2) is divided by the number of
Sub-Account units outstanding at the beginning of the
Valuation [Period].
The daily charges imposed on a Sub-Account 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.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Annuity Account
Values and the Variable Account. These charges and
deductions are:
CONTINGENT DEFERRED SALES CHARGE (SALES LOAD)
Upon a partial withdrawal or full surrender, a Contingent
Deferred Sales Charge (sales load) will be calculated and
will be deducted from the Annuity Account Value. This Charge
reimburses Lincoln Life for expenses incurred in connection
with the promotion, sale and distribution of the Contracts.
The Contingent Deferred Sales Charge applies only to those
Premium Payments received within seven (7) years of the date
of partial withdrawal or full surrender. In calculating the
Contingent Deferred Sales Charge, Premium Payments are
allocated to the amount surrendered or withdrawn on a
first-in, first-out basis. After all Premium Payments have
been deemed withdrawn, Lincoln Life will deem further
withdrawals to be from net investment results. The amount of
the Contingent Deferred Sales Charge is calculated by: (a)
allocating Premium Payments to the amount withdrawn or
surrendered; (b) multiplying each allocated Premium Payment
that has been held under the Contract for the period shown
below by the charge shown below:
<TABLE>
<CAPTION>
YEARS SINCE
PAYMENT CHARGE
- ------------------ ------
<S> <C>
0-1 7%
1-2 7%
2-3 7%
3-4 6%
4-5 6%
5-6 5%
6-7 4%
7+ 0
</TABLE>
and (c) adding the products of each multiplication in (b)
above. The charge will not exceed 7% of the Premium
Payments. Any applicable negative Market Value Adjustment
and Account Fee will be deducted before application of the
Contingent Deferred Sales Charge. The charge is not imposed
on any death benefit paid or upon amounts applied to an
annuity option.
A Contract Owner may, during each Contract Year, withdraw up
to fifteen percent (15%) of Premium Payments, or any
remaining portion thereof, without incurring a Contingent
Deferred Sales Charge. The earliest Premium Payments
remaining in the Contract will be deemed withdrawn first
under this Fifteen Percent Free provision. No Contingent
Deferred Sales Charge will be deducted on withdrawals from
Premium Payments which have been held under the Contract for
more than seven (7) Contract Years or from annuity payments.
Lincoln Life may also eliminate or reduce the Contingent
Deferred Sales Charge under Lincoln Life procedures then in
effect.
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For a partial withdrawal, unless the Owner designates
otherwise, the Contingent Deferred Sales Charge will be
deducted proportionately from the Sub-Account(s) from which
the withdrawal is to be made by cancelling Accumulation
Units from each applicable Sub-Account in the ratio that the
value of each Sub-Account bears to the total of the values
of the Sub-Accounts from which the partial withdrawal is
made. If the value(s) of such Sub-Account(s) are
insufficient, remaining Contingent Deferred Sales Charges
will be deducted on a pro rata basis from all Sub-Accounts
in proportion to the then current account value(s) of such
Sub-Accounts unless the Owner and Lincoln Life agree
otherwise.
Commissions of up to 7.00% will be paid to broker-dealers
who sell the Contracts, and Lincoln Life will incur other
promotional or distribution expenses associated with the
marketing of the Contracts. To the extent that the
Contingent Deferred Sales Charge is insufficient to cover
the actual cost of distribution, Lincoln Life may use any of
its corporate assets, including potential profit which may
arise from the Mortality and Expense Risk Charge, to make up
any difference.
MORTALITY AND EXPENSE RISK CHARGE
Lincoln Life deducts on each Valuation Date a Mortality and
Expense Risk Charge which is equal, on an annual basis, to
1.25% of the average daily net assets of the Variable
Account (consisting of approximately .75% for mortality
risks and approximately .50% for expense risks). The
mortality risks assumed by Lincoln Life arise from its
contractual obligation to make annuity payments after the
Annuity Date for the life of the Annuitant in accordance
with annuity rates guaranteed in the Contract and to pay
death benefits that may exceed the Annuity Account Value.
The expense risk assumed by Lincoln Life is that all actual
expenses involved in administering the Contracts, including
Contract maintenance costs, administrative costs, mailing
costs, data processing costs, legal fees, accounting fees,
filing fees, and the costs of other services may exceed the
amount recovered from the Account Fee and the Administrative
Expense Charge, each of which is described below.
If the Mortality and Expense Risk Charge is insufficient to
cover the actual costs, the loss will be borne by Lincoln
Life. Conversely, if the amount deducted proves more than
sufficient, the excess will be a profit to Lincoln Life.
Lincoln Life expects to profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by
Lincoln Life and cannot be increased.
ADMINISTRATIVE EXPENSE CHARGE
Lincoln Life deducts on each Valuation Date an
Administrative Expense Charge which is equal, on an annual
basis, to 0.15% of the average daily net assets of the
Variable Account. This charge is to reimburse Lincoln Life
for a portion of its expenses in administering the
Contracts. This charge is guaranteed by Lincoln Life and
cannot be increased.
ACCOUNT FEE
Lincoln Life deducts an annual Account Fee of $35 from the
Annuity Account Value on the last Valuation Date of each
Contract Year. This charge, like the Administrative Expense
Charge, is to reimburse Lincoln Life for its expenses in
administering the Contracts. Prior to the Annuity Date, this
charge is deducted by cancelling Accumulation Units from
each applicable Sub-Account in the ratio that the value of
each Sub-Account bears to the total Annuity Account Value.
When the Contract is annuitized or surrendered for its full
Surrender Value on other than a Contract Anniversary, the
Account Fee will be prorated at the time of surrender or
annuitization. On and after the Annuity Date, the
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<PAGE>
Account Fee will be collected proportionately from the
Sub-Account(s) on which the Variable Annuity payment is
based, prorated on a monthly basis and will result in a
reduction of the annuity payments. The Account Fee will be
waived for any Contract Year in which the Annuity Account
Value equals or exceeds $100,000 as of the last Valuation
Date of the Contract Year.
PREMIUM TAX EQUIVALENTS
Premium tax equivalents or other taxes payable to a state,
municipality or other governmental entity will be charged
against Annuity Account Value. Premium taxes currently
imposed by certain states on the Contracts offered hereby
range from 0% to 4.0% of Premiums paid. Some states assess
premium taxes at the time Premium Payments are made; others
assess premium taxes at the time annuity payments begin.
Lincoln Life will, in its sole discretion, determine when
taxes have resulted from: the investment experience of the
Variable Account; receipt by Lincoln Life of the Premium
Payment(s); or commencement of annuity payments. Lincoln
Life may, at its sole discretion, pay taxes when due and
deduct an equivalent amount reflecting investment experience
from the Annuity Account Value at a later date. Payment at
an earlier date does not waive any right Lincoln Life may
have to deduct amounts at a later date.
INCOME TAXES
While Lincoln Life is not currently maintaining a provision
for federal income taxes, Lincoln Life has reserved the
right to establish a provision for income taxes if it
determines, in its sole discretion, that it will incur a tax
as a result of the operation of the Variable Account.
Lincoln Life will deduct for any income taxes incurred by it
as a result of the operation of the Variable Account whether
or not there was a provision for taxes and whether or not it
was sufficient.
FUND EXPENSES
There are other deductions from, and expenses paid out of,
the assets of the Funds which are described in the
accompanying Funds' prospectuses.
TRANSFER FEE
Prior to the Annuity Date, a Contract Owner may transfer all
or a part of the Annuity Account Value in a Sub-Account to
another Sub-Account without the imposition of any transfer
fee or charge if there have been no more than twelve
transfers made in the Contract Year. For additional
transfers, Lincoln Life reserves the right to deduct a
transfer fee of up to $10 per transfer. Prescheduled
automatic Dollar Cost Averaging or Automatic Rebalancing
transfers are not counted toward the twelve transfer limit.
Lincoln Life reserves the right to charge a fee of up to $10
for each transfer after the Annuity Date. The transfer fee
at any given time will not be set at a level greater than
its cost and will contain no element of profit.
DEATH BENEFITS
DEATH BENEFITS PROVIDED BY THE CONTRACTS
In the event of death of the Contract Owner (or the
Annuitant, if the Owner is a non-natural person) prior to
the Annuity Date, a death benefit is payable to the
Beneficiary designated by the Owner upon due proof of death
(a certified copy of the Death Certificate) of the Owner. If
there is no designated Beneficiary, or contingent
Beneficiary, Lincoln Life will, within seven (7) days of
receipt of due proof of death of Owner, Beneficiary and
contingent Beneficiary, pay the death benefit in one lump
sum to the deceased Owner's estate.
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<PAGE>
If the death of any annuitant occurs on or after the Annuity
Date, no death benefit will be payable under the Contract
except as may be provided under the Annuity Option elected.
AMOUNT OF DEATH BENEFIT
The amount of the death benefit is determined as of the
effective date or deemed effective date of the death benefit
election (see "Election and Effective Date of Election"),
and is equal to the greatest of --
(a) the Annuity Account Value for the Valuation Period
during which the death benefit election is effective or
deemed to become effective;
(b) the sum of all the Premium Payments made under the
Contract, less the sum of all partial withdrawals; or
(c) the highest Annuity Account Value ever attained on a
Contract Anniversary date occurring on or before the
Owner's 80th birthday, with adjustments for any
subsequent Premium Payments, partial withdrawals and
charges made since such Contract Anniversary Date.
On or after Owner's 90th birthday, the amount of the death
benefit is the greater of (a) and (b) above.
No Market Value Adjustment (see "Market Value Adjustment",
page 33) or withdrawal charges are assessed against amounts
which are applied toward payment of a death benefit.
Upon a transfer of ownership, the death benefit becomes the
greatest of --
(a) the Annuity Account Value for the Valuation Period
during which the death benefit election is effective or
deemed to become effective;
(b) the sum of Premium Payments made less the sum of
withdrawals made on or before the date of transfer,
adjusted for any subsequent Premium Payments and partial
withdrawals made under the Contract; or
(c) the highest Annuity Account Value ever attained on a
Contract Anniversary date subsequent to the date of
transfer occurring on or before the new Owner's 80th
birthday, with adjustments for any subsequent Premium
Payments, partial withdrawals and charges made since
such Contract Anniversary Date.
On or after the then current Owner's 90th birthday, the
amount of the death benefit is the greater of (a) and (b)
above.
ELECTION AND EFFECTIVE DATE OF ELECTION
Unless specified in writing by the Owner the Beneficiary
may, at any time before the end of the sixty (60) day period
immediately following receipt of due proof of death by
Lincoln Life, elect the death benefit to be paid as follows:
1. the payment of the entire death benefit on a specified
date, which must be within five years of the date of the
death of the Owner or Annuitant, whichever is
applicable; or
2. payment over the lifetime of the designated Beneficiary
or over a period not extending beyond the life
expectancy of the Beneficiary, with distribution
beginning within one year of the date of death of the
Owner or Annuitant, whichever is applicable (see
"Annuity Provisions -- Annuity Options"); or
3. payment in accordance with one of the settlement options
under the Contract (see "Annuity Provisions -- Annuity
Options"); or
4. if the designated Beneficiary is the Owner's spouse,
he/she can continue the Contract in his/her own name.
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<PAGE>
Payment amounts may vary with their frequency and duration
(see "Annuity Provisions -- Annuity Options"). To the extent
that the Beneficiary elects a variable payment option, the
Beneficiary will bear the investment risk associated with
the performance of the underlying Fund(s) in which the
relevant Variable Sub-Account invest(s).
Such election may be made by filing with Lincoln Life a
statement in writing specifying the method by which the
death benefit shall be paid and such election shall become
effective on the later of (a) the date the election is
received by Lincoln Life, and (b) the date due proof of
death of the Owner is received by Lincoln Life. Payments
will begin thirty (30) days after the effective date of the
election.
If no payment option is elected, a single sum settlement
will be made by Lincoln Life within seven (7) days of the
end of the sixty (60) day period following receipt of due
proof of death of the Owner or Annuitant as applicable.
If the Owner is a non-natural person, then for purposes of
the death benefit, the Annuitant shall be treated as the
Owner, except that in such case a change of annuitant would
be treated as a death of the annuitant.
DEATH OF THE ANNUITANT BEFORE THE ANNUITY DATE
If the Annuitant dies prior to the Annuity Date and the
Annuitant is different from the Contract Owner, the Contract
Owner, if a natural person, may designate a new Annuitant.
Unless and until one is designated, the Contract Owner will
be the Annuitant. If the Contract Owner is not a natural
person, then the death benefit, valued as described in
"Amount of Death Benefit" but based on the Annuitant, is
paid on due proof of the Annuitant's death.
DEATH OF THE ANNUITANT AFTER THE ANNUITY DATE
If the Annuitant dies after the Annuity Date, the death
benefit, if any, will be as specified in the Annuity Option
elected.
Lincoln Life will require due proof of the Annuitant's
death. Death benefits will be paid at least as rapidly as
under the method of distribution in effect at the
Annuitant's death.
OTHER CONTRACT FEATURES
OWNERSHIP
The Contract Owner has all rights and may receive all
benefits under the Contract. The Contract Owner may change
the Contract Owner at any time. If the Contract Owner dies,
a death benefit will be paid to the Beneficiary upon proof
of the Contract Owner's death. If the Owner is a
corporation, partnership or other non-natural person, the
death benefit is paid upon receipt of due proof of the
Annuitant's death. A change of Contract Owner will
automatically revoke any prior designation of Contract
Owner. A request for change must be: (1) made in writing;
and (2) received by Lincoln Life at its Administrative
Office. The change will become effective as of the date the
written request is signed. A new designation of Contract
Owner will not apply to any payment made or action taken by
Lincoln Life prior to the time it was received.
For non-qualified contracts, in accordance with Code Section
72(u), a deferred annuity contract held by a corporation or
other entity that is not a natural person is not treated as
an annuity contract for tax purposes. Income on the contract
is treated as ordinary income received by the owner during
the taxable year. But in accordance with Code Section 72(u),
an annuity contract held by a trust or other entity as agent
for a natural person is considered held by a natural person.
23
<PAGE>
ASSIGNMENT
The Contract Owner may assign the Contract at any time
during his or her lifetime. Unless provided otherwise, an
assignment will not affect the interest of any previously
indicated Beneficiary. Lincoln Life will not be bound by any
assignment until written notice is received by Lincoln Life
at its Administrative Office. Lincoln Life is not
responsible for the validity of any assignment. Lincoln Life
will not be liable as to any payment or other settlement
made by Lincoln Life before such assignment has been
recorded at Lincoln Life's Administrative Office.
If the Contract is issued pursuant to a Qualified Plan, it
may not be assigned, pledged or otherwise transferred except
as may be allowed under applicable law.
BENEFICIARY
The Beneficiary is named when the Contract is applied for
and, unless changed, is entitled to receive any death
benefits to be paid. Prior to the Annuity Date, death
benefits are paid to the Beneficiary on the death of the
Owner.
CHANGE OF BENEFICIARY
The Contract Owner may change a Beneficiary by filing a
written request with Lincoln Life at its Administrative
Office unless an irrevocable Beneficiary designation was
previously filed. After the change is recorded, it will take
effect as of the date the request was signed. If the request
reaches the Lincoln Life's Administrative Office after the
death of the Annuitant or Contract Owner, as applicable, but
before any payment is made, the change will be valid.
Lincoln Life will not be liable for any payment made or
action taken before it records the change.
ANNUITANT
The Annuitant must be a natural person. The maximum age of
the Annuitant on the date the Contract is issued is 90 years
old. The Annuitant may be changed at any time prior to the
Annuity Date unless the Contract is owned by a non-natural
person. Joint Annuitants are allowed at the time of
annuitization only, if Lincoln Life chooses to make a joint
and survivor annuity payment option available in addition to
the options provided in the Contract. The Annuitant has no
rights or privileges prior to the Annuity Date. When an
Annuity Option is elected, the amount payable as of the
Annuity Date is based on the age and gender classification
(in accordance with state law) of the Annuitant, as well as
the Option selected and the Annuity Account Value.
TRANSFER OF CONTRACT VALUES BETWEEN SUB-ACCOUNTS
Prior to the Annuity Date, the Contract Owner may transfer
all or part of the Annuity Account Value in a Sub-Account to
another Sub-Account without the imposition of any fee or
charge if there have been no more than twelve transfers made
in the Contract Year. For additional transfers, Lincoln Life
reserves the right to deduct a transfer fee of up to $10
(See "Charges and Deductions -- Transfer Fee"). This
Contract is not designed for professional market timing
organizations or other entities using programmed and
frequent transfers.
Repeated patterns of frequent transfers are disruptive to
the operation of the Sub-Accounts, and should Lincoln Life
become aware of such disruptive practices, Lincoln Life may
refuse to permit more than 12 transfers in any year and may
modify the transfer provisions of the Contract.
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<PAGE>
There may be limits on the amount that can be transferred
from each Fixed Account Sub-Account during a Contract Year.
After the Annuity Date, provided a variable annuity option
was selected, the Contract Owner may make up to three
transfers between Variable Sub-Accounts in any Contract
Year.
All transfers are subject to the following:
a. The deduction of any transfer fee that may be imposed.
The transfer fee will be deducted from the amount which
is transferred if the entire amount in the Sub-Account is
being transferred, otherwise from the Sub-Account from
which the transfer is made.
b. The minimum amount which may be transferred is the lesser
of (i) $2,000 per Fixed Account Sub-Account or $50 per
Variable Account Sub-Account; or (ii) the Contract
Owner's entire interest in the Sub-Account. Lincoln Life,
at its sole discretion may waive these minimum
requirements.
c. No partial transfer will be made if the Contract Owner's
remaining Contract Value in Fixed Account Sub-Account
will be less than $2,000 or in the Variable Sub-Account
will be less than $50.
d. Transfers involving Variable Account Sub-Accounts will
reflect the purchase or cancellation of Variable
Accumulation Units having an aggregate value equal to the
dollar amount being transferred to or from a particular
Variable Account Sub-Account. The purchase or
cancellation of units shall be made using Variable
Accumulation Unit Values of the applicable Variable
Account Sub-Account at the end of the Valuation Period
during which the transfer request is received in good
order at Lincoln Life's Administrative Office. However,
no transfer may be made effective within seven calendar
days of the date on which the first annuity payment is
due. Transfers are not permitted during the
right-to-examine period.
e. Any transfer request must clearly specify the amount
which is to be transferred and the Sub-Accounts which are
to be affected.
f. Transfers of all or a portion of any Fixed Account
Sub-Account values (other than transfers pursuant to the
Dollar Cost Averaging program or at the end of a
Guaranteed Period) are subject to any applicable Market
Value Adjustment;
g. Lincoln Life reserves the right to defer transfers from
any Fixed Account Sub-Account for up to six months after
date of receipt of the transfer request;
h. Transfers involving the Variable Account Sub-Accounts are
subject to such restrictions as may be imposed by the
Funds;
i. Lincoln Life reserves the right at any time and without
prior notice to any party to terminate, suspend or modify
the transfer privileges described above.
j. After the Annuity Date, transfers may not take place
between a Fixed Annuity Option and a Variable Annuity
Option.
k. Lincoln Life reserves the right to reject any premium
allocation or transfer which would cause the Fixed
Account Sub-Account values in aggregate to exceed then
current Lincoln Life limits.
Transfers between Sub-Accounts may be made by calling or
writing Lincoln Life's Administrative Office. Transfer
requests must be received prior to 4:00 Eastern Time in
order to be effective that day.
Transfers between any Sub-Accounts may be suspended or
postponed during any period in which the New York Stock
Exchange is closed or has suspended trading.
PROCEDURES FOR TELEPHONE TRANSFERS
Owners may effect telephone transfers by calling Lincoln
Life's Administrative Office.
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<PAGE>
Lincoln Life will take the following procedures to confirm
that instructions communicated by telephone are genuine.
Before a service representative accepts any request, the
caller will be asked for specific information to validate
the request. All calls will be recorded. All transactions
performed will be confirmed by Lincoln Life in writing.
Lincoln Life is not liable for any loss, cost or expense for
acting on telephone instructions which are believed to be
genuine in accordance with these procedures.
SURRENDERS AND PARTIAL WITHDRAWALS
While the Contract is in force and before the Annuity Date,
Lincoln Life will, upon written request to Lincoln Life by
the Contract Owner, allow the surrender or partial
withdrawal of all or a portion of the Contract for its
Surrender Value. Surrenders or partial withdrawals will
result in the cancellation of Accumulation Units from each
applicable Sub-Account in the ratio that the value of each
Sub-Account bears to the total Annuity Account Value, unless
the Contract Owner specifies in writing in advance which
units are to be cancelled. Lincoln Life will pay the amount
of any surrender or partial withdrawal within seven (7) days
of receipt of a valid request, unless the "Delay of
Payments" provision is in effect. (See "Delay of Payments
and Transfers")
Certain tax withdrawal penalties and restrictions may apply
to surrenders and partial withdrawals from Contracts. (See
"Tax Matters.") Contract Owners should consult their own tax
counsel or other tax adviser regarding any surrenders and
partial withdrawals.
The Surrender Value is the Annuity Account Value for the
Valuation Period next following the Valuation Period during
which the written request to Lincoln Life for surrender is
received, reduced, in the case of full surrender, by the sum
of:
A. any applicable premium tax equivalents not previously
deducted;
B. any applicable Account Fee; and
C. any applicable Contingent Deferred Sales Charge; and
for partial withdrawals, by the sum of A and C above.
DELAY OF PAYMENTS AND TRANSFERS
Lincoln Life reserves the right to suspend or postpone
payment of proceeds or transfers for any period when:
1. the New York Stock Exchange is closed (other than
customary weekend and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably
practicable or it is not reasonably practicable to
determine the value of the Variable Account's net assets;
or
4. during any other period when the Commission, by order, so
permits for the protection of Contract Owners.
The applicable rules and regulations of the Commission will
govern as to whether the conditions described in 2. and 3.
exist.
Lincoln Life reserves the right to defer the payment or
transfer of amounts withdrawn from any Fixed Account
Sub-Account for a period not to exceed six months from the
date written request for such withdrawal or transfer is
received by Lincoln Life. If payment or transfer is deferred
beyond thirty (30) days, Lincoln Life will pay interest of
not less than 3% per year on amounts so deferred.
In addition, payment of the amount of any withdrawal
derived, all or in part, from any Premium Payment paid to
Lincoln Life by check or draft may be postponed until
Lincoln Life determines the check or draft has been honored.
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CHANGE IN OPERATION OF VARIABLE ACCOUNT
At Lincoln Life's election and subject to the approval of
persons having voting rights under the Contracts, the
Variable Account may be operated as a management company
under the 1940 Act or any other form permitted by law;
de-registered under the 1940 Act in the event registration
is no longer required (deregistration of the Variable
Account requires an order by the Commission); or combined
with one or more other separate accounts. To the extent
permitted by applicable law, Lincoln Life also may transfer
the assets of the Variable Account associated with the
Contracts to another account or accounts. In the event of
any change in the operation of the Variable Account pursuant
to this provision, Lincoln Life may make appropriate
endorsement to the Contracts to reflect the change and take
such other action as may be necessary and appropriate to
effect the change.
MODIFICATION
Upon notice to the Owner (or the Payee(s) during the Annuity
Period), the Contracts may be modified by Lincoln Life if
such modification: (i) is necessary to make the Contracts or
the Variable Account comply with, or take advantage of, any
law or regulation issued by a governmental agency to which
Lincoln Life or the Variable Account is subject; or (ii) is
necessary to attempt to assure continued qualification of
the Contracts under the Code or other federal or state laws
relating to retirement annuities or annuity contracts; or
(iii) is necessary to reflect a change in the operation of
the Variable Account or its Sub-Account(s) (See "Change in
Operation of Variable Account"); or (iv) provides additional
Variable Account and/or fixed accumulation options. In the
event of any such modification, Lincoln Life may make
appropriate endorsement to the Contracts to reflect such
modification.
In addition, upon notice to the Owner, the Contracts may be
modified by Lincoln Life to change the withdrawal charges,
Account Fees, mortality and expense risk charges,
administrative expense charges, the tables used in
determining the amount of the first monthly fixed annuity
payment, and the formula used to calculate the Market Value
Adjustment, provided that such modification shall apply only
to Contracts established after the effective date of such
modification. In order to exercise its modification rights
in these particular instances, Lincoln Life must notify the
Owner of such modification in writing. All of the charges
and the annuity tables which are provided in the Contracts
prior to any such modification will remain in effect
permanently, unless improved by Lincoln Life, with respect
to Contracts established prior to the effective date of such
modification.
DISCONTINUANCE
Lincoln Life reserves the right to limit or discontinue the
offer and issuance of new Contracts. Such limitation or
discontinuance shall have no effect on rights or benefits
with respect to any Contracts issued prior to the effective
date of such limitation or discontinuance.
ANNUITY PROVISIONS
ANNUITY DATE; CHANGE IN ANNUITY DATE AND ANNUITY OPTION
The Contract Owner selects an Annuity Date at the time of
application or order to purchase. The Contract Owner may,
upon at least forty-five (45) days prior written notice to
Lincoln Life, at any time prior to the Annuity Date, change
the Annuity Date. The new Annuity Date must be at least 30
days after the effective date of the change. The Annuity
Date must always be the first day of a calendar month. The
Annuity Date may not be later than the month following the
Annuitant's 90th birthday.
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The Contract Owner may, upon at least forty-five (45) days
prior written notice to Lincoln Life, at any time prior to
the Annuity Date, select and/or change the Annuity Option.
The first payment under the Annuity Option selected will be
made on the first day of the month following the Annuity
Date.
PENALTY-FREE ANNUITIZATION
At any time the Owner may request in writing payment of the
then current Annuity Account Value in accordance with any
one of the settlement options set forth in the Contract. In
such event, no Contingent Deferred Sales Charge or Market
Value Adjustment will be imposed at the time such settlement
is made. Such annuitization will automatically result in a
change in the Annuity Date to the date payments commence
under the settlement option elected.
ANNUITY OPTIONS
Instead of having the proceeds paid in one sum, the Contract
Owner may select one of the Annuity Options. These may be on
a fixed or variable basis, or a combination thereof.
However, if the amount to be applied under any settlement
option is less than $5,000, or if the first payment payable
in accordance with such option is less than $50, Lincoln
Life reserves the right to pay the adjusted value in a
single payment to the payee designated by the Owner. If the
Annuity Option elected results in a payment less than the
minimum payment amount determined by Lincoln Life, Lincoln
Life reserves the right to change the frequency of payments
to an interval that will provide the minimum payment amount.
The Annuity Option must be selected at least 30 days prior
to the Annuity Date. If no such selection is made, the
adjusted Annuity Account Value will be applied under a life
Annuity with 120 months guaranteed. In such situation, the
adjusted Annuity Account Value on the Annuity Date will be
applied to either a fixed option or a variable option in
proportion to the Annuity Account Value in the Fixed Account
or the Sub-Accounts, respectively, on the Annuity Date.
Lincoln Life may, at the time of election of an Annuity
Option, offer more favorable rates in lieu of those
guaranteed. Lincoln Life also may make available other
settlement options. Lincoln Life uses sex distinct or unisex
annuity rate tables when determining appropriate annuity
payments.
FIXED OPTIONS
Under a fixed option, once the selection has been made and
payments have begun, the amount of the payments will not
vary. The fixed options currently available are:
FIRST OPTION -- LIFE ANNUITY. Lincoln Life will make equal
monthly payments during the life of the Annuitant, ceasing
with the last payment due prior to the death of the
Annuitant.
SECOND OPTION -- LIFE ANNUITY WITH CERTAIN PERIOD. Lincoln
Life will make equal monthly payments during the life of the
Annuitant, but at least for the minimum period shown in the
annuity tables contained in the Contract. The amount of each
monthly payment per $1,000 of proceeds is based on the age
and gender classification (in accordance with state law) of
the Annuitant when the first payment is made and on the
minimum period chosen.
THIRD OPTION -- LIFE ANNUITY WITH CASH REFUND. Lincoln Life
will make equal monthly payments during the life of the
Annuitant. Upon the death of the Annuitant, after payments
have started, Lincoln Life will pay in one sum any excess of
the amount of the proceeds applied under this Option over
the total of all payments made under this Option. The amount
of each monthly payment per $1,000 of proceeds is based on
the age and gender (in accordance with state law) of the
Annuitant when the first payment is made.
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FOURTH OPTION -- ANNUITY CERTAIN. Lincoln Life will make
equal monthly payments for a number of years selected, not
less than five or more than thirty years.
VARIABLE OPTIONS
The actual dollar amount of variable annuity payments is
dependent upon (i) the Annuity Account Value at the time of
annuitization, (ii) the annuity table specified in the
Contract, (iii) the Annuity Option selected, and (iv) the
investment performance of the Sub-Account selected. Each
annuity payment will be less if payments are to be made more
frequently or for longer periods of time. The mortality and
expense risk charge will be assessed on all variable annuity
payments, including options that do not have a life
contingency and therefore no mortality risk.
The dollar amount of the first monthly variable annuity
payment is determined by applying the available value (after
deduction of any premium tax equivalents not previously
deducted) to the table using the age and gender (in
accordance with state law) of the Annuitant. The number of
Annuity Units is then determined by dividing this dollar
amount by the then current Annuity Unit value. Thereafter,
the number of Annuity Units remains unchanged during the
period of annuity payments. This determination is made
separately for each Sub-Account of the Variable Account. The
number of Annuity Units is determined for each Sub-Account
and is based upon the available value in each Sub-Account as
of the date annuity payments are to begin.
The dollar amount determined for each Sub-Account will then
be aggregated for purposes of making payments.
The dollar amount of the second and later variable annuity
payments is equal to the number of Annuity Units determined
for each Sub-Account times the Annuity Unit value for that
Sub-Account as of the due date of the payment. This amount
may increase or decrease from month to month.
The annuity tables contained in the Contract are based on a
three percent (3%) assumed net investment rate. If the
actual net investment rate exceeds three percent (3%),
payments will increase. Conversely, if the actual rate is
less than three percent (3%), annuity payments will
decrease.
The Annuitant receives the value of a fixed number of
Annuity Units each month. The value of a fixed number of
Annuity Units will reflect the investment performance of the
Sub-Account selected and the amount of each annuity payment
will vary accordingly.
The Annuity Unit Value for a Sub-Account is determined by
multiplying the Annuity Unit Value for that Sub-Account for
the preceding Valuation Period by the Net Investment Factor
for the current Valuation Period (calculated as described on
pages 19 and 20 of this Prospectus) and multiplying the
result by 0.999919020, the daily factor to neutralize the
assumed net investment rate, discussed above, of 3% per
annum which is built into the annuity rate table. It may
increase or decrease from Valuation Period to Valuation
Period.
The variable options currently available are:
OPTION I -- VARIABLE LIFE ANNUITY. Monthly annuity payments
are paid during the life of an Annuitant, ceasing with the
last annuity payment due prior to the Annuitant's death.
OPTION II -- VARIABLE LIFE ANNUITY WITH CERTAIN
PERIOD. Monthly annuity payments are paid during the life of
an Annuitant, but at least for the minimum period selected,
which may be five, ten, fifteen or twenty years;
OPTION III -- VARIABLE ANNUITY CERTAIN. Monthly annuity
payments are paid for a number of years selected, not less
than five or more than thirty years.
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After the Annuity Date, the payee may, by written request to
Lincoln Life's Administrative Office, exchange Annuity Units
of one Variable Sub-Account for Annuity Units of equivalent
value in another Variable Sub-Account up to three times each
Contract Year.
EVIDENCE OF SURVIVAL
Lincoln Life reserves the right to require evidence of the
survival of any Payee at the time any payment payable to
such Payee is due under the following Annuity Options: Life
Annuity (fixed), Life Annuity with Certain Period (fixed),
Cash Refund Life Annuity (fixed), Variable Life Annuity, and
Variable Life Annuity with Certain Period.
ENDORSEMENT OF ANNUITY PAYMENTS
Lincoln Life will make each annuity payment at its Home
Office by check. Each check must be personally endorsed by
the Payee or Lincoln Life may require that proof of the
Annuitant's survival be furnished.
THE FIXED ACCOUNT
THE FIXED ACCOUNT IS MADE UP OF THE GENERAL ASSETS OF
LINCOLN LIFE OTHER THAN THOSE ALLOCATED TO ANY SEPARATE
ACCOUNT. THE FIXED ACCOUNT IS PART OF LINCOLN LIFE'S GENERAL
ACCOUNT. BECAUSE OF APPLICABLE EXEMPTIVE AND EXCLUSIONARY
PROVISIONS, INTERESTS IN THE FIXED ACCOUNT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933
ACT"), AND NEITHER THE FIXED ACCOUNT NOR LINCOLN LIFE'S
GENERAL ACCOUNT HAS BEEN REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940 (THE "1940 ACT"). THEREFORE, NEITHER THE
FIXED ACCOUNT NOR ANY INTEREST THEREIN IS GENERALLY SUBJECT
TO REGULATION UNDER THE PROVISIONS OF THE 1933 ACT OR THE
1940 ACT. ACCORDINGLY, LINCOLN LIFE HAS BEEN ADVISED THAT
THE STAFF OF THE COMMISSION HAS NOT REVIEWED THE DISCLOSURE
IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT.
The initial Premium Payment and any subsequent Premium
Payment(s) will be allocated to Sub-Accounts available in
connection with the Fixed Account to the extent elected by
the Owner at the time such Premium Payment is made. In
addition, all or part of the Owner's Annuity Account Value
may be transferred among Sub-Accounts available under the
Contract as described under "Transfer of Contract Values
between Sub-Accounts." Instead of the Owner's assuming all
of the investment risk as is the case for Premium Payments
allocated to the Variable Account, Lincoln Life guarantees
it will credit interest of at least 3% per year to amounts
allocated to the Fixed Account.
Assets supporting amounts allocated to Sub-Accounts within
the Fixed Account become part of Lincoln Life's general
account assets and are available to fund the claims of all
creditors of Lincoln Life. All of Lincoln Life's general
account assets will be available to fund benefits under the
Contracts. The Owner does not participate in the investment
performance of the assets of the Fixed Account or Lincoln
Life's general account.
Lincoln Life will invest the assets of the general account
in those assets chosen by Lincoln Life and allowed by
applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and
the percentage of their assets that may be committed to any
particular type of investment. In general, these laws permit
investments, within specified limits and subject to certain
qualifications, in federal, state and municipal obligations,
corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
If the Account Value within a Fixed Account Sub-Account is
maintained for the duration of the Sub-Account's Guaranteed
Period, Lincoln Life guarantees that it will credit interest
to that amount at the guaranteed rate specified for the
Sub-Account which may but need not be more than 3% per year.
Any amount withdrawn from or transferred out
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of the Sub-Account prior to the expiration of the
Sub-Account's Guaranteed Period is subject to a Market Value
Adjustment (see "Market Value Adjustment") and a Deferred
Sales Charge, if applicable. Lincoln Life guarantees,
however, that a Contract will be credited with interest at a
rate of not less than 3% per year, compounded annually, on
amounts allocated to any Fixed Account Sub-Account,
regardless of any application of the Market Value Adjustment
(that is, the Market Value Adjustment will not reduce the
amount available for surrender, withdrawal or transfer to an
amount less than the initial amount allocated or transferred
to the Fixed Account Sub-Account plus interest of 3% per
year). Lincoln Life reserves the right to defer the payment
or transfer of amounts withdrawn from the Fixed Account for
a period not to exceed six (6) months from the date a proper
request for surrender, withdrawal or transfer is received by
Lincoln Life.
FIXED ACCUMULATION VALUE. The fixed accumulation value of an
Annuity Account, if any, for any Valuation Period is equal
to the sum of the values of all Fixed Account Sub-Accounts
which are part of the Annuity Account for such Valuation
Period.
GUARANTEED PERIODS. The Owner may elect to allocate Premium
Payments to one or more Sub-Accounts within the Fixed
Account. Currently, each Sub-Account maintains a Guaranteed
Period with a duration of one, five or ten years. Every
Premium Payment allocated to a Fixed Account Sub-Account
starts a new Sub-Account with its own duration and
Guaranteed Interest Rate. The duration of the Guaranteed
Period will affect the Guaranteed Interest Rate of the
Sub-Account. Initial Premium Payments and subsequent Premium
Payments, or portions thereof, and transferred amounts
allocated to a Fixed Account Sub-Account, less any amounts
subsequently withdrawn, will earn interest at the Guaranteed
Interest Rate during the particular Sub-Account's Guaranteed
Period unless prematurely withdrawn prior to the end of the
Guaranteed Period. Initial Sub-Account Guaranteed Periods
begin on the date a Premium Payment is accepted or, in the
case of a transfer, on the effective date of the transfer,
and end on the date after the number of calendar years in
the Sub-Account's Guaranteed Period elected from the date on
which the amount was allocated to the Sub-Account (the
"Expiration Date"). Any portion of Annuity Account Value
allocated to a specific Sub-Account with a specified
Expiration Date (including interest earned thereon) will be
referred to herein as a "Guaranteed Period Amount." Interest
will be credited daily at a rate equivalent to the compound
annual rate determined on the first day of the Sub-Account
Guaranteed Period. As a result of renewals and transfers of
portions of the Annuity Account Value described under
"Transfer of Contract Values between Sub-Accounts" above,
which will begin new Sub-Account Guaranteed Periods, amounts
allocated to Sub-Accounts of the same duration may have
different Expiration Dates. Thus each Guaranteed Period
Amount will be treated separately for purposes of
determining any applicable Market Value Adjustment (see
"Market Value Adjustment").
Lincoln Life will notify the Owner in writing at least 60
days prior to the Expiration Date for any Guaranteed Period
Amount. A new Sub-Account Guaranteed Period of the same
duration as the previous Sub-Account Guaranteed Period will
commence automatically at the end of the previous Guaranteed
Period unless Lincoln Life receives, following such
notification but prior to the end of such Guaranteed Period,
a written election by the Owner to transfer the Guaranteed
Period Amount to a different Fixed Account Sub-Account or to
a Variable Account Sub-Account from among those being
offered by Lincoln Life at such time. Transfers of any
Guaranteed Period Amount which become effective upon the
expiration of the applicable Guaranteed Period are not
subject to the twelve transfers per Contract Year
limitations or the additional Fixed Sub-Account transfer
restrictions (see "Transfer of Contract Values between
Sub-Accounts").
GUARANTEED INTEREST RATES. Lincoln Life periodically will
establish an applicable Guaranteed Interest Rate for each of
the Sub-Account Guaranteed Periods within the Fixed Account.
Current Guaranteed Interest Rates may be changed by Lincoln
Life
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frequently or infrequently depending on interest rates on
investments available to Lincoln Life and other factors as
described below, but once established, rates will be
guaranteed for the entire duration of the respective
Sub-Account's Guaranteed Period. However, any amount
withdrawn from the Sub-Account may be subject to any
applicable withdrawal charges, Account Fees, Market Value
Adjustment, premium taxes or other fees. Amounts transferred
out of a Fixed Account Sub-Account prior to the end of the
Guaranteed Period will be subject to the Market Value
Adjustment.
The Guaranteed Interest Rate will not be less than 3% per
year compounded annually, regardless of any application of
the Market Value Adjustment. Lincoln Life has no specific
formula for determining the rate of interest that it will
declare as a Guaranteed Interest Rate, as these rates will
be reflective of interest rates available on the types of
debt instruments in which Lincoln Life intends to invest
amounts allocated to the Fixed Account (see "The Fixed
Account"). In addition, Lincoln Life's management may
consider other factors in determining Guaranteed Interest
Rates for a particular Sub-Account including: regulatory and
tax requirements; sales commissions and administrative
expenses borne by Lincoln Life; general economic trends; and
competitive factors. THERE IS NO OBLIGATION TO DECLARE A
RATE IN EXCESS OF 3% PER YEAR; THE OWNER ASSUMES THE RISK
THAT DECLARED RATES WILL NOT EXCEED 3% PER YEAR. LINCOLN
LIFE HAS COMPLETE DISCRETION TO DECLARE ANY RATE, SO LONG AS
THAT RATE IS AT LEAST 3% PER YEAR.
MARKET VALUE ADJUSTMENT
Any surrender or transfer of a Fixed Account Guaranteed
Period Amount, other than a surrender or transfer pursuant
to an election which becomes effective upon the Expiration
Date of the Guaranteed Period, will be subject to a Market
Value Adjustment ("MVA"). The MVA will be applied to the
amount being surrendered or transferred after deduction of
any applicable Annuity Account Fee and before deduction of
any applicable surrender charge.
The MVA generally reflects the relationship between the
Index Rate (based upon the Treasury Constant Maturity Series
published by the Federal Reserve) in effect at the time a
Premium Payment is allocated to a Sub-Account's Guaranteed
Period under the Contract and the Index Rate in effect at
the time of the Premium Payment's surrender or transfer. It
also reflects the time remaining in the Sub-Account's
Guaranteed Period. Generally, if the Index Rate at the time
of surrender or transfer is lower than the Index Rate at the
time the Premium Payment was allocated, then the application
of the MVA will result in a higher payment upon surrender or
transfer. Similarly, if the Index Rate at the time of
surrender or transfer is higher than the Index Rate at the
time the Premium Payment was allocated, the application of
the MVA will generally result in a lower payment upon
surrender or transfer.
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The MVA is computed by applying the following formula:
(1+A)to the power N
------------------
(1+B)to the power N
where:
A = an Index Rate (based on the Treasury Constant Maturity
Series published by the Federal Reserve) for a security with
time to maturity equal to the Sub-Account's Guaranteed
Period, determined at the beginning of the Guaranteed
Period.
B = an Index Rate (based on the Treasury Constant Maturity
Series published by the Federal Reserve) for a security with
time to maturity equal to the Sub-Account's Guaranteed
Period, determined at the time of surrender or transfer,
plus a 0.50% adjustment (unless otherwise limited by
applicable state law). If Index Rates "A" and "B" are within
.25% of each other when the index rate factor is determined,
no such percentage adjustment to "B" will be made, unless
otherwise required by state law. This adjustment builds into
the formula a factor representing direct and indirect costs
to Lincoln Life associated with liquidating general account
assets in order to satisfy surrender requests. This
adjustment of 0.50% has been added to the denominator of the
formula because it is anticipated that a substantial portion
of applicable general account portfolio assets will be in
relatively illiquid securities. Thus, in addition to direct
transaction costs, if such securities must be sold (E.G.,
because of surrenders), the market price may be lower.
Accordingly, even if interest rates decline, there will not
be a positive adjustment until this factor is overcome, and
then any adjustment will be lower than otherwise, to
compensate for this factor. Similarly, if interest rates
rise, any negative adjustment will be greater than
otherwise, to compensate for this factor. If interest rates
stay the same, this factor will result in a small but
negative Market Value Adjustment.
N = The number of years remaining in the Guaranteed Period
(E.G. 1 year and 73 days = 1 + (73 divided by 365) = 1.2
years)
Straight-Line interpolation is used for periods to maturity
not quoted.
See the Statement of Additional information for examples of
the application of the Market Value Adjustment.
DISTRIBUTION OF THE CONTRACTS
Lincoln Life is the distributor of the Contracts. The
Contracts will be sold by our registered representatives who
have been licensed by state insurance departments. The
Contracts may also be sold by independent broker-dealers who
have been licensed by state insurance departments to
represent us and who have selling agreements with us.
Lincoln Life is registered with the Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers
(NASD). We will offer the Contracts in all states where we
are licensed to do business and in which the Contracts are
approved.
PERFORMANCE DATA
MONEY MARKET SUB-ACCOUNT
From time to time, the Money Market Sub-Account may
advertise its "yield" and "effective yield." Both yield
figures will be based on historical earnings and are not
intended to indicate future performance. The "yield" of the
Money Market Sub-Account refers to the income generated by
Annuity Account Values in the Money Market Sub-Account over
a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is,
the amount of income generated by the
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investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of
the Annuity Account Values in the Money Market Sub-Account.
The "effective yield" is calculated similarly but, when
annualized, the income earned by Annuity Account Values in
the Money Market Sub-Account is assumed to be reinvested.
The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed
reinvestment. The computation of the yield calculation
includes a deduction for the Mortality and Expense Risk
Charge, the Administrative Expense Charge, and the Account
Fee.
OTHER VARIABLE ACCOUNT SUB-ACCOUNTS
From time to time, the other Variable Account Sub-Accounts
may publish their current yields and total returns in
advertisements and communications to Contract Owners. The
current yield for each Variable Account Sub-Account will be
calculated by dividing the annualization of the dividend and
interest income earned by the underlying Fund during a
recent 30-day period by the maximum Accumulation Unit value
at the end of such period. Total return information will
include the underlying Fund's average annual compounded rate
of return over the most recent four calendar quarters and
the period from the underlying Fund's inception of
operations, based upon the value of the Accumulation Units
acquired through a hypothetical $1,000 investment at the
Accumulation Unit value at the beginning of the specified
period and upon the value of the Accumulation Unit at the
end of such period, assuming reinvestment of all
distributions and the deduction of the Mortality and Expense
Risk Charge, the Administrative Expense Charge and the
Annuity Account Fee. Each Variable Account Sub-Account may
also advertise aggregate and average total return
information over different periods of time.
In each case, the yield and total return figures will
reflect all recurring charges against the Variable Account
Sub-Account's income, including the deduction for the
Mortality and Expense Risk Charge, the Administrative
Expense Charge and the Account Fee for the applicable time
period. Contract Owners should note that the investment
results of each Sub-Account will fluctuate over time, and
any presentation of a Variable Account Sub-Account's current
yield or total return for any prior period should not be
considered as a representation of what an investment may
earn or what a Contract Owner's yield or total return may be
in any future period. See "Historical Performance Data" in
the Statement of Additional Information.
PERFORMANCE RANKING OR RATING
The performance of each or all of the Sub-Accounts of the
Variable Account may sometimes be published and compared to
the performance of other variable annuity issuers in general
or to the performance of particular types of variable
annuities investing in funds, or series of funds with
investment objectives similar to each of the Sub-Accounts of
the Variable Account. Lipper Analytical Services, Inc.
("Lipper") Morningstar Variable Annuity/Life Performance
Report of Morningstar, Inc. ("Morningstar") and the Variable
Annuity Research and Data Service
("VARDS-Registered Trademark-") are independent services
which monitor and rank or rate the performance of variable
annuity issuers in each of the major categories of
investment objectives on an industry-wide basis. Generally,
these services may not be used, and such comparisons may not
be made, in advertising or sales literature for variable
annuities.
Lipper's rankings include variable life issuers as well as
variable annuity issuers. VARDS-Registered Trademark-
rankings compare only variable annuity issuers. Morningstar
ratings include funds used by both variable life and
variable annuity issuers. The performance analyses prepared
by Lipper and VARDS-Registered Trademark- rank such issuers
on the basis of total return,
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assuming reinvestment of distributions, but do not take
sales charges, redemption fees or certain expense deductions
at the separate account level into consideration. In
addition, VARDS-Registered Trademark- prepares risk-adjusted
rankings, which consider the effects of market risk on total
return performance. This type of ranking may address the
question as to which funds provide the highest total return
with the least amount of risk. Morningstar assigns ratings
of zero to five stars to the mutual funds taking into
account primarily historical performance and risk factors.
TAX MATTERS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON LINCOLN LIFE'S
UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE
TO ANNUITIES IN GENERAL. LINCOLN LIFE CANNOT PREDICT THE
PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
OWNERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING
THE POSSIBILITY OF SUCH CHANGES. LINCOLN LIFE DOES NOT
GUARANTEE THE TAX STATUS OF THE CONTRACTS. OWNERS BEAR THE
COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS.
GENERAL
Section 72 of the Code governs taxation of annuities in
general. A Contract Owner is not taxed on increases in the
value of a Contract until distribution occurs, either in the
form of a lump sum payment or as annuity payments under the
Settlement Option elected. For a lump sum payment received
as a total surrender (total redemption), the recipient is
taxed on the portion of the payment that exceeds the cost
basis of the Contract. For Non-Qualified Contracts, this
cost basis is generally the Premium Payments, while for
Qualified Contracts there may be no cost basis. The taxable
portion of the lump sum payment is taxed at ordinary income
tax rates.
For annuity payments, the taxable portion is determined by a
formula which establishes the ratio that the cost basis of
the Contract bears to the total value of annuity payments
for the term of the Contract. The taxable portion is taxed
at ordinary income rates. For certain types of Qualified
Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Contract Owners,
Annuitants and Beneficiaries under the Contracts should seek
competent financial advice about the tax consequences of any
distributions.
Lincoln Life is taxed as a life insurance company under
Subchapter L of the Code. For federal income tax purposes,
the Variable Account is not a separate entity from Lincoln
Life, and its operations form a part of Lincoln Life.
Accordingly, the Variable Account will not be taxed
separately as a "regulated investment company" under
Subchapter M of the Code. Lincoln Life does not expect to
incur any federal income tax liability with respect to
investment income and net capital gains arising from the
activities of the Variable Account retained as part of the
reserves under the Contract. Based on this expectation, it
is anticipated that no charges will be made against the
Variable Account for federal income taxes. If, in future
years, any federal income taxes or other economic burden are
incurred by Lincoln Life with respect to the Variable
Account or the Contracts, Lincoln Life may make a charge for
any such amounts that are attributable to the Variable
Account.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable annuity
contracts. The Code provides that a variable annuity
contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments
are not adequately diversified in accordance with
regulations prescribed by the United States Treasury
Department ("Treasury Department").
35
<PAGE>
Disqualification of the Contract as an annuity contract
would result in imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the
Contract prior to the receipt of payments under the
Contract. The Code contains a safe harbor provision which
provides that annuity contracts such as the Contracts meet
the diversification requirements if, as of the end of each
quarter, the underlying assets meet the diversification
standards for a regulated investment company and no more
than fifty-five percent (55%) of the total assets consist of
cash, cash items, U.S. government securities and securities
of other regulated investment companies.
The Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for
the investment portfolios underlying variable contracts such
as the Contracts. The regulations amplify the
diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe
harbor provision described above. Under the regulations, an
investment portfolio will be deemed adequately diversified
if: (1) no more than 55% of the value of the total assets of
the portfolio is represented by any one investment; (2) no
more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more
than 80% of the value of the total assets of the portfolio
is represented by any three investments; and (4) no more
than 90% of the value of the total assets of the portfolio
is represented by any four investments.
The Code provides that for purposes of determining whether
or not the diversification standards imposed on the
underlying assets of variable contracts by Section 817(h) of
the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate
issuer."
Lincoln Life intends, and the Trusts have undertaken, that
all Funds underlying the Contracts will be managed in such a
manner as to comply with these diversification requirements.
The Treasury Department has indicated that guidelines may be
forthcoming under which a variable annuity contract will not
be treated as an annuity contract for tax purposes if the
owner of the contract has excessive control over the
investments underlying the contract (i.e., by being able to
transfer values among sub-accounts with only limited
restrictions). The issuance of such guidelines may require
Lincoln Life to impose limitations on a Contract Owner's
right to control the investment. It is not known whether any
such guidelines would have a retroactive effect.
DISTRIBUTION REQUIREMENTS
Section 72(s) of the Code requires that in order to be
treated as an annuity contract for Federal income tax
purposes, any Nonqualified Contract must provide that (a) if
any Owner dies on or after the Annuity Date but prior to the
time the entire interest in the Contract has been
distributed, the remaining portion of such interest will be
distributed at least as rapidly as under the method of
distribution being used when the Owner died; and (b) if any
Owner dies prior to the Annuity Date, the entire interest in
the Contract will be distributed within five years after
such death. These requirements will be considered satisfied
as to any portion of the Owner's interest which is payable
to or for the benefit of a "designated beneficiary" and
which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life
expectancy of that beneficiary, provided that such
distributions begin within one year of the Owner's death.
The Owner's "designated beneficiary" is the person
designated by such Owner as a Beneficiary and to whom
ownership of the Contract passes by reason of death and must
be a natural person. However, if the Owner's "designated
beneficiary" is the surviving spouse of the Owner, the
Contract may be continued with the surviving spouse as the
new Owner.
36
<PAGE>
The Contracts contain provisions which are intended to
comply with the requirements of Section 72(s) of the Code,
although no regulations interpreting these requirements have
yet been issued. Lincoln Life intends to review such
provisions and modify them if necessary to try to assure
that they comply with the Section 72(s) requirements when
clarified by regulation or otherwise. Similar rules may
apply to a Qualified Contract.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity
contracts which are issued during a calendar year to the
same contract owner by one company or its affiliates are
treated as one annuity contract for purposes of determining
the tax consequences of any distribution. Such treatment may
result in adverse tax consequences, including more rapid
taxation of the distributed amounts from such combination of
contracts. Contract Owners should consult a tax adviser
prior to purchasing more than one nonqualified annuity
contract in any single calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable
event. Contract Owners should therefore consult competent
tax advisers should they wish to assign their Contracts.
WITHHOLDING
Withholding of federal income taxes on the taxable portion
of all distributions may be required unless the recipient
elects not to have any such amounts withheld and properly
notifies Lincoln Life of that election. Different rules may
apply to United States citizens or expatriates living
abroad. Withholding is mandatory for certain distributions
from Qualified Contracts. In addition, some states have
enacted legislation requiring withholding.
SECTION 1035 EXCHANGES
Code Section 1035 generally provides that no gain or loss
shall be recognized on the exchange of one annuity contract
for another. If the surrendered contract was issued prior to
August 14, 1982, the tax rules that formerly provided that
the surrender was taxable only to the extent the amount
received exceeds the owner's investment in the contract will
continue to apply to amounts allocable to investment in the
contract before August 14, 1982. Special rules and
procedures apply to Code Section 1035 transactions.
Prospective purchasers wishing to take advantage of Code
Section 1035 should consult their tax advisers.
TAX TREATMENT OF WITHDRAWALS --
NON-QUALIFIED CONTRACTS
Section 72 of the Code governs the treatment of
distributions from annuity contracts. It provides that if
the Annuity Account Value exceeds the aggregate Premium
Payments made, any amount withdrawn will be treated as
coming first from the earnings and then, only after the
income portion is exhausted, as coming from the principal.
Withdrawn earnings are includable in gross income. It
further provides that a ten percent (10%) penalty will apply
to the income portion of any premature distribution.
However, the penalty is not imposed on amounts received: (a)
after the Payee reaches age 59 1/2; (b) after the death of
the Contract Owner (or, if the Contract Owner is a
non-natural person, the Annuitant); (c) if the Payee is
totally disabled (for this purpose disability is as defined
in Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy)
37
<PAGE>
of the Payee or for the joint lives (or joint life
expectancies) of the Payee and his/her beneficiary; (e)
under an immediate annuity; or (f) which are allocable to
Premium Payments made prior to August 14, 1982.
The above information does not apply, except where noted, to
Qualified Contracts. However, separate tax withdrawal
penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals -- Qualified
Contracts.")
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be
suitable for use under various types of Qualified Plans.
Because of the minimum purchase payment requirements, these
Contracts may not be appropriate for some periodic payment
retirement plans. Taxation of participants in each Qualified
Plan varies with the type of plan and terms and conditions
of each specific plan. Contract Owners, Annuitants and
Beneficiaries are cautioned that benefits under a Qualified
Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts
issued pursuant to the plan. Although Lincoln Life provides
administration for the Contract, it does not provide
administrative support for Qualified Plans. Following are
general descriptions of the types of Qualified Plans with
which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only.
The tax rules regarding Qualified Plans are very complex and
will have differing applications, depending on individual
facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued
in connection with a Qualified Plan.
Special favorable tax treatment may be available for certain
types of contributions and distributions (including special
rules for certain lump sum distributions). Adverse tax
consequences may result from contributions in excess of
specified limits, distributions prior to age 59 1/2 (subject
to certain exceptions), distributions that do not conform to
specified minimum distribution rules, aggregate
distributions in excess of a specified annual amount, and in
certain other circumstances. Therefore, Lincoln Life makes
no attempt to provide more than general information about
use of the Contract with the various types of qualified
plans. Purchasers and participants under qualified plans as
well as Annuitants, Payees and Beneficiaries are cautioned
that the rights of any person to any benefits under
qualified plans may be subject to the terms and conditions
of the plan themselves, regardless of the terms and
conditions of the Contract issued in connection therewith.
SECTION 403(b) Plans
Under Section 403(b) of the Code, payments made by public
school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable
from the gross income of the employee, subject to certain
limitations. However, such payments may be subject to FICA
(Social Security) taxes. Additionally, in accordance with
the requirements of the Code, Section 403(b) annuities
generally may not permit distribution of (i) elective
contributions made in years beginning after December 31,
1988, and (ii) earnings on those contributions and (iii)
earnings on amounts attributed to elective contributions
held as of the end of the last year beginning before January
1, 1989. Distributions of such amounts will be allowed only
upon the death of the employee, on or after attainment of
age 59 1/2, separation from service, disability, or
financial hardship, except that income attributable to
elective contributions may not be distributed in the case of
hardship.
38
<PAGE>
INDIVIDUAL RETIREMENT ANNUITIES
Sections 219 and 408 of the Code permit individuals or their
employers to contribute to an individual retirement program
known as an "Individual Retirement Annuity" or an "IRA".
Individual Retirement Annuities are subject to limitation on
the amount which may be contributed and deducted and the
time when distributions may commence. In addition,
distributions from certain other types of qualified plans
may be placed into an Individual Retirement Annuity on a
tax-deferred basis.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Section 401(a) and 403(a) of the Code permit corporate
employers to establish various types of retirement plans for
employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such
retirement plans may permit the purchase of the Contracts to
provide benefits under the plans.
DEFERRED COMPENSATION PLANS
Section 457 of the Code, while not actually providing for a
qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service
for state governments, local governments, political
sub-divisions, agencies, instrumentalities and certain
affiliates of such entities and tax exempt organizations
which enjoy special treatment. The Contracts can be used
with such plans. Under such plans a participant may specify
the form of investment in which his or her participation
will be made. All such investments of a nongovernmental
organization, however, are owned by, and are subject to, the
claims of the general creditors of the sponsoring employer.
Recent tax legislation provides that governmental plans, on
or after August 20, 1996, must hold the assets and income of
the plan for the exclusive benefit of participants and their
beneficiaries; preexisting plans have until January 1, 1999
to meet this requirement.
The above description of federal income tax consequences
pertaining to the different types of Qualified Plans that
may be funded by the Contracts is only a brief summary and
is not intended as tax advice. The rules governing the
provisions of Qualified Plans are extremely complex and
often difficult to comprehend. Anything less than full
compliance with the applicable rules, all of which are
subject to change, may have significant adverse tax
consequences. A prospective purchaser considering the
purchase of a Contract in connection with a Qualified Plan
should first consult a qualified and competent tax adviser
with regard to the suitability of the Contract as an
investment vehicle for the Qualified Plan.
TAX TREATMENT OF WITHDRAWALS --
QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the
taxable portion of any distribution from qualified
retirement plans, including Contracts issued and qualified
under Code Sections 401, 403(b) and 408. To the extent
amounts are not includable in gross income because they have
been properly rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax
penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the
Payee reaches age 59 1/2; (b) distributions following the
death of the Contract Owner or Annuitant (as applicable) or
disability of the Payee (for this purpose disability is as
defined in Section 72(m)(7) of the Code); (c) after
separation from service, distributions that are part of
substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy)
of the Payee or the joint lives (or joint life
39
<PAGE>
expectancies) of such Payee and his/her designated
beneficiary; (d) distributions to a Payee who has separated
from service after attaining age 55; (e) distributions made
to the extent such distributions do not exceed the amount
allowable as a deduction under Code Section 213 to the Payee
for amounts paid during the taxable year for medical care:
and (f) distributions made to an alternate payee pursuant to
a qualified domestic relations order.
The exceptions stated in items (d) and (f) above do not
apply in the case of an Individual Retirement Annuity.
Additional exceptions to the tax penalty are available for
the following distributions from an Individual Retirement
Annuity: (a) Payee is unemployed and uses the money to pay
health insurance premiums; and (b) for tax years after
December 31, 1997, Payee uses the distribution for higher
education expenses or a qualified first-time home purchase.
FINANCIAL STATEMENTS
[To be filed by amendment.]
LEGAL PROCEEDINGS
[To be filed by amendment.]
40
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information which contains more details concerning
some subjects discussed in this Prospectus is available (at no cost) by calling
or writing Lincoln Life's Administrative Office. The following is the Table of
Contents for that Statement:
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
THE CONTRACTS-GENERAL PROVISIONS................ 3
The Contracts................................. 3
Loans......................................... 3
Non-Participating Contracts................... 3
Misstatement of Age........................... 3
CALCULATION OF VARIABLE ACCOUNT VALUES.......... 3
Variable Accumulation Unit Value.............. 3
SAMPLE CALCULATIONS AND TABLES.................. 4
Variable Account Unit Value Calculations...... 4
Withdrawal Charge and Market Value Adjustment
Tables....................................... 5
STATE REGULATION OF LINCOLN LIFE................ 6
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
ADMINISTRATION.................................. 6
ACCOUNT INFORMATION............................. 7
DISTRIBUTION OF THE CONTRACTS................... 7
CUSTODY OF ASSETS............................... 7
HISTORICAL PERFORMANCE DATA..................... 7
Money Market Sub-Account Yield................ 7
Other Sub-Account Yields...................... 8
Total Returns................................. 8
Other Performance Data........................ 9
LEGAL PROCEEDINGS............................... 9
EXPERTS......................................... 9
FINANCIAL STATEMENTS............................ 9
</TABLE>
41
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS
Issued through
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
Offered by
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Administrative Office Location:
Telephone: (800)
This Statement of Additional Information ("Statement") expands upon subjects
discussed in the current Prospectus for the Variable Annuity Contracts (the
"Contracts") offered by The Lincoln National Life Insurance Company through
Lincoln Life Variable Annuity Account N. You may obtain a copy of the Prospectus
dated , 1998, by calling (800) , or by writing to The Lincoln
National Life Insurance Company at it's Administrative Office address shown
above. Terms used in the current Prospectus for the Contracts are incorporated
in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS AND LINCOLN LIFE
VARIABLE ANNUITY ACCOUNT N.
Dated: , 1998
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE CONTRACTS -- GENERAL PROVISIONS........................................................................ 3
The Contracts............................................................................................ 3
Loans.................................................................................................... 3
Non-Participating Contracts.............................................................................. 3
Misstatement of Age...................................................................................... 3
CALCULATION OF VARIABLE ACCOUNT VALUES..................................................................... 3
Variable Accumulation Unit Value......................................................................... 3
SAMPLE CALCULATIONS AND TABLES............................................................................. 4
Variable Account Unit Value Calculations................................................................. 4
Withdrawal Charge and Market Value Adjustment Tables..................................................... 5
STATE REGULATION OF LINCOLN LIFE........................................................................... 6
ADMINISTRATION............................................................................................. 6
ACCOUNT INFORMATION........................................................................................ 7
DISTRIBUTION OF THE CONTRACTS.............................................................................. 7
CUSTODY OF ASSETS.......................................................................................... 7
HISTORICAL PERFORMANCE DATA................................................................................ 7
Money Market Sub-Account Yield........................................................................... 7
Other Sub-Account Yields................................................................................. 8
Total Returns............................................................................................ 8
Other Performance Data................................................................................... 9
LEGAL PROCEEDINGS.......................................................................................... 9
EXPERTS.................................................................................................... 9
FINANCIAL STATEMENTS....................................................................................... 9
</TABLE>
2
<PAGE>
In order to supplement the description in the Prospectus, the following
provides additional information about The Lincoln National Life Insurance
Company ("Lincoln Life") and the Contracts which may be of interest to an Owner.
Terms have the same meaning as in the Prospectus, unless otherwise indicated.
THE CONTRACTS -- GENERAL PROVISIONS
THE CONTRACTS
A Contract, attached riders, amendments and any application, form the entire
contract. Only the President, a Vice President, a Secretary, a Director, or an
Assistant Director of Lincoln Life may change or waive any provision in a
Contract. Any changes or waivers must be in writing. Lincoln Life may change or
amend the Contracts if such change or amendment is necessary for the Contracts
to comply with or take advantage of any state or federal law, rule or
regulation.
LOANS
Under the Contracts, loans are not permitted.
NON-PARTICIPATING CONTRACTS
The Contracts do not participate or share in the profits or surplus earnings
of Lincoln Life.
MISSTATEMENT OF AGE
If the age of the Annuitant is misstated, any amounts payable by Lincoln
Life under the Contract will be adjusted to be those amounts which the Premium
Payments would have purchased for the correct age, according to Lincoln Life's
rates in effect on the Date of Issue. Any overpayment by Lincoln Life, with
interest at the rate of 6% per year, compounded annually, will be charged
against the payments to be made next succeeding the adjustment. Any underpayment
by Lincoln Life will be paid in a lump sum.
If the age or sex of the Owner is misstated, Lincoln Life will adjust the
charge associated with any Optional Death Benefits elected to the charges that
would have been assessed for the correct age and sex.
CALCULATION OF VARIABLE ACCOUNT VALUES
On any Valuation Date, the Variable Account value is equal to the totals of
the values allocated to the Contracts in each Sub-Account. The portion of an
Owner's Annuity Account Value held in any Variable Account Sub-Account is equal
to the number of Sub-Account units allocated to a Contract multiplied by the
Sub-Account accumulation unit value as described below.
VARIABLE ACCUMULATION UNIT VALUE
Upon receipt of a Premium Payment by Lincoln Life at its Administrative
Office, all or that portion, if any, of the Premium Payment to be allocated to
the Variable Account Sub-Accounts will be credited to the Variable Account in
the form of Variable Accumulation Units. The number of particular Variable
Accumulation Units to be credited is determined by dividing the dollar amount
allocated to the particular Variable Account Sub-Account by the Variable
Accumulation Unit Value for the particular Variable Account Sub-Account for the
Valuation Period during which the Premium Payment is received at the Company's
Administrative Office (for the initial Premium Payment, for the Valuation Period
during which the Premium Payment is accepted).
The Variable Accumulation Unit Value for each Variable Account Sub-Account
was set at an arbitrary amount for the first Valuation Period of the particular
Variable Account Sub-Account. The Variable Account commenced operations on
, 1998. The Accumulation Unit value for a Sub-Account for any later
Valuation Period is determined as follows:
(1) The total value of Fund shares held in the Sub-Account is calculated by
multiplying the number of Fund shares owned by the Sub-Account at the
beginning of the Valuation [Period]
3
<PAGE>
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 Valuation Period; minus
(2) The liabilities of the Sub-Account at the end of the Valuation [Period];
such liabilities include daily charges imposed on the Sub-Account, and
may include a charge or credit with respect to any taxes paid or reserved
for by Lincoln Life that Lincoln Life determines result from the
operations of the Variable Account; and
(3) The result of (2) is divided by the number of Sub-Account units
outstanding at the beginning of the Valuation [Period].
The daily charges imposed on a Sub-Account 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.
The Variable Account portion of the Annuity Account Value, if any, for any
Valuation Period is equal to the sum of the value of all Variable Accumulation
Units of each Variable Account Sub-Account credited to the Contract for such
Valuation Period. The value in a Contract of each Variable Account Sub-Account
is determined by multiplying the number of Variable Accumulation Units, if any,
credited to such Variable Account Sub-Account in a Contract by the Variable
Accumulation Unit Value of the particular Variable Account Sub-Account for such
Valuation Period.
SAMPLE CALCULATIONS AND TABLES
VARIABLE ACCOUNT UNIT VALUE CALCULATIONS
VARIABLE ACCUMULATION UNIT VALUE CALCULATION. Assume the net asset value of
a Fund share at the end of the current Valuation Period is $ ; and the
number of Fund shares held in the Sub-Account at the beginning of the Valuation
Period was ; the number of Sub-Account units outstanding at the beginning
of the Valuation Period was ; the Valuation Period is one day; and no
dividends or distributions caused Fund shares to go "ex-dividend" during the
current Valuation Period. multiplied by equals . Subtracting the
one day risk factor for mortality and expense risks and the administrative
expense charge of .00003862644 (the daily equivalent of the current charge of
1.40% on an annual basis) results in ; divided by (the number of
Sub-Account units outstanding at the beginning of the Valuation Period) equals a
Sub-Account unit value for the current Valuation Period of .
VARIABLE ANNUITY UNIT VALUE CALCULATION. The assumptions in the above
example exist. Also assume that the value of an Annuity Unit for the immediately
preceding Valuation Period had been $ . As the first variable annuity
payment is determined by using an assumed interest rate of 3% per year, the
value of the Annuity Unit for the current Valuation Period would be
$ [ X 0.999919020]. 0.999919020 is the factor, for a one day
Valuation Period, that neutralizes the assumed interest rate of three percent
(3%) per year used to establish the Annuity Payment Rates found in the Contract.
VARIABLE ANNUITY PAYMENT CALCULATION. Assume that a Participant's Variable
Annuity Account is credited with Variable Accumulation Units of a
particular Sub-Account; that the Variable Accumulation Unit Value and the
Annuity Unit Value for the particular Sub-Account for the Valuation Period which
ends immediately preceding the Annuity Date are $ and $
respectively; that the Annuity Payment Rate for the age and option elected is
$ per $1,000; and that the Annuity Unit Value on the day prior to the second
variable annuity payment date is $ . The first variable annuity payment
would be $ ( X $ X divided by 1,000). The number of
Annuity Units credited would be ($ divided by $ ) and the
second variable annuity payment would be $ ( X $ ).
4
<PAGE>
WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT TABLES
The following example illustrates the detailed calculations for a $50,000
deposit into the Fixed Account with a guaranteed rate of 8% for a duration of
five years. The intent of the example is to show the effect of the Market Value
Adjustment ("MVA") and the 3% minimum guarantee under various interest rates on
the calculation of the cash surrender (withdrawal) value. Any charges for
optional death benefit risks are not taken into account in the example. The
effect of the MVA is reflected in the index rate factor in column (2) and the
minimum 3% guarantee is shown under column (4) under the "Surrender Value
Calculation". The "Surrender Charge Calculation" assumes there have been no
prior withdrawals and illustrates the operation of the Fifteen Percent Free
provision of the Contract. The "Market Value Adjustment Tables" and "Minimum
Value Calculation" contain the explicit calculation of the index factors and the
3% minimum guarantee respectively. The "Annuity Value Calculation" and "Minimum
Value" calculations assume the imposition of the annual $35 Annuity Account Fee
charge, but that fee is waived if the Annuity Account Value at the end of a
Contract Year is $100,000 or more. The results would be slightly different for
New York Contracts which have a $30 annual Account Fee.
WITHDRAWAL CHARGE TABLES
SAMPLE CALCULATIONS FOR MALE 35 ISSUE
CASH SURRENDER VALUES
<TABLE>
<S> <C>
Single premium............................... $50,000
Premium taxes................................ None
Withdrawals.................................. None
Guaranteed period............................ 5 years
Guaranteed interest rate..................... 8%
Annuity date................................. Age 70
Index rate A................................. 7.50%
Index rate B................................. 8.00% end of contract year 1
7.75% end of contract year 2
7.00% end of contract year 3
6.50% end of contract year 4
Percentage adjustment to B................... 0.50%
</TABLE>
SURRENDER VALUE CALCULATION
<TABLE>
<CAPTION>
(3)
(1) (2) ADJUSTED (4) (5) (6) (7)
ANNUITY INDEX RATE ANNUITY MINIMUM GREATER OF SURRENDER SURRENDER
CONTRACT YEAR VALUE FACTOR VALUE VALUE (3)&(4) CHARGE VALUE
- -------------------- --------- ---------- ------------ --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1................... $ 53,965 0.963640 $ 52,003 $ 51,465 $ 52,003 $ 2,975 $ 49,028
2................... $ 58,247 0.993056 $ 57,843 $ 52,974 $ 57,843 $ 2,975 $ 54,868
3................... $ 62,872 1.000000 $ 62,872 $ 54,528 $ 62,872 $ 2,975 $ 59,897
4................... $ 67,867 1.004673 $ 68,184 $ 56,129 $ 68,184 $ 2,550 $ 65,634
5................... $ 73,261 1.000000 $ 73,261 $ 57,778 $ 73,261 $ 2,550 $ 70,711
</TABLE>
ANNUITY VALUE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR ANNUITY VALUE
- -------------------- -----------------------------------------
<S> <C>
1................... $50,000 X 1.08 - $35 = $53,965
2................... $53,965 X 1.08 - $35 = $58,247
3................... $58,247 X 1.08 - $35 = $62,872
4................... $62,872 X 1.08 - $35 = $67,867
5................... $67,867 X 1.08 - $35 = $73,261
</TABLE>
5
<PAGE>
SURRENDER CHARGE CALCULATION
<TABLE>
<CAPTION>
(1) (2) (3)
SURRENDER SURRENDER CHARGE SURRENDER
CONTRACT YEAR CHARGE FACTOR FACTOR CHARGE
- -------------------- --------------- ---------------------- -----------
<S> <C> <C> <C>
1................... 0.07 0.0595 $ 2,975
2................... 0.07 0.0595 $ 2,975
3................... 0.07 0.0595 $ 2,975
4................... 0.06 0.0510 $ 2,550
5................... 0.06 0.0510 $ 2,550
</TABLE>
MARKET VALUE ADJUSTMENT TABLES
INTEREST RATE FACTOR CALCULATION
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
INDEX INDEX ADJUSTED N (1+A)
CONTRACT YEAR RATE A RATE B INDEX RATE B -- (1+B)
- -------------------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1................... 7.50% 8.00% 8.50% 4 0.963640
2................... 7.50% 7.75% 7.75% 3 0.993056
3................... 7.50% 7.00% 7.50% 2 1.000000
4................... 7.50% 6.50% 7.00% 1 1.004673
5................... 7.50% NA NA 0 NA
</TABLE>
MINIMUM VALUE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR MINIMUM VALUE
- -------------------- -----------------------------------------
<S> <C>
1................... $50,000 X 1.03 - $35 = $51,465
2................... $51,465 X 1.03 - $35 = $52,974
3................... $52,974 X 1.03 - $35 = $54,528
4................... $54,528 X 1.03 - $35 = $56,129
5................... $56,129 X 1.03 - $35 = $57,778
</TABLE>
STATE REGULATION OF LINCOLN LIFE
Lincoln Life, an Indiana corporation, is subject to regulation by the
Indiana Department of Insurance. An annual statement is filed with the Indiana
Department of Insurance each year covering the operations and reporting on the
financial condition of Lincoln Life as of December 31 of the preceding year.
Periodically, the Indiana Department of Insurance or other authorities examine
the liabilities and reserves of Lincoln Life and the Variable Account, and a
full examination of Lincoln Life's operations is conducted periodically by the
Indiana Department of Insurance. In addition, Lincoln Life is subject to the
insurance laws and regulations of other states within which it is licensed to
operate. Generally, the Insurance Department of any other state applies the laws
of the state of domicile in determining permissible investments.
A Contract is governed by the laws of the state in which it is delivered.
The values and benefits of each Contract are at least equal to those required by
such state.
ADMINISTRATION
Lincoln Life performs certain administrative functions relating to the
Contracts, the individual Annuity Accounts, the Fixed Account, and the Variable
Account. These functions include, among other things, maintaining the books and
records of the Variable Account, the Fixed Account, and the Sub-Accounts, and
maintaining records of the name, address, taxpayer identification number,
contract number, Annuity Account number and type, the status of each Annuity
Account and other pertinent information necessary to the administration and
operation of the Contracts.
6
<PAGE>
ACCOUNT INFORMATION
At least once during each Calendar Year, Lincoln Life will furnish the Owner
with a report showing the Annuity Account Value at the end of the preceding
Calendar Year, all transactions during the reporting period, the current Annuity
Account Value, the number of Accumulation Units in each Variable Account
Sub-Account Accumulation Account and the applicable Accumulation Unit Value as
of the date of the report. In addition, each person having voting rights in the
Variable Account and a Fund or Funds will receive each such reports or
prospectuses as may be required by the Investment Company Act of 1940 and the
Securities Act of 1933. Lincoln Life will also send each Owner such statements
reflecting transactions in the Owner's Annuity Account as may be required by
applicable laws, rules and regulations.
Upon request to its Administrative Office, Lincoln Life will provide an
Owner with information regarding fixed and variable accumulation values.
DISTRIBUTION OF THE CONTRACTS
Lincoln Life is the principal underwriter for the Contracts, which are
offered continuously.
Sales charges on and exchange privileges under the Contracts are described
in the Prospectus. There are no variations in the prices at which the Contracts
are offered for certain types of purchasers.
CUSTODY OF ASSETS
Lincoln Life is the Custodian of the assets of the Variable Account. Lincoln
Life will purchase Fund shares at net asset value in connection with amounts
allocated to the Variable Account Sub-Accounts in accordance with the
instructions of the Purchasers and redeem Fund shares at net asset value for the
purpose of meeting the contractual obligations of the Variable Account, paying
charges relative to the Variable Account or making adjustments for annuity
reserves held in the Variable Account. The assets of the Sub-Accounts of the
Variable Account are held separate and apart from the assets of any other
segregated asset accounts of Lincoln Life and separate and apart from Lincoln
Life's general account assets. Lincoln Life maintains records of all purchases
and redemptions of shares of each Fund held by each of the Sub-Accounts of the
Variable Account.
HISTORICAL PERFORMANCE DATA
MONEY MARKET SUB-ACCOUNT YIELD
From time to time, the Money Market Sub-Account may advertise its "yield"
and "effective yield." Both yield figures will be based on historical earnings
and are not intended to indicate future performance. The "yield" of the Money
Market Sub-Account refers to the income generated by Annuity Account Values in
the Money Market Sub-Account over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
Annuity Account Values in the Money Market Sub-Account. The "effective yield" is
calculated similarly but, when annualized, the income earned by Annuity Account
Values in the Money Market Sub-Account is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The computation of the yield
calculation includes a deduction for the Mortality and Expense Risk Charge, the
Administrative Expense Charge, and the Annuity Account Fee.
The effective yield is calculated by compounding the unannualized base
period return according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)to the power of 365/7] - 1
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Sub-Account's actual yield is affected by changes in
interest
7
<PAGE>
rates on money market securities, average portfolio maturity of the Money Market
Fund, the types and quality of portfolio securities held by the Money Market
Fund and its operating expenses. The yield figures do not reflect withdrawal
charges or premium taxes.
OTHER SUB-ACCOUNT YIELDS
Lincoln Life may from time to time advertise or disclose the current
annualized yield of one or more of the Sub-Accounts of the Variable Account
(except the Money Market Sub-Account) for 30-day periods. The annualized yield
of a Sub-Account refers to income generated by the Sub-Account over a specific
30-day period. Because the yield is annualized, the yield generated by a
Sub-Account during the 30-day period is assumed to be generated each 30-day
period over a 12-month period. The yield is computed by: (i) dividing the net
investment income per accumulation unit earned during the period by the maximum
offering price per unit on the last day of the period, according to the
following formula:
Yield = 2 [(a - b + 1)(to the power of 6) - 1]
-----
cd
Where: a = Net investment income earned during the period by
the Fund attributable to shares owned by the
Sub-Account.
b = Expenses accrued for the period (net of
reimbursements).
c = The average daily number of accumulation units
outstanding during the period.
d = The maximum offering price per accumulation unit
on the last day of the period.
Because of the charges and deductions imposed by the Variable Account, the
yield for a Sub-Account of the Variable Account will be lower than the yield for
its corresponding Fund. The yield calculations do not reflect the effect of any
premium taxes or deferred sales charges that may be applicable to a particular
Contract. Deferred sales charges range from 7% to 1% of the amount withdrawn or
surrendered on total Premium Payments paid less prior partial withdrawals, based
on the Contract Year in which the withdrawal or surrender occurs.
The yield on amounts held in the Sub-Accounts of the Variable Account
normally will fluctuate over time. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. A Sub-Account's actual yield is affected by the types and quality of the
Fund's investments and its operating expenses.
TOTAL RETURNS
Lincoln Life may from time to time also advise or disclose annual average
total returns for one or more of the Sub-Accounts of the Variable Account for
various periods of time. When a Sub-Account has been in operation for 1, 5 and
10 years, respectively, the total return for these periods will be provided.
Total returns for other periods of time may from time to time also be disclosed.
Total returns represent the average annual compounded rates of return that would
equate the initial amount invested to the redemption value of that investment as
of the last day of each of the periods.
Total returns will be calculated using Sub-Account Unit Values which Lincoln
Life calculates on each Valuation Period based on the performance of the
Sub-Account's underlying Fund, and the deductions for the mortality and expense
risk charge, the administrative expense charge, and the Account Fee. The Account
Fee is reflected by dividing the total amount of such charges collected during
the year that are attributable to the Variable Account by the total average net
assets of all the Variable Sub-Accounts. The resulting percentage is deducted
from the return in calculating the ending redeemable value. These
8
<PAGE>
figures will not reflect any premium taxes. Total return calculations will
reflect the effect of deferred sales charges that may be applicable to a
particular period. The total return will then be calculated according to the
following formula:
P(1+T)to the power of n = ERV
Where: P = A hypothetical initial Premium Payment of $1,000.
T = Average annual total return.
n = Number of years in the period.
ERV = Ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period, at the end of the one, five or
ten-year period (or fractional portion thereof).
OTHER PERFORMANCE DATA
Lincoln Life may from time to time also disclose average annual total
returns in a non-standard format in conjunction with the standard format
described above. The non-standard format will be identical to the standard one
except that the deferred sales charge percentage will be assumed to be 0%.
Lincoln Life may from time to time disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the deferred sales
charge percentage will be 0%.
CTR = (ERV/P) - 1
Where: CTR = The cumulative total return net of Sub-Account
recurring charges for the period.
ERV = The ending redeemable value of the hypothetical
investment made at the beginning of the one, five
or ten-year period, at the end of the one, five or
ten-year period (or fractional portion thereof).
P = A hypothetical initial payment of $10,000
All non-standard performance data will only be advertised if the standard
performance data is also disclosed.
Lincoln Life may also from time to time use advertising which includes
hypothetical illustrations to compare the difference between the growth of a
taxable investment and a tax-deferred investment in a variable annuity.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or
to which the assets of the Variable Account are subject. Lincoln Life is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Variable Account.
EXPERTS
The consolidated financial statements of The Lincoln National Life Insurance
Company as of December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997 included in this Statement of Additional
Information have been so included in reliance on the report of ,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. 's consent to this reference to the firm
as an "expert" is filed as an exhibit to the registration statement of which
this Statement of Additional Information is a part.
FINANCIAL STATEMENTS
[To be filed by amendment.]
9
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements provided in the Statement of Additional Information.
To be filed by amendment.
(b) Exhibits
(1)
Resolution of Board of Directors and Memorandum from the President Of The
Lincoln National Life Insurance Company authorizing establishment of the
Variable Account.
(2)
Not Applicable.
(3)
Form of Selling Agreement.*
(4)
Form of The Lincoln National Life Insurance Company Variable Annuity
Contract.
(5)
Form of Application for the Contract.
(6)
(a) Articles of Incorporation of The Lincoln National Life Insurance
Company are incorporated herein by reference to Registration
Statement on Form N-4 (33-27783) filed on December 5, 1996.
(b) By-Laws of The Lincoln National Life Insurance Company are
incorporated herein by reference to Registration Statement on Form
N-4 (33-27783) filed on December 5, 1996.
(7)
Not Applicable.
(8)
(a) Fund Participation Agreements.
Agreements between The Lincoln National Life Insurance Company and:
(i) Alger American Fund.*
(ii)Lincoln National Money Market Fund, Inc.*
(iii)
Variable Insurance Products Fund.*
(iv)Variable Insurance Products Fund II.*
(v) Variable Insurance Products Fund III.*
(vi)MFS-Registered Trademark- Variable Insurance Trust.*
(vii)
Neuberger & Berman Advisers Management Trust.*
(viii)
OCC Accumulation Trust.*
(b) Accounting Services Agreement between the Lincoln National Life
Insurance Company and the Delaware Management Company is incorporated
herein by reference to the Registration Statement on Form N-4
(33-27783) filed on December 5, 1996.
(9)
Opinion [and Consent] of [ ] of The Lincoln National Life
Insurance Company.*
(10)
Consent of auditors.*
(11)
Not Applicable.
(12)
Not Applicable.
(13)
Schedule for Computation of Performance Results.*
(14)
Not Applicable.
(15)
(a) Organizational Chart of The Lincoln National Insurance Holding
Company System.*
(b) Books and Records Report.*
- ------------------------
* To be filed by amendment.
C-1
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME POSITIONS AND OFFICES WITH DEPOSITOR
- ------------------------------ ---------------------------------------------
President, Chief Executive Officer and
Jon A. Boscia* Director
Carolyn P. Brody* Vice President
Thomas L. Clagg* Vice President and Associate General Counsel
Kelly D. Clevenger* Vice President
Jeffrey K. Dellinger* Vice President
Jack D. Hunter* Executive Vice President and General Counsel
Donald E. Keller* Vice President
Stephen H. Lewis* Senior Vice President
E. Thomas McMeekin** Director
Reed P. Miller* Vice President
Ian M. Rolland** Director
Lawrence T. Rowland*** Executive Vice President and Director
Vice President, Chief Financial Officer and
Keith J. Ryan* Assistant Treasurer
Roy V. Washington* Vice President and Chief Compliance Officer
Janet C. Whitney** Vice President and Treasurer
C. Suzanne Womack** Secretary and Assistant Vice President
* Principal business address is 1300 South Clinton Street, Fort Wayne,
Indiana 46802.
** Principal business address is 200 East Berry Street, Fort Wayne,
Indiana 46802-2706.
*** Principal business address is 1700 Magnovox Way, One Reinsurance
Place, Fort Wayne, Indiana 46804.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
See Exhibit 15(a): Organizational Chart of The Lincoln National Life
Insurance Holding Company System (11/1/96).
ITEM 27. NUMBER OF PURCHASERS
Not applicable, since this separate account had not yet commenced
operations.
ITEM 28. INDEMNIFICATION
(a) Brief description of indemnification provisions.
C-2
<PAGE>
In general, Article VII of the By-Laws of The Lincoln National Life
Insurance Company (LNL) provides that LNL 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 LNL, 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, LNL.
Certain additional conditions apply to indemnification in criminal
proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LNL in connection with suits
by, or in the right of, LNL.
Please refer to Article VII of the By-Laws of LNL (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements
of, Indiana law.
(b) Understanding 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.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Lincoln National Variable Annuity Fund A (Group); Lincoln National Variable
Annuity Fund A (Individual); Lincoln National Variable Annuity Account C;
Lincoln National Flexible Premium Variable Life Account D; Lincoln National
Variable Annuity Account E; Lincoln National Flexible Premium Variable Life
Account F; Lincoln National Flexible Premium Variable Life Account G;
Lincoln National Variable Annuity Account H; Lincoln Life Flexible Premium
Variable Life Account J; Lincoln Life Flexible Premium Variable Life Account
K; Lincoln National Variable Annuity Account L; Lincoln National Variable
Annuity Accounts 50, 51 and 52.
(b) See Item 25.
(c) Lincoln Life received no commissions nor other compensation from the
Variable Account during the fiscal year which ended December 31, 1996
because the Variable Account had not yet commenced operations.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
See Exhibit 15(b): Books and Records Report.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
C-3
<PAGE>
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post effective amendment to this
registration statement under the Securities Act of 1933 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 (i) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information or
(ii) a space in the Contract application or order to purchase that an
applicant can check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver promptly, upon written or oral request made
to The Lincoln National Life Insurance Company at the address or phone
number listed in the Prospectus, any Statement of Additional Information and
any financial statements required by Form N-4 to be made available to
applicants or owners.
(d) The Lincoln National Life Insurance Company hereby represents that the fees
and charges deducted under the Contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by The Lincoln National Life Insurance Company.
(e) Registrant 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.
C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement on Form N-4 to
be signed on its behalf, in the City of Fort Wayne and State of Indiana on the
th day of November, 1997.
LINCOLN LIFE VARIABLE ANNUITY
ACCOUNT N (Registrant)
By: /s/ STEPHEN H. LEWIS
-----------------------------------
Stephen H. Lewis
(SIGNATURE-OFFICER OF DEPOSITOR)
SENIOR VICE PRESIDENT, LNL
(TITLE)
By: THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
(Depositor)
By: /s/ JON A. BOSCIA
-----------------------------------
Jon A. Boscia
PRESIDENT
(TITLE)
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------------- --------------------
<C> <S> <C>
/s/ JON A. BOSCIA President, Chief Executive Officer & November 24, 1997
------------------------------------ Director (Principal Executive
Jon A. Boscia Officer)
/s/ JACK D. HUNTER
------------------------------------ Executive Vice President, General November 24, 1997
Jack D. Hunter Counsel and Director
/s/ LAWRENCE T. ROWLAND
------------------------------------
Lawrence T. Rowland Executive Vice President and Director November 24, 1997
/s/ IAN M. ROLLAND
------------------------------------
Ian M. Rolland Director November 24, 1997
/s/ H. THOMAS MCMEEKIN
------------------------------------
H. Thomas McMeekin Director November 24, 1997
/s/ RICHARD C. VAUGHAN
------------------------------------
Richard C. Vaughan Director November 24, 1997
Vice President, Chief Financial
/s/ KEITH J. RYAN Officer and Assistant Treasurer November 24, 1997
------------------------------------ (Principal Accounting Officer and
Keith J. Ryan Principal Financial Officer)
</TABLE>
<PAGE>
Exhibit 1
ESTABLISHMENT OF SEGREGATED INVESTMENT ACCOUNT
OF
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Pursuant to the authority given me by Resolution No. 82-28 of the Board
of Directors of The Lincoln National Life Insurance Company (the "Company")
dated November 4, 1982, I hereby establish a segregated investment account
designated as "Lincoln Life Variable Annuity Account N" (the "Separate
Account"). The Separate Account is to be used in connection with the issuance
by the Company of certain variable annuity contracts (the "Contracts").
The Separate Account will be registered as a unit investment trust with
the Securities and Exchange Commission ("SEC") and shall invest in shares of
investment companies which are registered with the SEC.
The establishment and operation of the Separate Account will be in
accordance with the applicable provisions of the Indiana Insurance Code
("IIC") and all rules and regulations issued pursuant thereto. In particular,
but not by way of limitation, the Separate Account shall not be chargeable
with liabilities arising out of any other business the Company may conduct
and which has no specific relation to or dependence upon the Separate
Account. The Contracts issued in connection with the Separate Account are
subject to review by the Commissioner of Insurance of the State of Indiana.
The Separate Account's investment objectives, contracts, and limitations
shall be in accordance with (1) the registration statement for the Contracts
filed with the SEC under the Securities Act of 1933, and (2) applicable
provisions of IIC and all other applicable legal requirements.
/s/ Jon A. Boscia
--------------------------
Jon A. Boscia
Chief Executive Officer
Effective Date:
November 3, 1997
- ---------------------------
<PAGE>
BOARD RESOLUTION
OF
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
ADOPTED NOVEMBER 4, 1982
82-28 RESOLVED, That the resolution relating to the establishment of
segregated investment accounts, adopted by the Board of Directors on
September 12, 1968, is hereby rescinded effective this date; and
RESOLVED FURTHER, That the chief executive officers of the Company
is hereby authorized in his discretion from time to time to establish one
or more segregated investment accounts in accordance with the provisions of
the Indiana Insurance Law, for such purpose or purposes as he may
determine and as may be apporpriate under the Indiana Insurance Law; and
RESOLVED FURTHER, That if in the opinion of legal counsel of the
Company it is necessary or desirable to register any of such accounts
under the Investment Company Act of 1940 or to register a security issued
by any such account under the Securities Act of 1933, or to make
application for exemption from registration, the chief executive officer
or such other officers as he may designate are hereby authorized to
accomplish any such registration or to make any such application for
exemption, and to perform all other acts as may be desirable or necessary
in connection with the conduct of business of the Company with respect
to any such account.
<PAGE>
LINCOLN NATIONAL LIFE INSURANCE COMPANY
A Stock Company Home Office Location: 1300 South Clinton Street
Fort Wayne, Indiana 46802-3506
ADMINISTRATOR MAILING ADDRESS: [LINCOLN NATIONAL LIFE INSURANCE COMPANY
ANNUITY & VARIABLE LIFE SERVICE CENTER
- ROUTING S249
HARTFORD, CT 06152-2249]
The Company agrees with the Owner to provide the benefits in this contract.
RIGHT TO EXAMINE CONTRACT. The contract may be returned to the individual
through whom it was purchased or to the Company within 10 days after its receipt
(20 days after its receipt where required by law for a contract issued in
replacement of another contract). If the contract is so returned, it will be
deemed void from the Date of Issue, and the Company will refund the Premium
Payment(s) as provided plus or minus any investment gains or losses under the
contract as of the date the returned contract is received by the Company, unless
required otherwise by law.
The contract is issued and accepted subject to the terms set forth on this page
and on the following pages which are made a part of the contract. In
consideration of the Premium Payment(s) as provided, this contract is executed
by the Company as of its Date of Issue.
Registrar
/s/ Jon A. Boscia
PRESIDENT
PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT ARE SUBJECT TO A MARKET VALUE
ADJUSTMENT FORMULA, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR DOWNWARD
ADJUSTMENTS IN AMOUNTS PAYABLE TO THE OWNER, INCLUDING WITHDRAWALS AND
TRANSFERS. PAYMENTS MADE FROM THE FIXED ACCOUNT PURSUANT TO AN ELECTION WHICH
BECOMES EFFECTIVE AT THE END OF A GUARANTEED PERIOD AND PAYMENTS MADE UNDER THE
"ANNUITY BENEFIT" PROVISIONS ARE NOT SUBJECT TO THE MARKET VALUE ADJUSTMENT.
PAYMENTS MADE UNDER THE "DEATH BENEFIT" PROVISIONS ARE NOT SUBJECT TO ANY MARKET
VALUE ADJUSTMENT.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
USE OF CONTRACT. This contract is available for retirement and deferred
compensation plans some of which may qualify for special tax treatment under
various sections of the Internal Revenue Code.
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
WITH FIXED AND VARIABLE ACCOUNTS - NON-PARTICIPATING
THIS IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY
READ YOUR CONTRACT CAREFULLY.
AN425 LL
<PAGE>
TABLE OF CONTENTS
CONTRACT SPECIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SCHEDULE OF CHARGES, EXPENSES AND FEES . . . . . . . . . . . . . . . . . . . 7
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PREMIUM PAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
Premium Payments
Allocation of Premium Payments
Annuity Account Continuation
Minimum Value Requirements
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS . . . . . . . . . . . . . . 11
Owner
Rights of Owner
Transfer of Ownership
Assignment
Beneficiary
Change of Beneficiary
FIXED AND VARIABLE ACCOUNTS PROVISIONS . . . . . . . . . . . . . . . . . . . 12
Fixed Account and Sub-Accounts
Variable Account and Sub-Accounts
Investment Risk
Investments of the Variable Account Sub-Accounts
Substituted Securities
CONTRACT VALUES DURING ACCUMULATION PERIOD PROVISIONS. . . . . . . . . . . . 13
Part A - Fixed Account Value
Guaranteed Periods
Guaranteed Interest Rates
Fixed Accumulation Value
Minimum Surrender Value
Part B - Variable Account Value
Acquisition and Redemption of Variable Accumulation Units
Variable Accumulation Unit Value
Variable Accumulation Value
Net Investment Factor
Part C - General
Annuity Account
Transfer Privilege
Annuity Account Fee
CASH WITHDRAWALS, WITHDRAWAL CHARGES AND MARKET VALUE
ADJUSTMENT PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Cash Withdrawals
Withdrawal Charges
Market Value Adjustment
2
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PENALTY-FREE WITHDRAWALS, TRANSFERS AND ANNUITIZATION PROVISIONS 18
Penalty-Free Partial Withdrawals or Transfers
Full or Partial Withdrawals and Transfers at the End of a Guaranteed Period
Waiver of Withdrawal Charge and Market Value Adjustment on
Death or Annuity Date
Penalty-Free Annuitization
BENEFIT PROVISIONS 18
Annuity Benefit
Annuity Date
Election and Effective Date of Election with Respect to Annuity Benefit
Determination of Amount
Income Payment Benefits
Death Benefit
Election and Effective Date of Election with Respect to Death Benefit
Payment of Death Benefit
Amount of Death Benefit
GENERAL PROVISIONS 21
The Contract
Modification of Contract
Non-Participation
Loans
Determination of Values
Endorsement of Income Payments
Misstatement of Age
Claims of Creditors
Periodic Reports
Followed by Optional Methods of Settlement and any Riders
Note: Pages 4, 6 and 8 are intentionally "blank."
3
<PAGE>
CONTRACT SPECIFICATIONS
SPECIMEN CONTRACT NUMBER
ANNUITANT(S) JOHN DOE AGE AT ISSUE 35
DATE OF ISSUE JANUARY 1, 1998
ANNUITY DATE JANUARY 1, 2028
- --------------------------------------------------------------------------------
LINCOLN NATIONAL ACCRU CHOICEPLUS VARIABLE ANNUITY
FORM BENEFIT INITIAL PREMIUM
PAYMENT
AN425 FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY $50,000
WITH FIXED AND VARIABLE ACCOUNTS
INITIAL PREMIUM PAYMENT ALLOCATION PERCENTAGE
FIXED ACCOUNT - SUB-ACCOUNTS
PERCENTAGE ADJUSTMENT TO INDEX RATE "B": .50%
INITIAL GUARANTEED PERIOD/INTEREST RATE 1/YEAR /4.55% 10%
INITIAL GUARANTEED PERIOD/INTEREST RATE 5/YEARS/6.40% 0%
INITIAL GUARANTEED PERIOD/INTEREST RATE 10/YEARS/6.90% 0%
VARIABLE ACCOUNT - SUB-ACCOUNTS (FUNDS)
ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO 10%
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO 0%
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO 0%
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO 0%
FIDELITY VARIABLE INSURANCE PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY VIP HIGH INCOME PORTFOLIO 10%
FIDELITY VIP EQUITY-INCOME PORTFOLIO 10%
FIDELITY VIP OVERSEAS PORTFOLIO 0%
VARIABLE INSURANCE PRODUCTS FUND II
FIDELITY VIPII INVESTMENT GRADE BONDS PORTFOLIO 0%
FIDELITY VIPII CONTRA FUND PORTFOLIO 0%
VARIABLE INSURANCE PRODUCTS FUND III
FIDELITY VIPIII GROWTH OPPORTUNITIES PORTFOLIO 0%
MFS VARIABLE INSURANCE TRUST
MFS TOTAL RETURN SERIES 0%
MFS UTILITIES SERIES 10%
MFS EMERGING GROWTH SERIES 0%
MFS RESEARCH SERIES 0%
MFS GROWTH WITH INCOME SERIES 10%
(Continued on Page 5.1)
5
<PAGE>
CONTRACT SPECIFICATIONS
CONTRACT NUMBER SPECIMEN
ANNUITANT(S) JOHN DOE AGE AT ISSUE 35
DATE OF ISSUE JANUARY 1, 1998
ANNUITY DATE JANUARY 1, 2028
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST ("AMT")
AMT PARTNERS PORTFOLIO 0%
AMT LIMITED MATURITY BOND PORTFOLIO 10%
OCC ACCUMULATION TRUST
OCC GLOBAL EQUITY PORTFOLIO 10%
OCC MANAGED PORTFOLIO 10%
OCC SMALL CAP PORTFOLIO 0%
LINCOLN NATIONAL VARIABLE PRODUCTS GROUP
LINCOLN NATIONAL MONEY MARKET FUND 10%
TOTAL 100%
LIMITATIONS ON TRANSFERS FROM FIXED ACCOUNT: IN EACH CONTRACT YEAR, AN OWNER IS
ALLOWED TO MAKE ONE OR MORE TRANSFERS FROM EACH SUB-ACCOUNT, AND THE AMOUNT(S)
TRANSFERRED IN AGGREGATE MAY NOT EXCEED MORE THAN [15%] OF THE THEN CURRENT
VALUE OF THE APPLICABLE SUB-ACCOUNT(S).
THIS CONTRACT IS FOR USE WITH "LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N".
OWNER: THE ANNUITANT
BENEFICIARY: THE PERSON(S) DESIGNATED BY THE OWNER AND RECORDED BY THE
COMPANY
MINIMUM SUBSEQUENT PREMIUM PAYMENTS:
$2,000 PER FIXED ACCOUNT GUARANTEED PERIOD
$100 PER VARIABLE ACCOUNT SUB-ACCOUNT
5.1
<PAGE>
SCHEDULE OF CHARGES, EXPENSES AND FEES
ANNUITY ACCOUNT FEE: The Annuity Account Fee is $35 per Contract Year and will
be deducted on the last Valuation Date of each Contract Year. The Annuity
Account Fee, however, will be waived for any Contract Year for which the Annuity
Account Value equals or exceeds $100,000 as of the last Valuation Date of such
Contract Year.
WITHDRAWAL CHARGES: The Withdrawal charges applicable under this contract are
as follows.
Withdrawal Charge
Against Premium Year
Payment Withdrawn Applicable
----------------- ----------
[7%] During 1st year since Premium Payment Accepted
[7%] During 2nd year since Premium Payment Accepted
[7%] During 3rd year since Premium Payment Accepted
[6%] During 4th year since Premium Payment Accepted
[6%] During 5th year since Premium Payment Accepted
[5%] During 6th year since Premium Payment Accepted
[4%] During 7th year since Premium Payment Accepted
[0%] Thereafter
Each Subsequent Premium Payment will be subject to its own 7-year period.
Any Withdrawal from the Fixed Account prior to the end of a Guaranteed Period
may also be subject to a Market Value Adjustment as described on page 17 which
may increase, decrease, or have no effect on the applicable account value(s). A
Market Value Adjustment would not apply to a withdrawal effective at the end of
a Guaranteed Period.
PENALTY-FREE PARTIAL WITHDRAWAL CHARGES: The Withdrawal charges are not
applicable to certain partial withdrawals of 15% or less of Premium Payments
annually (see page 18). Withdrawal charges and a Market Value Adjustment are
not applicable to annuitization of the contract at any time. Withdrawal charges
and a Market Value Adjustment are not applicable to payment of the Death
Benefit. (See "Penalty-Free Withdrawals, Transfers and Annuitization
Provisions.")
ASSET CHARGES: The Company imposes a mortality and expense ("M&E") risk charge
and an administrative expense charge, each of which is calculated as a
percentage of asset value of each Variable Account Sub-Account, to cover
mortality and expense risk and other administrative costs. The percentages
applied to asset value to determine these charges are the Daily M&E Rate and the
Daily Administrative Rate. These charges are deducted from each Variable
Account Sub-Account by reducing the Variable Accumulation Unit Value at the end
of each Valuation Period. The Daily M&E Rate is equal to the daily rate
equivalent of the annual rate of [1.25%] and the Daily Administrative Rate is
equal to the daily rate equivalent of the annual rate of [0.15%].
In addition, Daily Fund Operating Expenses will be applied by each Fund as a
percent of the daily fund balance as set forth in the prospectus for the
applicable Fund(s).
7
<PAGE>
SCHEDULE OF CHARGES, EXPENSES AND FEES (CONTINUED)
TAXES: Premium tax equivalents (including any related retaliatory taxes), if
any, and any other taxes due under this contract will be deducted if applicable.
It is currently the Company's practice to deduct such taxes, if any, at the time
the Annuity Account Value, or any portion thereof, becomes payable. (Refer to
Definition of "Annuity Account Value".)
7.1
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD. The period from the Date of Issue to the Annuity Date, the
date on which the Death Benefit becomes payable, or the date on which the
contract is surrendered or annuitized, whichever is earliest.
ANNUITANT(S). The person or persons on whose life the first Income Payment is
to be made. The Annuitant(s) on the Date of Issue is/are the person(s)
designated in the Contract Specifications and will remain the Annuitant(s) under
the contract unless the Owner exercises the right to change the Annuitant(s) as
set forth in the "Rights of Owner" provision. If prior to the Annuity Date, the
Annuitant predeceases the Owner, the Owner will then become the Annuitant until
such time as the Owner exercises the right to designate a new Annuitant as set
forth in the "Rights of Owner" provision. (Provided that the Contract Owner is
a natural person.) If joint Annuitants are named and if one of the Annuitants
predeceases the Owner prior to the Annuity Date, the contract will thereupon
become an annuity contract on the surviving Annuitant until such time that the
Owner exercises the right to designate another joint Annuitant as set forth in
the "Rights of Owner" provision.) A request for change of Annuitant(s) must be
in writing to the Company at its Annuity & Variable Life Service Center's
Mailing Address and will not take effect until recorded by the Company.
ANNUITY ACCOUNT. The account which is comprised of the Fixed and Variable
Accounts with respect to this contract.
ANNUITY ACCOUNT VALUE. The account value which at any time equals the sum of
all the then current values of the Fixed and Variable Accounts with respect to
this contract. Applicable premium taxes, if any, will be deducted when the
Annuity Account Value amount to be applied under the Annuity Benefit, Death
Benefit, Cash Withdrawals or Penalty-Free Withdrawal and Annuitization
provisions is determined.
ANNUITY DATE. The date on which Income Payments begin upon annuitization of the
contract.
CONTRACT YEARS AND CONTRACT ANNIVERSARIES. All Contract Years and Contract
Anniversaries are 12-month periods measured from the Date of Issue.
DAILY M&E RATE. The rate applied by the Company as a percentage of each
Variable Account Sub-Account's asset value to determine the M&E charge for its
assumption of mortality and expense risks for a 24-hour period.
DATE OF ISSUE. The date on which the contract becomes effective.
DUE PROOF OF DEATH. An original certified copy of an official death
certificate, an original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or any other proof of death
satisfactory to the Company.
EXPIRATION DATE(S). The date(s) on which Guaranteed Period(s), if any, end.
FIXED ACCOUNT. The term "Fixed Account" under this contract means all
Sub-Account(s) associated with Guaranteed Period(s) and Guaranteed Interest
Rate(s). Fixed Account assets are general assets of the Company and are
distinguishable from those allocated to a separate account of the Company.
FUND(S). The Variable Account Sub-Accounts in which Premium Payments, or
Transfers in accordance with the "Transfer Privilege" provision, may be
invested.
GUARANTEED PERIOD. The Guaranteed Period is the period for which interest, at
either an initial or subsequent Guaranteed Interest Rate will be credited to an
amount under a Fixed Account Sub-Account.
HOME OFFICE. The term "Home Office" means the Company indicated on the front
cover of the contract.
9
<PAGE>
DEFINITIONS (CONTINUED)
IN WRITING. The term "in writing" means in a written form satisfactory to the
Company and received by the Company at its Annuity & Variable Life Service
Center's Mailing Address.
INCOME PAYMENTS. Income Payments are the amounts payable under this contract as
determined by the settlement options provisions of the contract.
PAYOUT PERIOD. The period during which Income Payments are made under this
contract.
SEC. The Securities and Exchange Commission.
SUB-ACCOUNT. That portion of the Fixed Account associated with specific
Guaranteed Period(s) and Guaranteed Interest Rate(s) and that portion of the
Variable Account which invests in shares of a specific Fund.
VALUATION DATE. Any day on which the New York Stock Exchange ("NYSE") is open
for business, except a day during which trading on the NYSE is restricted or on
which an emergency exists as a result of which the valuation or disposal of
securities is not reasonably practicable.
VALUATION PERIOD. The period beginning immediately after the close of business
on a Valuation Date and ending at the close of business on the next Valuation
Date.
VARIABLE ACCOUNT. The term "Variable Account" under this contract means all
Sub-Account(s) associated with investments in the Fund(s). Variable Account
assets are separate account assets of the Company, the investment performance of
which is kept separate from that of the general assets of the Company and are
not chargeable with general liabilities of the Company.
VARIABLE ANNUITY UNITS. A unit of measure used in the calculation of the value
of the variable portion of the Annuity Account during the Payout Period.
VARIABLE ACCUMULATION UNIT. A unit of measure used in the calculation of the
value of the variable portion of the Annuity Account before the Payout Period.
PREMIUM PAYMENT PROVISIONS
PREMIUM PAYMENTS. Premium Payments are payable to the Company at its Annuity &
Variable Life Service Center's Mailing Address (or its lockbox address) or to an
authorized agent of the Company. A Company receipt will be furnished upon
request. The Initial Premium Payment is the amount paid to the Company as
consideration for the benefits provided under the contract on the Date of Issue.
Subsequent Premium Payments may be paid to the Company from time to time after
the Date of Issue and prior to the Annuity Date. The Company will not accept
any Premium Payment which is less than the minimum amount requirement then in
effect as determined by the Company. In addition, the prior approval of the
Company is required before it will accept a Premium Payment in excess of the
maximum amount limit then in effect as determined by the Company. All Premium
Payments must meet the allocation requirements specified under the "Allocation
of Premium Payments" provision. The payment of any amount under the contract
which is derived, all or in part, from any Premium Payments made by check or
draft may be postponed until such check or draft has been honored by the
financial institution upon which it is drawn.
The Initial Premium Payment attributable to the contract is shown on the
Contract Specifications page.
ALLOCATION OF PREMIUM PAYMENTS. Upon receipt by the Company at its Annuity &
Variable Life Service Center's Mailing Address, each Premium Payment will be
added to the Annuity Account established under the contract. The Annuity
Account is described under the "Annuity Account" provision and is comprised of
Fixed Account Sub-Account(s) and Variable Account Sub-Account(s). The Initial
Premium Payment will be allocated to one or more such Sub-Accounts in accordance
with the allocation percentages specified by the Owner and shown in the Contract
Specifications, provided such allocations to Fixed and/or Variable Accounts
conform to the Company's minimum deposit requirements in effect as of the
Date of Issue.
10
<PAGE>
PREMIUM PAYMENT PROVISIONS (CONTINUED)
Subsequent Premium Payments will be allocated as directed by the Owner. If no
direction is given, the allocation percentages will be that which has been most
recently directed for payments by the Owner. If a portion of the most recent
previous Premium Payment was allocated to the Fixed Account and the allocation
percentages when applied to a Subsequent Premium Payment does not produce an
amount which meets the Fixed Account minimum requirements, the Company will
promptly seek further instructions from the Owner regarding allocation of the
premium or otherwise return the applicable portion of such Premium Payment as
provided by law.
ANNUITY ACCOUNT CONTINUATION. The Annuity Account shall be continued
automatically in full force from the Date of Issue until the Annuity Date or
until the contract is surrendered or annuitized, the Death Benefit is paid, or
the Annuity Account Value no longer meets the requirements specified in the
"Minimum Value Requirements" provision, whichever occurs first.
MINIMUM VALUE REQUIREMENTS. If no Premium Payments have been made for three
consecutive years and the Annuity Account Value decreases to less than $1,000
during that period, or if any partial withdrawal decreases the Annuity Account
Value to less than $1,000, the Company reserves the right to cancel the contract
and pay to the Owner an adjusted value of the Annuity Account as would be
calculated under the "Determination of Amount" provision. The Company will,
however, provide at least 30 days advance notice to the Owner of its intended
action. During the notification period an additional Premium Payment may be
made to meet the minimum value requirements.
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS
OWNER. The Owner on the Date of Issue will be the person designated in the
Contract Specifications. If no Owner is designated, the Annuitant(s) will be the
Owner.
RIGHTS OF OWNER. The Owner may exercise all rights and privileges under the
contract including the right to: (a) agree with the Company to any change in or
amendment to the contract, (b) transfer all rights and privileges to another
person, (c) change the Beneficiary, (d) change the Annuitant(s) any time prior
to the Annuity Date or name a new Annuitant if the Annuitant, or one of the
Annuitants named under a joint life annuity, predeceases the Owner, (e) name the
payee to whom Income Payments are to be directed, and (f) assign the contract.
All rights and privileges of the Owner may be exercised without the consent
of any designated transferee, or any Beneficiary if the Owner has reserved
the right to change the Beneficiary. All such rights and privileges, however,
may be exercised only with the consent of any assignee on record with the
Company.
TRANSFER OF OWNERSHIP. The Owner may transfer all rights and privileges of the
Owner. On the effective date of transfer, (a) the transferee will become the
Owner and will have all the rights and privileges of the Owner, and (b) the
amount of Death Benefit applicable under the contract will change as set forth
under the "Amount of Death Benefit" provision. The Owner may revoke any
transfer prior to its effective date.
Unless provided otherwise, a transfer will not affect the interest of any
Beneficiary designated prior to the effective date of the transfer.
A transfer of Ownership, or a revocation of transfer, must be in writing to the
Company at its Annuity & Variable Life Service Center's Mailing Address. A
transfer or a revocation will not take effect until recorded in writing by the
Company at its Annuity & Variable Life Service Center's Mailing Address. When a
transfer or revocation has been so recorded, 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.
ASSIGNMENT. The Company will not be affected by any assignment of the contract
until the original assignment or a certified copy of the assignment is filed
with the Company at its Annuity & Variable Life Service Center's Mailing
Address.
11
<PAGE>
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS (CONTINUED)
The Company does not assume responsibility for the validity or sufficiency of
any assignment. An assignment of the contract will operate so long as the
assignment remains in force.
To the extent provided under the terms of the assignment, an assignment will
transfer the interest of any designated transferee or of any Beneficiary if the
Owner has reserved the right to change the Beneficiary.
BENEFICIARY. The Beneficiary is the person who has the right to receive the
Death Benefit set forth in the contract and, for Non-Qualified Contracts, who is
the "designated beneficiary" for purposes of Section 72(s) of the Internal
Revenue Code in the event of the Owner's death. The Beneficiary on the Date of
Issue will be the person designated in the Contract Specifications.
Unless provided otherwise, the interest of any Beneficiary who dies before the
Owner will vest in the Owner or the Owner's administrators or assigns.
CHANGE OF BENEFICIARY. A new Beneficiary may be designated from time to time. A
request for change of Beneficiary must be in writing to the Company at its
Annuity & Variable Life Service Center's Mailing Address. The request must be
signed by the Owner. The request must also be signed by the Beneficiary if the
right to change the Beneficiary has not been reserved to the Owner.
A change of Beneficiary will not take effect until recorded by the Company.
When a change of Beneficiary has been so recorded, whether or not the Owner
is then alive, it will take effect as of the date the request was signed. Any
payment made or any action taken or allowed by the Company before the change
of Beneficiary is recorded will be without prejudice to the Company.
Unless provided otherwise, the right to change any Beneficiary is reserved to
the Owner.
FIXED AND VARIABLE ACCOUNTS PROVISIONS
FIXED ACCOUNT AND SUB-ACCOUNTS. Fixed Account assets are general assets of the
Company and are distinguishable from those allocated to a separate account of
the Company. Any portion of Premium Payments allocated by the Owner to a Fixed
Account Sub-Account will become part of the Fixed Account.
VARIABLE ACCOUNT AND SUB-ACCOUNTS. The Variable Account to which the variable
accumulation values, if any, under this contract relate is shown in the Contract
Specifications. It was established pursuant to a resolution of its Board of
Directors as a "separate account" under governing law of Indiana, the Company's
state of domicile, and registered as a unit investment trust under the 1940 Act.
Under Indiana law, the Variable Account assets (except assets in excess of its
reserves and other contract liabilities) cannot be charged with the general
liabilities from any other business of the Company and the income, gains or
losses from the Variable Account assets are credited or charged against the
Variable Account without regard to the income, gains or losses of the Company.
The Variable Account assets are owned and controlled exclusively by the Company,
and the Company is not a trustee with respect to those assets.
The Variable Account is divided into Sub-Accounts. Each Variable Account
Sub-Account's assets are invested in shares of a particular Fund made available
as a funding vehicle under this contract. For each Variable Account
Sub-Account, the Company maintains Variable Accumulation Units whose values
reflect the investment performance of the Fund whose shares are held in that
Sub-Account.
Subject to any vote by persons having the right under the 1940 Act to vote
thereon, the Company may elect to operate the Variable Account as a management
company rather than a unit investment trust under the 1940 Act, or, if
registration is no longer required, to deregister the Variable Account. In such
event, the Company may endorse this contract to reflect such change and any
necessary or appropriate action taken to effect the change. Any changes in
Variable Account investment policy shall have been approved by the Indiana
Insurance Commissioner and approved or filed, as required, in the state or other
jurisdiction where this policy was issued.
12
<PAGE>
FIXED AND VARIABLE ACCOUNTS PROVISIONS (CONTINUED)
INVESTMENT RISK. Each Variable Account Sub-Account's assets are always fully
invested in the shares of the particular Fund purchased for that Sub-Account.
Each Variable Account Sub-Account's investment performance reflects the
investment performance of the Fund. Fund share values fluctuate, reflecting the
risks of changing economic conditions and the ability of a Fund's investment
advisor or sub-adviser to manage that Fund and anticipate changes in economic
conditions. As to the Variable Account assets, the Owner bears the entire
investment risk of gain or loss.
INVESTMENTS OF THE VARIABLE ACCOUNT SUB-ACCOUNTS. All amounts allocated to a
Variable Account Sub-Account will be used to purchase shares of a specific Fund.
The Funds available on the Date of Issue are shown in the Contract
Specifications; more may be subsequently added. The Fund is an open-end
management investment company registered under the Investment Company Act of
1940. Any and all distributions made by the Fund(s) will be reinvested to
purchase additional shares of that Fund at net asset value. Deductions from the
Variable Account Sub-Accounts will, in effect, be made by redeeming a number of
Fund shares at net asset value equal in total value to the amount to be
deducted. Assets of Variable Account Sub-Accounts will be fully invested in
Fund shares at all times.
SUBSTITUTED SECURITIES. Shares corresponding to a particular Fund may not always
be available for purchase or the Company may decide that further investment in
such Fund is no longer appropriate in view of the purposes of the Variable
Account, or in view of legal, regulatory or federal income tax restrictions. In
such event, shares of another registered open-end investment company or unit
investment trust may be substituted both for Fund shares already purchased
and/or as the securities to be purchased in the future, provided that these
substitutions meet applicable Internal Revenue Service diversification
guidelines and have been approved by the Securities and Exchange Commission and
such other regulatory authorities as may be necessary. In the event of any
substitution pursuant to this provision, the Company may make appropriate
endorsement(s) to this contract to reflect the substitution.
CONTRACT VALUES DURING ACCUMULATION PERIOD PROVISIONS
PART A - FIXED ACCOUNT VALUE
GUARANTEED PERIODS. The Initial Guaranteed Period(s), if any, are selected by
the Owner and are shown in the Contract Specifications. The duration of the
Initial Guaranteed Period(s) will affect the Initial Guaranteed Interest
Rate(s). Any Premium Payment or the portion thereof (or amount transferred in
accordance with the "Transfer Privilege" provision described below) allocated to
a particular Guaranteed Period will earn interest at the specified Guaranteed
Interest Rate during the Guaranteed Period. Initial Guaranteed Periods begin on
the date a Premium Payment is accepted (or, in the case of a transfer, on the
effective date of the transfer) and end on the Expiration Date for each duration
selected.
Any portion of the Annuity Account Value comprising a particular Fixed Account
Sub-Account (including interest earned thereon) will be referred to in this
contract as the "Guaranteed Period Amount." As a result of renewals, Subsequent
Payments, and transfers of portions of the Annuity Account Value, Guaranteed
Amounts for Guaranteed Periods of the same duration may have different
Expiration Dates, and each Guaranteed Period Amount will be treated separately
for purposes of determining any Market Value Adjustment.
The Company will send written notice to the Owner by ordinary mail to the most
recent address in the Company's records about the upcoming expiration of a
Guaranteed Period with respect to a Fixed Account Sub-Account at least 60 days
prior to the Expiration Date of such Guaranteed Period. A subsequent Guaranteed
Period of the same duration will begin automatically at the end of the previous
Guaranteed Period unless the Company receives, in writing at its Annuity &
Variable Life Service Center's Mailing Address within the 60-day period
immediately preceding the end of such Guaranteed Period, an election by the
Owner of a different Guaranteed Period from among those being offered by the
Company at such time, or instructions to transfer all or a portion of the
applicable Guaranteed Period Amount to one or more Fixed Account or Variable
Account Sub-Accounts in accordance with the "Transfer Privilege" provision.
13
<PAGE>
CONTRACT VALUES DURING ACCUMULATION PERIOD PROVISIONS (CONTINUED)
GUARANTEED INTEREST RATES. The Company will establish the applicable Guaranteed
Interest Rate that will be used to determine the interest with respect to a
Fixed Account Sub-Account for each Guaranteed Period at the beginning of the
Guaranteed Period. This rate will be guaranteed for the duration of the
applicable Guaranteed Period. The Initial or Subsequent Guaranteed Interest
Rate will never be less than 3% per year, compounded annually. Subsequent
Guaranteed Interest Rate(s) will also be determined at the beginning of
Guaranteed Period(s) and may be higher or lower than the previous rate, but will
never be less than 3% per year, compounded annually. (See "Minimum Surrender
Value" provision.)
FIXED ACCUMULATION VALUE. Upon receipt of a Premium Payment by the Company at
its Annuity & Variable Life Service Center's Mailing Address, all or that
portion, if any, of the Premium Payment which is allocated to the Fixed Account
will be credited to the Fixed Account and allocated to the Fixed Account
Sub-Accounts selected by the Owner. The Fixed Accumulation Value, if any, at
any time, is equal to the sum of the then current values of all Guaranteed
Period Amounts with respect to this contract.
MINIMUM SURRENDER VALUE. The Minimum Surrender Value for the Fixed Account for
a given contract year is the Premium Payment(s), or portion thereof, and
transfers allocated to the Fixed Account accumulated at 3% per year, compounded
annually, less the deduction of the applicable withdrawal charge(s), any prior
withdrawals or transfers out of the Fixed Account, premium taxes, if any, and
applicable Annuity Account Fee(s).
PART B - VARIABLE ACCOUNT VALUE
ACQUISITION AND REDEMPTION OF VARIABLE ACCUMULATION UNITS. Any dollar amounts
allocated to a Variable Account Sub-Account shall be converted into Variable
Accumulation Units and credited to the Variable Account Sub-Account on a unit
basis. The number of Variable Accumulation Units into which a dollar amount
would be converted is calculated by dividing the dollar amount by the Variable
Accumulation Unit Value for the particular Sub-Account. Any redemption of units
from a Variable Account Sub-Account will be processed at the end of a Valuation
Period, including any units redeemed to fund a monthly deduction, and shall
result in the redemption and cancellation of Variable Accumulation Units having
an aggregate dollar value equal to the amount of such withdrawal.
VARIABLE ACCUMULATION UNIT VALUE. The Variable Accumulation Unit Value at the
beginning of the first Valuation Period of each Variable Account Sub-Account was
established at $10.00. The Variable Accumulation Unit value in any later
Valuation Period is equal to the net asset value per unit of the particular
Sub-Account as of the end of such Valuation Period.
VARIABLE ACCUMULATION VALUE. The Variable Accumulation Value of the Annuity
Account, if any, for any Valuation Period is equal to the sum of the value of
all Variable Accumulation Units of each Variable Account Sub-Account credited to
the Variable Account with respect to this contract at the end of such Valuation
Period. The Variable Accumulation Value of each Variable Account Sub-Account is
determined by multiplying the number of Variable Accumulation Units, if any,
credited to each Variable Account Sub-Account with respect to this contract at
the end of a Valuation Period, by the Variable Accumulation Unit Value of the
particular Variable Account Sub-Account for such Valuation Period.
NET INVESTMENT FACTOR. An index, calculated as described below, that provides a
measure of the investment performance of a Variable Account Sub-Account for each
Valuation Period. The Net Investment Factor is equal to A+B-C where:
----- - E
D
A is the net asset value per unit of the Fund held in the Variable Account
Sub-Account (such net asset value being determined as described in the
prospectus for the Fund) as of the end of the Valuation Period;
B is any dividend or other distribution payable with respect to units held
of record during the Valuation Period;
14
<PAGE>
CONTRACT VALUES DURING ACCUMULATION PERIOD PROVISIONS (CONTINUED)
C is the per unit amount of any tax determined by the Company to be
attributable to the operation of the Variable Account Sub-Account during
such Valuation Period;
D is the net asset value of each unit of the Fund as of the close of
business on the Valuation Date immediately preceding the Valuation Period;
and
E is the sum of the Daily M&E Rate plus the Daily Administrative Rate,
multiplied by the number of 24-hour periods included in the Valuation
Period.
The Net Investment Factor may be 1.0 or may be greater or less than 1.0,
reflecting the possibility that the Variable Accumulation Unit Value of a
particular Variable Account Sub-Account may remain the same, increase or
decrease.
PART C - GENERAL
ANNUITY ACCOUNT. The Company will establish an Annuity Account under the
contract and will maintain the Annuity Account during the Accumulation Period.
The Annuity Account Value at any time equals the sum of all the then current
values of the Fixed and Variable Accounts with respect to this contract.
TRANSFER PRIVILEGE. At any time during the Accumulation Period, other than
during the "Right to Examine Contract" period, the Owner may transfer all or
part of the Annuity Account Value to one or more of the Fixed or Variable
Account Sub-Accounts then available under the contract, subject to the
provisions set forth below. Transfers may be made in writing or by telephone,
if telephone transfers have been previously authorized in writing. Transfer
requests must be received at the Company's Annuity & Variable Life Service
Center prior to the time of day set forth in the prospectus, and provided the
New York Stock Exchange is open for business, in order to be processed as of
the close of business on the date the request is received; otherwise, the
transfer will be processed on the next business day the New York Stock Exchange
is open for business. The Company will not be held legally responsible for (a)
any liability for acting in good faith upon any transfer instructions given by
telephone, or (b) the authenticity of such instructions.
Transfers involving Variable Account Sub-Accounts will reflect the purchase or
cancellation of Variable Accumulation Units having an aggregate value equal to
the dollar amount being transferred to or from a particular Variable Account
Sub-Account. The purchase or cancellation of such units shall be made using
Variable Accumulation Unit Values of the applicable Variable Account Sub-Account
at the end of the Valuation Period for which the transfer is effective.
Transfers to a Fixed Account Sub-Account will result in a new Guaranteed Period
for the amount being transferred. Any such Guaranteed Period will begin on the
effective date of the transfer. The amount transferred into such Fixed Account
Sub-Account will earn interest at the Guaranteed Interest Rate declared by the
Company for that Guaranteed Period as of the effective date of the transfer.
Transfers shall be subject to the following conditions: (a) Not more than 12
transfers may be made per Contract Year (including the frequency limitation
shown in the Contract Specifications with respect to transfers from the Fixed
Account), unless otherwise authorized in writing by the Company; (b) No
withdrawal charge will be imposed on transferred amounts, however, transfers of
all or a portion out of a Fixed Account Sub-Account may be subject to the Market
Value Adjustment set forth below unless such transfer is made in accordance with
the "Full or Partial Withdrawals and Transfers at the End of a Guaranteed
Period" provision; (c) The amount being transferred may not be less than $100
unless the entire value of the Fixed or Variable Account Sub-Account is being
transferred; (d) The amount being transferred may not exceed the Company's
maximum amount limit then in effect; (e) The amount transferred to any Fixed
Account Sub-Account may not be less than $2,000, or $100 to a Variable
Sub-Account; (f) Unless a transfer out of a Fixed Account Sub-Account is made in
accordance with the "Full or Partial Withdrawals and Transfers at the End of a
Guaranteed Period" provision, the amount transferred from each Fixed Account
Sub-Account during any contract year may not exceed the limits shown in the
Contract Specifications; (g) Any value remaining in a Fixed Account Sub-Account
may not be less than $2,000, or a Variable Account Sub-Account may not
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CONTRACT VALUES DURING ACCUMULATION PERIOD PROVISIONS (CONTINUED)
be less than $50; (h) The Company reserves the right to defer transfers of
amounts from the Fixed Account for a period not to exceed six months from the
date the request for such transfer is received by the Company in writing or by
telephone, if such has been previously authorized, at its Annuity & Variable
Life Service Center; and (i) Transfers involving Variable Account Sub-Account(s)
shall be subject to such terms and conditions as may be imposed by the Funds.
TRANSFER FEE. The Company reserves the right to charge a fee up to $10 for each
transfer prior to the Annuity Date if there have been more than twelve transfers
made in the Contract Year.
ANNUITY ACCOUNT FEE. Prior to the Annuity Date, on the anniversary date of each
Contract Year the Company will deduct from the value of the Annuity Account the
annual Annuity Account Fee, if any, shown in the Schedule of Charges, Expenses
and Fees to reimburse it for administrative expenses relating to the Annuity
Account. The Annuity Account Fee will be deducted on a pro rata basis from
amounts allocated to each Fixed and Variable Account Sub-Account in which the
Annuity Account values are invested at the time of such deduction. If the
Annuity Account is surrendered for its full value, the Annuity Account Fee will
be deducted in full at the time of such surrender. On the Annuity Date the
value of the Annuity Account will be reduced by a proportionate amount of the
Annuity Account Fee to reflect the time elapsed between the last valuation date
of the most recent Contract Year and the day before the Annuity Date.
CASH WITHDRAWALS, WITHDRAWAL CHARGES AND MARKET
VALUE ADJUSTMENT PROVISIONS
CASH WITHDRAWALS. At any time before the Annuity Date, the Owner may elect to
receive a cash withdrawal payment from the Company by filing with the Company
at its Annuity & Variable Life Service Center's Mailing Address a written
election in such form as the Company may require. Any such election shall
specify the amount of the withdrawal and will be effective on the date that it
is received at the Company's Annuity & Variable Life Service Center's Mailing
Address. Any cash withdrawal payment will be paid within seven days of the
Company's receipt of such request, except as the Company may be permitted to
defer the payment of amounts withdrawn from the Variable Account in accordance
with the Investment Company Act of 1940. The Company reserves the right to defer
the payment of amounts withdrawn from the Fixed Account for a period not to
exceed six months from the date written request for such withdrawal is received
by the Company at its Annuity & Variable Life Service Center's Mailing Address.
The amount of the cash withdrawal payment may be for any amount not to exceed
the Annuity Account Value at the end of the Valuation Period during which
the election becomes effective, plus or minus any applicable Market Value
Adjustment, and less any applicable withdrawal charge and premium taxes. In the
case of a full surrender, the Annuity Account will be canceled and the contract
will terminate. 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 Market Value
Adjustment, any applicable withdrawal charge and premium taxes.
In the case of a partial withdrawal, the Owner must instruct the Company as to
the amounts to be withdrawn from each Fixed and/or Variable Account Sub-Account.
If not so instructed, the Company will effect such withdrawal from each Fixed
and/or Variable Sub-Account in proportion to the then current Sub-Account
values. Partial withdrawals cannot reduce any Fixed Account Sub-Account below
$2,000 or any Variable Account Sub-Account below $50. Such partial withdrawals
will be treated as a full surrender of that Sub-Account and the balance will be
transferred to the largest Variable Account Sub-Account, if any. Partial
withdrawals may not reduce the total Annuity Account Value below $1,000. (See
"Minimum Value Requirements" provision.) Such partial withdrawals may be
treated as a full surrender.
Cash withdrawals from a Variable Account Sub-Account will result in the
cancellation of Variable Accumulation Units attributable to the Annuity Account
with an aggregate value on the effective date of the withdrawal equal to the
total amount by which the Variable Account Sub-Account is reduced. The
cancellation of such units will be based on the Variable Accumulation Unit
values of the Variable Account Sub-Account at the end of the Valuation Period
during which the cash withdrawal is effective.
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CASH WITHDRAWALS, WITHDRAWAL CHARGES AND MARKET
VALUE ADJUSTMENT PROVISIONS (CONTINUED)
All cash withdrawals or transfers of any portion of Fixed Account Sub-Accounts,
except those specified otherwise under "Penalty-Free Withdrawals, Transfers and
Annuitization Provisions," will be subject to the Market Value Adjustment
described below.
WITHDRAWAL CHARGES. If a cash withdrawal is made, a withdrawal charge may be
assessed by the Company. The length of time between the Company acceptance of
the Premium Payment(s) and the receipt of a withdrawal request determines the
withdrawal charge. For this purpose each withdrawal is deemed to represent a
withdrawal of a Premium Payment previously accepted (or a portion thereof).
Premium Payments will be deemed to have been withdrawn in the order in which the
Premium Payments were received by the Company (i.e., oldest premium first).
After all Premium Payments have been deemed withdrawn, the Company will deem
further withdrawals to be from net investment results attributable to such
Premium Payments, if any. The schedule of withdrawal charges is set forth in
the "Schedule of Charges, Expenses and Fees." On withdrawal, any applicable
Annuity Account Fee and Market Value Adjustment will be deducted before
application of any withdrawal charge.
Withdrawal charges are deducted proportionately from the Fixed and/or Variable
Account Sub-Account(s) from which the withdrawal is to be made, provided such
Sub-Account(s) have sufficient account value(s) for making such deduction(s).
If any of the account value(s) of such Sub-Account(s), however, are
insufficient, its remaining withdrawal charges will be deducted on a pro rata
basis from all Fixed and/or Variable Account Sub-Accounts in proportion to the
then current account value(s) of Such Sub-Account(s).
See "Penalty-Free Withdrawals, Transfers and Annuitization Provisions" for
situations in which a withdrawal charge is not imposed.
For the purpose of any qualified plan riders which may be attached to this
contract, the term "Surrender Charge" wherever referenced therein, shall mean
"withdrawal charge" as set forth above.
MARKET VALUE ADJUSTMENT. Any cash withdrawal or transfer from a Fixed Account
Sub-Account, except those specified otherwise under the "Penalty-Free
Withdrawals, Transfers and Annuitization Provisions," will be subject to a
Market Value Adjustment.
The amount payable on such cash withdrawal or transfer may be adjusted up or
down by the application of the Market Value Adjustment. The Index Rate Factor
applicable to the amount of such cash withdrawal or transfer is:
N
(1+A)
------
N
(1+B)
where:
A = an Index Rate (based on the Treasury Constant Maturity Series published by
the Federal Reserve) for a security with time to maturity equal to the
applicable Guaranteed Period, determined at the beginning of the Guaranteed
Period.
B = an Index Rate (based on the Treasury Constant Maturity Series published by
the Federal Reserve) for a security with time to maturity equal to the
applicable Guaranteed Period, determined at the time of cash withdrawal or
transfer, plus the percentage adjustment to "B" as shown in the Contract
Specifications. If Index Rates "A" and "B" are within .25% of each other when
the Index Rate Factor is determined, no such percentage adjustment to "B" will
be made.
N = The number of years remaining in the applicable Guaranteed Period (e.g. 1
year and 73 days = 1 + (73 divided by 365) = 1.2 years)
Straight-line interpolation is used for periods to maturity not quoted.
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PENALTY-FREE WITHDRAWALS, TRANSFERS AND ANNUITIZATION PROVISIONS
PENALTY-FREE PARTIAL WITHDRAWALS OR TRANSFERS. Upon request in writing, the
Owner may, during any Contract Year prior to the Annuity Date, withdraw up to
[15%] of the Premium Payment(s) or portion remaining thereof, without incurring
a withdrawal charge. For this purpose each withdrawal is deemed to represent a
withdrawal of a portion of a Premium Payment previously accepted. Premium
Payments will be deemed to be withdrawn in the order in which they were received
by the Company (i.e., the oldest premium first). Any such withdrawal from a
Fixed Account Sub-Account may be subject to a Market Value Adjustment unless the
withdrawal is made at the end of a Guaranteed Period as set forth below. The
Owner must specify from which Fixed and/or Variable Account Sub-Accounts the
withdrawal is to be made, otherwise the Company may effect such withdrawal on a
proportionate basis from all Fixed and/or Variable Account Sub-Accounts in which
the Annuity Account is invested.
Such partial withdrawals may be either taken as a lump sum or, upon consent of
the Company, paid in equal installments.
No withdrawal charge will be imposed on any withdrawal with respect to a Premium
Payment after the end of the seventh year following the Company's acceptance of
that Premium Payment.
The Owner may also transfer amounts within the Annuity Account during the
Accumulation Period without the application of a withdrawal charge, however, any
transfers would be subject to any terms and conditions as may be imposed under
the "Transfer Privilege" provision.
FULL OR PARTIAL WITHDRAWALS AND TRANSFERS AT THE END OF A GUARANTEED PERIOD. No
Market Value Adjustment will be imposed on a full or partial withdrawal or
transfer made from a Fixed Account Sub-Account which becomes effective at the
end of the applicable initial or subsequent Guaranteed Period. In such event,
the Owner's proper request for withdrawal or transfer must be received at the
Company's Annuity & Variable Life Service Center's Mailing Address within a
45-day period immediately preceding the end of such Guaranteed Period.
WAIVER OF WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT ON DEATH OR ANNUITY
DATE. No withdrawal charge or Market Value Adjustment will be imposed upon
payments made under the Annuity Benefit or Death Benefit provisions of this
contract.
PENALTY-FREE ANNUITIZATION. At any time the Owner may request in writing
payment of the then current Annuity Account Value in accordance with any one of
the settlement options set forth in this contract. In such event, no withdrawal
charge or Market Value Adjustment will be imposed at the time such settlement is
made. Such annuitization will automatically result in a change in the Annuity
Date to the date Income Payments commence under the settlement option elected.
BENEFIT PROVISIONS
ANNUITY BENEFIT. On the Annuity Date the Company will pay all or a part of the
adjusted value of the Annuity Account (as set forth below) in cash or apply it
in accordance with the settlement option(s) elected by the Owner. However, if
the amount to be applied under any settlement option is less than $5,000, or if
the first Income Payment payable in accordance with such option is less than
$50, the Company will pay the adjusted value in a single payment to the payee
designated by the Owner.
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BENEFIT PROVISIONS (CONTINUED)
ANNUITY DATE. The Annuity Date selected by the Owner is shown in the Contract
Specifications. The Annuity Date may be changed from time to time by the Owner
by notifying the Company in writing. The notice must be received at the
Company's Annuity & Variable Life Service Center's Mailing Address at least 45
days prior to the Annuity Date then in effect. The new Annuity Date selected
must be at least 30 days after the effective date of the change and not later
than the Annuitant's 90th birthday.
After the Annuity Date, no change of a settlement option is permitted, no
payments may be requested under the "Cash Withdrawals" provision of the
contract, and no Death Benefit is payable under the contract except as otherwise
specified under the settlement option selected.
ELECTION AND EFFECTIVE DATE OF ELECTION WITH RESPECT TO ANNUITY BENEFIT. During
the lifetime of the Owner and prior to the Annuity Date, the Owner may elect to
have the adjusted value of the Annuity Account applied on the Annuity Date under
one or more of the settlement options set forth in this contract, or under any
other settlement option as agreed to by the Company. The Owner may also change
any election, but any election or change of election must be received at the
Company's Annuity & Variable Life Service Center's Mailing Address at least 45
days prior to the Annuity Date. The election or change of election may be made
by filing with the Company at its Annuity & Variable Life Service Center's
Mailing Address written notice in such form as the Company may require. If no
such election is in effect on the 30th day prior to the Annuity Date, the
adjusted value of the Annuity Account will be applied under a Life Annuity with
120 months guaranteed. In such situation, the portion of the adjusted value of
the Annuity Account to be applied for a Fixed Life Annuity under the Second
Option and/or a Variable Life Annuity under Option II will be determined on a
pro rata basis from the composition of the Annuity Account on the Annuity Date.
DETERMINATION OF AMOUNT. On the Annuity Date the Annuity Account will be
canceled and the adjusted value of the Annuity Account to be applied under the
settlement options provisions shall be equal to the Annuity Account Value for
the Valuation Period which ends immediately preceding the Annuity Date, minus
any applicable premium or similar tax. For the purposes of any qualified plan
riders which may be attached to this contract, the term "Annuity Value,"
wherever referenced therein, shall mean the "adjusted value of the Annuity
Account" as defined above.
INCOME PAYMENT BENEFITS. On the Annuity Date, the adjusted value of the Annuity
Account as determined under the "Determination of Amount" provision may be
applied, as elected by the Owner, under one or more of the settlement options
set forth in the contract to effect: (a) a Fixed Income Payment Benefit or a
Variable Income Payment Benefit; or (b) a combination of the Fixed Income
Payment Benefit and the Variable Income Payment Benefit. If a combination Fixed
and Variable Income Payment Benefit is elected, the Owner may specify the amount
to be allocated to the Fixed Income Payment Benefit and the amount to be
allocated to the Variable Income Payment Benefit. Such election and allocation
may also be made by a Beneficiary to the extent provided in the "Election and
Effective Date of Election with Respect to Death Benefit Provision."
DEATH BENEFIT. If the Owner dies before the Annuity Date, the Company will pay
the Death Benefit to the Beneficiary upon receipt of due proof of the death of
the Owner in accordance with the "Payment of Death Benefit" provision. If there
is no designated Beneficiary living on the date of death of the Owner, the
Company will pay the Death Benefit, upon receipt of due proof of the death of
both the Owner and the designated Beneficiary, in one sum to the estate of the
Owner.
ELECTION AND EFFECTIVE DATE OF ELECTION WITH RESPECT TO DEATH BENEFIT. During
the lifetime of the Annuitant and prior to the Annuity Date, the Owner may elect
one or more of the settlement options set forth in this contract to effect an
annuity for the Beneficiary as payee after the death of the Owner. This
election may be made or subsequently revoked by filing with the Company at its
Annuity & Variable Life Service Center's Mailing Address a written election or
revocation of an election in such form as required by the Company.
Any election or revocation of an election of a method of settlement of the Death
Benefit will become effective on the date it is received by the Company at its
Annuity & Variable Life Service Center's Mailing Address.
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<PAGE>
Benefit Provisions (Continued)
Unless otherwise specified in writing by the Owner, the Beneficiary may elect
(a) to receive the Death Benefit as a cash payment, in which event the Annuity
Account will be canceled, or (b) to have the Death Benefit applied under one or
more of the settlement options set forth under the contract. This election may
be made by filing with the Company a written request in a form as required by
the Company. Any written request for an election of a settlement option for the
Death Benefit by the Beneficiary will become effective on the later of (a) the
date the request is received by the Company at its Annuity & Variable Life
Service Center's Mailing Address; or (b) the date due proof of the death of the
Owner is received by the Company at its Annuity & Variable Life Service Center's
Mailing Address. If a written request for a settlement option by the
Beneficiary is not received by the Company within 60 days following the date due
proof of the death of the Owner is received by the Company, the Beneficiary
shall be deemed to have elected a cash payment as of the last day of the 60-day
period.
Notwithstanding the above, the Owner or Beneficiary may only elect a settlement
option which provides for the distribution of the entire Death Benefit to the
Beneficiary within five years of the Owner's death unless; (a) the entire
interest in the contract is distributed over the life of the Beneficiary, with
distributions beginning within one year of the Owner's death; (b) the entire
interest in the contract is distributed over a period not extending beyond the
life expectancy of the Beneficiary, with distributions beginning within one year
of the Owner's death; or (c) the Beneficiary is the deceased Owner's spouse and
elects to continue the contract and become the new Owner, but in no event may
such an election be made under this contract more than once.
For purposes of Section 72(s) of the Internal Revenue Code, if any Owner is not
an individual, the death or change of any Annuitant is treated as the death of
an Owner, and if the Owner is grantor trust within the meaning of the Internal
Revenue Code, the death of the grantor of such trust is also treated as the
death of an Owner.
PAYMENT OF DEATH BENEFIT. If the Death Benefit is to be paid in cash to the
Beneficiary, payment will be made within 7 days of the date the election becomes
effective or is deemed to become effective, provided due proof of the death of
the Owner is received by the Company at its Annuity & Variable Life Service
Center's Mailing Address, except as the Company may be permitted to defer any
such payment of amounts derived from the Variable Account in accordance with the
Investment Company Act of 1940. If the Death Benefit is to be paid in one sum
to the estate of the deceased Owner, payment will be made within 7 days of the
date due proof of the death of the Owner and/or Beneficiary is received by the
Company at its Annuity & Variable Life Service Center's Mailing Address, except
as the Company may be permitted to defer any such payment of amounts derived
from the Variable Account in accordance with the Investment Company Act of 1940.
If settlement under the settlement option provisions is elected, the Income
Payments will commence 30 days following the effective date or the deemed
effective date of the election and the Annuity Account will be maintained in
effect until such Income Payments commence.
AMOUNT OF DEATH BENEFIT. The Death Benefit is determined as of the effective
date or deemed effective date of the Death Benefit election and is equal to the
greatest of (a) the Annuity Account Value for the Valuation Period during which
the Death Benefit election is effective or is deemed to become effective, (b)
the sum of all the Premium Payment(s) made under the contract less the sum of
all partial withdrawals, or (c) the highest Annuity Account Value ever attained
on a Contract Anniversary date, occurring on or before the Owner's 80th birthday
(or the Annuitant's 80th birthday in the case of a non-natural Owner), with
adjustments for any subsequent Premium Payments, partial withdrawals and charges
made since such Contract Anniversary Date. However, the Death Benefit on or
after the Owner's 90th birthday (if a natural person) will be the greater of the
sum of all the Premium Payment(s) with adjustments for any partial withdrawals
and charges made under the contract since the Date of Issue or the Annuity
Account Value for the Valuation Period during which the Death Benefit election
is effective or is deemed to become effective.
On and after the effective date of each transfer of Ownership, the Amount of
Death Benefit will be equal to the greatest of 1) the sum of Premium Payments
made prior to the date of such transfer of Ownership, less
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BENEFIT PROVISIONS (CONTINUED)
the sum of all withdrawals made on or before the effective date of such
transfer, plus the sum of all Premium Payments made on or after the effective
date of such transfer, less the sum of all partial withdrawals made on or after
the effective date of such transfer, 2) the Annuity Account Value for the
Valuation Period during which the Death Benefit election is effective or is
deemed to become effective, or 3) the highest Annuity Account Value ever
attained on a Contract Anniversary date occurring on or after the date of such
transfer of Ownership, with adjustments for any subsequent Premium Payments,
partial withdrawals and charges made since such Contract Anniversary Date.
SECTION 72(s). The provisions above will be interpreted so as to comply with
the requirements of Section 72(s) of the Internal Revenue Code.
GENERAL PROVISIONS
THE CONTRACT. The contract constitutes the entire contract between the parties.
Only the President, a Vice President, an Assistant Vice President, a Secretary,
a Director or an Assistant Director of the Company may make or modify this
contract.
The contract is executed at the administrator mailing address located on the
front cover of the contract.
MODIFICATION OF CONTRACT. The Company reserves the right to modify this
contract to meet the requirements of applicable state and federal laws or
regulations. The Company will notify the Owner in writing of any changes.
NON-PARTICIPATION. The contract is not entitled to share in surplus
distribution.
LOANS. Loans are not permitted under this contract.
DETERMINATION OF VALUES. The method of determination by the Company of the Net
Investment Factor and the number and value of Accumulation Units and Annuity
Units shall be conclusive upon the Owner, and any Beneficiary or payee.
ENDORSEMENT OF INCOME PAYMENTS. The Company will make each Income Payment at
the administrator mailing address by check. Each check must be personally
endorsed by the payee/Annuitant, or the Company may require that proof of the
payee/Annuitant's survival be furnished.
MISSTATEMENT OF AGE. If the age of an Annuitant is misstated, the amount
payable under the contract will be adjusted to be the amount of Income which the
actual premium paid would have purchased for the correct age according to the
Company's rates in effect on the Date of Issue. Any overpayment by the Company,
with interest at the rate of 6% per year, compounded annually, will be charged
against the payments to be made next succeeding the adjustment. Any
underpayment by the Company will be paid in a lump sum, with interest at the
rate of 6% per year, compounded annually.
CLAIMS OF CREDITORS. To the extent permitted by law, no amounts payable under
this contract will be subject to the claims of creditors of any payee.
PERIODIC REPORTS. At least once each calendar year, the Company will furnish
the Owner a report as required by law showing the Annuity Account Value at the
end of the preceding year, all transactions during the year, the current Annuity
Account Value, the number of Accumulation Units in each Variable Accumulation
Account, the applicable Accumulation Unit Value as of the date of the report and
the interest rate credited to the Fixed Account Sub-Account(s). The Company
will also send such statements reflecting transactions in the Annuity Account as
may be required by applicable laws, rules and regulations.
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OPTIONAL METHODS OF SETTLEMENT
This rider is made part of the contract to which it is attached as of the Date
of Issue. Upon written request, the Company will agree to pay in accordance
with any one of the options shown below all or part of the net proceeds that may
be payable under the contract.
While the Owner is alive, the request, including the designation of the payee,
may be made by the Owner. At the time a Death Benefit becomes payable under the
contract, the request, including the designation of the payee, may then be made
by the Beneficiary. Once Income Payments have begun, no surrender of the
Annuity Value can be made (unless Variable Income Payments are made under Option
III) and the Annuitant(s) cannot be changed, nor can the settlement option be
changed.
PAYMENT DATES. The first Income Payment under the settlement option selected
will be made on the first day of the month following the Annuity Date.
Subsequent payments will be made on the first day of each month in accordance
with the manner of payment selected.
MINIMUM PAYMENT AMOUNT. The settlement option elected must result in an Income
Payment at least equal to the minimum payment amount in accordance with the
Company's rules then in effect. If at any time payments are less than the
minimum payment amount, the Company has the right to change the frequency to an
interval that will provide the minimum payment amount. If any amount due is
less than the minimum per year, the Company may make other arrangements that are
equitable.
FIXED BENEFIT OPTIONS
FIXED INCOME PAYMENTS. Fixed Income Payments will remain constant pursuant to
the terms of the fixed settlement option(s) selected. The amount of each Fixed
Income Payment shall be determined in accordance with the terms of the
settlement option and the table(s) set forth in this rider, as applicable. The
mortality table used is the 1983 Individual Annuitant Mortality (IAM) Table "a"
and 3% interest. In determining the settlement amount, the Annuitant's
settlement age will be reduced by one year when the first instalment is payable
during the 1990's, reduced by two years when the first instalment is payable
during the decade 2000-2009, and so on.
FIRST OPTION: LIFE ANNUITY. An annuity payable monthly to the payee during the
lifetime of the Annuitant, ceasing with the last payment due prior to the death
of the Annuitant.
SECOND OPTION: LIFE ANNUITY WITH CERTAIN PERIOD. An annuity providing monthly
income to the payee for a fixed period of 60, 120, 180, or 240 months (as
selected), and for as long thereafter as the Annuitant shall live.
THIRD OPTION: CASH REFUND LIFE ANNUITY. An annuity payable monthly to the payee
during the lifetime of the Annuitant ceasing with the last payment due prior to
the death of the Annuitant provided that, at the death of the Annuitant, the
payee will receive an additional payment equal to the excess, if any, of (a)
over (b) where: (a) is the initial value of the proceeds applied under this
option; and (b) is the dollar amount of payments already paid.
FOURTH OPTION: ANNUITY CERTAIN. An amount payable monthly for the number of
years selected which may be from 5 to 30 years.
EXCESS INTEREST. At the sole discretion of the Company, excess interest may be
paid or credited from time to time in addition to the payments guaranteed under
any fixed benefit Optional Method of Settlement.
AR425 (Page 1)
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OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
VARIABLE BENEFIT OPTIONS
VARIABLE INCOME PAYMENTS. The amount of the first Variable Income Payment shall
be determined in accordance with the terms of the settlement option and the
table(s) set forth in this rider, as applicable. The mortality table used is
the 1983 Individual Annuitant Mortality (IAM) Table "a" and 3%. In determining
the settlement amount, the Annuitant's settlement age will be reduced by one
year when the first instalment is payable during the 1990's, reduced by two
years when the first instalment is payable during the decade 2000-2009 and so
on.
All Variable Income Payments other than the first are determined by means of
Annuity Units credited to the contract with respect to the particular payee.
The number of Annuity Units to be credited in respect of a particular Sub-
Account is determined by dividing that portion of the first Variable Income
Payment attributable to that Sub-Account by the Annuity Unit Value of that Sub-
Account for the Valuation Period which ends immediately preceding the Annuity
Date. The number of Annuity Units of each Sub-Account credited with respect to
the particular payee then remains fixed unless an exchange of Annuity Units is
made pursuant to the "Exchange of Variable Annuity Units" section. The dollar
amount of each Variable Income Payment after the first may increase, decrease or
remain constant, and is equal to the sum of the amounts determined by
multiplying the number of Annuity Units of a particular Sub-Account for the
Valuation Period which ends immediately preceding the due date of each
subsequent payment by the Annuity Unit Value for the particular Sub-Account for
the first Valuation Period occurring on or immediately prior to the first day of
each month.
ANNUITY UNIT VALUE. The Annuity Unit Value for each Sub-Account was established
at $10.00 for the first Valuation Period of the particular Sub-Account. The
Annuity Unit Value for the particular Sub-Account for any subsequent Valuation
Period is determined by multiplying the Annuity Unit Value for the particular
Sub-Account for the immediately preceding Valuation Period by the Net Investment
Factor for the current Valuation Period and then multiplying that product by a
factor to neutralize the assumed interest rate of 3% per year to establish the
Annuity Payment Rates set forth in this rider. The factor is 0.99991902 for a
one day valuation period.
EXCHANGE OF VARIABLE ANNUITY UNITS. After the Annuity Date the payee may, by
filing a written request with the Company at its Annuity & Variable Life Service
Center's Mailing Address, exchange the value of a designated number of Annuity
Units of particular Variable Sub-Accounts then credited with respect to such
payee into other Annuity Units, the value of which would be such that the dollar
amount of an Income Payment made on the date of the exchange would be unaffected
by the exchange. Unless otherwise authorized by the Company in writing, no more
than 3 exchanges may be made in any Contract Year.
Exchanges may be made among the Variable Sub-Accounts only. Exchanges shall be
made using the Annuity Unit Values for the Valuation Period during which the
request for exchange is received by the Company at its Annuity & Variable Life
Service Center's Mailing Address.
ANNUITY ACCOUNT FEE. After the Annuity Date an Annuity Account Fee amounting to
$35 per year will be deducted in equal amounts from each variable Income Payment
made during the calendar year. For example, this would amount to a $2.92
deduction from each monthly Variable Income Payment. No deduction will be made
from Fixed Income Payments.
OPTION I: VARIABLE LIFE ANNUITY. A variable annuity payable monthly to the
payee during the lifetime of the Annuitant, ceasing with the last payment due
prior to the death of the Annuitant.
AR425 (Page 2)
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
OPTION II: VARIABLE LIFE ANNUITY WITH CERTAIN PERIOD. A variable annuity which
provides monthly payments during the lifetime of the annuitant and further
provides that if, at the death of the annuitant, payments have been made for
less than the elected period certain, which may be 60, 120, 180 or 240 months,
the annuity payments will be continued during the remainder of such period.
OPTION III: VARIABLE ANNUITY CERTAIN. A variable amount payable monthly for
the number of years selected which may be from 5 to 30 years. At the expiration
of the period certain, no further payments of any kind are payable. If the
Annuitant dies before the specified number of certain payments have been
received, the remainder of the payments will be continued during the remainder
of such period.
ADDITIONAL FIXED AND VARIABLE OPTIONS. Any proceeds payable under the contract
may also be settled under any other method of settlement (including joint and
survivor settlement options under joint life annuities) offered by the Company
at the time of the request.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
/s/ Jon A. Boscia
-----------------
PRESIDENT
AR425 (Page 3)
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED
- - MALE
- ---------------------------------------------------
Settlement age of Number of instalments certain
Annuitant nearest
birthday 60 120 180 240
- ---------------------------------------------------
Age Life Annuity
10 $2.87 $2.87 $2.87 $2.87 $2.87
11 2.89 2.89 2.89 2.88 2.88
12 2.90 2.90 2.90 2.90 2.90
13 2.92 2.92 2.91 2.91 2.91
14 2.93 2.93 2.93 2.93 2.92
15 2.95 2.95 2.95 2.94 2.94
16 2.96 2.96 2.96 2.96 2.96
17 2.98 2.98 2.98 2.98 2.97
18 3.00 3.00 3.00 2.99 2.99
19 3.02 3.02 3.01 3.01 3.01
20 3.04 3.04 3.03 3.03 3.03
21 3.06 3.05 3.05 3.05 3.05
22 3.08 3.08 3.07 3.07 3.07
23 3.10 3.10 3.09 3.09 3.09
24 3.12 3.12 3.12 3.11 3.11
25 3.14 3.14 3.14 3.14 3.13
26 3.17 3.17 3.16 3.16 3.15
27 3.19 3.19 3.19 3.19 3.18
28 3.22 3.22 3.22 3.21 3.20
29 3.25 3.25 3.24 3.24 3.23
30 3.28 3.28 3.27 3.27 3.26
31 3.31 3.31 3.30 3.30 3.29
32 3.34 3.34 3.33 3.33 3.32
33 3.37 3.37 3.37 3.36 3.35
34 3.41 3.41 3.40 3.39 3.38
35 $3.44 $3.44 $3.44 $3.43 $3.41
36 3.48 3.48 3.48 3.46 3.45
37 3.52 3.52 3.52 3.50 3.48
38 3.57 3.56 3.56 3.54 3.52
39 3.61 3.61 3.60 3.58 3.56
40 3.66 3.65 3.65 3.63 3.60
41 3.71 3.70 3.69 3.67 3.64
42 3.76 3.75 3.74 3.72 3.68
43 3.81 3.81 3.79 3.77 3.73
44 3.87 3.86 3.85 3.82 3.77
45 3.93 3.92 3.90 3.87 3.82
46 3.99 3.98 3.96 3.92 3.87
47 4.05 4.05 4.02 3.98 3.92
48 4.12 4.11 4.09 4.04 3.97
49 4.19 4.18 4.15 4.10 4.03
50 4.27 4.26 4.22 4.17 4.08
51 4.34 4.33 4.30 4.23 4.14
52 4.43 4.41 4.37 4.30 4.20
53 4.51 4.50 4.45 4.37 4.26
54 4.60 4.59 4.54 4.45 4.32
55 4.70 4.68 4.62 4.53 4.39
56 4.80 4.78 4.72 4.61 4.45
57 4.91 4.89 4.82 4.69 4.51
58 5.03 5.00 4.92 4.78 4.58
59 5.15 5.12 5.03 4.87 4.65
60 $5.28 $5.25 $5.14 $4.96 $4.71
61 5.43 5.39 5.27 5.06 4.78
62 5.58 5.53 5.39 5.16 4.84
63 5.74 5.69 5.53 5.26 4.90
64 5.91 5.85 5.66 5.36 4.96
65 6.10 6.03 5.81 5.46 5.02
66 6.30 6.21 5.96 5.56 5.08
67 6.51 6.41 6.12 5.66 5.13
68 6.73 6.62 6.28 5.77 5.18
69 6.97 6.84 6.44 5.86 5.23
70 7.23 7.07 6.61 5.96 5.27
71 7.51 7.32 6.79 6.05 5.31
72 7.80 7.58 6.96 6.14 5.34
73 8.12 7.85 7.14 6.23 5.37
74 8.46 8.14 7.32 6.31 5.40
75 8.82 8.45 7.50 6.38 5.42
76 9.21 8.76 7.67 6.45 5.44
77 9.63 9.10 7.84 6.51 5.45
78 10.08 9.44 8.01 6.57 5.47
79 10.56 9.80 8.17 6.62 5.48
80 11.07 10.17 8.33 6.66 5.49
81 11.62 10.55 8.48 6.70 5.49
82 12.20 10.94 8.61 6.73 5.50
83 12.82 11.33 8.74 6.76 5.50
84 13.47 11.73 8.86 6.79 5.51
85 14.17 12.12 8.97 6.81 5.51
AR425 (Page 4)
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED
- - FEMALE
- ---------------------------------------------------
Settlement age of Number of instalments certain
Annuitant nearest
birthday 60 120 180 240
- ---------------------------------------------------
Age Life Annuity
10 $2.80 $2.80 $2.80 $2.80 $2.80
11 2.81 2.81 2.81 2.81 2.81
12 2.82 2.82 2.82 2.82 2.82
13 2.83 2.83 2.83 2.83 2.83
14 2.85 2.85 2.85 2.84 2.84
15 2.86 2.86 2.86 2.86 2.86
16 2.87 2.87 2.87 2.87 2.87
17 2.89 2.89 2.89 2.88 2.88
18 2.90 2.90 2.90 2.90 2.90
19 2.92 2.92 2.92 2.91 2.91
20 2.93 2.93 2.93 2.93 2.93
21 2.95 2.95 2.95 2.95 2.94
22 2.96 2.96 2.96 2.96 2.96
23 2.98 2.98 2.98 2.98 2.98
24 3.00 3.00 3.00 3.00 2.99
25 3.02 3.02 3.02 3.02 3.01
26 3.04 3.04 3.04 3.03 3.03
27 3.06 3.06 3.06 3.06 3.05
28 3.08 3.08 3.08 3.08 3.07
29 3.10 3.10 3.10 3.10 3.09
30 3.13 3.13 3.12 3.12 3.12
31 3.15 3.15 3.15 3.14 3.14
32 3.18 3.18 3.17 3.17 3.16
33 3.20 3.20 3.20 3.20 3.19
34 3.23 3.23 3.23 3.22 3.22
35 $3.26 $3.26 $3.26 $3.25 $3.24
36 3.29 3.29 3.29 3.28 3.27
37 3.32 3.32 3.32 3.31 3.30
38 3.35 3.35 3.35 3.34 3.33
39 3.39 3.39 3.38 3.38 3.37
40 3.42 3.42 3.42 3.41 3.40
41 3.46 3.46 3.46 3.45 3.43
42 3.50 3.50 3.50 3.49 3.47
43 3.54 3.54 3.54 3.53 3.51
44 3.59 3.59 3.58 3.57 3.55
45 3.64 3.63 3.63 3.61 3.59
46 3.68 3.68 3.67 3.66 3.63
47 3.73 3.73 3.72 3.71 3.68
48 3.79 3.79 3.77 3.76 3.72
49 3.84 3.84 3.83 3.81 3.77
50 3.90 3.90 3.89 3.86 3.82
51 3.97 3.96 3.95 3.92 3.88
52 4.03 4.03 4.01 3.98 3.93
53 4.10 4.10 4.08 4.04 3.99
54 4.18 4.17 4.15 4.11 4.04
55 4.25 4.25 4.22 4.18 4.11
56 4.34 4.33 4.30 4.25 4.17
57 4.42 4.41 4.38 4.32 4.23
58 4.52 4.51 4.47 4.40 4.30
59 4.61 4.60 4.56 4.48 4.37
60 $4.72 $4.70 $4.66 $4.57 $4.44
61 4.83 4.81 4.76 4.66 4.51
62 4.95 4.93 4.87 4.75 4.58
63 5.08 5.05 4.98 4.85 4.65
64 5.21 5.18 5.10 4.95 4.72
65 5.36 5.32 5.22 5.05 4.79
66 5.51 5.47 5.36 5.16 4.86
67 5.67 5.63 5.50 5.26 4.93
68 5.85 5.80 5.65 5.37 5.00
69 6.04 5.98 5.80 5.49 5.06
70 6.25 6.18 5.97 5.60 5.12
71 6.47 6.39 6.14 5.71 5.18
72 6.71 6.62 6.32 5.83 5.23
73 6.98 6.86 6.50 5.94 5.28
74 7.26 7.12 6.69 6.04 5.32
75 7.57 7.40 6.89 6.14 5.35
76 7.90 7.69 7.09 6.24 5.39
77 8.26 8.01 7.29 6.33 5.41
78 8.65 8.34 7.49 6.41 5.43
79 9.08 8.70 7.69 6.49 5.45
80 9.54 9.07 7.89 6.55 5.47
81 10.03 9.47 8.08 6.61 5.48
82 10.58 9.88 8.26 6.66 5.49
83 11.16 10.31 8.43 6.70 5.49
84 11.80 10.75 8.59 6.74 5.50
85 12.48 11.20 8.74 6.77 5.50
- ---------------------------------------------------
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
- ---------------------------------------------------
Numbers of years Amount of each instalment
during which
instalments will be
paid Annual Monthly
- ---------------------------------------------------
5 $ 211.99 $ 17.91
6 179.22 15.14
7 155.83 13.16
8 138.31 11.68
9 124.69 10.53
10 113.82 9.61
11 $ 104.93 $ 8.86
12 97.54 8.24
13 91.29 7.71
14 85.95 7.26
15 81.33 6.87
16 77.29 6.53
17 $ 73.74 $ 6.23
18 70.59 5.96
19 67.78 5.73
20 65.26 5.51
25 55.76 4.71
AR425 (Page 5)
<PAGE>
LINCOLN NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
WITH FIXED AND VARIABLE ACCOUNTS - NON-PARTICIPATING
<PAGE>
OPTIONAL METHODS OF SETTLEMENT
This rider is made part of the contract to which it is attached as of the Date
of Issue. Upon written request, the Company will agree to pay in accordance
with any one of the options shown below all or part of the net proceeds that may
be payable under the contract.
While the Owner is alive, the request, including the designation of the payee,
may be made by the Owner. At the time a Death Benefit becomes payable under the
contract, the request, including the designation of the payee, may then be made
by the Beneficiary. Once Income Payments have begun, no surrender of the
Annuity Value can be made (unless Variable Income Payments are made under Option
III) and the Annuitant(s) cannot be changed, nor can the settlement option be
changed.
PAYMENT DATES. The first Income Payment under the settlement option selected
will be made on the first day of the month following the Annuity Date.
Subsequent payments will be made on the first day of each month in accordance
with the manner of payment selected.
MINIMUM PAYMENT AMOUNT. The settlement option elected must result in an Income
Payment at least equal to the minimum payment amount in accordance with the
Company's rules then in effect. If at any time payments are less than the
minimum payment amount, the Company has the right to change the frequency to an
interval that will provide the minimum payment amount. If any amount due is
less than the minimum per year, the Company may make other arrangements that are
equitable.
FIXED BENEFIT OPTIONS
FIXED INCOME PAYMENTS. Fixed Income Payments will remain constant pursuant to
the terms of the fixed settlement option(s) selected. The amount of each Fixed
Income Payment shall be determined in accordance with the terms of the
settlement option and the table(s) set forth in this rider, as applicable. The
mortality table used is the 1983 Individual Annuitant Mortality (IAM) Table "a"
and 3% interest. In determining the settlement amount, the Annuitant's
settlement age will be reduced by one year when the first instalment is payable
during the 1990's, reduced by two years when the first instalment is payable
during the decade 2000-2009, and so on.
FIRST OPTION: LIFE ANNUITY. An annuity payable monthly to the payee during the
lifetime of the Annuitant, ceasing with the last payment due prior to the death
of the Annuitant.
SECOND OPTION: LIFE ANNUITY WITH CERTAIN PERIOD. An annuity providing monthly
income to the payee for a fixed period of 60, 120, 180, or 240 months (as
selected), and for as long thereafter as the Annuitant shall live.
THIRD OPTION: CASH REFUND LIFE ANNUITY. An annuity payable monthly to the payee
during the lifetime of the Annuitant ceasing with the last payment due prior to
the death of the Annuitant provided that, at the death of the Annuitant, the
payee will receive an additional payment equal to the excess, if any, of (a)
over (b) where: (a) is the initial value of the proceeds applied under this
option; and (b) is the dollar amount of payments already paid.
FOURTH OPTION: ANNUITY CERTAIN. An amount payable monthly for the number of
years selected which may be from 5 to 30 years.
EXCESS INTEREST. At the sole discretion of the Company, excess interest may be
paid or credited from time to time in addition to the payments guaranteed under
any fixed benefit Optional Method of Settlement.
(Page 1)
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
VARIABLE BENEFIT OPTIONS
VARIABLE INCOME PAYMENTS. The amount of the first Variable Income Payment shall
be determined in accordance with the terms of the settlement option and the
table(s) set forth in this rider, as applicable. The mortality table used is
the 1983 Individual Annuitant Mortality (IAM) Table "a" and 3%. In determining
the settlement amount, the Annuitant's settlement age will be reduced by one
year when the first instalment is payable during the 1990's, reduced by two
years when the first instalment is payable during the decade 2000-2009 and so
on.
All Variable Income Payments other than the first are determined by means of
Annuity Units credited to the contract with respect to the particular payee.
The number of Annuity Units to be credited in respect of a particular Sub-
Account is determined by dividing that portion of the first Variable Income
Payment attributable to that Sub-Account by the Annuity Unit Value of that Sub-
Account for the Valuation Period which ends immediately preceding the Annuity
Date. The number of Annuity Units of each Sub-Account credited with respect to
the particular payee then remains fixed unless an exchange of Annuity Units is
made pursuant to the "Exchange of Variable Annuity Units" section. The dollar
amount of each Variable Income Payment after the first may increase, decrease or
remain constant, and is equal to the sum of the amounts determined by
multiplying the number of Annuity Units of a particular Sub-Account for the
Valuation Period which ends immediately preceding the due date of each
subsequent payment by the Annuity Unit Value for the particular Sub-Account for
the first Valuation Period occurring on or immediately prior to the first day of
each month.
ANNUITY UNIT VALUE. The Annuity Unit Value for each Sub-Account was established
at $10.00 for the first Valuation Period of the particular Sub-Account. The
Annuity Unit Value for the particular Sub-Account for any subsequent Valuation
Period is determined by multiplying the Annuity Unit Value for the particular
Sub-Account for the immediately preceding Valuation Period by the Net Investment
Factor for the current Valuation Period and then multiplying that product by a
factor to neutralize the assumed interest rate of 3% per year to establish the
Annuity Payment Rates set forth in this rider. The factor is 0.99991902 for a
one day valuation period.
EXCHANGE OF VARIABLE ANNUITY UNITS. After the Annuity Date the payee may, by
filing a written request with the Company at its Annuity & Variable Life Service
Center's Mailing Address, exchange the value of a designated number of Annuity
Units of particular Variable Sub-Accounts then credited with respect to such
payee into other Annuity Units, the value of which would be such that the dollar
amount of an Income Payment made on the date of the exchange would be unaffected
by the exchange. Unless otherwise authorized by the Company in writing, no more
than 3 exchanges may be made in any Contract Year.
Exchanges may be made among the Variable Sub-Accounts only. Exchanges shall be
made using the Annuity Unit Values for the Valuation Period during which the
request for exchange is received by the Company at its Annuity & Variable Life
Service Center's Mailing Address.
ANNUITY ACCOUNT FEE. After the Annuity Date an Annuity Account Fee amounting to
$35 per year will be deducted in equal amounts from each variable Income Payment
made during the calendar year. For example, this would amount to a $2.92
deduction from each monthly Variable Income Payment. No deduction will be made
from Fixed Income Payments.
OPTION I: VARIABLE LIFE ANNUITY. A variable annuity payable monthly to the
payee during the lifetime of the Annuitant, ceasing with the last payment due
prior to the death of the Annuitant.
(Page 2)
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
OPTION II: VARIABLE LIFE ANNUITY WITH CERTAIN PERIOD. A variable annuity which
provides monthly payments during the lifetime of the annuitant and further
provides that if, at the death of the annuitant, payments have been made for
less than the elected period certain, which may be 60, 120, 180 or 240 months,
the annuity payments will be continued during the remainder of such period.
OPTION III: VARIABLE ANNUITY CERTAIN. A variable amount payable monthly for
the number of years selected which may be from 5 to 30 years. At the expiration
of the period certain, no further payments of any kind are payable. If the
Annuitant dies before the specified number of certain payments have been
received, the remainder of the payments will be continued during the remainder
of such period.
ADDITIONAL FIXED AND VARIABLE BENEFIT OPTIONS. Any proceeds payable under the
contract may also be settled under any other method of settlement (including
joint and survivor settlement options under joint life annuities) offered by the
Company at the time of the request.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
/s/ Jon A. Boscia
PRESIDENT
(Page 3)
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED
- - UNISEX
- -----------------------------------------------------
Settlement age of Number of instalments certain
Annuitant nearest
birthday 60 120 180 240
- -----------------------------------------------------
Age Life Annuity
10 2.84 2.84 2.84 2.84 2.83
11 2.85 2.85 2.85 2.85 2.85
12 2.86 2.86 2.86 2.86 2.86
13 2.88 2.88 2.88 2.87 2.87
14 2.89 2.89 2.89 2.89 2.89
15 2.91 2.90 2.90 2.90 2.90
16 2.92 2.92 2.92 2.92 2.91
17 2.94 2.94 2.93 2.93 2.93
18 2.95 2.95 2.95 2.95 2.95
19 2.97 2.97 2.97 2.96 2.96
20 2.99 2.99 2.98 2.98 2.98
21 3.00 3.00 3.00 3.00 3.00
22 3.02 3.02 3.02 3.02 3.01
23 3.04 3.04 3.04 3.04 3.03
24 3.06 3.06 3.06 3.06 3.05
25 3.08 3.08 3.08 3.08 3.07
26 3.11 3.11 3.10 3.10 3.10
27 3.13 3.13 3.13 3.12 3.12
28 3.15 3.15 3.15 3.15 3.14
29 3.18 3.18 3.17 3.17 3.16
30 3.20 3.20 3.20 3.20 3.19
31 3.23 3.23 3.23 3.22 3.22
32 3.26 3.26 3.26 3.25 3.24
33 3.29 3.29 3.29 3.28 3.27
34 3.32 3.32 3.32 3.31 3.30
35 3.35 3.35 3.35 3.34 3.33
36 3.39 3.39 3.38 3.38 3.36
37 3.42 3.42 3.42 3.41 3.40
38 3.46 3.46 3.46 3.45 3.43
39 3.50 3.50 3.49 3.48 3.47
40 3.54 3.54 3.54 3.52 3.50
41 3.59 3.59 3.58 3.56 3.54
42 3.63 3.63 3.62 3.61 3.58
43 3.68 3.68 3.67 3.65 3.62
44 3.73 3.73 3.72 3.70 3.67
45 3.78 3.78 3.77 3.74 3.71
46 3.84 3.84 3.82 3.79 3.76
47 3.90 3.89 3.88 3.85 3.80
48 3.96 3.95 3.93 3.90 3.85
49 4.02 4.02 3.99 3.96 3.91
50 4.09 4.08 4.06 4.02 3.96
51 4.16 4.15 4.13 4.08 4.01
52 4.23 4.22 4.20 4.15 4.07
53 4.31 4.30 4.27 4.21 4.13
54 4.39 4.38 4.35 4.28 4.19
55 4.48 4.47 4.43 4.36 4.25
56 4.57 4.56 4.51 4.43 4.32
57 4.67 4.65 4.60 4.51 4.38
58 4.78 4.76 4.70 4.60 4.45
59 4.89 4.87 4.80 4.68 4.51
60 5.00 4.98 4.91 4.77 4.58
61 5.13 5.10 5.02 4.87 4.65
62 5.27 5.23 5.13 4.96 4.72
63 5.41 5.37 5.26 5.06 4.79
64 5.56 5.52 5.39 5.16 4.85
65 5.73 5.68 5.52 5.27 4.92
66 5.90 5.84 5.67 5.37 4.98
67 6.09 6.02 5.82 5.48 5.04
68 6.29 6.21 5.97 5.58 5.10
69 6.51 6.41 6.13 5.69 5.15
70 6.74 6.63 6.30 5.79 5.20
71 6.99 6.86 6.47 5.90 5.25
72 7.25 7.10 6.65 6.00 5.29
73 7.54 7.36 6.83 6.09 5.33
74 7.85 7.63 7.02 6.19 5.36
75 8.19 7.92 7.21 6.27 5.39
76 8.55 8.23 7.39 6.36 5.42
77 8.93 8.56 7.58 6.43 5.44
78 9.35 8.90 7.77 6.50 5.45
79 9.80 9.26 7.95 6.56 5.47
80 10.29 9.63 8.12 6.61 5.48
81 10.81 10.02 8.29 6.66 5.49
82 11.37 10.42 8.45 6.70 5.49
83 11.98 10.83 8.60 6.74 5.50
84 12.62 11.25 8.74 6.76 5.50
85 13.31 11.67 8.86 6.79 5.51
- -----------------------------------------------------
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
- -----------------------------------------------------
Numbers of years Amount of each instalment
during which
instalments will be
paid Annual Monthly
- -----------------------------------------------------
5 211.99 17.91
6 179.22 15.14
7 155.83 13.16
8 138.31 11.68
9 124.69 10.53
10 113.82 9.61
11 104.93 8.86
12 97.54 8.24
13 91.29 7.71
14 85.95 7.26
15 81.33 6.87
16 77.29 6.53
17 $ 73.74 $ 6.23
18 70.59 5.96
19 67.78 5.73
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
(Page 4)
<PAGE>
<TABLE>
<S><C>
VARIABLE ANNUITY LINCOLN NATIONAL LIFE INSURANCE COMPANY
- ---------------- ---------------------------------------
MAILING ADDRESS:
[LINCOLN NATIONAL LIFE INSURANCE COMPANY
VARIABLE PRODUCTS SERVICE CENTER, ROUTING S249
HARTFORD, CONNECTICUT 06152-2249]
- ----------------------------------------------------------------------------------------------------------------------------------
1
OWNER Name
-----------------------------------------------------------------------------------------------------
First Middle Last
Address
--------------------------------------------------------------------------------------------------
Number Street City State Zip Code
Date of Birth / / SS# Sex / / M Telephone ( ) (HOME)
--- --- --- -------------------- / / F ---- ---------------
Mo. Day Yr. (or Tax Iden. #) ( ) (WORK)
---- ---------------
Full Name of Trust Name(s) of Trustee(s)
-------------------------- --------------- -------------------
(If applicable) (Date of Trust) (If applicable)
- ----------------------------------------------------------------------------------------------------------------------------------
2
a. ANNUITANT a. Annuitant
(If different from --------------------------------------------------------------------------------------------
Owner)(List older First Middle Last
Annuitant first, if Address
Joint Annuitant) -------------------------------------------------------------------------------------------------
Number Street City State Zip Code
Date of Birth / / SS# Sex / / M Telephone ( ) (HOME)
--- --- --- -------------------- / / F ---- ---------------
Mo. Day Yr. (or Tax Iden. #) ( ) (WORK)
---- ---------------
b. JOINT b. Joint Annuitant
ANNUITANT ---------------------------------------------------------------------------------------
(If applicable) First Middle Last
(Annuitant/Joint Address
Annuitant may not --------------------------------------------------------------------------------------------------
be a corporation Number Street City State Zip Code
or trust)
Date of Birth / / SS# Sex / / M Telephone ( ) (HOME)
--- --- --- -------------------- / / F ---- ---------------
Mo. Day Yr. (or Tax Iden. #) ( ) (WORK)
---- ---------------
- ----------------------------------------------------------------------------------------------------------------------------------
3
OWNER'S Primary Beneficiary(s) and relationship to Owner Contingent Beneficiary(s) and relationship to Owner
BENEFICIARY
DESIGNATION ------------------------------------------------ ---------------------------------------------------
------------------------------------------------ ---------------------------------------------------
------------------------------------------------ ---------------------------------------------------
------------------------------------------------ ---------------------------------------------------
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4
PREMIUM PAYMENT(S) I. Premium Payment $ (MAKE CHECK PAYABLE TO "Lincoln National Life
------------------------ Insurance Co.")
II. Plan Type (CHECK ONE) / / QUALIFIED (IF QUALIFIED, PLEASE COMPLETE ADDENDUM TO APPLICATION - FORM
B10243)
/ / NON-QUALIFIED
III. Does any portion of the payment represent after-tax dollars?
/ / YES / / NO IF YES, SPECIFY THE AMOUNT $
----------------------------
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5 Fixed Account Guaranteed Periods - (Sub-Accounts)
PREMIUM % 1 Year % 5 Years % 10 Years
PAYMENT ----- ----- -----
ALLOCATION % Years (IF AVAILABLE FROM THE COMPANY)
----
(Allocation to any VARIABLE ACCOUNT - SUB-ACCOUNTS (FUNDS)
one % line must be ---------------------------------------
1% or more. Use ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
Whole percentages ___% Alger American Growth Portfolio ___% MFS Total Return Series
only. Must total ___% Alger American Leverage AllCap Portfolio ___% MFS Utilities Series
100%.) ___% Alger American Midcap Growth Portfolio ___% MFS Emerging Growth Series
___% Alger American Small Capitalization Portfolio ___% MFS Research Series
If DOLLAR COST ___% MFS Growth With Income Series
AVERAGING is LINCOLN NATIONAL VARIABLE PRODUCTS GROUP
employed, an ___% Lincoln National Money Market Fund NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
allocation must be ("AMT")
made to the Lincoln FIDELITY INVESTMENTS ___% AMT Partners Portfolio
Variable Products ___% Fidelity High Income Portfolio ___% AMT Limited Maturity Bond Portfolio
Money Market Fund ___% Fidelity Equity-Income Portfolio
and the % allocation ___% Fidelity Overseas Portfolio OCC ACCUMULATION TRUST
must result in at ___% Fidelity Investment Grade Bonds Portfolio ___% OCC Global Equity Portfolio
least $12,000 to such ___% Fidelity Contra Fund Portfolio ___% OCC Managed Portfolio
account. Please ___% Fidelity Growth Opportunities Portfolio ___% OCC Small Cap Portfolio
complete Section 8.
OTHER (IF AVAILABLE FROM THE COMPANY)
___% _________________________________
___% _________________________________
_____% TOTAL of percentages allocated to Fixed Account and/or Variable Account (MUST EQUAL 100%).
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6
TELEPHONE I(We) acknowledge that neither the Company nor any person authorized by the Company will be responsible
TRANSFER for any claim, loss, liability or expense in connection with a telephone transfer if the Company or such
AUTHORIZATION other person acted on telephone transfer instructions in good faith in reliance on this authorization.
Check here if you DO NOT wish to authorize telephone transfer instructions. / /
Check here if you wish to authorize your registered representative/agent to make
telephone transfers. / /
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(Page 1)
<PAGE>
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7
ANNUITY DATE The Annuity Date (INCOME PAYMENTS BEGIN ON THE FIRST DAY OF THE MONTH FOLLOWING THE ANNUITY DATE) must be
at least one month after the Date of Issue. If no date is selected, the initial Annuity Date will be
the Annuitant's (older Annuitant's, if Joint Annuitant) 90th birthday (FOR QUALIFIED PLANS, AGE
701/2).
Initial Annuity Date __________________________________
MONTH YEAR
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8
DOLLAR COST SELECT ONE TRANSFER OPTION ($1,000 MINIMUM PER TRANSFER):
AVERAGING / / $_____________ monthly / / $_____________ quarterly
(For Variable Each amount transferred is to be applied to the following Fund(s) in these percentages (USE WHOLE
Account only) PERCENTAGES ONLY. TOTAL MUST EQUAL 100%.):
(FOLLOW ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
INSTRUCTIONS IN ___% Alger American Growth Portfolio ___% MFS Total Return Series
SECTION 5 BEFORE ___% Alger American Leveraged AllCap Portfolio ___% MFS Utilities Series
COMPLETING THIS ___% Alger American Midcap Growth Portfolio ___% MFS Emerging Growth Series
SECTION.) ___% Alger American Small Capitalization Portfolio ___% MFS Research Series
___% MFS Growth With Income Series
LINCOLN NATIONAL VARIABLE PRODUCTS GROUP
___% Lincoln National Money Market Fund NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
("AMT")
FIDELITY INVESTMENTS ___% AMT Partners Portfolio
___% Fidelity High Income Portfolio ___% AMT Limited Maturity Bond Portfolio
___% Fidelity Equity-Income Portfolio
___% Fidelity Overseas Portfolio OCC ACCUMULATION TRUST
___% Fidelity Investment Grade Bonds Portfolio ___% OCC Global Equity Portfolio
___% Fidelity Contra Fund Portfolio ___% OCC Managed Portfolio
___% Fidelity Growth Opportunities Portfolio ___% OCC Small Cap Portfolio
OTHER (IF AVAILABLE FROM THE COMPANY)
___% _________________________________
___% _________________________________
_____% TOTAL of percentages allocated to Fixed Account and/or Variable Account (MUST EQUAL 100%).
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9
REPLACEMENT Will the contract replace one or more existing annuity or life insurance contracts? / / YES / / NO
IF YES, PLEASE PROVIDE COMPANY NAME, POLICY NUMBER AND AMOUNT IN SPECIAL REMARKS SECTION AND FOR
NON-QUALIFIED PLANS, COMPLETE THE FOLLOWING:
INDICATE COST BASIS: COST BASIS GAIN
---------- ----
PRE-TEFRA (PRIOR TO 8/13/82)
------------------------ ----------------------
POST-TEFRA (ON OR AFTER 8/13/82)
------------------------ ----------------------
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10
SPECIAL
REMARKS
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11
HOME OFFICE
CHANGES OR
CORRECTIONS
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12
SIGNATURE(S) I(We) hereby certify that the answers to the above questions are true and correct to the best of my(our)
knowledge and belief and agree that this application will be made a part of any contract issued by the
Company. ALL PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT ARE SUBJECT TO A MARKET VALUE ADJUSTMENT
FORMULA THAT MAY INCREASE OR DECREASE THE VALUE OF ANY PARTIAL OR FULL SURRENDER MADE PRIOR TO THE END OF
A GUARANTEED PERIOD. ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. I(We)
acknowledge receipt of a current prospectus. Please check here / / if you wish to receive a copy of the
Statement of Additional Information which supplements the information in the prospectus. Under penalties
of perjury, I (the Owner) certify that the above Social Security and Taxpayer Identification numbers are
correct and that I am of legal age to enter into this agreement.
Signed at (City and State) On / /
------------------------------------------------- ----- ----- -----
MO DAY YEAR
---------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
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13
CERTIFICATION/ The Registered Representative hereby certifies that the contract / / IS / / IS NOT intended to replace
REPORT BY or change any existing annuity or life insurance.
REGISTERED
REPRESENTATIVE/ Print Name Signature
WITNESS -------------------------------------------- --------------------------------------
SS# Telephone
---------------------------------------------------- --------------------------------------
Rep. Code/Percentage / % Field Office Code
----------------------------------- -------------------------------
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Print Name Signature
-------------------------------------------- ---------------------------------------
SS# Telephone
---------------------------------------------------- --------------------------------------
Rep. Code/Percentage / % Field Office Code
----------------------------------- -------------------------------
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14
BROKER/ Print Name Telephone
DEALER -------------------------------------------- ---------------------------------------
INFORMATION Address Broker Code
----------------------------------------------- -------------------------------------
Field Office Code
----------------------------------------------- -------------------------------
Registered Representative Election (IF NO CHOICE IS ELECTED, THE COMPANY WILL DEFAULT TO AN OPTION PICKED
BY A BROKER/DEALER.)
A, B, C Other
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(Page 2)
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