<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1998
1933 ACT REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
(EXACT NAME OF REGISTRANT)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
120 Madison Street, Suite 1700, Syracuse, NY 13202
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
Depositor's Telephone Number, including Area Code
(315) 428-8400
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<S> <C>
Robert O. Sheppard, Esquire COPY TO:
Lincoln Life & Annuity Company of New York George N. Gingold, Esq.
120 Madison Street, Suite 1700 900 Cottage Grove Road, S-321
Syracuse NY 13202 Hartford, CT 06152-2321
(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.
UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE OF SECURITIES BEING REGISTERED)
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
(RECONCILIATION AND TIE)
REQUIRED BY INSTRUCTION 4 TO FORM S-6
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ITEM OF FORM
N-8B-2 LOCATION IN PROSPECTUS
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1 Cover Page Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 LLANY
6(a) The Variable Account
6(b) *
9 Legal Proceedings
10(a)-(c) Short-Term Right to Cancel the Policy; Surrenders;
Accumulation Value; Reports to Policy Owners
10(d) Right to Exchange for a Fixed Benefit Policy; Policy Loans;
Surrenders; Allocation of Net Premium Payments
10(e) Lapse and Reinstatement
10(f) Voting Rights
10(g)-(h) Substitution of Securities
10(i) Premium Payments; Transfers; Death Benefit; Policy Values;
Settlement Options
11 The Funds
12 The Funds
13 Charges; Fees
14 Issuance
15 Premium Payments; Transfers
16 The Variable Account
17 Surrenders
18 The Variable Account
19 Reports to Policy Owners
20 *
21 Policy Loans
22 *
23 LLANY
24 Incontestability; Suicide; Misstatement of Age or Sex
25 LLANY
26 Fund Participation Agreements
27 The Variable Account
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<TABLE>
<CAPTION>
ITEM OF FORM
N-8B-2 LOCATION IN PROSPECTUS
- ----------------- --------------------------------------------------------------
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28 Directors and Officers of LLANY
29 LLANY
30 *
31 *
32 *
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 The Funds; Premium Payments
45 *
46 Surrenders
47 The Variable Account; Surrenders, Transfers
48 *
49 *
50 The Variable Account
51 Cover Page; Highlights; Premium Payments; Right to Exchange
for a Fixed Benefit Policy
52 Substitution of Securities
53 Tax Matters
54 *
55 *
</TABLE>
* Not Applicable
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HOME OFFICE LOCATION:
120 MADISON STREET
SUITE 1700
SYRACUSE, NY 13202
ADMINISTRATIVE OFFICE MAILING ADDRESS:
900 COTTAGE GROVE ROAD, S-249
HARTFORD, CT 06152-2249
(800)552-9898
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THE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
BENEFITS PAYABLE ON DEATH OF SECOND OF TWO INSUREDS
- --------------------------------------------------------------------------------
Through this prospectus, Lincoln Life & Annuity Company of New York ("LLANY")
offers a flexible premium variable life insurance contract ("POLICY") which pays
death benefits on the death of the second to die of the two Insureds named in
the Policy ("SECOND DEATH"). The Policy allows flexible premium payments and a
choice between two death benefit options. Applicants should carefully consider
whether such a "second-to-die" Policy, which pays a death benefit only on the
Second Death, is appropriate to their financial objectives.
The Policy is funded through one or more of nineteen different mutual funds
("FUNDS"), available through LLANY's Separate Account, and LLANY's fixed option,
the Fixed Account. The performance and values of the Funds are not guaranteed or
otherwise assured by LLANY. The Fixed Account, which credits at least 4% per
year interest on principal, is an obligation of, and guaranteed by, LLANY.
Special limits apply to withdrawals and transfers from the Fixed Account. This
Prospectus describes only the Separate Account options unless the Fixed Account
is specifically mentioned.
The Policy's value and (depending on the death benefit option selected) the
Death Benefit Proceeds may vary with the investment return on the Owner's
funding options. Policy values may be used to continue the Policy in force,
borrowed in part, withdrawn in part or, subject to a surrender charge,
surrendered in full. Following the Second Death, the Beneficiary may choose
among settlement options equivalent to the Death Benefit Proceeds, or receive
the Death Benefit Proceeds in a lump sum.
Each of the Funds available through the Separate Account has its own investment
objective. The funding options available in the Separate Account are:
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
CIGNA VARIABLE PRODUCTS GROUP
CIGNA S&P 500 Index Fund
CIGNA Money Market Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio
Investment Grade Bond Portfolio
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
MFS World Governments Series
OCC ACCUMULATION TRUST
Global Equity Portfolio
Managed Portfolio
Small Cap Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation Fund Class I
Templeton International Fund Class I
Templeton Stock Fund Class I
It may not be advantageous to replace existing insurance or supplement an
existing flexible premium variable life insurance contract with the Policy. This
Prospectus and the Prospectuses of the Funds, furnished with this Prospectus,
should be read carefully to understand the Policy being offered.
The Policy described in this prospectus is available only in New York.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AVAILABLE AS INVESTMENT OPTIONS THROUGH THE SEPARATE ACCOUNT UNDER THE
POLICY OFFERED BY THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ CAREFULLY TO
UNDERSTAND THE POLICY AND 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>
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CONTENTS PAGE
<S> <C>
DEFINITIONS..................................... 3
HIGHLIGHTS...................................... 5
PURPOSE OF POLICY............................. 5
INITIAL CHOICES TO BE MADE.................... 5
LEVEL OR VARYING DEATH BENEFIT................ 6
PREMIUM PAYMENTS.............................. 6
SELECTION OF UNDERLYING INVESTMENTS........... 6
CHARGES AND FEES.............................. 6
INFORMATION ABOUT LLANY AND THE SEPARATE
ACCOUNT........................................ 7
PURPOSE OF THE POLICY........................... 8
Personal Circumstances........................ 8
Market, Interest Rate and Credit Risk
Exposure................................... 8
Replacements.................................. 9
APPLICATION..................................... 9
OWNERSHIP....................................... 9
BENEFICIARY..................................... 10
INSUREDS........................................ 10
THE CONTRACT.................................... 10
Policy Specifications......................... 10
PREMIUM FEATURES................................ 10
Additional Premiums; Planned Premiums......... 11
Limits on Right to Make Payments of
Additional and Planned Premiums............ 11
Premium Load; Net Premium Payment........... 11
RIGHT-TO-EXAMINE PERIOD......................... 11
TRANSFERS AND ALLOCATION AMONG ACCOUNTS......... 11
Allocation of Net Premium Payments............ 11
Transfers..................................... 12
Optional Sub-Account Allocation Programs...... 12
Dollar Cost Averaging....................... 12
Automatic Rebalancing....................... 13
INVESTMENT OPTIONS.............................. 13
Fixed Account................................. 13
Variable Account.............................. 14
POLICY VALUES................................... 14
Accumulation Value............................ 15
Variable Account Value........................ 15
Variable Accumulation Unit Value............ 15
Variable Accumulation Units................. 15
Fixed Account and Loan Account Value.......... 16
Net Accumulation Value........................ 16
FUNDS........................................... 16
Substitution of Securities.................... 19
Voting Rights................................. 19
Fund Participation Agreements................. 19
CHARGES AND FEES................................ 19
Deductions Made Monthly....................... 20
Monthly Deduction........................... 20
Cost of Insurance Charge.................... 20
Mortality and Expense Risk Charge and Fund
Expenses..................................... 21
Surrender Charges........................... 23
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CONTENTS PAGE
<S> <C>
Transaction Fee for Excess Transfers.......... 23
DEATH BENEFITS.................................. 23
Death Benefit Options......................... 23
Changes in Death Benefit Options and Specified
Amount....................................... 24
Federal Income Tax Definition of Life
Insurance.................................... 25
NOTICE OF DEATH OF INSUREDS..................... 25
PAYMENT OF DEATH BENEFIT PROCEEDS............... 25
SETTLEMENT OPTIONS.............................. 26
POLICY LIQUIDITY................................ 26
Policy Loans.................................. 26
Partial Surrender............................. 27
Surrender of the Policy....................... 28
Surrender Value............................. 28
Deferral of Payment and Transfers............. 28
ASSIGNMENT; CHANGE OF OWNERSHIP................. 28
LAPSE AND REINSTATEMENT......................... 29
Lapse of a Policy............................. 29
No Lapse Provision.......................... 29
Reinstatement of a Lapsed Policy.............. 29
COMMUNICATIONS WITH LLANY....................... 30
Proper Written Form........................... 30
OTHER POLICY PROVISIONS......................... 30
Issuance...................................... 30
Date of Coverage.............................. 30
Right to Exchange the Policy.................. 30
Paid-up Insurance Option...................... 31
Incontestability.............................. 31
Misstatement of Age or Gender................. 31
Suicide....................................... 31
Nonparticipating Policies..................... 31
TAX ISSUES...................................... 32
Tax Treatment of Death Benefit................ 32
Federal Income Tax Considerations............. 32
Taxation of LLANY............................. 33
Other Considerations.......................... 33
FAIR VALUE OF THE POLICY........................ 33
DIRECTORS AND OFFICERS OF LLANY................. 34
DISTRIBUTION OF POLICIES........................ 35
CHANGES OF INVESTMENT POLICY.................... 36
OTHER CONTRACTS ISSUED BY LLANY................. 36
STATE REGULATION................................ 36
REPORTS TO OWNERS............................... 36
ADVERTISING..................................... 36
LEGAL PROCEEDINGS............................... 37
EXPERTS......................................... 37
REGISTRATION STATEMENT.......................... 37
FINANCIAL STATEMENTS............................ 37
Illustrations...................................
Appendices......................................
Appendix 1...................................... 38
Illustration of Accumulation Values, Surrender
Values, and Death Benefits................... 38
</TABLE>
2
<PAGE>
DEFINITIONS
ACCUMULATION VALUE: The sum of the Fixed Account Value,
Variable Account Value and the Loan Account Value.
ADMINISTRATIVE OFFICE: The administrative office of Lincoln
Life & Annuity Company of New York, whose mailing address is
900 Cottage Grove Road, S-249, Hartford, CT 06152-2249.
AGE: The age of the subject person at her or his nearest
birthday.
BENEFICIARY: The person designated by the applicant or Owner
to receive any Death Benefit Proceeds payable under the
Policy.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: The Securities and Exchange Commission.
CORRIDOR DEATH BENEFIT: The Death Benefit calculated as a
percentage of the Accumulation Value rather than by
reference to the Specified Amount to satisfy the Internal
Revenue Service definition of "life insurance."
COST OF INSURANCE: The portion of the Monthly Deduction
designed to compensate LLANY (defined below) for the
anticipated cost of paying Death Benefits in excess of the
Accumulation Value, not including riders, supplemental
benefits or monthly expense charges.
DATE OF ISSUE: The date on which LLANY begins life insurance
coverage under a Policy.
DEATH BENEFIT OPTION: Either of two methods for determining
the Death Benefit Proceeds.
DEATH BENEFIT PROCEEDS: The amount payable to the
Beneficiary upon the Second Death (defined below), in
accordance with the Death Benefit Option elected, before
deduction of the amount necessary to repay any loans in
full, and overdue deductions.
EFFECTIVE DATE: The date on which the initial premium is
applied to the Policy.
FIXED ACCOUNT: The account under which principal is
guaranteed and interest is credited at a rate of not less
than 4% per year. Fixed Account assets are general assets of
LLANY held in LLANY's General Account.
FIXED ACCOUNT VALUE: The portion of the Accumulation Value,
other than the Loan Account Value, held in LLANY's General
Account.
FUND(S): One or more of AIM Variable Insurance Funds, Inc.
-- AIM V.I. Capital Appreciation Fund, AIM V.I. Diversified
Income Fund, AIM V.I. Growth Fund, AIM V.I. Value Fund;
CIGNA Variable Products Group -- CIGNA S&P 500 Index Fund
and CIGNA Money Market Fund; Fidelity Variable Insurance
Products Fund -- Equity-Income Portfolio; Fidelity Variable
Insurance Products Fund II -- Asset Manager Portfolio,
Investment Grade Bond Portfolio; MFS-Registered Trademark-
Variable Insurance Trust -- MFS Emerging Growth Series, MFS
Total Return Series, MFS Utilities Series, MFS World
Governments Series; Templeton Variable Products Series Fund
-- Templeton Asset Allocation Fund, Templeton International
Fund, Templeton Stock Fund; OCC Accumulation Trust -- Global
Equity Portfolio, Managed Portfolio and Small Cap Portfolio.
Each of them is an open-end management investment company
(mutual fund) whose shares are available to fund a Variable
Sub-Account under the Policy.
GENERAL ACCOUNT: LLANY's general asset account, in which
assets attributable to the non-variable portion of the
Policies are held.
3
<PAGE>
GRACE PERIOD: The 61-day period following a Monthly
Anniversary Day on which the Policy's Net Accumulation Value
is insufficient to cover the current Monthly Deduction.
LLANY will send notice at least 31 days before the end of
the Grace Period that the Policy will lapse without value
unless a sufficient payment (described in the notification
letter) is received by LLANY.
HOME OFFICE: The Headquarters of Lincoln Life & Annuity
Company of New York, located at 120 Madison Street, Suite
1700, Syracuse, NY 13202.
INITIAL SPECIFIED AMOUNT: The amount (at least $250,000),
originally chosen by the applicant, initially equal to the
Death Benefit. The Specified Amount may be increased or
decreased as described in this Prospectus.
INSURED: Each of the two persons whose lives are insured by
the Policy. Any Death Benefit is payable only on the Second
Death of the Insureds.
LLANY: Lincoln Life & Annuity Company of New York.
LOAN ACCOUNT: The account in which Policy indebtedness
(outstanding loans and interest) accrues once it is
transferred out of the Fixed and Variable Sub-Accounts. The
Loan Account is part of LLANY's General Account.
MONTHLY ANNIVERSARY DAY: The day of the month (as shown in
the Policy Specifications) when LLANY makes the Monthly
Deduction, or the next Valuation Day if that day is not a
Valuation Day or is nonexistent for that month.
MONTHLY DEDUCTION: The monthly deduction made from Net
Accumulation Value; this deduction includes the cost of
insurance, an administrative expense charge, and charges for
supplemental riders or benefits, if applicable.
NET ACCUMULATION VALUE: The Accumulation Value less the Loan
Account Value.
NET AMOUNT AT RISK: The Death Benefit minus the Accumulation
Value.
NET PREMIUM PAYMENT: The portion of a Premium Payment, after
deduction of 8.0% for the premium load, available for
allocation to the Fixed and Variable Sub-Accounts.
NO LAPSE PREMIUM: The cumulative premium required to have
been paid by each Monthly Anniversary Day to prevent the
Policy from lapsing.
OWNER: The person or persons (including non-natural
persons), holding legal ownership rights to the Policy so
long as one or both Insureds are living.
PLANNED PREMIUMS: The amount of premium (as shown in the
Policy Specifications) the applicant chooses to pay LLANY on
a scheduled basis. This is the amount for which LLANY sends
a premium reminder notice.
POLICY: The life insurance contract described in this
Prospectus.
POLICY ANNIVERSARY: The day of the year the Policy was
issued, or the next Valuation Day if that day is not a
Valuation Day or is nonexistent for that year.
POLICY YEAR: Each twelve-month period, beginning on the Date
of Issue, during which the Policy is in effect.
PREMIUM PAYMENT: A premium payment made to LLANY under the
Policy.
RIGHT-TO-EXAMINE PERIOD: The period of time, generally 10
days unless otherwise stipulated by state law requirements,
beginning when the Policy is delivered to the Owner, during
which the Owner may return the Policy and receive a refund
of premiums paid.
SECOND DEATH: The Death of the second of the two Insureds to
die.
4
<PAGE>
SEPARATE ACCOUNT: LLANY Separate Account R for Flexible
Premium Variable Life Insurance. Assets maintained in the
Separate Account are kept separate from the general assets
of LLANY and are not subject to the general liabilities of
LLANY.
SETTLEMENT OPTION(S): Several ways in which the Beneficiary
may receive Death Benefit Proceeds, or in which the Owner
may choose to receive payments upon surrender of the Policy.
SUB-ACCOUNTS: The investment options available under this
Policy, including Fixed and Variable Sub-Accounts.
SURRENDER CHARGE: The amount retained by LLANY upon the full
surrender of the Policy.
SURRENDER VALUE: The amount an Owner can receive in cash by
surrendering the Policy. This equals the Net Accumulation
Value minus the applicable Surrender Charge. All of the
Surrender Value may be applied to one or more of the
Settlement Options.
VALUATION DAY: Every day on which Accumulation Units are
valued; that is any day on which the New York Stock Exchange
is open, except any day on which trading on the Exchange is
restricted, or on which an emergency exists, as determined
by the Commission, so that valuation or disposal of
securities is not practicable.
VALUATION PERIOD: The period of time beginning on the day
following a Valuation Day and ending on the next Valuation
Day. A Valuation Period may be more than one day in length.
VARIABLE ACCOUNT: The aggregate of the Variable Sub-Accounts
of LLANY Separate Account R for Flexible Premium Variable
Life Insurance each invested in shares of a Fund. The
Variable Account is also the Separate Account.
VARIABLE ACCOUNT VALUE: The portion of the Accumulation
Value attributable to the Variable Account.
VARIABLE ACCUMULATION UNIT: A unit of measure used to
calculate the value of a Variable Sub-Account.
HIGHLIGHTS
The Policy is a flexible premium variable life insurance
policy. Its values may be accumulated on a fixed, variable
or combination basis.
PURPOSE OF POLICY
The Policy insures two Insureds. The Death Benefit under the
Policy is payable only on the Second Death of the two
Insureds. The Policy is appropriate when the Owner desires
to provide Death Benefits only after the Second Death. For
example, the Policy may be suitable to insure a dual income
couple who desire to provide support for their dependents in
the event both should die, or when a couple desires to
provide liquidity to their heirs on the Second Death. It
would not be suitable when the need for a source of
replacement income or liquidity will occur after the death
of only a single Insured.
INITIAL CHOICES TO BE MADE
The Owner (initially, the applicant) has at least three
important choices under the Policy. The Owner selects:
1)One of the two Death Benefit Options;
2)The amount and frequency of Premium Payments; and
3)The allocation of Net Premium Payments to underlying
investments.
5
<PAGE>
LEVEL OR VARYING DEATH BENEFIT
There are two death benefit options (each a "DEATH BENEFIT
OPTION"). The amount payable under each is determined as of
the date of the Second Death. The Death Benefit Proceeds are
the greater of the amount payable under (a) the Death
Benefit Option selected and (b) the Corridor Death Benefit
(see page 24). Death Benefit Option 1 provides a death
benefit of the Specified Amount. Death Benefit Option 2
provides a death benefit of the Specified Amount plus the
Accumulation Value as of the end of the Valuation Period in
which LLANY receives Due Proof of Death of both Insureds.
(SEE DEATH BENEFITS, DEATH BENEFIT OPTIONS.) If the
applicant fails to designate a Death Benefit Option, Death
Benefit Option 1 applies.
It is sometimes possible to change the Death Benefit Option
or the Specified Amount. (SEE DEATH BENEFIT, CHANGES IN
DEATH BENEFIT OPTIONS AND SPECIFIED AMOUNT).
PREMIUM PAYMENTS
The Policy provides for flexible Premium Payments. The Owner
may make an initial Premium Payment, elect a premium payment
plan under which periodic reminder notices will be sent for
Planned Premiums, or make fixed or varying Premium Payments
from time to time, or some combination of these. To the
extent that the Net Accumulation Value is insufficient to
pay required deductions (including the Cost of Insurance), a
Premium Payment will be required to continue the Policy in
force and a premium notice will be sent. If a Premium
Payment required to continue the Policy in force is not
received in a timely manner, the Policy will lapse. If the
Policy lapses it may be reinstated under certain
circumstances. The Policy will not lapse if, on each Monthly
Anniversary, the Owner has met the No Lapse Premium
requirement. (SEE LAPSE AND REINSTATEMENT, NO LAPSE
PROVISION) Premium Payments are refundable during the Right-
to-Examine Period. The right of the Owner to make Premium
Payments may be limited by LLANY in certain circumstances
and may be limited by applicable tax laws.
SELECTION OF UNDERLYING INVESTMENTS
The Owner allocates the Net Premium Payments among the
Variable Sub-Accounts in the Separate Account, each of which
invests only in shares of a particular Fund, and the Fixed
Account. The initial Premium Payment is allocated to the
Sub-Accounts after the end of the Right-to-Examine Period
(See RIGHT TO EXAMINE PERIOD). Allocations to each Fixed and
Variable Sub-Account must be in whole percentages. At this
time, no more than 18 Sub-Accounts may be opened during the
life of the Policy. LLANY may increase the maximum number of
Sub-Accounts in the future. The values of the Variable
Sub-Accounts are not guaranteed and will vary with the
investment performance of the Funds chosen by the Owner.
CHARGES AND FEES
There is a 8.0% premium load on all Premium Payments. (SEE
PREMIUM PAYMENTS, PREMIUM LOAD).
Monthly Deductions are made for the Cost of Insurance and
any riders. (SEE CERTAIN FEES AND CHARGES, COST OF INSURANCE
CHARGE).
Monthly Deductions (a flat dollar fee of $12.50 per month
during the first Policy Year and, currently $5 per month
thereafter) and a charge of $0.09 per $1000 of Specified
Amount for the first 20 years of the Policy are made to
compensate LLANY for administrative expenses associated with
Policy issue and ongoing Policy maintenance.
6
<PAGE>
An additional monthly charge of $0.01 per $1,000 of
Specified Amount will also be imposed if the No Lapse
Provision is selected and remains in effect. (SEE CERTAIN
FEES AND CHARGES, MONTHLY DEDUCTION).
Daily deductions from each Variable Sub-Account are made for
the mortality and expense risk. The current rate of
deduction, stated as an annual percentage of the value of
the Variable Sub-Account, is 0.80%. (SEE CERTAIN FEES AND
CHARGES, MORTALITY AND EXPENSE RISK CHARGE).
Investment results for each Variable Sub-Account are
affected by each Fund's daily charge for management fees;
these charges vary by Fund and are shown on pages 21-22 of
this Prospectus.
A transaction fee of $25 is imposed for partial surrenders.
(SEE POLICY LIQUIDITY, PARTIAL SURRENDERS).
LLANY reserves the right to impose a $25 charge for each
request for transfers among Fixed and Variable Sub-Accounts
in excess of 12 requests in any Policy Year. (SEE CERTAIN
FEES AND CHARGES, TRANSACTION FEE FOR EXCESS TRANSFERS).
A surrender charge is deducted from proceeds (excluding
Death Benefit Proceeds) payable to the Owner when the Policy
is surrendered before the fifteenth anniversary of the Date
of Issue or, with respect to any increase in Specified
Amount, before the fifteenth anniversary of the increase.
(SEE POLICY LIQUIDITY, SURRENDER CHARGES).
Interest is charged on Policy loans. (SEE POLICY LIQUIDITY,
POLICY LOANS).
INFORMATION ABOUT LLANY AND THE SEPARATE ACCOUNT
LLANY is a life insurance company chartered under New York
law on June 6, 1996. LLANY's principal offices are located
at 120 Madison Street, Suite 1700, Syracuse, New York 13202.
LLANY is licensed to sell life insurance policies and
annuity contracts in New York.
LLANY is a subsidiary of The Lincoln National Life Insurance
Company, which is a stock life insurance company
incorporated under the laws of Indiana on June 12, 1905.
Lincoln National Life Insurance Company is principally
engaged in offering life insurance policies and annuity
contracts, and ranks among the largest United States stock
life insurance companies in terms of assets and life
insurance in force.
The Lincoln National Life Insurance Company 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 The Lincoln
National Life Insurance Company and LNC are located at 1300
South Clinton Street, Fort Wayne, Indiana 46802. Through
subsidiaries, LNC engages primarily in the businesses of
insurance and financial services. Administrative services
necessary for the operation of the Variable Account and the
Policies are currently provided by The Lincoln National Life
Insurance Company. However, neither the assets of LNC nor
those of The Lincoln National Life Insurance Company support
the obligations of LLANY under the Policies.
LLANY Separate Account R for Flexible Premium Variable Life
Insurance ("SEPARATE ACCOUNT") is a separate account of
LLANY organized on January 29, 1998. Under New York
insurance law, the income, gains and losses from separate
account assets are credited to or charged against the
account, without regard to other income, gains or losses of
LLANY. LLANY owns the assets in the Separate Account,
although the Separate Account assets are available first to
satisfy the obligation of LLANY with respect to the
Policies. LLANY does not guarantee the Separate Account's
investment performance.
7
<PAGE>
Lincoln Financial Advisors, Inc. ("LFA") is the principal
underwriter for the Policies. (SEE "DISTRIBUTION OF
POLICIES").
Net Premium Payments allocated to the Separate Account will
be invested in Fund shares at net asset value. Monies
necessary to fund deductions, charges, transfers and
surrenders from the Separate Account are raised by selling
Fund shares at net asset value. On each Valuation Day, the
Separate Account will purchase or redeem Fund shares based
on a netting of all transactions in that Variable
Sub-Account for that day.
The Separate Account is registered with the Commission as a
unit investment trust under the Investment Company Act of
1940 ("1940 ACT"). Registration under the 1940 Act does not
involve supervision by the Commission of the Separate
Account or LLANY's management or investment practices or
policies. LLANY has other separate accounts, some of which
are so registered. The other registered separate accounts
hold assets that support different variable annuity
contracts and variable life insurance policies of LLANY.
PURPOSE OF THE POLICY
PERSONAL CIRCUMSTANCES
The Policy generally provides a greater death benefit for
the same amount of premium, or the same death benefit for a
lower premium, than would a policy on the life of only one
of the Insureds. This is possible because the probability of
two deaths within a given period of time is less than the
probability of a single death. This Policy may be
appropriate in any situation in which death benefit proceeds
are not required until after the death of both Insureds. For
example, a husband and wife who plan to use the marital
deduction for estate tax purposes on the first death, would
not ordinarily need liquidity to pay estate taxes until
after the Second Death. The Policy would also be appropriate
in the case of a dual income couple, in which each has
significant earning capacity, whose dependents will need
replacement funds to provide support only after the Second
Death. Such funds could be used to pay for a variety of
needs of dependents, including support, medical treatment,
education.
Applicants should consult with their professional advisors
concerning the appropriateness of the Policy in their
circumstances, and as to whether all appropriate legal, tax
and financial factors have been taken into consideration.
MARKET, INTEREST RATE AND CREDIT RISK EXPOSURE
The use of variable life insurance rather than traditional
life insurance provides greater opportunities and
corresponding risks. If Death Benefit Option 2 is chosen,
favorable investment performance may increase death
benefits, by increasing the Net Accumulation Value, or
reduce the amount of required premium payments, by funding
the cost of insurance with before-tax Policy Value
accumulations. On the other hand, unfavorable investment
performance may cause a relative decline in death benefits
if Death Benefit Option 2 is chosen, or increase the amount
of premium payments required to avoid lapse. Such premium
payments could be required at times when the Owner's
resources most constrain his or her ability to pay them.
Through selection of the underlying investments, an Owner
may decide the degree of risk exposure best suited to the
Owner's particular needs and circumstances. An applicant who
is averse to market and interest rate risk, or wishes to
provide a fixed amount of liquidity upon the Second Death,
should strongly consider the purchase of a non-variable
second-to-die life insurance policy. LLANY will provide
information about such a policy on request to the
Administrative Office.
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REPLACEMENTS
Before purchasing the Policy to replace, or to be funded
with proceeds borrowed or withdrawn from, an existing life
insurance policy, a number of matters should be considered
by the applicant. First, the applicant should consider
whether any commission will be paid to an agent or any other
person with respect to the replacement. Second, the
applicant should consider whether coverages and comparable
values are available from the Policy, as compared to his or
her existing policy. For example, the Insureds may no longer
be insurable, or the contestability period may have elapsed
with respect to the underlying policy, while the Policy
could be contested. The Owner should consider similar
matters before deciding to replace the Policy or withdraw
funds from the Policy for the purchase of funding a new
policy of life insurance.
APPLICATION
Any person who wants to buy a Policy must first complete an
application on a form provided by LLANY.
A complete application identifies the prospective Insureds
and provides sufficient information about them to permit
LLANY to begin underwriting the risks under the Policy. A
medical history and examination of each of the Insureds is
required. LLANY may decline to provide insurance on the
lives of the Insureds or, if it agrees to provide insurance,
it may place one or both Insureds into a special
underwriting category (these include preferred, non-smoker
standard, smoker standard, non-smoker substandard and smoker
substandard). The amount of the Cost of Insurance deducted
monthly from the Policy value after issue varies among the
underwriting categories as well as by Age and gender of the
Insureds.
The applicant will select the Beneficiary or Beneficiaries
who are to receive Death Benefit Proceeds payable on the
Second Death, the initial face amount (the "INITIAL
SPECIFIED AMOUNT") of the Death Benefit and which of two
methods of computing the Death Benefit is to be used. (See
DEATH BENEFITS, DEATH BENEFIT OPTIONS). The applicant will
also indicate both the frequency and amount of Premium
Payments. See PREMIUM FEATURES. The applicant must also
determine how Policy values are initially to be allocated
among the available funding options following the expiration
of the Right-to-Examine Period. (See RIGHT-TO-EXAMINE
PERIOD).
OWNERSHIP
The Owner is the person or persons named as "OWNER" in the
application, and on the Date of Issue will usually be
identified as "OWNER" in the Policy Specifications. If no
person is identified as Owner in the Policy Specifications,
then the Insureds are the Owner. The person or persons
designated to be Owner of the Policy must have, or hold
legal title for the sole benefit of a person who has, an
"insurable interest" in the lives of each of the Insureds
under applicable state law. The Owner may be either or both
of the Insureds, or any other natural person or non-natural
person. The Owner owns and exercises the rights under the
Policy prior to the Second Death.
The Owner is the person who is ordinarily entitled to
exercise the rights under the Policy so long as either of
the Insureds is living. These rights include the power to
select the Beneficiary and the Death Benefit Option. The
Owner generally also has the right to request policy loans,
make partial surrenders or surrender the Policy. The Owner
may also name a new owner, assign the Policy or agree not to
exercise all of the Owner's rights under the Policy.
If the Owner is a person other than the last surviving
Insured, and that Owner dies before the Second Death, the
Owner's rights in the Policy will belong to the Owner's
estate, unless otherwise specified to LLANY.
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BENEFICIARY
The person or persons named in the application as
"BENEFICIARY" are the Beneficiaries under the Policy.
Multiple Beneficiaries will be paid in equal shares, unless
otherwise specified to LLANY.
Except when LLANY has acknowledged an assignment of the
Policy or an agreement not to change the Beneficiary, the
Owner may change the Beneficiary at any time while either of
the Insureds is living. Any request for a change in the
Beneficiary must be in a written form satisfactory to LLANY
and submitted to LLANY at its Administrative Office. Unless
the Owner has reserved the right to change the Beneficiary,
such a request must be signed by both the Owner and the
Beneficiary. On recordation, the change of Beneficiary will
be effective as of the date of signature or, if there is no
such date, the date of recordation. No change of Beneficiary
will affect, or prejudice LLANY as to, any payment made or
action taken by LLANY before it was recorded.
If any Beneficiary dies before the Second Death, the
Beneficiary's potential interest shall pass to any surviving
Beneficiaries, unless otherwise specified to LLANY. If no
named Beneficiary survives the Second Death, any Death
Benefit Proceeds will be paid to the Owner or the Owner's
executor, administrator or assigns.
INSUREDS
There are two Insureds under the Policy. At the Date of
Issue of the Policy the Owner must have an insurable
interest in each of the Insureds. On the Second Death, a
Death Benefit is payable under the Policy.
THE CONTRACT
On issuance, a life insurance contract ("POLICY") will be
delivered to the Owner. The Policy sets forth the terms of
the Policy, as applicable to the Owner, and should be
reviewed by the Owner on receipt to confirm that it sets
forth the features specified in the application. The
ownership and other options set forth in the Policy are
registered, and may be transferred, solely on the books and
records of LLANY. Possession of the Policy does not
represent ownership or the right to exercise the incidents
of ownership with respect to the Policy. If the Owner loses
the form of Policy, LLANY will issue a replacement on
request. LLANY may impose a Policy replacement fee.
POLICY SPECIFICATIONS
The Policy includes a page entitled "POLICY SPECIFICATIONS"
in which is set forth certain information applicable to the
specific Policy. This information includes the identity of
the Owner, the Date of Issue, the Initial Specified Amount,
the Death Benefit Option selected, the Insureds, the issue
Ages, the Beneficiary, the initial Premium Payment, and the
No Lapse Premium if the No Lapse Provision has been
selected.
PREMIUM FEATURES
The Policy permits flexible premium payments, meaning that
the frequency and the amount of Premium Payments may be
selected by the Owner. After the Initial Premium Payment is
paid there is no minimum premium required, unless to
maintain the No Lapse Provision. (See LAPSE AND
REINSTATEMENT NO LAPSE PROVISION). The initial Premium
Payment is due on the Effective Date and must be equal to or
exceed the amount necessary to provide for two Monthly
Deductions or, if selected, the No Lapse Premium.
If at least one of the Insureds is still living when the
younger Insured attains or would have attained Age 100, and
the Policy has not been surrendered, there are certain
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changes under the Policy. LLANY will no longer accept
Premium Payments. LLANY will pay the Surrender Value of the
Policy to the Owner as of the next Monthly Anniversary Day.
ADDITIONAL PREMIUMS; PLANNED PREMIUMS
Any later Premium Payments ("ADDITIONAL PREMIUMS")must be
sent directly to the Administrative Office. Additional
Premiums will be credited only when actually received by
LLANY. An applicant may schedule Premium Payments with a
annual, semiannual, quarterly or monthly frequency ("PLANNED
PREMIUMS"). Pre-authorized automatic Additional Premium
Payments can also be arranged at any time.
Unless specifically otherwise directed, any payment received
(other than any Premium Payment necessary to prevent, or
cure, Policy lapse) will be applied first to reduce Policy
indebtedness. There is no premium load on such payments to
the extent applied to reduce indebtedness.
LIMITS ON RIGHT TO MAKE PAYMENTS OF ADDITIONAL AND PLANNED
PREMIUMS
The Owner may increase Planned Premiums, or pay Additional
Premiums, subject to the following limitations and LLANY's
right to limit the amount or frequency of Additional
Premiums.
LLANY may require evidence of insurability if any payment of
Additional Premium (including Planned Premium) would
increase the difference between the Death Benefit and the
Accumulation Value. If LLANY is unwilling to accept the
risk, the increase in premium will be refunded without
interest and without participation of such amounts in any
underlying investment.
LLANY may also decline any Additional Premium (including
Planned Premium) or a portion thereof that would result in
total Premium Payments exceeding the maximum limitation for
life insurance under federal tax laws. The excess amount
would be returned.
PREMIUM LOAD; NET PREMIUM PAYMENT
LLANY deducts 8.0% from each Premium Payment. This amount,
sometimes referred to as "PREMIUM LOAD," covers certain
Policy-related state tax and federal income tax liabilities
and a portion of the sales expenses incurred by LLANY. The
Premium Payment, net of the premium load, is called the "NET
PREMIUM PAYMENT."
RIGHT-TO-EXAMINE PERIOD
The Owner may return the Policy to LLANY for cancellation as
follows. If the Owner mails or delivers the Policy to the
Administrative Office on or before 10 days after delivery of
the Policy (60 days for Policies issued in replacement of
other insurance) ("RIGHT-TO-EXAMINE PERIOD") LLANY will
refund to the Owner all Premium Payments.
Any Premium Payments received by LLANY before the end of the
Right-to-Examine Period will be held in the Money Market
Account, and will be allocated to the Sub-Accounts
designated by the Owner at the end of a Right-to-Examine
Period. If the Policy is returned for cancellation within
the Right-to-Examine Period, any Premium Payments will be
returned within seven days, although any refund of a Premium
Payment made by check may be delayed until the check clears.
TRANSFERS AND ALLOCATION AMONG ACCOUNTS
ALLOCATION OF NET PREMIUM PAYMENTS
The allocation of Net Premium Payments among the Fixed and
Variable Sub-Accounts may be set forth in the application.
An Owner may change the allocation of future Net
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Premium Payments at any time. In any allocation, the amount
allocated to any Sub-Account must be in whole percentages.
No allocation can be made which would result in a
Sub-Account Value of less than $50. LLANY, at its sole
discretion, may waive minimum balance requirements on the
Sub-Accounts. At the present time, no more than 18
Sub-Accounts may be opened during the life of the Policy.
LLANY may increase the number of Sub-Accounts in the future.
TRANSFERS
The Owner may make transfers among the Sub-Accounts, on the
terms set forth below, at any time before the younger
Insured reaches or would have reached Age 100. The Owner
should carefully consider current market conditions and each
Sub-Account's investment policies and related risks before
allocating money to the Sub-Accounts. See pages 17-22 of
this Prospectus.
Transfer of amounts of at least $500 from one Variable
Sub-Account to another or from the Variable Sub-Accounts to
the Fixed Account are possible at any time. Within 30 days
after each anniversary of the Date of Issue, the Owner may
transfer up to the lesser of $250,000 or 25% of the Fixed
Account Value (as of the preceding anniversary of the Date
of Issue) to one or more Variable Sub-Accounts. Up to 12
transfer requests (a request may involve more than a single
transfer) may be made in any Policy Year without charge, and
any value remaining in a Sub-Account after a transfer must
be at least $500. LLANY reserves the right to impose a
charge for each transfer request in excess of 12 requests in
any Policy Year, except for transfers from a Variable Sub-
Account to the Fixed Account following a change in that
Variable Sub-Account's investment strategy. LLANY may
further limit transfers from the Fixed Account at any time.
Transfers must be made in proper written form. Written
transfer requests received at the Administrative Office by
the close of the New York Stock Exchange (usually, 4:00 PM
ET) on a Valuation Day will be effected that day. Otherwise,
requests will be effective as of the next Valuation Day.
Any transfer among the Variable Sub-Accounts or to the Fixed
Account will result in the crediting and cancellation of
Accumulation Units based on the Accumulation Unit values
next determined after the Administrative Office receives a
request in proper written form. Any transfer made which
causes the remaining value of Accumulation Units for a
Variable Sub-Account or the Fixed Account to be less than
$500 will result in those remaining Accumulation Units being
canceled and their aggregate value reallocated
proportionately among the other Variable Sub-Accounts and
the Fixed Account to which Policy values are then allocated.
OPTIONAL SUB-ACCOUNT ALLOCATION PROGRAMS
The Owner may elect to participate in programs providing for
Dollar Cost Averaging or Automatic Rebalancing, but may
participate in only one program at any time.
DOLLAR COST AVERAGING
Dollar Cost Averaging systematically transfers specified
dollar amounts from the Money Market Sub-Account. Transfer
allocations may be made to one or more of the Sub-Accounts
on a monthly or quarterly basis. By making allocations on a
regularly scheduled basis, instead of on a lump sum basis,
an Owner may reduce exposure to market volatility. Dollar
Cost Averaging will not assure a profit or protect against a
declining market. An election to Dollar Cost Average is
subject to the 18 Sub-Account Limitation described under
ALLOCATION OF NET PREMIUM PAYMENTS.
If the Owner elects Dollar Cost Averaging, the value in the
Money Market Sub-Account must be at least $1,000 initially.
The minimum amount that may be allocated is $50 monthly.
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An election for Dollar Cost Averaging is effective after the
Administrative Office receives a request from the Owner in
proper written form or by telephone, if adequately
authenticated. An election is effective within ten business
days, but only if there is sufficient value in the Money
Market Sub-Account. LLANY may, in its sole discretion, waive
Dollar Cost Averaging minimum deposit and transfer
requirements.
Dollar Cost Averaging terminates automatically: (1) if the
number of designated transfers has been completed; (2) if
the value in the Money Market Sub-Account is insufficient to
complete the next transfer; (3) one week after the
Administrative Office receives a request for termination in
proper written form or by telephone, if adequately
authenticated; or (4) if the Policy is surrendered.
Currently, there is no charge for Dollar Cost Averaging, but
LLANY reserves the right to impose a charge.
AUTOMATIC REBALANCING
Automatic Rebalancing periodically restores to a
pre-determined level the percentage of Policy value
allocated to each Variable Sub-Account (e.g. 20% Money
Market, 50% Growth, 30% Utilities). The Fixed Account is not
subject to rebalancing. The pre-determined level is the
allocation initially selected on the application, until
changed by the Owner. If Automatic Rebalancing is elected,
all Net Premium Payments allocated to the Variable
Sub-Accounts will be subject to Automatic Rebalancing.
The Owner may select Automatic Rebalancing on a quarterly,
semi-annual or annual basis. Automatic Rebalancing may be
elected, terminated or the allocation may be changed at any
time, effective within ten business days upon receipt by the
Administrative Office of a request in proper written form or
by telephone, if adequately authenticated.
Currently, there is no current charge for Automatic
Rebalancing, but LLANY reserves the right to impose a
charge.
INVESTMENT OPTIONS
FIXED ACCOUNT
Premium Payments allocated to the Fixed Account become part
of LLANY's General Account, and do not participate in the
investment experience of the Variable Account. The General
Account is subject to regulation and supervision by the New
York Insurance Department as well as the insurance laws and
regulations of the jurisdictions in which the Policies are
distributed.
IN RELIANCE ON CERTAIN EXEMPTIONS, EXCLUSIONS AND RULES,
LLANY HAS NOT REGISTERED INTERESTS IN THE FIXED ACCOUNT AS A
SECURITY UNDER THE SECURITIES ACT OF 1933 AND HAS NOT
REGISTERED THE FIXED ACCOUNT AS AN INVESTMENT COMPANY UNDER
THE 1940 ACT. ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY
INTERESTS THEREIN ARE SUBJECT TO REGULATION UNDER THE 1933
ACT OR THE 1940 ACT. LLANY HAS BEEN ADVISED THAT THE STAFF
OF THE SEC HAS NOT MADE A REVIEW OF THE DISCLOSURES WHICH
ARE INCLUDED IN THIS PROSPECTUS WHICH RELATE TO THE GENERAL
ACCOUNT AND TO THE FIXED ACCOUNT UNDER THE CONTRACT. THESE
DISCLOSURES, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS
RELATING TO THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE
IN PROSPECTUSES. THIS PROSPECTUS IS GENERALLY INTENDED TO
SERVE AS A DISCLOSURE DOCUMENT ONLY FOR ASPECTS OF THE
POLICY INVOLVING THE VARIABLE ACCOUNT, AND THEREFORE
CONTAINS ONLY SELECTED INFORMATION REGARDING THE FIXED
ACCOUNT. COMPLETE DETAILS REGARDING THE FIXED ACCOUNT ARE IN
THE POLICY.
Premium Payments allocated to the Fixed Account are
guaranteed to be credited with a minimum interest rate,
specified in the Policy, of at least 4.0%. Interest in
excess of 4.0% may be credited in LLANY's sole discretion.
Such interest rate will be established
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on a prospective basis in LLANY's sole discretion and may
vary by the Policy issue year and duration. LLANY may vary
the way in which it credits interest to the Fixed Account
from time to time.
ANY INTEREST IN EXCESS OF 4.0% WILL BE DECLARED IN ADVANCE
IN LLANY'S SOLE DISCRETION. POLICY OWNERS BEAR THE RISK THAT
NO INTEREST IN EXCESS OF 4.0% WILL BE DECLARED.
VARIABLE ACCOUNT
LLANY Separate Account R for Flexible Premium Variable Life
Insurance was established on January 29, 1998 pursuant to a
resolution of the Board of Directors of LLANY. The Variable
Account is composed of the Variable Sub-Accounts. Under New
York insurance law, the income, gains and losses, realized
or unrealized, from assets allocated to the Variable Account
are credited to or charged against the Variable Account,
without regard to other income, gains or losses of LLANY.
LLANY owns the assets in the Variable Account, but the
Variable Account assets equal to its reserves and other
liabilities are available first to satisfy the obligation of
LLANY with respect to any obligations of LLANY funded by the
Variable Account, and are not chargeable with liabilities
arising out of any other business conducted by LLANY. LLANY
does not guarantee the Variable Account's investment
performance.
Available proceeds received by the Variable Account will be
invested in Fund shares at net asset value. Monies necessary
to fund deductions, charges, transfers and surrenders from
the Variable Account are raised by selling Fund shares at
net asset value. On each Valuation Day, the Variable Account
will purchase or redeem Fund shares for each Variable
Sub-Account based on a netting of all transactions for each
Variable Sub-Account for that day. Fund shares held in the
Variable Account are registered by book entry on the books
maintained by or for the Funds.
The Variable Account is registered with the Commission as a
unit investment trust under the 1940 Act. Registration under
the 1940 Act does not involve supervision of the Variable
Account or LLANY's management or investment practices or
policies by the Commission.
LLANY has other separate accounts, some of which are
registered as unit investment trusts. The other registered
separate accounts hold assets that support different
variable annuity contracts and variable life insurance
policies of LLANY.
POLICY VALUES
The Accumulation Value of the Policy depends on the
performance of the underlying investments. Policy values are
used to fund Policy fees and expenses, including the Cost of
Insurance. Required Premium Payments, if any, will vary
based on the investment performance of the underlying
investments. A market downturn, affecting the Variable
Sub-Accounts upon which the Accumulation Value of a
particular Policy depends, may require Additional Premium
Payments beyond those expected (unless the No Lapse
Provision requirements have been satisfied) to maintain the
level of coverage or to avoid lapse of the Policy. Review of
periodic statements is strongly suggested to determine if
Additional Premium Payments may be necessary to avoid lapse
of the Policy.
Each Owner will be advised at least annually as to the
Accumulation Value, the number of Accumulation Units which
remain credited to the Policy, the current Accumulation Unit
values, the Variable Sub-Account Values, the Fixed Account
Value and the Loan Account Value.
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ACCUMULATION VALUE
Each Net Premium Payment will be credited to the Policy as
of the end of the Valuation Period in which it is received
at the Administrative Office. The "ACCUMULATION VALUE" of a
Policy is determined by: (1) multiplying the total number of
Accumulation Units credited to the Policy for each Variable
Sub-Account by its appropriate current Variable Accumulation
Unit Value; (2) if a combination of Variable Sub-Accounts is
elected, totaling the resulting values; and (3) adding any
values attributable to the Fixed Account and the Loan
Account. The Accumulation Value will be affected by Monthly
Deductions.
VARIABLE ACCOUNT VALUE
VARIABLE ACCUMULATION UNIT VALUE
When all or a part of a Net Premium Payment is allocated to
a Variable Sub-Account, the amount allocated is converted
into Variable Accumulation Units by dividing the amount
allocated to the Variable Sub-Account by the value of the
Variable Accumulation Unit for the Variable Sub-Account
calculated at the end of the Valuation Period in which it is
received at the Administrative Office. The Variable
Accumulation Unit Value for each Variable Sub-Account was
established at $10.00 for the first Valuation Period of the
particular Variable Sub-Account. The Variable Accumulation
Unit Value for each Variable Sub-Account would thereafter
vary independently of the other Variable Sub-Accounts and
may increase or decrease from one Valuation Period to the
next. Allocations to Variable Sub-Accounts are made only as
of the end of a day, called the "VALUATION DAY," on which
the New York Stock Exchange is open for business.
VARIABLE ACCUMULATION UNITS
A "VARIABLE ACCUMULATION UNIT" is a unit of measure used in
the calculation of the value of each Variable Sub-Account.
The Variable Accumulation Unit Value will be as determined
for the Valuation Period during which a Premium Payment or
request for transfer is received by LLANY. The Variable
Accumulation Unit Value for a Variable Sub-Account for any
later Valuation Period is determined as follows:
1.The total value of Fund shares held in the Variable
Sub-Account is calculated by multiplying the number of
Fund shares owned by the Variable 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
2.The liabilities of the Variable Sub-Account at the end
of the Valuation Period; such liabilities include daily
charges imposed on the Variable Sub-Account, and may
include a charge or credit with respect to any taxes
paid or reserved for by LLANY that LLANY determines
result from the operations of the Variable Account; and
3.The result of (2) is divided by the number of Variable
Accumulation Units outstanding at the beginning of the
Valuation Period.
The daily charges imposed on a Variable Sub-Account for any
Valuation Period are equal to the daily mortality and
expense risk charge multiplied by the number of calendar
days in the Valuation Period. The amount of monthly
deduction allocated to each Variable Sub-Account will result
in the cancellation of Variable Accumulation Units that have
an aggregate value on the date of such deduction equal to
the total amount by which the Variable Sub-Account is
reduced.
The number of Variable Accumulation Units credited to a
Policy will not be changed by any subsequent change in the
value of a Variable Accumulation Unit. Such value may vary
from Valuation Period to Valuation Period to reflect the
investment experience of the Fund used in a particular
Variable Sub-Account and fees and charges under the Policy.
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FIXED ACCOUNT AND LOAN ACCOUNT VALUE
The Fixed Account Value and the Loan Account Value reflect
amounts allocated to LLANY's General Account through payment
of premiums or through transfers from the Variable Account.
NET ACCUMULATION VALUE
The "NET ACCUMULATION VALUE" is the Accumulation Value less
the Loan Account Value. The Net Accumulation Value
represents the net value of the Policy and is the basis for
calculating the Surrender Value.
FUNDS
Each of the nineteen Variable Sub-Accounts is invested
solely in the shares of one of the nineteen Funds available
under the Policies. Except for AIM Variable Insurance Funds,
Inc., which is a Maryland corporation, each of the Funds is
a series of one of eight Massachusetts business trusts. Each
such trust or corporation is registered as an open-end,
diversified management investment company under the 1940
Act.
The Fund Groups and their investment advisers and
distributors are:
AIM Variable Insurance Funds, Inc. ("AIM V.I. FUND"),
managed by AIM Advisors, Inc., and distributed by AIM
Distributors Inc., 11 Greenway Plaza, Suite 100,
Houston, TX 77046-1173;
CIGNA Variable Products Group, managed by CIGNA
Investments, Inc. and distributed by CIGNA Financial
Services, Inc., 900 Cottage Grove Road, Bloomfield, CT
06002;
Variable Insurance Products Fund ("FIDELITY VIP I"), and
Variable Insurance Products Fund II ("FIDELITY VIP II"),
managed by Fidelity Management & Research Company and
distributed by Fidelity Distributors 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;
Templeton Variable Products Series Fund ("TEMPLETON
TRUST"), managed by Templeton Investment Counsel, Inc.
and its Templeton and Franklin affiliates and
distributed by Franklin/Templeton Distributors, Inc.,
700 Central Avenue, St. Petersburg, FL 33701;
OCC Accumulation Trust ("OCC TRUST"), managed by OpCap
Advisors and distributed by OCC Distributors, One World
Financial Center, New York, NY 10281.
Four Funds of AIM V.I. Fund are available under the
Policies:
AIM V.I. Capital Appreciation Fund;
AIM V.I. Diversified Income Fund;
AIM V.I. Growth Fund;
AIM V.I. Value Fund.
Two Funds of CIGNA Group are available under the Policies:
Money Market Fund;
S&P 500 Index Fund.
One Fund of FIDELITY VIP I is available under the Policies:
Equity-Income Portfolio ("FIDELITY VIP EQUITY-INCOME
PORTFOLIO").
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Two Funds of FIDELITY VIP II are available under the
Policies:
Asset Manager Portfolio ("FIDELITY VIP II ASSET MANAGER
PORTFOLIO");
Investment Grade Bond Portfolio ("FIDELITY VIP II
INVESTMENT GRADE BOND PORTFOLIO").
Four Funds of MFS Trust are available under the Policies:
MFS Emerging Growth Series;
MFS Total Return Series;
MFS Utilities Series;
MFS World Governments Series.
Three Funds of TEMPLETON Trust and are available under the
Policies:
Templeton Asset Allocation Fund: Class I;
Templeton International Fund: Class I;
Templeton Stock Fund: Class I.
Three Funds of OCC Trust are available under the Policies:
Global Equity Portfolio;
Managed Portfolio;
Small Cap Portfolio.
The investment advisory fees charged the Funds by their
advisers are shown on pages 21-22 of this Prospectus.
Below is a brief description of the investment objective and
program of each Fund. There can be no assurance that any of
the stated investment objectives will be achieved.
AIM V.I. CAPITAL APPRECIATION FUND (Small Cap Stocks): Seeks
to provide capital appreciation through investments in
common stocks, with emphasis on medium-sized and smaller
emerging growth companies.
AIM V.I. DIVERSIFIED INCOME FUND (Fixed Income -
Intermediate Term Bonds): Seeks to achieve a high level of
current income primarily by investing in a diversified
portfolio of foreign and U.S. government and corporate debt
securities, including lower rated high yield debt securities
(commonly known as "JUNK BONDS").
AIM V.I. GROWTH FUND (Large Cap Stocks): Seeks to provide
growth of capital through investments primarily in common
stocks of leading U.S. companies considered by its adviser
to have strong earnings momentum.
AIM V.I. VALUE FUND (Large Cap Stocks): Seeks to achieve
long-term growth of capital by investing primarily in equity
securities judged by its adviser to be undervalued relative
to the current or projected earnings of the companies
issuing the securities, or relative to current market values
of assets owned by the companies issuing the securities or
relative to the equity markets generally. Income is a
secondary objective.
CIGNA VP MONEY MARKET FUND (Money Market): Seeks to provide
as high a level of current income as is consistent with the
preservation of capital and liquidity and the maintenance of
a stable $1.00 per share net asset value by investing in
short-term money market instruments.
CIGNA VP S&P 500 INDEX FUND (Large Cap Stocks): Seeks to
achieve its objective of long-term growth of capital by
attempting to replicate the composition and total return,
reduced by fund expenses, of the Standard & Poor's 500
Composite Stock price Index.
FIDELITY VIP II ASSET MANAGER PORTFOLIO (Balanced or Total
Return): Seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed-income
instruments.
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.
17
<PAGE>
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.
MFS EMERGING GROWTH SERIES (Large Cap Stocks): Seeks to
provide long-term growth of capital by investing primarily
in common stocks of foreign and domestic insurers.
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.
MFS WORLD GOVERNMENTS SERIES (International Fixed Income):
Seeks not only preservation, but also growth, of capital
together with moderate current income through a
professionally managed, internationally diversified
portfolio consisting primarily of debt securities and to a
lesser extent equity securities.
TEMPLETON ASSET ALLOCATION FUND (Balanced or Total Return):
Seeks a high level of total return through a flexible policy
of investing in stocks of companies in any nation, debt
securities of companies and governments of any nation, and
in money market instruments. Assets are allocated among
different investments depending upon worldwide market and
economic conditions.
TEMPLETON INTERNATIONAL FUND (International Stocks): Seeks
long-term capital growth through a flexible policy of
investing in stocks and debt obligations of companies and
governments outside the United States.
TEMPLETON STOCK FUND (Global Stocks): Seeks capital growth
through a policy of investing primarily in common stocks
issued by companies, large and small, in various nations
throughout the world, including the U.S.
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.
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 AIM V.I. Diversified Income Fund, Fidelity VIP
Equity-Income Portfolio, Fidelity VIP II Asset Manager
Portfolio, MFS Emerging Growth Series, MFS Total Return
Series, MFS Utilities Series, MFS World Governments Series,
OCC Global Equity Portfolio, OCC Managed Portfolio, OCC
Small Cap Portfolio, Templeton Asset Allocation Fund,
Templeton International Fund and Templeton Stock Fund may
invest in non-investment grade, high-risk debt securities
(commonly referred to as "junk bonds"), as detailed in the
individual Fund Prospectuses.
There is no assurance that the investment objective of any
of the Funds will be met. Each Owner has all of the
investment performance risk for the Variable Sub-Accounts
selected by the Owner. There is investment performance risk
in each of the Variable Sub-Accounts, although the amount of
such risk varies significantly among the Variable
Sub-Accounts. Owners should read each Fund's prospectus
carefully and understand the risks before making or changing
investment choices. Additional Funds may, from time to
18
<PAGE>
time, be made available as underlying investments. The right
to select among Funds will be limited by the terms and
conditions imposed by LLANY (SEE ALLOCATION OF NET PREMIUM
PAYMENTS).
Required premium levels will vary based on market
performance. In a prolonged market downturn, affecting all
Sub-Accounts, additional Premium Payments may be necessary
to maintain the level of coverage or to avoid lapsing of the
Policy. Review of periodic contract statements is strongly
suggested to determine appropriate premium requirements.
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
LLANY, further investment in such shares should cease to be
appropriate in view of the purpose of the Variable Account
or in view of legal, regulatory or federal income tax
restrictions, LLANY may substitute shares of another Fund.
There will be no substitution of securities in any Variable
Sub-Account without prior approval of the Commission.
VOTING RIGHTS
LLANY will vote the shares of each Fund held in the Variable
Account at special meetings of the shareholders of the
particular Fund in accordance with instructions received by
the Administrative Office in proper written form from
persons having a voting interest in the Variable Account.
LLANY will vote shares for which it has not received
instructions in the same proportion as it votes shares for
which it has received instructions. The Funds do not hold
regular meetings of shareholders.
The number of shares which a person has a right to vote will
be determined as of a date to be chosen by the appropriate
Trust not more than sixty (60) days prior to the meeting of
the particular Fund. Voting instructions will be solicited
by written communication at least fourteen (14) days prior
to the meeting.
The Funds' shares are issued and redeemed only in connection
with variable annuity contracts and variable life insurance
policies issued through separate accounts of LLANY and other
life insurance companies. The Funds do not foresee any
disadvantage to 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 Fund Groups' 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.
FUND PARTICIPATION AGREEMENTS
With respect to a Trust, the adviser and/or the distributor,
or an affiliate thereof, may compensate LLANY (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
Policies along with certain other variable contracts issued
or administered by LLANY (or an affiliate).
CHARGES AND FEES
Charges will be deducted in connection with the Policy to
compensate LLANY for providing the insurance benefit set
forth in the Policy, administering the Policy, assuming
certain risks in connection with the Policy and for
incurring expenses associated with the distribution of the
Policy.
19
<PAGE>
The nature and amount of these charges are as follows:
DEDUCTIONS MADE MONTHLY
There are various expense deductions that are made monthly.
The Monthly Deduction, including the Cost of Insurance
Charge is made from the Net Accumulation Value.
The Monthly Deductions are deducted proportionately from the
value of each underlying investment subject to the charge.
In the case of Variable Sub-Accounts, Variable Accumulation
Units are canceled and the value of the canceled Variable
Accumulation Units is withdrawn in the same proportion as
their respective values have to the Net Accumulation Value.
The Monthly Deductions are made on the Monthly Anniversary
Day starting on the Date of Issue. The "MONTHLY ANNIVERSARY
DAY" under the Policy is the same day of each month as the
Date of Issue, provided that if there is no such date in a
given month, it is the first Valuation Day of the next
month. If the day that would otherwise be a Monthly
Anniversary Day is not a Valuation Day, then the Monthly
Anniversary Day is the next Valuation Day.
If either Insured is still living when the younger Insured
would have attained Age 100 and the Policy has not been
surrendered, no further Monthly Deductions will be made and
the Variable Account Value will be transferred to the Fixed
Account. The Policy will then remain in force until
surrender or the Second Death.
MONTHLY DEDUCTION
There is a flat dollar Monthly Deduction of $12.50 until the
first Policy Anniversary and, currently, $5 thereafter
(guaranteed not to exceed $10). In addition there is a
Monthly Deduction charge of $0.09 per $1000 of Specified
Amount for the first twenty years of the Policy and for the
first twenty years following an increase in Specified
Amount. If the No Lapse Provision is in effect there will
also be a Monthly Deduction of $0.01 per $1000 of Specified
Amount.
These charges compensate LLANY for administrative expenses
associated with Policy issue and ongoing Policy maintenance
including premium billing and collection, policy value
calculation, confirmations, periodic reports and other
similar matters.
COST OF INSURANCE CHARGE
The Cost of Insurance charge depends on the Age,
underwriting category and gender (in accordance with state
law) of both Insureds and the current Net Amount at Risk.
The rate on which the Monthly Deduction for the Cost of
Insurance is based will generally increase as the Insureds
age, although the Cost of Insurance charge could decline if
the Net Amount at Risk drops relatively faster than the Cost
of Insurance Rate increases.
The Cost of Insurance charge is determined by dividing the
Death Benefit at the previous Monthly Anniversary Day by
1.0032737 (the monthly equivalent of an annual rate of 4%),
subtracting the Accumulation Value at the previous Monthly
Anniversary Day, and multiplying the result (the "NET AMOUNT
AT RISK") by the applicable Cost of Insurance Rate as
determined by LLANY. The Guaranteed Maximum Cost of
Insurance Rates, per $1,000 of Net Amount at Risk, for
standard risks are based on the 1980 Commissioners Standard
Ordinary Mortality Tables, Age Nearest Birthday (1980 CSO,
Male or Female); or, for unisex rates, on the 1980 CSO-B
Table.
20
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE AND FUND EXPENSES
EXPENSE DATA
The purpose of the following Table is to assist in the understanding of the
costs and expenses imposed on underlying Funds investments in the Variable
Sub-Accounts. The table reflects expenses of the Variable Account as well as of
the individual Funds underlying the Variable Sub-Accounts. The Mortality and
Expense Risk Charge shown is the currently charged rate of 0.80% per year and is
guaranteed not to exceed 0.90% per year.
FEE TABLE
<TABLE>
<CAPTION>
CIGNA
VARIABLE
PRODUCTS
AIM VARIABLE INSURANCE FUNDS, INC. GROUP
-------------------------------------------- --------
AIM V.L. AIM V.I. CIGNA VP
CAPITAL AIM V.I. DIVERSIFIED MONEY
APPRECIATION AIM V.I. VALUE INCOME MARKET
FUND GROWTH FUND FUND FUND FUND
-------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge....... [0.80%] [0.80%] [0.80%] [0.80%] [0.80%]
Total Separate Account Annual Expenses.. [0.80%] [0.80%] [0.80%] [0.80%] [0.80%]
FUND PORTFOLIO ANNUAL EXPENSES
Management Fees......................... [0.64%] [0.60%] [0.65%] [0.64%] [0.35%]
Other Expenses.......................... [0.09%] [0.26%] [0.13%] [0.09%] [0.15%]
Total Fund Portfolio Annual Expenses.... [0.73%] [0.86%] [0.78%] [0.73%] [0.50%](1)
<CAPTION>
FIDELITY VARIABLE
INSURANCE PRODUCTS
FUNDS
-------------------
VIP II
VIP II VIP I INVESTMENT
CIGNA VP ASSET EQUITY- GRADE
S&P 500 MANAGER INCOME BOND
INDEX FUND PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- -------- --------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge....... [0.80%] [0.80%] [0.80%] [0.80%]
Total Separate Account Annual Expenses.. [0.80%] [0.80%] [0.80%] [0.80%]
FUND PORTFOLIO ANNUAL EXPENSES
Management Fees......................... [0.25%] [0.64%] [0.51%] [0.45%]
Other Expenses.......................... [0.00%] [0.10%] [0.07%] [0.13%]
Total Fund Portfolio Annual Expenses.... [0.25%](1) [0.74%](2) [0.58% [0.58%]
</TABLE>
- ------------------------------
(1) The Funds' investment adviser has voluntarily agreed to waive such portion
of its management fee as is necessary to cause the Total Fund Portfolio
Annual Expenses of the Fund not to exceed .50% of the VP Money Market
Fund's average daily net asset value and .25% of the VP S&P 500 Index
Fund's average daily net asset value. If this is not sufficient to cause
the Total Fund Portfolio Annual Expenses of the VP Money Market Fund and VP
S&P 500 Index Fund not to exceed the applicable percentage of average daily
net asset value, the adviser has agreed to pay such other expenses of those
Funds as is necessary to keep Total Fund Portfolio Annual Expenses from
exceeding the applicable percentage. This arrangement will continue in
effect until May 1, 1998, and afterwards to the extent described in the
Funds' then current prospectus. To the extent management fees are waived by
the adviser, or expenses of a Fund are paid by the adviser, the total
return to shareholders will increase. Total return to shareholders will
decrease to the extent management fees are no longer waived or expenses of
a Fund are no longer paid. Total Fund Portfolio Annual Expenses would have
been 1.53% and 0.64% for VP Money Market and VP S&P 500 Index Fund,
respectively, prior to reimbursement by the adviser.
(2) A portion of the brokerage commissions that certain funds paid 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 0.73% for the VIP II Asset Manager
Portfolio and 0.56% for the VIP Equity-Income Portfolio.
21
<PAGE>
The following table does not reflect the Premium Load or the Monthly Deduction
described at page of this Prospectus. The information set forth should be
considered together with the information provided in this Prospectus under the
heading "Charges and Fees", and in the prospectus for each Fund. All expenses
are expressed as a percentage of the Variable Sub-Account Value.
<TABLE>
<CAPTION>
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TEMPLETON VARIABLE
TRUST PRODUCTS SERIES
- --------------------------------------------- --------------------- FUNDS OCC ACCUMULATION TRUST
MFS TEMPLETON --------- ---------------------------------
EMERGING MFS TOTAL MFS MFS WORLD ASSET TEMPLETON TEMPLETON GLOBAL
GROWTH RETURN UTILITIES GOVERNMENTS ALLOCATION INTERNATIONAL STOCK EQUITY MANAGED SMALL CAP
SERIES SERIES SERIES SERIES FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%]
[0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%] [0.80%]
[0.75%] [0.75%] [0.75%] [0.75%] [0.48%] [0.49%] [0.47%] [0.80%] [0.80%] [0.80%]
[0.25%] [0.25%] [0.25%] [0.25%] [0.18%] [0.22%] [0.19%] [0.45%] [0.14%] [0.20%]
[1.00%](3) [1.00%](3) [1.00%](3) [1.00%](4) [0.66%] [0.71%] [0.66%] [1.25%](5) [0.94%](5) [1.00%](5)
</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, Total Return Series, Utilities Series and World Government Series
would be 0.41%, 1.35%, 2.00% and 1.28% respectively, and "Total Fund
Portfolio Annual Expenses" would be 1.16%, 2.10%, 2.75%, and 2.03%
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) Management Fees and Total Fund Portfolio Annual Expenses have been restated
to reflect the management fee schedule approved by shareholders effective
May 1, 1997. See fund prospectus for details. Actual fees and annual
expenses before May 1, 1997 were lower.
(6) The annual expenses of OCC Accumulation Trust Portfolios (the "Portfolios")
as of December 31, 1996 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,
1998, 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: .80%, 1.04% and 1.84%, respectively, for the Global
Equity Portfolio; .80%, .10% and .90%, respectively, for the Managed
Portfolio; and .80%, .26% and 1.06%, respectively, for the Small Cap
Portfolio.
22
<PAGE>
SURRENDER CHARGES
A generally declining surrender charge ("SURRENDER CHARGE")
will apply during the first fifteen years following the Date
of Issue or the first fifteen years following an increase in
Specified Amount. The Surrender Charge varies by Age of the
Insureds, the number of years since the Date of Issue, and
Specified Amount. The charge is in part a deferred sales
charge and in part a recovery of certain first year
administrative costs. In no event will the Surrender Charge
exceed the maximum allowed by state or federal law. The
Surrender Charge can be seen in Appendix I by subtracting
"Surrender Value" from "Total Accumulation Value" on any
chosen set of investment return assumptions.
If the Specified Amount is increased, a new Surrender Charge
will be applicable, in addition to any existing Surrender
Charge. The Surrender Charge applicable to the increase
would be equal to the Surrender Charge on a new Policy whose
Specified Amount was equal to the amount of the increase.
The minimum allowable increase in Specified Amount is
$1,000. LLANY may change this at any time.
If the Specified Amount is decreased while the Surrender
Charge applies, the Surrender Charge will remain the same.
No Surrender Charge is imposed on a partial surrender, but
an administrative fee of $25 is imposed, allocated pro-rata
among the Sub-Accounts from which the partial surrender
proceeds are taken.
Any surrenders may result in tax implications. SEE TAX
MATTERS
Based on its actuarial determination, LLANY does not
anticipate that the Surrender Charge, together with the
portion of the premium load attributable to sales expense,
will cover all sales and administrative expenses which LLANY
will incur in connection with the Policy. Any such
shortfall, including but not limited to payment of sales and
distribution expenses, would be available for recovery from
the General Account of LLANY, which supports insurance and
annuity obligations.
TRANSACTION FEE FOR EXCESS TRANSFERS
LLANY reserves the right to impose a charge for each
transfer request in excess of 12 in any Policy Year. A
single transfer request may consist of multiple
transactions.
DEATH BENEFITS
The applicant must select the Specified Amount of the Death
Benefit, which may not be less than $250,000 and the Death
Benefit Option. The two Death Benefit Options are described
below. The applicant must consider a number of factors in
selecting the Specified Amount, including the amount of
proceeds required on the Second Death and the Owner's
ability to make Premium Payments. In evaluating this
decision, the applicant should consider that the greater the
Net Amount at Risk, the greater the monthly deductions for
the Cost of Insurance.
DEATH BENEFIT OPTIONS
Two different Death Benefit Options are available under the
Policy. The amount payable under the Policy is the greater
of (a) the Corridor Death Benefit or (b) the amount
determined under the Death Benefit Option in effect on the
date of the Second Death, less (in each case) any
indebtedness under the Policy. In the case of Death Benefit
Option 1, the Specified Amount is reduced by the amount of
any partial surrender. The "CORRIDOR DEATH BENEFIT" is the
applicable percentage (the "CORRIDOR PERCENTAGE") of the
Accumulation Value required to maintain the Policy as a
"life insurance contract" for Federal income tax purposes.
The Corridor Percentage is 250% through the time the
23
<PAGE>
younger Insured reaches or would have reached Age 40 and
decreases in accordance with the table at page 25 of this
Prospectus to 100% when the younger Insured reaches or would
have reached Age 95.
Death Benefit Option 1 provides Death Benefit Proceeds equal
to the Specified Amount (a minimum of $250,000). If Option 1
is selected, the Policy pays level Death Benefit Proceeds
until the Minimum Death Benefit exceeds the Specified
Amount. (See DEATH BENEFITS, FEDERAL INCOME TAX DEFINITION
OF LIFE INSURANCE).
Death Benefit Option 2 provides Death Benefit Proceeds equal
to the sum of the Specified Amount plus the Accumulation
Value as of the Valuation Day immediately after receipt by
LLANY of Due Proof of the Second Death. If Option 2 is
selected, the Death Benefit Proceeds increase or decrease
over time, depending on the amount of premium paid and the
investment performance of the underlying Sub-Accounts.
If for any reason the applicant fails to affirmatively elect
a particular Death Benefit Option, Death Benefit Option 1
shall apply until changed as provided below. The ability of
the Owner to support the Policy is an important factor in
selecting between the Death Benefit Options, because the
greater the Net Amount at Risk at any time, the more that
will be deducted from the value of the Policy to pay the
Cost of Insurance.
Owners who prefer insurance coverage that generally does not
vary in amount and generally has lower Cost of Insurance
Charges should elect Option 1. Owners who prefer to have
favorable investment experience reflected in increased
insurance coverage should select Option 2. Under Option 1,
any Surrender Value at the time of the Second Death will
revert to LLANY.
CHANGES IN DEATH BENEFIT OPTIONS AND SPECIFIED AMOUNT
All requests for changes between Death Benefit Options and
changes in the Specified Amount must be submitted in proper
written form to the Administrative Office. The minimum
amount of increase in Specified Amount currently permitted
is $1,000. If requested, a supplemental application and
evidence of insurability must also be submitted to LLANY.
In a change from Death Benefit Option 1 to Death Benefit
Option 2, the Specified Amount shall be reduced so it
thereafter equals (a) the amount payable under the Death
Benefit Option in effect immediately before the change,
minus (b) the Accumulation Value immediately before the
change. In a change from Death Benefit Option 2 to Death
Benefit Option 1, the Specified Amount shall be increased so
that it thereafter equals the amount payable under the Death
Benefit Option in effect immediately before the change.
Any reductions in Specified Amount will be made against the
initial Specified Amount and any later increase in the
Specified Amount on a last in, first out basis. Any increase
in the Specified Amount will increase the amount of the
Surrender Charge applicable to the Policy.
LLANY may at its discretion decline any request for a change
between Death Benefit Options or increase in the Specified
Amount. LLANY may at its discretion decline any request for
change of the Death Benefit Option or reduction of the
Specified Amount if, after the change, the Specified Amount
would be less than the minimum Specified Amount or would
reduce the Specified Amount below the level required to
maintain the Policy as life insurance for purposes of
Federal income tax law.
Any change is effective on the first Monthly Anniversary Day
on or after the date of approval of the request by LLANY,
unless the Monthly Deduction Amount would increase
24
<PAGE>
as a result of the change. In that case, the change is
effective on the first Monthly Anniversary Day on which the
Accumulation Value is equal to or greater than the Monthly
Deduction Amount, as increased.
FEDERAL INCOME TAX DEFINITION OF LIFE INSURANCE
The amount of the Death Benefit must satisfy certain
requirements under the Code if the policy is to qualify as
insurance for federal income tax purposes. The amount of the
Death Benefit Proceeds required to be paid under the Code to
maintain the Policy as life insurance under each of the
Death Benefit Options (see INSURANCE COVERAGE PROVISIONS,
DEATH BENEFIT) is equal to the product of the Accumulation
Value and the applicable Corridor Percentage set forth
below.
<TABLE>
<CAPTION>
ATTAINED AGE OF THE
YOUNGER INSURED
(NEAREST BIRTHDAY) CORRIDOR PERCENTAGE
- ------------------- ---------------------
<S> <C>
0-40 250
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
<CAPTION>
ATTAINED AGE OF THE
YOUNGER INSURED
(NEAREST BIRTHDAY) CORRIDOR PERCENTAGE
- ------------------- ---------------------
<S> <C>
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75-90 105
91 104
92 103
93 102
94 101
95-99 100
</TABLE>
NOTICE OF DEATH OF INSUREDS
Due Proof of Death must be furnished to LLANY at the
Administrative Office as soon as reasonably practicable
after the death of each Insured. "DUE PROOF OF DEATH" must
be in proper written form and includes a certified copy of
an official death certificate, a 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 LLANY.
PAYMENT OF DEATH BENEFIT PROCEEDS
The Death Benefit Proceeds under the Policy will ordinarily
be paid within seven days, if in a lump sum, or in
accordance with any Settlement Option selected by the Owner
or the Beneficiary after receipt at the Administrative
Office of Due Proof of Death of both Insureds. SEE
SETTLEMENT OPTIONS. The amount of the Death Benefit Proceeds
under Option 2 will be determined as of the date of the
Second Death. Payment of the Death Benefit Proceeds may be
delayed if the Policy is contested or if Variable Account
values cannot be determined.
25
<PAGE>
The Owner may elect a Settlement Option before the Second
Death; after the Second Death, if the Owner has not
irrevocably selected a Settlement Option, the Beneficiary
may elect one of the Settlement Options. If no Settlement
Option is selected, the Death Benefit Proceeds will be paid
in a lump sum.
If the Policy is assigned as collateral security, LLANY will
pay any amount due the assignee in one lump sum. Any
remaining Death Benefit Proceeds will be paid as elected.
SETTLEMENT OPTIONS
If an Insured is living, the Owner may elect a Settlement
Option and may revoke or change a prior election. The
Beneficiary may make or change an election within 90 days of
the Second Death of the Insured, unless the Owner's election
was stated to be irrevocable.
A request to elect, change, or revoke a Settlement Option
must be received in proper written form by the
Administrative Office before payment of the lump sum or
under any Settlement Option. The first payment under the
Settlement Option selected will become payable on the date
proceeds are settled under the option. Payments after the
first payment will be made on the first day of each month.
Once payments have begun, the Policy cannot be surrendered
and neither the payee nor the Settlement Option may be
changed.
There are at least four Settlement Options:
The first Settlement Option is an annuity for the
lifetime of the payee.
The second Settlement Option is an annuity for the
lifetime of the payee, with monthly payments guaranteed
for 60, 120, 180, or 240 months.
Under the third Settlement Option, LLANY makes monthly
payments for a stated number of years, at least five but
no more than thirty.
The fourth Settlement Option, provides that LLANY pays
interest annually on the sum left with LLANY at a rate
of at least 3% per year, and pays the amount on deposit
on the payee's death.
Any other Settlement Option offered by LLANY at the time of
election may also be selected.
POLICY LIQUIDITY
The Policy provides only limited liquidity. Subject to
certain limitations, however, the Owner may borrow against
the Surrender Value of the Policy, may make a partial
surrender of some of the Surrender Value of the Policy and
may fully surrender the Policy for its Surrender Value.
POLICY LOANS
The Owner may at any time contract for Policy Loans up to an
aggregate amount not to exceed 90% of the Surrender Value at
the time a Policy Loan is made. It is a condition to
securing a Policy Loan that the Owner execute a loan
agreement and that the Policy be assigned to LLANY free of
any other assignments. Interest on Policy Loans accrues at
an annual rate of 8%, and loan interest is payable to LLANY
(for its account) once a year in arrears on each Policy
Anniversary, or earlier upon full surrender or other payment
of proceeds of a Policy.
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<PAGE>
The amount of a loan, plus any accrued but unpaid interest,
is added to the outstanding Policy Loan balance. Unless paid
in advance, any loan interest due will be transferred from
the values in each Fixed and Variable Sub-Account, and
treated as an additional Policy Loan, and added to the Loan
Account Value.
During the first ten Policy Years, LLANY's current practice
is to credit interest to the Loan Account Value at an annual
rate equal to the interest rate charged on the loan minus 1%
(guaranteed not to exceed 2%). Beginning with the eleventh
Policy Year, LLANY's current practice is to credit interest
at an annual rate equal to the interest rate charged on the
loan, less 0% annually (guaranteed not to exceed 1%). In no
case will the annual credited interest rate be less than 6%
in each of the first ten Policy Years and 7% thereafter.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, transfers from each for loans and
loan interest will be made in proportion to the assets in
each Sub-Account at that time, unless LLANY is instructed
otherwise in proper written form at the Administrative
Office. Repayments on the loan and interest credited on the
Loan Account Value will be allocated according to the most
recent Premium Payment allocation at the time of the
repayment.
A Policy Loan, whether or not repaid, affects the proceeds
payable upon the Second Death and the Accumulation Value.
The longer a Policy Loan is outstanding, the greater the
effect is likely to be. While an outstanding Policy Loan
reduces the amount of assets invested, depending on the
investment results of the Sub-Accounts, the effect could be
favorable or unfavorable. LLANY may at its discretion
decline any request for a Policy Loan.
If at any time the total indebtedness against the Policy,
including interest accrued but not due, equals or exceeds
the then current Accumulation Value less Surrender Charges,
the Policy will terminate without value subject to the
conditions in the Grace Period Provision, unless the No
Lapse Provision is in effect. (SEE LAPSE AND REINSTATEMENT,
LAPSE OF A POLICY)
If a Policy lapses while a loan is outstanding, adverse tax
consequences may result.
PARTIAL SURRENDER
A partial surrender may be made at any time before the
Second Death by request to the Administrative Office in
proper written form or by telephone, if telephone
transactions have been authorized by the Owner. A $25
transaction fee is charged for each partial surrender. Total
partial surrenders may not exceed 90% of the Surrender Value
of the Policy. Each partial surrender may not be less than
$500. Partial surrenders are subject to other limitations as
described below.
Partial surrenders may reduce the Specified Amount and, in
each case, reduce the Death Benefit Proceeds. To the extent
that a requested partial surrender would cause the Specified
Amount to be less than $250,000, the partial surrender will
not be permitted by LLANY. In addition, if following a
partial surrender and the corresponding decrease in the
Specified Amount, the Policy would not comply with the
maximum premium limitations required by federal tax law, the
surrender may be limited to the extent necessary to meet the
federal tax law requirements.
The effect of partial surrenders on the Death Benefit
Proceeds depends on the Death Benefit Option elected under
the Policy. If Death Benefit Option 1 has been elected, a
partial surrender would reduce the Accumulation Value and
the Specified Amount. The reduction in the Specified Amount,
which would reduce any past increases on a last in, first
out basis, reduces the amount of the Death Benefit Proceeds.
27
<PAGE>
If Death Benefit Option 2 has been elected, a partial
surrender would reduce the Accumulation Value, but would not
reduce the Specified Amount. The reduction in the
Accumulation Value reduces the amount of the Death Benefit
Proceeds.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, surrenders from each will be made
in proportion to the assets in each Sub-Account at the time
of the surrender, unless LLANY is instructed otherwise in
proper written form at the Administrative Office. LLANY may
at its discretion decline any request for a partial
surrender.
SURRENDER OF THE POLICY
The Owner may surrender the Policy at any time. On surrender
of the Policy, LLANY will pay to the Owner, or assignee, the
Surrender Value next computed after receipt of the request
in proper written form at the Administrative Office. Payment
of any amount from the Variable Account on a full surrender
will usually be made within seven calendar days thereafter.
All coverage under the Policy will automatically terminate
if the Owner makes a full surrender.
SURRENDER VALUE
The "SURRENDER VALUE" of a Policy is the amount the Owner
can receive in a lump sum by surrendering the Policy. The
Surrender Value is the Net Accumulation Value less the
Surrender Charge (SEE CHARGES AND FEES, SURRENDER CHARGE).
All or part of the Surrender Value may be applied to one or
more of the Settlement Options. Surrender Values are
illustrated in the Appendix.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of loans or of the Surrender Value from any Variable
Sub-Accounts will be made within 7 days. Payment or transfer
from the Fixed Account may be deferred up to six months at
LLANY's option. If LLANY exercises its right to defer any
payment from the Fixed Account, interest will accrue and be
paid as required by law from the date the recipient would
otherwise have been entitled to receive the payment.
ASSIGNMENT; CHANGE OF OWNERSHIP
While either Insured is living, the Owner may assign the
Owner's rights in the Policy, including the right to change
the beneficiary designation. The assignment must be in
proper written form, signed by the Owner and recorded at the
Administrative Office. No assignment will affect, or
prejudice LLANY as to, any payment made or action taken by
LLANY before it was recorded. LLANY is not responsible for
any assignment not submitted for recording, nor is LLANY
responsible for the sufficiency or validity of any
assignment. Any assignment is subject to any indebtedness
owed to LLANY at the time the assignment is recorded and any
interest accrued on such indebtedness after recordation of
any assignment.
Once recorded, the assignment remains effective until
released by the assignee in proper written form. So long as
an effective assignment remains outstanding, the Owner will
not be permitted to take any action with respect to the
Policy without the consent of the assignee in proper written
form.
So long as either Insured is living, the Owner may name a
new Owner by recording a change in ownership in proper
written form at the Administrative Office. On recordation,
the change will be effective as of the date of execution of
the document of transfer or, if there is no such date, the
date of recordation. No such change of ownership will
affect,
28
<PAGE>
or prejudice LLANY as to, any payment made or action taken
by LLANY before it was recorded. LLANY may require that the
Policy be submitted to it for endorsement before making a
change.
LAPSE AND REINSTATEMENT
LAPSE OF A POLICY
Except as provided by the No Lapse Provision, if at any time
the Net Accumulation Value is insufficient to pay the
Monthly Deduction, the Policy is subject to lapse and
automatic termination of all coverage under the Policy. The
Net Accumulation Value may be insufficient (1) because it
has been exhausted by earlier deductions, (2) due to poor
investment performance, (3) due to partial surrenders, (4)
due to indebtedness for Policy Loans, or (5) because of some
combination of the foregoing factors. If LLANY has not
received a Premium Payment or payment of indebtedness on
Policy Loans necessary so that the Net Accumulation Value is
sufficient to pay the Monthly Deduction Amount on a Monthly
Anniversary Day, LLANY will send a written notice to the
Owner and any assignee of record. The notice will state the
amount of the Premium Payment or payment of indebtedness on
Policy Loans necessary such that the Net Accumulation Value
is at least equal to two times the Monthly Deduction Amount.
If the minimum required amount set forth in the notice are
not paid to LLANY on or before the day that is the later of
(a) 31 days after the date of mailing of the notice, and (b)
61 days after the date of the Monthly Anniversary Day with
respect to which such notice was sent (together, the "GRACE
PERIOD"), then the policy shall terminate and all coverage
under the policy shall lapse without value. If the Second
Death occurs during the Grace Period, Death Benefit Proceeds
will be paid, but will be reduced, in addition to any other
reductions, by any unpaid Monthly Deductions. If the Second
Death occurs after the Policy has lapsed, no Death Benefit
Proceeds will be paid.
NO LAPSE PROVISION
The applicant may elect the NO LAPSE PROVISION at issue of
the Policy. If this provision is elected and if at each
Monthly Anniversary Day the sum of all Premium Payments less
any policy loans (including any accrued loan interest) and
partial surrenders is at least equal to the sum of the No
Lapse Premiums (as indicated in the Policy Specifications)
due since the Date of Issue of the Policy, the Policy will
not lapse. A Grace Period will be allotted after each
Monthly Anniversary Day on which insufficient premiums have
been paid (see preceding paragraph).
The No Lapse Provision will be terminated if the Owner fails
to meet the premium requirements, if there is an increase in
Specified Amount or if the Owner changes the Death Benefit
Option. Once the No Lapse Provision is terminated, it cannot
be reinstated.
REINSTATEMENT OF A LAPSED POLICY
After the policy has lapsed due to the failure to make a
necessary payment before the end of an applicable Grace
Period, the policy may be reinstated provided (a) the policy
has not been surrendered, (b) there is an application for
reinstatement in proper written form, (c) evidence of
insurability of both insureds is furnished to LLANY and it
agrees to accept the risk, (d) LLANY receives a payment
sufficient to keep the Policy in force for at least two
months, and (e) any accrued loan interest is paid. The
effective date of the reinstated policy shall be the Monthly
Anniversary Day after the date on which LLANY approves the
application for reinstatement. Surrender Charges will be
reinstated as of the Policy Year in which the Policy lapsed.
29
<PAGE>
If the Policy is reinstated, such reinstatement is effective
on the Monthly Anniversary Day following LLANY approval. The
Accumulation Value at reinstatement will be the Net Premium
Payment then made less the Monthly Deduction due that day.
If the Surrender Value is not sufficient to cover the full
Surrender Charge at the time of lapse, the remaining portion
of the Surrender Charge will also be reinstated at the time
of Policy reinstatement.
COMMUNICATIONS WITH LLANY
PROPER WRITTEN FORM
When ever this Prospectus refers to a communication "IN
PROPER WRITTEN FORM," it means a writing, in form and
substance reasonably satisfactory to LLANY, received at the
Administrative Office.
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only when both
Insureds are at least age 18 but are less than Age 80.
DATE OF COVERAGE
The date of coverage will be the Date of Issue, provided
both Insureds are alive and prior to any change in the
health and insurability of the Insureds as represented in
the application.
RIGHT TO EXCHANGE THE POLICY
The Owner may during the first two years following the
issuance of the Policy exchange the Policy for a
substantially comparable flexible premium fixed benefit
adjustable life insurance policy then being offered by
LLANY. No evidence of insurability will be required.
The Owner, the Insured and the Beneficiary under the new
policy will be the same as those under the exchanged Policy
on the date of the exchange. The Accumulation Value under
the new Policy will be equal to the Accumulation Value under
the old Policy on the date the exchange request is received.
The new policy will have a Death Benefit on the exchange
date not more than the Death Benefit of the original Policy
immediately prior to the exchange date. If the Accumulation
Value is insufficient to support the Death Benefit, the
Owner will be required to make additional Premium Payments
in order to effect the exchange. The new Policy will have a
Date of Issue and issue Ages as of the date of exchange. The
initial Specified Amount and any increases in Specified
Amount will have the same rate class as those of the
original Policy. Any indebtedness may be transferred to the
new policy.
The exchange may be subject to an equitable adjustment in
rates and values to reflect variances, if any, in the rates
and values between the two Policies. After adjustment, if
any excess is owed the Owner, LLANY will pay the excess to
the Owner in cash. The exchange may be subject to federal
income tax withholding.
If at any time while both Insureds are alive, a change in
the Internal Revenue Code would result in a less favorable
tax treatment of the Insurance provided under the policy or
if the Insureds are legally divorced while the policy is in
force, the Owner may exchange the policy for separate single
life policies on each of the Insureds subject to the
following conditions: (a) evidence of insurability
satisfactory to LLANY is furnished,
30
<PAGE>
(b) the amount of insurance of each new Policy is not larger
than one half of the amount of insurance then in force under
the policy, (c) the premium for each new policy is
determined according to LLANY's rates then in effect for
that policy based on each Insured's then attained age and
sex, and (d) any other requirements as determined by LLANY
are met. The new policy will not take effect until the date
all such requirements are met.
PAID-UP INSURANCE OPTION
At any time, the Owner may transfer all of the Variable
Account value to the Fixed Account and then surrender the
Policy for reduced guaranteed non-participating paid-up
insurance, to which no monthly administrative fees would
apply.
INCONTESTABILITY
LLANY will not contest payment of the Death Benefit Proceeds
based on the initial Specified Amount after the Policy has
been in force for two years from the Date of Issue so long
as both Insureds were alive during those two years. For any
increase in Specified Amount requiring evidence of
insurability, LLANY will not contest payment of the Death
Benefit Proceeds based on such an increase after it has been
in force for two years from its effective date so long as
both Insureds were alive during those two years.
MISSTATEMENT OF AGE OR GENDER
If the Age or gender of either of the Insureds has been
misstated, the affected benefits will be adjusted. The
amount of the Death Benefit Proceeds will be 1. multiplied
by 2. and then the result added to 3. where:
1. is the Net Amount at Risk at the time of the Second
Death;
2. is the ratio of the monthly Cost of Insurance applied
in the Policy month of death to the monthly Cost of
Insurance that should have been applied at the true
Age and gender in the Policy month of death; and
3. is the Accumulation Value at the time of the Second
Death.
SUICIDE
If the Second Death is by suicide, while sane or insane,
within two years from the Date of Issue, LLANY will upon the
Second Death pay no more than the sum of the premiums paid,
less any indebtedness and the amount of any partial
surrenders. If the Second Death is by suicide, while sane or
insane, within two years from the date an application is
accepted for an increase in the Specified Amount, LLANY will
upon the Second Death pay no more than a refund of the
monthly charges for the cost of such additional benefit.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of LLANY.
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<PAGE>
TAX ISSUES
Section 7702 of the Code provides that if certain tests are
met, a Policy will be treated as a life insurance policy for
federal tax purposes. LLANY will monitor compliance with
these tests. The Policy should thus receive the same federal
income tax treatment as fixed benefit life insurance.
TAX TREATMENT OF DEATH BENEFIT
The death proceeds payable under a Policy are excludable
from gross income of the Beneficiary under Section 101 of
the Code.
FEDERAL INCOME TAX CONSIDERATIONS
Section 7702A of the Code defines modified endowment
contracts as those policies issued or materially changed on
or after June 21, 1988 on which the total premiums paid
during the first seven years exceed the amount that would
have been paid if the policy provided for paid up benefits
after seven level annual premiums. The Code provides for
taxation of surrenders, partial surrenders, loans,
collateral assignments and other pre-death distributions
from modified endowment contracts in the same way annuities
are taxed. Modified endowment contract distributions are
defined by the Code as amounts not received as an annuity
and are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into
the policy. A 10% tax penalty generally applies to the
taxable portion of such distributions unless the Owner is
over 59 1/2 years of Age or disabled.
The Policies offered by this Prospectus may or may not be
issued as modified endowment contracts. LLANY will monitor
premiums paid and will notify the Owner when the Policy is
in jeopardy of becoming a modified endowment contract. If a
Policy is not a modified endowment contract, a cash
distribution during the first 15 years after a Policy is
issued which causes a reduction in death benefits may still
become fully or partially taxable to the Owner pursuant to
Section 7702(f)(7) of the Code. The Owner should carefully
consider this potential effect and seek further information
before initiating any changes in the terms of the Policy.
Under certain conditions, a Policy may become a modified
endowment contract as a result of a material change or a
reduction in benefits as defined by Section 7702A(c) of the
Code. LLANY will monitor compliance with these tests.
In addition to meeting the tests required under Section 7702
and Section 7702A, Section 817(h) of the Code requires that
the investments of separate accounts such as the Variable
Account be adequately diversified. Regulations issued by the
Secretary of the Treasury set the standards for measuring
the adequacy of this diversification. A variable life
insurance policy that is not adequately diversified under
these regulations would not be treated as life insurance
under Section 7702 of the Code. To be adequately
diversified, each Variable Sub-Account must meet certain
tests. LLANY believes the Variable Account investments meet
the applicable diversification standards.
Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of funds, transfers
between funds, exchanges of funds or changes in investment
objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code,
LLANY reserves the right to steps required to remain in
compliance.
LLANY will monitor compliance with these regulations and, to
the extent necessary, will change the objectives or assets
of the Variable Sub-Account investments to remain in
32
<PAGE>
compliance. LLANY also reserves the right to make changes in
this Policy or to make distributions from the Policy to the
extent it deems necessary, in its sole discretion, to
continue to qualify this Policy as life insurance.
A total surrender or termination of the Policy by lapse may
have adverse tax consequences. If the amount received by the
Owner plus total Policy indebtedness exceeds the premiums
paid into the Policy, the excess will generally be treated
as taxable income, whether or not the Policy is a modified
endowment contract.
Federal estate and state and local estate, inheritance and
other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Owner or
Beneficiary.
TAXATION OF LLANY
LLANY is taxed as a life insurance company under the Code.
Since the Variable Account is not a separate entity from
LLANY and its operations form a part of LLANY, it will not
be taxed separately as a "regulated investment company"
under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Separate Account
are reinvested and taken into account in determining the
value of Variable Accumulation Units.
LLANY does not initially expect to incur any Federal income
tax liability that would be chargeable to the Variable
Account. Based upon these expectations, no charge is
currently being made against the Variable Account for
federal income taxes. If, however, LLANY determines that on
a separate company basis such taxes may be incurred, it
reserves the right to assess a charge for such taxes against
the Variable Account.
LLANY may also incur state and local taxes in addition to
premium taxes in several states. At present, these taxes are
not significant. If they increase, however, additional
charges for such taxes may be made.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as
tax advice. Counsel and other competent advisers should be
consulted for more complete information. This discussion is
based on LLANY's understanding of Federal income tax laws as
they are currently interpreted by the Internal Revenue
Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations.
FAIR VALUE OF THE POLICY
It is sometime necessary for tax and other reasons to
determine the "fair value" of the Policy. The fair value of
the Policy is measured differently for different purposes.
It is not necessarily the same as the Accumulation Value or
the Net Accumulation Value, although the amount of the Net
Accumulation Value will typically be important in valuing
the Policy for this purpose. For some but not all purposes,
the fair value of the Policy may be the Surrender Value of
the Policy. The fair value of the Policy may be impacted by
developments other than the performance of the underlying
investments. For example, without regard to any other
factor, it increases as the Insureds grow older. Moreover,
on the death of the first of the Insureds to die, it tends
to increase significantly. The Owner should consult with his
or her advisors for guidance as to the appropriate
methodology for determining the fair value of the Policy for
a particular purpose.
33
<PAGE>
DIRECTORS AND OFFICERS OF LLANY
The following persons are Directors and Officers of LLANY.
<TABLE>
<CAPTION>
NAME, ADDRESS AND POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
<S> <C>
- ----------------------------------------------------------------------------------------
ROLAND C. BAKER President [1/95-present], First Penn-Pacific Life
DIRECTOR Insurance Co. Formerly: Chairman and CEO
1801 S. Meyers Road [7/88-1/95], Baker, Ralish, Shipley & Politzer, Inc.
Oakbrook Terrace, Ill. 60181
J. PATRICK BARRETT President [12/94-present], BGS Leasing Group, Ltd.;
DIRECTOR Chief Executive Officer [1/93-present], Syracuse
4605 Watergap Executive Air Service, Inc. Formerly: Chief
Manlius, NY 13104 Executive Officer [8/81-9/87] and Chairman
[7/83-9/87], Avis, Inc.
DAVID N. BECKER Vice President [1/90-present], The Lincoln National
SECOND VICE PRESIDENT AND Life Insurance Company
APPOINTED ACTUARY
1300 South Clinton Street
Fort Wayne, Ind. 46802
THOMAS D. BELL, JR. President and Chief Executive Officer
DIRECTOR [4/95-present], Burson-Marstellar. Formerly: Vice
230 Park Avenue, South Chairman [4/94-4/95], Gulfstream Aerospace Corp.;
New York, NY 10003 Vice Chairman and Chief Executive Officer
[1/89-1/94], Burson-Marstellar
JON A. BOSCIA President and Chief Executive Officer
DIRECTOR [10/96-present] (formerly Chief Operating Officer
1300 South Clinton Street [5/94-10/96]), Lincoln National Life Insurance Co.
Fort Wayne, Ind. 46802 Formerly: President [7/91-5/94] Lincoln Investment
Management Inc.
PHILIP L. HOLSTEIN President, Lincoln Life & Annuity Company of New
PRESIDENT AND DIRECTOR York [7/96-Present] Formerly: President, [1/82-7/96]
120 Madison Street, Suite 1700 The Holstein Company, Inc.
Syracuse, NY 13202
HARRY L. KAVETAS Executive Vice President and Chief Financial Officer
DIRECTOR [2/94-present], Eastman Kodak Company. Formerly:
343 State Street Vice President [9/61-12/93], IBM Corp.
Rochester, NY 14650-0235
BARBARA S. KOWALCZYK Senior Vice-President Corporation Planning
DIRECTOR [1/94-present], Lincoln National Corp.; Formerly:
200 East Berry Street Senior Vice President [1/77-1/94], Lincoln National
Fort Wayne, Ind. 46802 Investment Management Co.
MARGEURITE L. LACHMAN Managing Director
DIRECTOR [4/87-present], Schroder Real Estate Associates
437 Madison Avenue, 18th Floor
New York, NY 10022
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- ----------------------------------------------------------------------------------------
<S> <C>
LOUIS G. MARCOCCIA Officer [1/75-present], Syracuse University
DIRECTOR
Skytop Office Building
Skytop Road
Syracuse, NY 13244-5300
TROY D. PANNING Second Vice President and Chief Financial Officer
SECOND VICE PRESIDENT AND [11/96-present] Formerly: Manager [9/90-11/96],
CHIEF FINANCIAL OFFICER Ernst & Young LLP
120 Madison Street, Suite 1700
Syracuse, New York 13202
JOHN M. PIETRUSKI Chairman of Board
DIRECTOR [1/89-present], Texas Biotechnology Corp.
One Penn Plaza
Suite 3408
New York, NY 10119
LAWRENCE T. ROWLAND Executive Vice President [10/96-present] (formerly
DIRECTOR Senior Vice President One Reinsurance [1/93-10/96],
Place Vice President [10/91-1/93]), Lincoln National Life
1700 Magnavox Way Insurance Co.
Fort Wayne, Ind. 46804
JOHN L. STEINKAMP Vice President and Associate General Counsel
DIRECTOR [8/77-present], Lincoln National Corp.
200 East Berry Street
Fort Wayne, Ind. 46802
RICHARD C. VAUGHAN Executive Vice President and Chief Financial Officer
DIRECTOR [1/95-present] (formerly Senior Vice President
200 East Berry Street [6/92-1/95], Lincoln National Corp.
Fort Wayne, Ind. 46802
</TABLE>
DISTRIBUTION OF POLICIES
LLANY intends to offer the Policy in New York. Lincoln
Financial Advisors, Inc. ("LFA"), the principal underwriter
for the Policies, is registered with the Securities and
Exchange Commission under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National
Association of Securities Dealers ("NASD"). The principal
underwriter, LFA, will be offering the Policies and
performing all duties and functions necessary and prepare
for the distribution of the Policies. The principal business
address of LFA is 3811 Illinois Road, Suite 205, Fort Wayne,
IN 46804.
The Policy will be sold by individuals, who in addition to
being licensed as life insurance agents for LLANY, are also
registered representatives of The Lincoln National Life
Insurance Company. These representatives ordinarily receive
commission and services fee up to [000.0%] of the first year
premium, plus up to [0.000%] of all other premiums paid,
plus [0.00%] of Accumulation Value in the second policy year
and each year thereafter. The local agency receives
additional compensation on the first year premium and all
additional premiums, plus a small percentage of accumulated
policy values. In some situations, the local agency may
elect to share its commission with the registered
representative. Selling representatives are also eligible
for bonuses and non-cash compensation if certain production
levels are reached. All compensation is paid from LLANY's
resources, which include sales charges made under this
Policy.
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<PAGE>
CHANGES OF INVESTMENT POLICY
LLANY may materially change the investment policy of the
Variable Account. LLANY must inform the Owners and obtain
all necessary regulatory approvals. Any change must be
submitted to the New York Department of Insurance, which
shall disapprove it if deemed detrimental to the interests
of the Owners or if it renders LLANY's operations hazardous
to the public. If an Owner objects, the Policy may be
converted to a substantially comparable fixed benefit life
insurance policy then being offered by LLANY on the life of
the Insured. The Owner has the later of 60 days from the
date of the investment policy change or 60 days from being
informed of such change to make this conversion. LLANY will
not require evidence of insurability for this conversion.
The new policy will not be affected by the investment
experience of any separate account. The new policy will be
for an amount of insurance not exceeding the Death Benefit
of the Policy converted on the date of such conversion.
OTHER CONTRACTS ISSUED BY LLANY
LLANY from time to time offers other variable annuity
contracts and variable life insurance policies with benefits
which vary in accordance with the investment experience of a
separate account of LLANY.
STATE REGULATION
LLANY is subject to the laws of New York governing insurance
companies and to regulation by the New York Insurance
Department. An annual statement in a prescribed form is
filed with the Insurance Department each year covering the
operation of LLANY for the preceding year and its financial
condition as of the end of such year. Regulation by the
Insurance Department includes periodic examination to
determine LLANY's contract liabilities and reserves so that
the Insurance Department may certify the items are correct.
LLANY's books and accounts are subject to review by the
Insurance Department at all times and a full examination of
its operations is conducted periodically by the New York
Department of Insurance. Such regulation does not, however,
involve any supervision of management or investment
practices or policies.
A blanket bond with a per event limit of $25 million and an
annual policy aggregate limit of $50 million covers all of
the officers and employees of the Company.
REPORTS TO OWNERS
LLANY maintains Policy records and will mail to each Owner,
at the last known address of record, an annual statement
showing the amount of the current Death Benefit, the
Accumulation Value, and Surrender Value, premiums paid and
monthly charges deducted since the last report, the amounts
invested in each Sub-Account and any Loan Account Value, and
any other information required by the New York
Superintendent of Insurance.
Owners will also be sent annual reports containing financial
statements for the Variable Account and annual and
semi-annual reports of the Funds as required by the 1940
Act.
In addition, Owners will receive statements of significant
transactions, such as changes in Specified Amount, changes
in Death Benefit Option, transfers among Sub-Accounts,
Premium Payments, loans, loan repayments, reinstatement and
termination.
ADVERTISING
LLANY is also ranked and rated by independent financial
rating services, including Moody's, Standard & Poor's, Duff
& Phelps and A.M. Best Company. The purpose of
36
<PAGE>
these ratings is to reflect the financial strength or
claims-paying ability of LLANY. The ratings are not intended
to reflect the investment experience or financial strength
of the Separate Account. LLANY may advertise these ratings
from time to time. In addition, LLANY may include in certain
advertisements, endorsements in the form of a list of
organizations, individuals or other parties which recommend
LLANY or the Policies. Furthermore, LLANY may occasionally
include in advertisements comparisons of currently taxable
and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles
and general economic conditions.
LEGAL PROCEEDINGS
[TO BE FILED BY AMENDMENT]
EXPERTS
[TO BE FILED BY AMENDMENT]
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, with respect to the Policies offered hereby. This
Prospectus does not contain all the information set forth in
the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference
is hereby made for further information concerning the
Variable Account, LLANY, and the Policies offered hereby.
Statements contained in this Prospectus as to the content of
Policies and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made
to such instruments as filed.
FINANCIAL STATEMENTS
[TO BE FILED BY AMENDMENT.]
37
<PAGE>
APPENDIX 1
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES, AND
DEATH BENEFIT PROCEEDS
The illustrations in this Prospectus have been prepared to
help show how values under the Policies change with
investment performance. The illustrations illustrate how
Accumulation Values, Surrender Values and Death Benefit
Proceeds under a Policy would vary over time if the
hypothetical gross investment rates of return were a uniform
annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%,
6%, or 12% over a period of years, but fluctuates above or
below those averages for individual years, the Accumulation
Values, Surrender Values and Death Benefit Proceeds may be
different. The illustrations also assume there are no Policy
Loans or Partial Surrenders, no additional Premium Payments
are made other than shown, no Accumulation Values are
allocated to the Fixed Account, and there are no changes in
the Specified Amount or Death Benefit Option, and that the
No-Lapse Provision is not selected.
The amounts shown for the Accumulation Value, Surrender
Value and Death Benefit Proceeds as of each Policy
Anniversary reflect the fact that the net investment return
on the assets held in the Sub-Accounts is lower than the
gross return. This is due to the daily charges made against
the assets of the Sub-Accounts for assuming mortality and
expense risks. The current mortality and expense risk
charges are equivalent to an annual effective rate of 0.80%
of the daily net asset value of the Variable Account. The
mortality and expense risk charge is guaranteed never to
exceed an annual effective rate of 0.90%. In addition, the
net investment returns also reflect the deduction of Fund
investment advisory fees and other expenses which will vary
depending on which funding vehicle is chosen but which are
assumed for purposes of these illustrations to be equivalent
to an annual effective rate of 0.80% of the daily net asset
value of the Variable Account.
Considering current charges for mortality and expense risks
and the assumed Fund expenses, gross annual rates of return
of 0%, 6%, and 12% correspond to net investment experience
at constant annual rates of -1.60%, 4.40% and 10.40%.
Considering guaranteed charges for mortality and expense
risks and the assumed Fund expenses, gross annual rates of
0%, 6% and 12% correspond to net investment experience at
constant annual rates of -1.70%, 4.30% and 10.30%.
The illustrations also reflect the fact that the Company
makes monthly charges for providing insurance protection.
Current values reflect current Cost of Insurance charges and
guaranteed values reflect the maximum Cost of Insurance
charges guaranteed in the Policy. The values shown are for
Policies which are issued as preferred and standard.
Policies issued on a substandard basis would result in lower
Accumulation Values and Death Benefit Proceeds than those
illustrated.
The illustrations also reflect the fact that the Company
deducts a premium load of 8.0% from each Premium Payment.
The Surrender Values shown in the illustrations reflect the
fact that the Company will deduct a Surrender Charge from
the Policy's Accumulation Value for any Policy surrendered
in full during the first fifteen Policy Years. Surrender
Charges reflect, in part, age and Specified Amount.
38
<PAGE>
In addition, the illustrations reflect the fact that the
Company deducts a monthly administrative charge at the
beginning of each Policy Month. This monthly administrative
expense charge is a flat dollar charge of $12.50 per month
in the first year. Current values reflect a current flat
dollar monthly administrative expense charge of $5 (and
guaranteed values, $10) in subsequent Policy Years. The
charge also includes $0.09 per $1,000 of Specified Amount
during the first twenty Policy Years.
Upon request, the Company will furnish a comparable
illustration based on the proposed insureds' ages, gender
classification, smoking classification, risk classification
and premium payment requested.
39
<PAGE>
MALE AGE 55/FEMALE AGE 55 NONSMOKER
STANDARD -- $13,667 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
SURRENDER VALUE
DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT RETURN
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF OF
END OF ACCUMULATED AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
POLICY 5% INTEREST NET NET NET NET NET NET NET NET
YEAR PER YEAR -1.70% 4.30% 10.30% -1.70% 4.30% 10.30% -1.70% 4.30%
- ----------- --------------- --------- --------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 14,350 1,000,000 1,000,000 1,000,000 10,959 11,634 12,308 0 0
2 29,418 1,000,000 1,000,000 1,000,000 21,717 23,756 25,876 8,450 10,490
3 45,239 1,000,000 1,000,000 1,000,000 32,099 36,202 40,640 19,346 23,449
4 61,852 1,000,000 1,000,000 1,000,000 42,084 48,957 56,694 29,877 36,751
5 79,295 1,000,000 1,000,000 1,000,000 51,645 62,004 74,141 39,917 50,276
6 97,610 1,000,000 1,000,000 1,000,000 60,748 75,314 93,090 49,636 64,202
7 116,841 1,000,000 1,000,000 1,000,000 69,349 88,851 113,651 59,472 78,973
8 137,033 1,000,000 1,000,000 1,000,000 77,386 102,557 135,932 68,743 93,915
9 158,235 1,000,000 1,000,000 1,000,000 84,774 116,355 160,039 77,366 108,947
10 180,497 1,000,000 1,000,000 1,000,000 91,419 130,152 186,087 85,246 123,979
15 309,660 1,000,000 1,000,000 1,000,000 109,821 195,535 351,157 109,821 195,535
20 474,508 1,000,000 1,000,000 1,000,000 86,688 238,858 598,680 86,688 238,858
25 684,901 -- 1,000,000 1,065,555 -- 212,008 1,014,814 -- 212,008
30 953,421 -- -- 1,796,688 -- -- 1,711,131 -- --
<CAPTION>
END OF GROSS 12%
POLICY NET
YEAR 10.30%
- ----------- -----------
<S> <C>
1 0
2 12,610
3 27,887
4 44,488
5 62,414
6 81,978
7 103,773
8 127,289
9 152,631
10 179,913
15 351,157
20 598,680
25 1,014,814
30 1,711,131
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.80% per year. See "Expense
Data" at pages 21-22 of this Prospectus.
40
<PAGE>
MALE AGE 55/FEMALE AGE 55 NONSMOKER
STANDARD -- $13,667 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
SURRENDER VALUE
DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT RETURN
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF OF
END OF ACCUMULATED AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
POLICY 5% INTEREST NET NET NET NET NET NET NET NET
YEAR PER YEAR -1.60% 4.40% 10.40% -1.60% 4.40% 10.40% -1.60% 4.40%
- ----------- --------------- --------- --------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 14,350 1,000,000 1,000,000 1,000,000 11,092 11,770 12,449 0 0
2 29,418 1,000,000 1,000,000 1,000,000 22,131 24,191 26,333 8,865 10,925
3 45,239 1,000,000 1,000,000 1,000,000 32,967 37,131 41,633 20,213 24,378
4 61,852 1,000,000 1,000,000 1,000,000 43,599 50,610 58,494 31,393 38,404
5 79,295 1,000,000 1,000,000 1,000,000 54,028 64,648 77,073 42,300 52,920
6 97,610 1,000,000 1,000,000 1,000,000 64,251 79,265 97,547 53,139 68,153
7 116,841 1,000,000 1,000,000 1,000,000 74,268 94,483 120,108 64,391 84,606
8 137,033 1,000,000 1,000,000 1,000,000 84,078 110,324 144,972 75,435 101,681
9 158,235 1,000,000 1,000,000 1,000,000 93,677 126,811 172,374 86,269 119,403
10 180,497 1,000,000 1,000,000 1,000,000 103,062 143,966 202,575 96,889 137,793
15 309,660 1,000,000 1,000,000 1,000,000 145,521 239,550 405,875 145,521 239,550
20 474,508 1,000,000 1,000,000 1,000,000 173,986 348,366 733,813 173,986 348,366
25 684,901 1,000,000 1,000,000 1,346,520 178,751 469,956 1,282,400 178,751 469,956
30 953,421 1,000,000 1,000,000 2,283,838 119,155 588,794 2,175,083 119,155 588,794
<CAPTION>
END OF GROSS 12%
POLICY NET
YEAR 10.40%
- ----------- -----------
<S> <C>
1 0
2 13,067
3 28,880
4 46,287
5 65,346
6 86,435
7 110,231
8 136,329
9 164,966
10 196,402
15 405,875
20 733,813
25 1,282,400
30 2,175,083
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.80% per year. See "Expense
Data" at pages 21-22 of this Prospectus.
41
<PAGE>
MALE AGE 65/FEMALE AGE 65 NONSMOKER
STANDARD -- $21,578 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE SURRENDER VALUE
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
END OF 5% INTEREST NET NET NET NET NET NET NET NET NET
POLICY YEAR PER YEAR -1.70% 4.30% 10.30% -1.70% 4.30% 10.30% -1.70% 4.30% 10.30%
- ----------- ----------- --------- --------- --------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 22,657 1,000,000 1,000,000 1,000,000 17,827 18,929 20,031 0 0 0
2 46,447 1,000,000 1,000,000 1,000,000 34,691 37,997 41,436 10,631 13,937 17,376
3 71,426 1,000,000 1,000,000 1,000,000 50,324 56,918 64,058 27,333 33,927 41,068
4 97,654 1,000,000 1,000,000 1,000,000 64,612 75,557 87,904 42,659 53,605 65,951
5 125,194 1,000,000 1,000,000 1,000,000 77,424 93,762 112,975 56,541 72,878 92,092
6 154,110 1,000,000 1,000,000 1,000,000 88,590 111,336 139,252 68,745 91,491 119,406
7 184,473 1,000,000 1,000,000 1,000,000 97,878 128,022 166,673 80,238 110,381 149,033
8 216,353 1,000,000 1,000,000 1,000,000 104,964 143,466 195,118 89,528 128,030 179,683
9 249,828 1,000,000 1,000,000 1,000,000 109,424 157,215 224,406 96,194 143,984 211,175
10 284,976 1,000,000 1,000,000 1,000,000 110,761 168,737 254,333 99,736 157,712 243,308
15 488,903 1,000,000 1,000,000 1,000,000 49,159 169,945 408,894 49,159 169,945 408,894
20 749,172 -- -- 1,000,000 -- -- 567,303 -- -- 567,303
25 1,081,348 -- -- 1,000,000 -- -- 766,413 -- -- 766,413
30 1,505,298 -- -- 1,282,217 -- -- 1,269,522 -- -- 1,269,522
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.80% per year. See "Expense
Data" at pages 21-22 of this Prospectus.
42
<PAGE>
MALE AGE 65/FEMALE AGE 65 NONSMOKER
STANDARD -- $21,578 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE SURRENDER VALUE
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
END OF 5% INTEREST NET NET NET NET NET NET NET NET NET
POLICY YEAR PER YEAR -1.60% 4.40% 10.40% -1.60% 4.40% 10.40% -1.60% 4.40% 10.40%
- ----------- ----------- --------- --------- --------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 22,657 1,000,000 1,000,000 1,000,000 18,193 19,306 20,419 0 0 0
2 46,447 1,000,000 1,000,000 1,000,000 36,090 39,461 42,966 12,030 15,401 18,906
3 71,426 1,000,000 1,000,000 1,000,000 53,560 60,359 67,712 30,570 37,369 44,721
4 97,654 1,000,000 1,000,000 1,000,000 70,587 82,011 94,863 48,634 60,059 72,911
5 125,194 1,000,000 1,000,000 1,000,000 87,163 104,438 124,662 66,279 83,554 103,779
6 154,110 1,000,000 1,000,000 1,000,000 103,278 127,659 157,376 83,432 107,814 137,530
7 184,473 1,000,000 1,000,000 1,000,000 118,923 151,698 193,302 101,282 134,058 175,662
8 216,353 1,000,000 1,000,000 1,000,000 134,086 176,580 232,775 118,651 161,144 217,340
9 249,828 1,000,000 1,000,000 1,000,000 148,757 202,330 276,169 135,526 189,100 262,939
10 284,976 1,000,000 1,000,000 1,000,000 162,921 228,978 323,903 151,895 217,952 312,878
15 488,903 1,000,000 1,000,000 1,000,000 218,882 370,816 642,037 218,882 370,816 642,037
20 749,172 1,000,000 1,000,000 1,220,900 213,787 504,611 1,162,762 213,787 504,611 1,162,762
25 1,081,348 1,000,000 1,000,000 2,121,351 112,229 634,702 2,020,334 112,229 634,702 2,020,334
30 1,505,298 -- 1,000,000 3,448,166 -- 771,777 3,414,026 -- 771,777 3,414,026
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.80% per year. See "Expense
Data" at pages 21-22 of this Prospectus.
43
<PAGE>
PART II
FEES AND CHARGES REPRESENTATION
Lincoln Life & Annuity Company of New York 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 Lincoln Life & Annuity Company of New York.
UNDERTAKING
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of Lincoln Life & Annuity
Company of New York (LLANY) provides that LLANY 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 LLANY, 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, LLANY. Certain additional conditions apply to indemnification in
criminal proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LLANY in connection with suits
by, or in the right of, LLANY.
Please refer to Article VII of the By-Laws of LLANY (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements
of, New York law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities
Act of 1933.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 28(a) above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of
any such action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus, consisting of 43 pages;
The undertaking to file reports;
The signatures;
Written consents of the following persons:
Robert O. Sheppard, Esq. *
(actuary)*
(independent accountants)*
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of Lincoln Life & Annuity
Company of New York and related documents authorizing establishment
of the Account.
(2) Not applicable.
(3) (a) Underwriting Agreement between Lincoln Financial Advisors, Inc.
and Lincoln Life & Annuity Company of New York*
(b) Form of Selling Group Agreement.*
(c) Commission Schedule for Variable Life Policies.*
(4) Not applicable.
(5) (a) Proposed Form of Policy and Application.
(b) Riders.
<PAGE>
(6) (a) Articles of Incorporation of Lincoln Life & Annuity Company of
New York are incorporated herein by reference to Registration
Statement on Form N-4 (File No. 333-38007) filed on October 16,
1997.
(b) Bylaws of Lincoln Life & Annuity Company of New York are
incorporated herein by reference to Registration Statement on
Form N-4 (File No. 333-38007) filed on October 16, 1997.
(7) Not applicable.
(8) Fund Participation Agreements.
Agreements between Lincoln Life & Annuity Company of New York and:
(a) AIM Variable Insurance Funds, Inc.*
(b) CIGNA Variable Products Group.*
(c) Fidelity Variable Insurance Products Fund.*
(d) Fidelity Variable Insurance Products Fund II.*
(e) MFS-Registered Trademark- Variable Insurance Trust.*
(f) Templeton Variable Products Series Fund.*
(g) OCC Accumulation Trust.*
(9) (a) Form of Services Agreement between Lincoln Life & Annuity
Company of New York and Delaware Management Company is
incorporated herein by reference to Registration on Form N-4
(File No. 333-38007) filed on October 16, 1997.
(b) *
(10) See Exhibit 1(5).
2. See Exhibit 1(5).
3. Opinion and Consent of Counsel.*
4. Not applicable.
5. Not applicable.
6. Opinion and consent of , F.S.A.*
7. Opinion and consent of , Independent Accountants.*
8. Not applicable.
* To be filed by amendment
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the registrant has duly caused
this Registration Statement on Form S-6 to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Syracuse and State of New
York, on the 11th day of February, 1998.
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE
(Name of Registrant)
By: /s/ PHILIP L. HOLSTEIN
-----------------------------------
Philip L. Holstein
PRESIDENT
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK
LINCOLN LIFE & ANNUITY COMPANY OF NEW
YORK
(Name of Depositor)
By: /s/ PHILIP L. HOLSTEIN
-----------------------------------
Philip L. Holstein
PRESIDENT
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on February 11, 1998 by the
following persons, as officers and directors of the Depositor, in the capacities
indicated:
SIGNATURE TITLE
- -------------------------------------------------- -------------------------
/s/ PHILIP L. HOLSTEIN President, Treasurer and
------------------------------------------- Director (Principal
Philip L. Holstein Executive Officer)
/s/ JON A. BOSCIA
------------------------------------------- Director
Jon A. Boscia
/s/ RICHARD C. VAUGHAN
------------------------------------------- Director
Richard C. Vaughan
Second Vice President and
/s/ TROY D. PANNING Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/S/ THOMAS D. BELL, JR.
------------------------------------------- Director
Thomas D. Bell, Jr.
------------------------------------------- Director
Roland C. Baker
/s/ HARRY L. KAVETAS
------------------------------------------- Director
Harry L. Kavetas
/s/ BARBARA STEURY KOWALCZYK
------------------------------------------- Director
Barbara Steury Kowalczyk
------------------------------------------- Director
Marguerite Leanne Lachman
------------------------------------------- Director
John M. Pietruski
/s/ LAWRENCE T. ROLAND
------------------------------------------- Director
Lawrence T. Roland
/s/ J. PATRICK BARRETT
------------------------------------------- Director
J. Patrick Barrett
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- -------------------------
<C> <S>
------------------------------------------- Director
John L. Steinkamp
/s/ LOUIS G. MARCOCCIA
------------------------------------------- Director
Louis G. Marcoccia
</TABLE>
(A majority of the Directors)
