<PAGE>
As filed with the Securities and Exchange Commission on Feb. 28, 1997
Registration No. 33-25990
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 13
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
(Check appropriate box or boxes.)
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
-------------------------------------------
(Exact Name of Registrant)
LINCOLN NATIONAL LIFE INSURANCE COMPANY
-------------------------------------------
(Name of Depositor)
1300 South Clinton Street
Fort Wayne, Indiana 46802
-------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (219)455-2000
Jack D. Hunter, Esq.
200 East Berry Street
Fort Wayne, Indiana 46802
Telephone No. (219)455-2000
-------------------------------------------
(Name and Address of Agent for Service)
Copies of all communications to Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C.
Attention: Gary O. Cohen, Esq.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of
1940. Pursuant to Rule 24f-2(b)(2), the Registrant filed a Rule 24f-2 Notice for
the last fiscal year (1996) on February 28, 1997.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
X on 5/1/97 pursuant to paragraph (a)(1) of Rule 485
<PAGE>
ACCOUNT C
CROSS REFERENCE SHEET TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM CAPTION IN PROSPECTUS (PART A)
- -------- ------------------------------
<C> <S>
1. Cover Page
2. Special Terms
3.(a) Expense Table
(b) Not Applicable
(c) Not Applicable
(d) For Your Information
4.(a) Condensed Financial Information
(b) Condensed Financial Information
(c) Financial Statements
5.(a) Cover Page; Lincoln National Life
Insurance Company
(b) Cover Page; Variable Annuity Account;
Investments of the Variable Annuity
Account
(c) Investments of the Variable Account
(d) Cover Page
(e) Voting Rights
(f) Not Applicable
6.(a) For Your Information; Charges and
Other Deductions
(b) Charges and Other Deductions
(c) Charges and Other Deductions
(d) Charges and Other Deductions
(e) Charges and Other Deductions
(f) Charges and Other Deductions
7.(a) The Contracts; Investments of the Variable
Account; Annuity Payments; Voting Rights;
Return Privilege
(b) Investments of the Variable Account;
The Contracts; Cover Page
(c) The Contracts
(d) The Contracts
</TABLE>
<PAGE>
CROSS REFERENCE SHEET TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM CAPTION IN PROSPECTUS (PART A)
- -------- ------------------------------
<C> <S>
1. Cover Page
8. (a) Annuity Payments
(b) Annuity Payments
(c) Annuity Payments
(d) Annuity Payments
(e) Cover Page; Annuity Payments
(f) The Contracts; Annuity Payments
9. (a) The Contracts; Annuity Payments
(b) The Contracts; Annuity Payments
10.(a) The Contracts; Cover Page; Charges
and Other Deductions
(b) The Contracts; Investments of the
Variable Account
(c) The Contracts
(d) Distribution of the Contracts
11.(a) The Contracts
(b) Restrictions Under the Texas
Optional Retirement Program
(c) The Contracts
(d) The Contracts
(e) Return Privilege
12.(a) Federal Tax Status
(b) Cover Page; Federal Tax Status
(c) Federal Tax Status
13.
14. Table of Contents to the Statement
of Additional Information (SAI)
for Lincoln National Variable
Annuity Account C
</TABLE>
<PAGE>
CROSS REFERENCE SHEET TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
CAPTION IN STATEMENT OF ADDITIONAL
----------------------------------
N-4 ITEM INFORMATION (PART B)
- -------- --------------------
<C> <S>
15. Cover Page for Part B
16. Cover Page for Part B
17.(a) Not Applicable
(b) Not Applicable
(c) General Information and History
of Lincoln National Life
Insurance Co. (Lincoln Life)
18.(a) Not Applicable
(b) Not Applicable
(c) Services
(d) Not Applicable
(e) Not Applicable
(f) Services
19.(a) Purchase of Securities Being
Offered
(b) Not Applicable
20.(a) Underwriters
(b) Underwriters
(c) Underwriters
(d) Underwriters
21. Calculation of Performance Data
22. 22. Annuity Payouts
23.(a) Financial Statements -- Lincoln
National Variable Annuity
Account C
(b) Consolidated Financial Statements --
Lincoln National Life
Insurance Co. (Lincoln Life)
</TABLE>
<PAGE>
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
TABLE OF CONTENTS
POST-EFFECTIVE AMENDMENT NO. 13 UNDER THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 25 UNDER THE INVESTMENT COMPANY ACT OF 1940
ON FORM N-4
Cover Page
Table of Contents
Cross Reference Sheets
Prospectus (Part A)
Statement of Additional Information
Other Information (Part C)
SIGNATURES
Exhibit Index
<PAGE>
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
issued by:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Account C
This Prospectus describes individual variable annuity contracts issued by
Lincoln National Life Insurance Co. (Lincoln Life). They are for use with the
following retirement plans qualified for special tax treatment (qualified
contracts) under the Internal Revenue Code of 1986, as amended (the code):
1. Public school systems and 501(c)(3) tax-exempt organizations (403(b));
2. Qualified corporate employee pension and profit-sharing trusts and qualified
annuity plans;
3. Corresponding plans of self-employed individuals (H.R. 10 or Keogh);
4. Individual retirement annuities (IRA);
5. Government deferred compensation plans (457); and
6. Simplified employee pension plans (SEP).
7. SIMPLE IRA (consult your representative as to the availability of this
contract for SIMPLE IRAs).
The contracts described in this Prospectus are also offered to plans
established by persons who are not entitled to participate in one of the
previously mentioned plans (nonqualified contracts).
This Prospectus offers you, as contractowner, contracts of the following types:
1. Single premium deferred annuity;
2. Flexible premium deferred annuity (Multi Fund 2, 3 and 4); and
3. Periodic premium deferred annuity (Multi Fund 1).
The contracts offer you the accumulation of contract value and payment of
periodic annuity benefits. These benefits may be paid on a variable or fixed
basis or a combination of both. Benefits start at an annuity commencement date
which you select. If the annuitant dies before the annuity commencement date, a
death benefit will be paid to the beneficiary.
The minimum initial purchase payment for each of the three types of contract
is:
1. Single premium deferred contract: $1,000 for IRAs and SEPs; $3,000 for all
others;
2. Flexible premium deferred contract: $1,000 for IRAs and SEPs; $3,000 for all
others (subsequent purchase payments: $100); and
3. Periodic premium deferred contract: $600 per contract year (minimum $25 per
purchase payment).
All investments (purchase payments) for benefits on a variable basis will be
placed in Lincoln National Variable Annuity Account C (variable annuity account
[VAA]). The VAA is a segregated investment account of Lincoln Life, which is
the Depositor. Based upon your instructions, the VAA invests purchase payments
(at net asset value) in specified mutual funds (the fund or funds and series).
Both the value of a contract before the annuity commencement date and the
amount of payouts afterward will depend upon the investment performance of the
fund(s) or series selected. Investments in these funds and series are neither
insured nor guaranteed by the U.S. Government or by any other person or entity.
Purchase payments for benefits on a fixed basis will be placed in the fixed
side of the contract, which is part of our general account. However, this
Prospectus deals only with those elements of the contracts relating to the VAA,
except where reference to the fixed side is made.
We may not offer a contract continuously or in every state. THE MULTI FUND 4
CONTRACT AND THE ENHANCED GUARANTEED MINIMUM DEATH BENEFIT ARE EXPECTED TO BE
AVAILABLE AFTER JUNE 1997. PLEASE CONSULT YOUR REPRESENTATIVE AS TO THE
AVAILABILITY IN YOUR STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (SEC) NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus details the information regarding the VAA that you should know
before investing. This Prospectus is printed in a booklet that also includes a
current Prospectus for each of the following funds: Lincoln National Aggressive
Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln National Capital
Appreciation Fund, Inc., Lincoln National Equity-Income Fund, Inc., Lincoln
National Global Asset Allocation Fund, Inc., Lincoln National Growth and Income
Fund, Inc., Lincoln National International Fund, Inc., Lincoln National Managed
Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln National Social
Awareness Fund, Inc., and Lincoln National Special Opportunities Fund, Inc. and
a current Prospectus for the Delaware Group Premium Fund, Inc., which contains
information regarding the Equity/Income Series, Global Bond Series and the
Emerging Growth Series. All Prospectuses should be read carefully and kept for
future reference.
A statement of additional information (SAI), dated May 1, 1997, concerning the
VAA has been filed with the SEC and is incorporated by this reference into this
Prospectus. If you would like a free copy, write, Lincoln National Life
Insurance Co., P.O. Box 2340, Fort Wayne, Indiana 46801, or call 1-800-4Lincoln
(454-6265). A table of contents for the SAI appears on the last page of this
Prospectus.
This Prospectus is dated May 1, 1997.
1
<PAGE>
Account C
FOR YOUR INFORMATION:
IF YOU SURRENDER YOUR CONTRACT OR WITHDRAW CONTRACT VALUE, A SURRENDER CHARGE
OF UP TO 8% MAY BE DEDUCTED. THE AMOUNT OF THE SURRENDER CHARGE DEPENDS ON THE
TYPE OF CONTRACT AND ITS DURATION. HOWEVER, NO SURRENDER CHARGE IS ASSESSED
WHEN ANNUITY PAYOUTS BEGIN OR AT THE ANNUITANT'S DEATH. SEE CHARGES AND OTHER
DEDUCTIONS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- ----------------------------------------------------------------------
<S> <C>
Special terms 3
- ----------------------------------------------------------------------
Expense tables 4
- ----------------------------------------------------------------------
Condensed financial information for the variable annuity account 7
- ----------------------------------------------------------------------
Financial statements 9
- ----------------------------------------------------------------------
Lincoln National Life Insurance Co. 9
- ----------------------------------------------------------------------
Variable annuity account (VAA) 9
- ----------------------------------------------------------------------
Investments of the variable annuity account 9
- ----------------------------------------------------------------------
Charges and other deductions 12
- ----------------------------------------------------------------------
The contracts 14
- ----------------------------------------------------------------------
Annuity payouts 17
- ----------------------------------------------------------------------
</TABLE>
ALSO, YOU MAY BE SUBJECT TO A PENALTY TAX UNDER SECTION 72 (Q) OF THE CODE (SEE
FEDERAL TAX STATUS) SHOULD YOU WITHDRAW CONTRACT VALUE OR SURRENDER THE
CONTRACT BEFORE THE ANNUITY COMMENCEMENT DATE.
THESE CONTRACTS CONTAIN A FREE-LOOK PROVISION. SEE RETURN PRIVILEGE.
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------
<S> <C>
Federal tax status 18
- --------------------------------------------------------------
Voting rights 20
- --------------------------------------------------------------
Distribution of the contracts 20
- --------------------------------------------------------------
Return privilege 21
- --------------------------------------------------------------
State regulation 21
- --------------------------------------------------------------
Restrictions under the Texas Optional Retirement Program 21
- --------------------------------------------------------------
Records and reports 21
- --------------------------------------------------------------
Other information 21
- --------------------------------------------------------------
Statement of additional information
table of contents for VAA 22
- --------------------------------------------------------------
</TABLE>
2
<PAGE>
Account C
SPECIAL TERMS
(Throughout this Prospectus, in order to make the following documents more
understandable to you, we have italicized the special terms.)
Account or variable annuity account (VAA) -- The segregated investment account,
Account C, into which Lincoln Life sets aside and invests the assets for the
variable annuity contracts offered in this Prospectus.
Accumulation unit -- A measure used to calculate contract value for the
variable side of the contract before the annuity commencement date. See The
contracts.
Advisor or investment advisor -- Lincoln Investment Management, Inc. (Lincoln
Investment), which provides investment management services to each of the
funds. See Investment advisor.
Annuitant -- The person upon whose life the annuity benefit payments made after
the annuity commencement date will be based.
Annuity commencement date -- The valuation date when the funds or series are
withdrawn or converted into annuity units or fixed dollar payout for payment of
annuity benefits under the annuity payout option selected. For purposes of
determining whether an event occurs before or after the annuity commencement
date, the annuity commencement date is deemed to begin at the valuation period.
Annuity option -- One of the optional forms of payout of the annuity available
within the contract. See Annuity payouts.
Annuity payout -- An amount paid after the annuity commencement date at regular
intervals under one of several options available to the annuitant and/or any
other payee. This amount may be paid on a variable or fixed basis, or a
combination of both.
Annuity unit -- A measure used to calculate the amount of annuity payouts after
the annuity commencement date. See Annuity payouts.
Beneficiary -- The person whom you designate to receive the death benefit, if
any, in case of the annuitant's death.
Cash surrender value -- Upon surrender, the contract value less any applicable
charges, fees, and taxes.
Code -- The Internal Revenue Code of 1986, as amended.
Contract (variable annuity contract) -- The agreement between you and us
providing a variable annuity.
Contractowner (you, your owner) -- The person who has the ability to exercise
the rights within the contract (decides on investment allocations, transfers,
payout options; designates the beneficiary, etc.). Usually, but not always, the
owner is also the annuitant.
Contract value -- At a given time, the total value of all accumulation units
for a contract plus the value of the fixed side of the contract.
Contract year -- Each one-year period starting with the effective date of the
contract and starting with each contract anniversary after that.
Death benefit -- The amount payable to your designated beneficiary if the
annuitant dies before the annuity commencement date. See The contracts.
Enhanced Guaranteed Minimum Death Benefit (EGMDB)--The EGMDB is the greater of:
(1) the contract value at the end of the valuation period when the death claim
is approved for payment by Lincoln Life or (2) the higher of:
a. the contract value at the end of the valuation period when the EGMDB becomes
effective and;
b. the highest contract value at the end of the valuation period that includes
any contract anniversary date up to and including age 75 following election
of the EGMDB;
increased by purchase payments and decreased by any withdrawals,
annuitizations, and premium taxes incurred after the contract anniversary or
EGMDB effective date the highest contract value occurred. See The contracts.
Delaware Management -- Delaware Management Company, Inc.
Flexible premium deferred contract (Multi Fund 2, 3, and 4) -- An annuity
contract with an initial purchase payment, allowing additional purchase
payments to be made, and with annuity payouts beginning at a future date.
Fund -- Any of the eleven individual Lincoln National underlying investment
options in which your purchase payments are invested.
Home office -- The headquarters of Lincoln National Life Insurance Co., located
at 1300 South Clinton Street, Fort Wayne, Indiana 46802.
Lincoln Investment -- Lincoln Investment Management, Inc.
Lincoln Life (we, us, our) -- Lincoln National Life Insurance Co.
Lump sum -- A one-time purchase payment of $5,000 or more ($1,000 for IRAs and
SEPs) made to a periodic premium deferred contract.
Periodic premium deferred contract -- An annuity contract with purchase
payments due periodically and with annuity payouts beginning at a future date.
Purchase payments -- Amounts paid into the contract to purchase an annuity.
Qualified plan -- A retirement plan qualified for special tax treatment under
the Internal Revenue Code of 1986, as amended, including Sections 401, 403, 408
and 457.
Series -- Any of the three underlying portfolios of the Delaware Group Premium
Fund, Inc., in which your purchase payments are invested.
Single premium deferred contract -- An annuity contract with a single purchase
payment and with annuity payouts beginning at a future date.
Statement of additional information (SAI) -- A document required by the SEC to
be provided upon request to a prospective purchaser of a contract, you. This
free document gives more information about Lincoln Life, the VAA, and the
variable annuity contract.
Subaccount -- That portion of the VAA that reflects investments in accumulation
and annuity units of a particular fund and series. There is a separate
subaccount which corresponds to each fund.
Surrender -- A contract right that allows you to terminate your contract and
receive your cash surrender value. See The contracts.
Surrender charge -- The term that refers to what is known in the industry as a
contingent deferred sales charge. See Charges and other deductions.
Valuation date -- Each day the New York Stock Exchange (NYSE) is open for
trading.
Valuation period -- The period starting at the close of trading (currently 4:00
p.m. New York time) on each day that the New York Stock Exchange is open for
trading (valuation date) and ending at the close of such trading on the next
valuation date.
Withdrawal -- A contract right that allows you to obtain a portion of your cash
surrender value.
3
<PAGE>
Account C
EXPENSE TABLES
CONTRACTOWNER TRANSACTION EXPENSES-SINGLE PREMIUM AND PERIODIC PREMIUM DEFERRED
CONTRACTS:
Surrender charge (as a percentage of contract value surrendered/withdrawn):7%
(single premium)
8% (periodic premium)
(Note: Upon the first withdrawal of contract value in any contract year, up to
15% of contract value may be withdrawn free of this charge.)
REDUCED SURRENDER CHARGES OVER TIME:
The surrender charge percentages listed above are the maximum percentages
charged as a percentage of contract value withdrawn. The later a
surrender/withdrawal occurs, the lower the surrender charge percentage applied,
according to the following table:
<TABLE>
<CAPTION>
Contract type Contract year
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7 8 9 10 11+
Single premium 7% 6 5 4 3 2 1 0 0 0 0
Periodic premium 8% 8 8 8 8 4 4 4 4 4 0
</TABLE>
- --------------------------------------------------------------------------------
CONTRACTOWNER TRANSACTION EXPENSES-FLEXIBLE PREMIUM DEFERRED CONTRACT:
Surrender charge (as a percentage of purchase payments
surrendered/withdrawn) 7% (flexible premium)
(Note: Upon the first withdrawal of purchase payments in any contract year, up
to 15% of those purchase payments may be withdrawn free of this charge.)
REDUCED SURRENDER CHARGE OVER TIME:
The surrender charge percentage listed above is the maximum percentage charged
as a percentage of purchase payments withdrawn. This charge is calculated
separately for each contract year's purchase payments. The later a
surrender/withdrawal occurs, the lower the surrender charge percentage applied,
according to the following table:
<TABLE>
<CAPTION>
Completed contract years between date
of
purchase payments and date of
Contract type surrender/withdrawal
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1 2 3 4 5 6 7+
Flexible premium 7% 6 5 4 3 2 1 0
</TABLE>
ANNUAL CONTRACT FEE:
$-0-(single premium and flexible premium Multi Fund 3 and 4)
$25 (periodic and flexible premium Multi Fund 2) This fee is a single charge
assessed against contract value on the last valuation date of each contract
year and upon full surrender; it is NOT a separate charge for each subaccount.
VAA ANNUAL EXPENSES
(as a percentage of average account value for each subaccount)*:
<TABLE>
<CAPTION>
Contracts with EGMDB Contracts without EGMDB
<S> <C> <C>
Mortality and expense risk fees 1.00% 1.00%
EGMDB charge .30 --
---- ----
Total Account C annual expenses 1.30% 1.00%
</TABLE>
*The VAA is divided into 14 separately-named subaccounts, each of which, in
turn, invests purchase payments in its respective fund or series.
4
<PAGE>
Account C
ANNUAL EXPENSES OF THE FUNDS AND SERIES FOR THE YEAR ENDED 1996
(as a percentage of each fund's and series' average net assets):
<TABLE>
<CAPTION>
Management Other Total
fees + expenses = expenses
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Aggressive Growth (AG) .75% .07% .82%
- -----------------------------------------------------------------------------
2. Bond (B) .46 .05 .51
- -----------------------------------------------------------------------------
3. Capital Appreciation (CA) .80 .13 .93
- -----------------------------------------------------------------------------
4. Equity-Income (EI) .95 .13 1.08
- -----------------------------------------------------------------------------
5. Global Asset Allocation (GAA) .73 .27 1.00
- -----------------------------------------------------------------------------
6. Growth and Income (GI) .33 .03 .36
- -----------------------------------------------------------------------------
7. International (I) .82 .37 1.19
- -----------------------------------------------------------------------------
8. Managed (M) .39 .04 .43
- -----------------------------------------------------------------------------
9. Money Market (MM) .48 .09 .57
- -----------------------------------------------------------------------------
10. Social Awareness (SA) .42 .04 .46
- -----------------------------------------------------------------------------
11. Special Opportunities (SO) .40 .04 .44
- -----------------------------------------------------------------------------
12. Delaware Emerging Growth (DEG)* .70* .10 .80
- -----------------------------------------------------------------------------
13. Delaware Equity/Income (DE/I)* .54* .13 .67
- -----------------------------------------------------------------------------
14. Delaware Global Bond (DGB)* .36* .44 .80
</TABLE>
- --------------------------------------------------------------------------------
*The investment advisors for these series currently voluntarily waive
management fees to the extent necessary to maintain the series total expense
ratio at a maximum of .80%. The management fees and total expenses, absent the
waiver, would have been .75% and . % for DEG and .75% and . % for DGB. Should
they cease to waive those amounts in the future, these management fee
percentages and total expenses may be higher in future years.
EXAMPLES
(reflecting expenses of the VAA, the funds and series):
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming a 5% annual
return:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
Flexible Flexible Flexible
Flexible Multi- Flexible Multi- Flexible Multi-
Multi- Fund Multi- Fund Multi- Fund
Single Fund 2 3 & 4 Periodic Single Fund 2 3 & 4 Periodic Single Fund 2 3 & 4 Periodic Single
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. AG $ $ $ $ $ $ $ $ $ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------------
2. B
- --------------------------------------------------------------------------------------------------------------------------
3. CA
- --------------------------------------------------------------------------------------------------------------------------
4. EI
- --------------------------------------------------------------------------------------------------------------------------
5. GAA
- --------------------------------------------------------------------------------------------------------------------------
6. GI
- --------------------------------------------------------------------------------------------------------------------------
7. I
- --------------------------------------------------------------------------------------------------------------------------
8. M
- --------------------------------------------------------------------------------------------------------------------------
9. MM
- --------------------------------------------------------------------------------------------------------------------------
10. SA
- --------------------------------------------------------------------------------------------------------------------------
11. SO
- --------------------------------------------------------------------------------------------------------------------------
12. DEG
- --------------------------------------------------------------------------------------------------------------------------
13. DE/I
- --------------------------------------------------------------------------------------------------------------------------
14. DGB
<CAPTION>
Flexible
Flexible Multi-
Multi- Fund
Fund 2 3 & 4 Periodic
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AG $ $ $
- --------------------------------------------------------------------------------------------------------------------------
2. B
- --------------------------------------------------------------------------------------------------------------------------
3. CA
- --------------------------------------------------------------------------------------------------------------------------
4. EI
- --------------------------------------------------------------------------------------------------------------------------
5. GAA
- --------------------------------------------------------------------------------------------------------------------------
6. GI
- --------------------------------------------------------------------------------------------------------------------------
7. I
- --------------------------------------------------------------------------------------------------------------------------
8. M
- --------------------------------------------------------------------------------------------------------------------------
9. MM
- --------------------------------------------------------------------------------------------------------------------------
10. SA
- --------------------------------------------------------------------------------------------------------------------------
11. SO
- --------------------------------------------------------------------------------------------------------------------------
12. DEG
- --------------------------------------------------------------------------------------------------------------------------
13. DE/I
- --------------------------------------------------------------------------------------------------------------------------
14. DGB
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
Account C
If you do not surrender your contract, (whether single, flexible or periodic),
or if you annuitize, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -----------------------------------------
<S> <C> <C> <C> <C>
1. AG $ $ $ $
- -----------------------------------------
2. B
- -----------------------------------------
3. CA
- -----------------------------------------
4. EI
- -----------------------------------------
5. GAA
- -----------------------------------------
6. GI
- -----------------------------------------
7. I
- -----------------------------------------
8. M
- -----------------------------------------
9. MM
- -----------------------------------------
10. SA
- -----------------------------------------
11. SO
- -----------------------------------------
12. DEG
- -----------------------------------------
13. DE/I
- -----------------------------------------
14. DGB
</TABLE>
- --------------------------------------------------------------------------------
This table is provided to assist you in understanding the various costs and
expenses that you will bear directly or indirectly. The table reflects expenses
of the VAA, the 11 funds and the 3 series for the year ended December 31, 1996.
For more complete descriptions of the various costs and expenses involved, see
Charges and other deductions in this Prospectus, and Management of the funds in
the Appendix to the funds' Prospectuses and the Prospectus for Delaware Group
Premium Fund, Inc. Premium taxes may also be applicable, although they do not
appear in the table. In addition, we reserve the right to impose a charge on
transfers between subaccounts as well as to and from the fixed account,
although we do not currently do so. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN. This table is unaudited.
These examples reflect expenses assuming that the EGMDB is NOT in effect. If
the EGMDB is in effect, these examples will be higher.
6
<PAGE>
CONDENSED FINANCIAL INFORMATION FOR THE VAA
Account C
ACCUMULATION UNIT VALUES
The following information relating to accumulation unit values and number of
accumulation units for each of the 10 years in the period ended December 31,
1996 comes from the VAA's financial statements. It should be read in
conjunction with the VAA's financial statements and notes which are all
included in the SAI.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth
subaccount
Accumulation unit value
. Beginning of period $ 1.196 .896 1.000 1.000*
. End of period $ 1.384 1.196 .896 1.000* trading began in 1994.
Number of accumulation
units
. End of period (000's
omitted) 172,630 114,518 67,547 110
- ------------------------------------------------------------------------------------------------------------
Bond subaccount
Accumulation unit value
. Beginning of period $ 4.228 3.585 3.780 3.398 3.181 2.737 2.591 2.312 2.162 2.156
. End of period $ 4.282 4.228 3.585 3.780 3.398 3.181 2.737 2.591 2.312 2.162
Number of accumulation
units
. End of period (000's
omitted) 62,709 62,644 57,900 62,765 52,842 46,830 40,983 37,671 28,146 25,879
- ------------------------------------------------------------------------------------------------------------
Capital Appreciation
subaccount
Accumulation unit value
. Beginning of period $ 1.294 1.017 1.000 1.000*
. End of period $ 1.519 1.294 1.017 1.000* trading began in 1994.
Number of accumulation
units
. End of period (000's
omitted) 174,073 98,067 52,125 110
- ------------------------------------------------------------------------------------------------------------
zEquity-Income
subaccount
Accumulation unit value
. Beginning of period $ 1.391 1.046 1.000 1.000*
. End of period $ 1.662 1.391 1.046 1.000* trading began in 1994.
Number of accumulation
units
. End of period (000's
omitted) 275,631 171,817 75,383 110
- ------------------------------------------------------------------------------------------------------------
Global Asset Allocation
subaccount
Accumulation unit value
. Beginning of period $ 2.013 1.642 1.689 1.453 1.378 1.174 1.175 1.005 .914 1.000*
. End of period $ 2.301 2.013 1.642 1.689 1.453 1.378 1.174 1.175 1.005 .914*
trading
Number of accumulation began
units in 1987.
. End of period (000's
omitted) 140,241 126,558 122,061 92,778 67,873 57,199 50,149 39,835 27,750 23,120
- ------------------------------------------------------------------------------------------------------------
Growth and Income
subaccount
Accumulation unit value
. Beginning of period $ 6.292 4.593 4.579 4.084 4.050 3.125 3.126 2.611 2.436 2.130
. End of period $ 7.453 6.292 4.593 4.579 4.084 4.050 3.125 3.126 2.611 2.436
Number of accumulation
units
. End of period (000's
omitted) 332,885 291,063 253,621 226,072 188,659 144,515 114,974 96,161 81,066 73,488
- ------------------------------------------------------------------------------------------------------------
International subaccount
Accumulation unit value
. Beginning of period $ 1.368 1.271 1.243 .901 .990 1.000*
. End of period $ 1.488 1.368 1.271 1.243 .901 .990* trading began in 1991.
Number of accumulation
units
. End of period (000's
omitted) 294,569 261,509 248,639 129,551 50,718 21,088
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* These values do not reflect a full year's experience because they are
calculated for the period from the beginning of investment activity of the
subaccounts, through December 31.
7
<PAGE>
Account C
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managed subaccount
Accumulation unit value
. Beginning of period $ 3.515 2.747 2.827 2.558 2.492 2.065 2.015 1.737 1.609 1.495
. End of period $ 3.913 3.515 2.747 2.827 2.558 2.492 2.065 2.015 1.737 1.609
Number of accumulation units
. End of period (000's omitted) 178,495 172,789 167,184 162,485 139,606 115,929 104,011 95,285 84,586 78,432
- ----------------------------------------------------------------------------------------------------------------
Money Market subaccount
Accumulation unit value
. Beginning of period $ 2.235 2.137 2.079 2.044 1.996 1.907 1.783 1.651 1.553 1.472
. End of period $ 2.324 2.235 2.137 2.079 2.044 1.996 1.907 1.783 1.651 1.553
Number of accumulation units
. End of Period (000's omitted) 40,057 35,136 37,106 39,763 46,993 77,812 57,377 53,287 37,890 37,132
- ----------------------------------------------------------------------------------------------------------------
Social Awareness subaccount
Accumulation unit value
. Beginning of period $ 2.843 2.005 2.021 1.796 1.750 1.285 1.357 1.042 1.000*
. End of period $ 3.637 2.843 2.005 2.021 1.796 1.750 1.285 1.357 1.042* trading
began
in 1988
Number of accumulation units
. End of period (000's omitted) 175,969 106,204 83,069 69,006 50,838 30,735 19,486 7,127 1,984
- ----------------------------------------------------------------------------------------------------------------
Special Opportunities subaccount
Accumulation unit value
. Beginning of period $ 5.618 4.303 4.392 3.740 3.519 2.481 2.710 2.054 1.997 1.867
. End of period $ 6.504 5.618 4.303 4.392 3.740 3.519 2.481 2.710 2.054 1.997
Number of accumulation units
. End of period (000's omitted) 97,743 88,993 73,673 62,314 51,056 37,798 33,837 27,789 31,068 29,240
- ----------------------------------------------------------------------------------------------------------------
DE Emerging Growth subaccount
Accumulation unit value
. Beginning of period $ 1.000*
. End of period $ 0.991* trading began in 1996
Number of accumulation units
. End of period (000's omitted) 23,508
- ----------------------------------------------------------------------------------------------------------------
DE Equity/Income subaccount
Accumulation unit value
. Beginning of period $ 1.000*
. End of period $ 1.126* trading began in 1996
Number of accumulation units
. End of period (000's omitted) 12,219
- ----------------------------------------------------------------------------------------------------------------
DE Global Bond subaccount
Accumulation unit value
. Beginning of period $ 1.000*
. End of period $ 1.110* trading began in 1996
Number of accumulation units
. End of period (000's omitted) 7,613
</TABLE>
- --------------------------------------------------------------------------------
*These values do not reflect a full year's experience because they are
calculated for the period from the beginning of investment activity of
the subaccounts, through December 31.
ADDITIONAL INFORMATION FOR THE MONEY MARKET SUBACCOUNT:
Seven-day yield: xxx%; Length of base period-7 days; Date of last day of base
period: December 31, 1996.
8
<PAGE>
Account C
PERFORMANCE DATA:
At times the VAA may advertise the Money Market subaccount's yield. The yield
refers to the income generated by an investment in the subaccount over a seven-
day period. This income is then annualized. The process of annualizing results
when the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. THE YIELD FIGURE IS BASED ON HISTORICAL EARNINGS
AND IS NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The VAA advertises the annual performance of the subaccounts for the funds and
series on both a standardized and nonstandardized basis.
The standardized calculation measures average annual total return. This is
based on a hypothetical $1,000 payment made at the beginning of a one-year, a
five-year, and a 10-year period. This calculation reflects all fees and charges
that are or could be imposed on all contractowner accounts.
The nonstandardized calculation compares changes in accumulation unit values
from the beginning of the most recently completed calendar year to the end of
that year. It may also compare changes in accumulation unit values over shorter
or longer time periods. This calculation reflects mortality and expense risk
fees. It also reflects management fees and other expenses of the fund. It does
not include surrender charges or the account charge; if included, they would
decrease the performance.
For additional information about performance calculations, please refer to the
SAI.
FINANCIAL STATEMENTS
The financial statements for the VAA and Lincoln Life are located in the SAI.
You may obtain a free copy by writing Lincoln National Life Insurance Co., P.O.
Box 2340, Fort Wayne, Indiana 46801 or calling
1-800-4Lincoln (454-6265).
LINCOLN NATIONAL LIFE INSURANCE CO.
Lincoln Life was founded in 1905 and is organized under Indiana law. We are one
of the largest stock life insurance companies in the United States. We serve as
the principal underwriter for the contracts. We are owned by Lincoln National
Corp. (LNC) which is also organized under Indiana law. LNC's primary businesses
are insurance and financial services.
VARIABLE ANNUITY ACCOUNT (VAA)
On June 3, 1981, the VAA was established as an insurance company separate
account under Indiana law. It is registered with the SEC as a unit investment
trust under the provisions of the Investment Company Act of 1940 (1940 Act).
The SEC does not supervise the VAA or Lincoln Life. The VAA is a segregated
investment account, meaning that its assets may not be charged with liabilities
resulting from any other business that we may conduct. Income, gains and
losses, whether realized or not, from assets allocated to the VAA are, in
accordance with the applicable annuity contracts, credited to or charged
against the VAA. They are credited or charged without regard to any other
income, gains or losses of Lincoln Life. The VAA satisfies the definition of
separate account under the federal securities laws. We do not guarantee the
investment performance of the VAA. Any investment gain or loss depends on the
investment performance of the funds and series. YOU ASSUME THE FULL INVESTMENT
RISK FOR ALL AMOUNTS PLACED IN THE VAA.
INVESTMENTS OF THE VARIABLE ANNUITY ACCOUNT
You decide the subaccount(s) to which you allocate purchase payments. There is
a separate subaccount which corresponds to each fund and series. You may change
your allocations without penalty or charges. Shares of the funds and series
will be sold at net asset value (See the Appendix to the funds' Prospectuses
for an explanation of net asset value) to the VAA in order to fund the
contracts. The funds and series are required to redeem their shares at net
asset value upon our request. We reserve the right to add, delete or substitute
funds and series.
INVESTMENT ADVISOR
Lincoln Investment (owned by LNC) is the advisor for each of the funds and is
primarily responsible for the investment decisions affecting the funds. The
services it provides are explained in the Prospectuses of the funds. Under an
advisory agreement with each fund, Lincoln Investment provides portfolio
management and investment advice to that fund, subject to the supervision of
the fund's Board of Directors.
Additionally, Lincoln Investment currently has six sub-advisory agreements in
which the sub-advisor may perform some or substantially all of the investment
advisory services required by those respective funds.
No additional compensation from the assets of those funds will be assessed as a
result of the sub-advisory agreements.
9
<PAGE>
Account C
Following is a chart that shows the fund names and the six sub-advisors under
Lincoln Investment (the advisor):
<TABLE>
<CAPTION>
Sub-advisor Fund
- ------------------------------------------------------------------------------
<S> <C>
Clay Finlay Inc. International
- ------------------------------------------------------------------------------
Fidelity Management Trust Co. Equity-Income
- ------------------------------------------------------------------------------
Janus Capital Corp. Capital Appreciation
- ------------------------------------------------------------------------------
Lynch & Mayer, Inc. Aggressive Growth
- ------------------------------------------------------------------------------
Putnam Investment
Management, Inc. Global Asset Allocation
- ------------------------------------------------------------------------------
Vantage Global Growth and Income; Managed
Advisors, Inc. (for stock portfolio);
Social Awareness; and
Special Opportunities
- ------------------------------------------------------------------------------
</TABLE>
The Bond and Money Market Funds do not have sub-advisors.
Delaware Management, an indirect subsidiary of LNC, is the advisor for the
series and is primarily responsible for the investment decisions affecting the
series. Delaware International Advisers Limited (Delaware International), an
affiliate of Delaware Management, furnishes investment management services to
the Global Bond series.
Additional information about Delaware Management and Delaware International may
be found in the Delaware Group Premium Fund, Inc. Prospectus enclosed in this
booklet under Management of the Fund.
FUNDS/SERIES
Following are brief summaries of the investment objectives and policies of the
funds. The year in which each fund started trading is in parentheses. There is
more detailed information in the current Prospectuses for the funds, which are
included in this booklet.
All of the funds with the exception of the Special Opportunities Fund are
diversified, open-end management investment companies. Diversified means not
owning too great a percentage of the securities of any one company. An open-end
company is one which, in this case, permits Lincoln Life to sell its shares
back to the fund or series when you make a withdrawal, surrender the contract
or transfer from one fund to another. Management investment company is the
legal term for a mutual fund. The Special Opportunities Fund is open-end, but
is non-diversified. Non-diversified means the fund may own a larger percentage
of the securities of particular companies than will a diversified company.
These definitions are very general. The precise legal definitions for these
terms are contained in the 1940 Act. PLEASE BE ADVISED THAT THERE IS NO
ASSURANCE THAT ANY OF THE FUNDS OR SERIES WILL ACHIEVE ITS STATED OBJECTIVES.
FUNDS
1. AGGRESSIVE GROWTH FUND (1994) -- The investment objective is to maximize
capital appreciation. The fund invests in stocks of smaller, lesser-known
companies which have a chance to grow significantly in a short time.
2. BOND FUND (1981) -- The investment objective is maximum current income
consistent with prudent investment strategy. The fund invests primarily in
medium-and long-term corporate and government bonds.
3. CAPITAL APPRECIATION FUND (1994) -- The investment objective is long-term
growth of capital in a manner consistent with preservation of capital. The
fund primarily buys stocks in a large number of companies of all sizes if
the companies are competing well and if their products or services are in
high demand. It may also buy some money market securities and bonds,
including junk (high-risk) bonds.
4. EQUITY-INCOME FUND (1994) -- The investment objective is to achieve
reasonable income by investing primarily in income-producing equity
securities. The fund invests mostly in high-income stocks and some high-
yielding bonds (including junk bonds).
5. GLOBAL ASSET ALLOCATION FUND (1987) -- The investment objective is long-
term total return consistent with preservation of capital. The fund
allocates its assets among several categories of equity and fixed-income
securities, both of U.S. and foreign issuers.
6. GROWTH AND INCOME FUND (1981) -- The investment objective is long-term
capital appreciation. The fund buys stocks of established companies.
7. INTERNATIONAL FUND (1991) -- The investment objective is long-term capital
appreciation. The fund trades in securities issued outside the United
States--mostly stocks, with an occasional bond or money market security.
8. MANAGED FUND (1983) -- The investment objective is maximum long-term total
return (capital gains plus income) consistent with prudent investment
strategy. The fund invests in a mix of stocks, bonds, and money market
securities, as determined by an investment committee.
10
<PAGE>
Account C
9. MONEY MARKET FUND (1981) -- The investment objective is maximum current
income consistent with the preservation of capital. The fund invests in
short-term obligations issued by U.S. corporations; the U.S. Government;
and federally-chartered banks and U.S. branches of foreign banks.
10. SOCIAL AWARENESS FUND (1988) -- The investment objective is long-term
capital appreciation. The fund buys stocks of established companies which
adhere to certain specific social criteria.
11. SPECIAL OPPORTUNITIES FUND (1981) -- The investment objective is maximum
capital appreciation. The fund primarily invests in mid-size companies
whose stocks have significant growth potential. Current income is a
secondary consideration.
SERIES
Following are brief summaries of the investment objectives and policies of the
three series being offered by Delaware Group Premium Fund, Inc. More detailed
information may be obtained from the current prospectus for those series, which
is included in this booklet. PLEASE BE ADVISED THAT THERE IS NO ASSURANCE THAT
ANY OF THE SERIES WILL ACHIEVE ITS STATED OBJECTIVES.
1. EQUITY/INCOME -- seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. This series has the same
objective and investment disciplines as the Decatur Total Return Fund of
Delaware Group Decatur Fund, Inc., a separate Delaware Group fund, in that
it invests generally, but not exclusively, in common stocks and income-
producing securities convertible into common stocks, consistent with the
series' objective.
2. EMERGING GROWTH -- seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging
and other growth-oriented companies. These securities will have been judged
to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. This series
has the same objective and investment disciplines as Delaware Group Trend
fund, Inc., a separate Delaware Group fund.
3. GLOBAL BOND -- seeks current income consistent with preservation of
principal by investing primarily in fixed income securities that may also
provide the potential for capital appreciation. This series is a global
fund. As such, at least 65% of the series' assets will be invested in fixed
income securities of issuers organized or having a majority of their assets
in or deriving a majority of their operating income in at least three
different countries, one of which may be the United States. This series has
the same objective and investment disciplines as the Global Bond Series of
Delaware Group Global & International Funds, Inc., a separate Delaware Group
fund.
Shares of the funds and series are sold to Lincoln Life for investment of the
assets of the VAA and of Lincoln Life Flexible Premium Variable Life Account K,
for variable life insurance contracts. Shares of some, but not all, of the
funds are also sold to Lincoln Life for investment of the assets of Lincoln
Life Flexible Premium Variable Life Accounts D and G, also to fund variable
life insurance contracts. In addition, shares of the Delaware Group Premium
Fund, Inc. are sold to separate accounts of life insurance companies other than
Lincoln Life. See Other information. Shares of the funds and series are not
sold directly to the general public.
We will purchase shares of the funds and series at net asset value and direct
them to the appropriate subaccounts of the VAA. We will redeem sufficient
shares of the appropriate funds and series to pay annuity payouts, death
benefits, surrender/ withdrawal proceeds or for purposes described in the
contract. If you desire to transfer all or part of your investment from one
subaccount to another, we may redeem shares held in the first and purchase
shares for the other subaccount. The shares are retired, but they may be
reissued later.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
All of the investment objectives of the funds and series are fundamental which
means that no changes may be made without the affirmative vote of a majority of
the outstanding voting securities of each respective fund or series. The extent
to which the particular investment policies, practices or restrictions for each
fund or series are fundamental or non-fundamental depends on the particular
fund or series. If they are non-fundamental, they may be changed by the Board
of Directors of the funds or series without shareholder approval.
You are urged to consult the Prospectuses in this booklet and SAIs for each
individual fund or series for additional information regarding the fundamental
and non-fundamental policies, practices and restrictions of each of the funds
and series.
REINVESTMENT
All dividend and capital gain distributions of the funds and series are
automatically reinvested in shares of the distributing funds and series at
their net asset value on the date of distribution. Dividends are not paid out
to contractowners as additional units, but are reflected in changes in unit
values.
11
<PAGE>
Account C
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, within the law, to make additions, deletions and
substitutions for the funds and series held by the VAA. (We may substitute
shares of another series or of other funds for shares already purchased, or to
be purchased in the future, under the contract. This substitution might occur
if shares of a fund and series should no longer be available, or if investment
in any fund's and series' shares should become inappropriate, in the judgement
of our management, for the purposes for the contract.) No substitution of the
shares attributable to your account may take place without notice to you and
prior approval of the SEC, in accordance with the 1940 Act.
CHARGES AND OTHER DEDUCTIONS
DEDUCTIONS FROM PURCHASE PAYMENTS
There are no front-end deductions for sales charges made from purchase
payments. However, we will deduct premium taxes, when applicable.
ACCOUNT CHARGE
There is no account charge for single premium deferred contracts and flexible
premium deferred contracts, Multi Fund 3 and 4. For periodic and flexible
premium, Multi Fund 2 deferred contracts, we will deduct $25 from the contract
value on the last valuation date of each contract year to compensate us for the
administrative services provided to you; this $25 account charge will also be
deducted from the contract value upon surrender. Administrative services
include processing applications; issuing contracts; processing purchase and
redemptions of fund shares; maintaining records; administering annuity payouts;
providing accounting, valuation, regulatory and reporting services.
SURRENDER CHARGES
There are charges associated with the surrender of a contract or the withdrawal
of contract value (or of purchase payments, for flexible contracts) before the
annuity commencement date. The surrender charges associated with surrender or
withdrawal are paid to us to compensate us for the loss we experience on
contract distribution costs when contractowners surrender or withdraw before
distribution costs have been recovered. Charges are the same for
surrenders/withdrawals except that, for the first withdrawal in a contract
year, up to 15% of contract value (purchase payments for flexible contracts)
may be withdrawn free of charges. This 15% withdrawal exception does not apply
to a surrender of a contract.
A. PERIODIC PREMIUM DEFERRED CONTRACT
For the first withdrawal in a contract year in excess of 15%, for any
subsequent withdrawals in the same contract year, or for surrender of the
contract, there will be a surrender charge of 8% for years 1-5; 4% in years 6-
10; and no charge after the contract has been in force for 10 years. In
addition, as explained previously, an account charge will be deducted for a
surrender.
Surrender charges will be waived in the event of the death of the annuitant. If
between the effective date of the contract and the annuitant's 65th birthday,
the annuitant should become totally and permanently disabled [as defined in
Section 22(e)(3) of the code], surrender charges will also be waived. In
addition, for 403(b) and 457 contracts only, surrender charges will be waived
in the event the annuitant: (1) has terminated employment with the employer
that sponsored the contract; and (2) has been in the contract for at least five
years (the five year date beginning either November 1, 1991 or the date of the
contract, whichever is later); and (3) is at least age 55.
B. SINGLE PREMIUM DEFERRED CONTRACT OR NONRECURRING LUMP SUM PAYMENT TO
PERIODIC PREMIUM DEFERRED CONTRACT
For a single premium deferred contract or a nonrecurring lump sum payment made
to a periodic premium deferred contract, the surrender/withdrawal charges (when
applicable as described previously) will be:
<TABLE>
<CAPTION>
Contract year in which surrender/withdrawal
occurs
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7 8+
Charge as a percent
of proceeds withdrawn 7% 6 5 4 3 2 1 0
</TABLE>
Investment gains attributable to a nonrecurring lump sum payment made to a
periodic premium deferred contract will be subject to surrender charges of 8%
in years 1-5, 4% in years 6-10, and no charge after the contract has been in
force for 10 years.
Lump sum payments may be deposited into a periodic premium deferred contract
within 12 months of the effective date of the contract. After the 12-month
period, a new contract must be established for a lump sum payment.
For periodic premium deferred contracts under which a nonrecurring lump sum has
been received, withdrawals will be made first from any amount subject to the
lowest charge until that amount is gone.
Surrender charges will be waived in the event of the death of the annuitant. If
between the effective date of the contract and the annuitant's 65th birthday,
the annuitant should become totally and permanently disabled, surrender charges
will also be waived.
12
<PAGE>
Account C
C. FLEXIBLE PREMIUM DEFERRED CONTRACT
For a flexible premium deferred contract, the surrender/withdrawal charges
(when applicable as described previously) will be:
<TABLE>
<CAPTION>
Completed contract years
between date of purchase
payments and date of
surrender/withdrawal*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 1 2 3 4 5 6 7+
Charge as a percent of
total purchase payments surrendered/withdrawn
in a contract year 7% 6 5 4 3 2 1 0
</TABLE>
*The surrender charge is calculated separately for each contract year's
purchase payments.
For the first withdrawal of purchase payments in each contract year, up to 15%
of purchase payments will be free of these charges. In addition, as explained
previously, an account charge will be deducted for a surrender on Multi Fund 2
flexible premium contracts.
Surrender charges will be waived in the event of the death of the annuitant. If
between the effective date of the contract and the annuitant's 65th birthday,
the annuitant should become totally and permanently disabled, surrender charges
will also be waived.
The surrender charge is calculated separately for each contract year's purchase
payments to which a charge applies. (FOR PURPOSES OF CALCULATING THIS CHARGE,
WE ASSUME THAT PURCHASE PAYMENTS ARE WITHDRAWN ON A FIRST IN-FIRST OUT BASIS,
AND THAT ALL PURCHASE PAYMENTS ARE WITHDRAWN BEFORE ANY EARNINGS ARE
WITHDRAWN.) The surrender charges associated with surrender or withdrawal are
paid to us to compensate us for the loss we experience on contract
distributions costs when contractowners surrender or withdraw before
distribution costs have been recovered.
ADDITIONAL INFORMATION
Participants in the Texas Optional Retirement Program should refer to
Restrictions under the Texas Optional Retirement Program, later in this
Prospectus booklet.
The charges associated with surrender/withdrawal are paid to us to compensate
us for the cost of distributing the contracts. As required by the National
Association Securities Dealers, in no event will the aggregate surrender
charges under a contract exceed 8.5% of your total purchase payments.
The surrender and account charges described previously may be reduced or
eliminated for any particular contract. However these charges will be reduced
only to the extent that we anticipate lower distribution and/or administrative
expenses or that we perform fewer sales or administrative services than those
originally contemplated in establishing the level of those charges. Lower
distribution and administrative expenses may be the result of economies
associated with (1) the use of mass enrollment procedures, (2) the performance
of administrative or sales functions by the employer, (3) the use by an
employer of automated techniques in submitting deposits or information related
to deposits on behalf of its employees, or (4) any other circumstances which
reduce distribution or administrative expenses. The exact amount of surrender
and account charges applicable to a particular contract will be stated in that
contract.
DEDUCTIONS FROM THE VAA FOR ASSUMPTION OF MORTALITY AND EXPENSE RISKS
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.002% of the daily net asset value, to compensate us for our
assumption of certain risks described below. This charge is made up of two
parts: (1) our assumption of mortality risks (0.900%) and (2) our assumption of
expense risks (0.102%). The level of this charge is guaranteed not to change.
Our assumption of mortality risks guarantees that the annuity payouts made to
our contractowners will not be affected by the mortality experience (life span)
either of persons receiving those payouts or of the general population. We
assume this mortality risk through guaranteed annuity rates incorporated into
the contract which cannot be changed. We also assume the risk that the charges
for administrative expenses, which cannot be changed by us, will be
insufficient to cover actual administrative costs.
If the 1.002% charge proves insufficient to cover underwriting and
administrative costs in excess of the charges made for administrative expenses,
we will absorb the loss. However, if the amount deducted proves more than
sufficient, we will keep the profit.
DEDUCTIONS FOR PREMIUM TAXES
Any premium tax or other tax levied by any governmental entity as a result of
the existence of the contracts or the VAA will be deducted from the contract
value when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation, or by judicial action. These premium taxes will
generally depend upon the law of your state of residence. The tax ranges from
0.5% to 4.0%.
DEDUCTION FOR THE EGMDB
When the EGMDB becomes effective, we will begin deducting from the VAA an
amount, computed daily, which is equal to an annual rate of 0.30% of the daily
13
<PAGE>
Account C
net asset value. This charge will start at the beginning of the next valuation
period. This charge will continue for all future contract years unless the
owner elects to discontinue the EGMDB. If the EGMDB is discontinued, the 0.30%
annual charge will cease at the end of the valuation period when the EGMDB is
terminated. See The contracts--Death benefit before the annuity commencement
date.
OTHER CHARGES AND DEDUCTIONS
There are deductions from and expenses paid out of the assets of the eleven
funds and the three series that are described later in this booklet in the
Appendix to the funds' Prospectuses and in the Prospectus for the series
respectively.
THE CONTRACTS
PURCHASE OF CONTRACTS
If you wish to purchase a contract, you must apply for it through one of our
authorized sales representatives. The completed application is sent to us and
we decide whether to accept or reject it. If the application is accepted, a
contract is prepared and executed by our legally authorized officers. The
contract is then sent to you through your sales representative. See
Distribution of the contracts.
If a completed application and all other information necessary for processing a
purchase order are received, an initial purchase payment will be priced no
later than two business days after we receive the order. While attempting to
finish an incomplete application, we may hold the initial purchase payment for
no more than five business days. If the incomplete application cannot be
completed within those five days, you will be informed of the reasons, and the
purchase payment will be returned immediately (unless you specifically
authorize us to keep it until the application is complete). Once the
application is complete, the initial purchase payment must be priced within two
business days.
WHO CAN INVEST
To apply for a periodic premium deferred contract, you must be of legal age in
a state where the contracts may be lawfully sold and also be eligible to
participate in any of the qualified or nonqualified plans for which the
contracts are designed. The annuitant cannot be older than age 74.
To apply for a flexible premium deferred contract, a single premium deferred
contract or to make a nonrecurring lump sum payment to a periodic premium
deferred contract, you must meet the same requirements as for an application of
a periodic premium deferred contract, except that the annuitant cannot be older
than age 84.
PURCHASE PAYMENTS
Purchase payments are payable to us at a frequency and in an amount selected by
you in the application. The minimum purchase payment for a single premium
deferred contract is $3,000 ($1,000 for IRAs and SEPs). The minimum initial
purchase payment for a flexible premium deferred contract is $3,000 ($1,000 for
IRAs and SEPs), and subsequent purchase payments must be at least $100. For a
periodic premium deferred contract, the minimum amount of any scheduled
purchase payment is $25, and the scheduled purchase payments must total at
least $600 per year. Purchase payments in any one contract year which exceed
twice the amount of purchase payments made in the first contract year may be
made only with our permission. Purchase payments in total may not exceed $1
million for each annuitant. If you stop making purchase payments, the contract
will remain in force as a paid-up contract as long as the total contract value
is at least $600. Payments may be resumed at any time until the annuity
commencement date, the maturity date, the surrender of the contract, or payment
of any death benefit, whichever comes first.
VALUATION DATE
Accumulation and annuity units will be valued once daily as of the close of
trading (currently 4:00 p.m., New York time) on each day that the New York
Stock Exchange (NYSE) is open for trading (valuation date). On any date other
than a valuation date, the accumulation unit value and the annuity unit value
will not change.
ALLOCATION OF PURCHASE PAYMENTS
Purchase payments are placed into the VAA's subaccounts, each of which invests
in shares of its corresponding fund or series, according to your instructions.
The minimum amount of any purchase payment which can be put into any one
subaccount is $20 under periodic premium deferred contracts, $1,000 under
single premium deferred contracts and $100 under flexible premium deferred
contracts. Upon allocation to the appropriate subaccount, purchase payments are
converted into accumulation units. The number of accumulation units credited is
determined by dividing the amount allocated to each subaccount by the value of
an accumulation unit for that subaccount on the valuation date on which the
purchase payment is received at the home office if received before 4:00 p.m.,
New York Time. If the purchase payment is received at or after 4:00 p.m., New
York Time, we will use the accumulation unit value computed on the next
valuation date. The number of accumulation units determined in this way shall
not be changed by any subsequent change in the value of an accumulation unit.
However, the dollar value of an accumulation unit will vary depending not only
upon how well the investments perform, but also upon the related expenses of
the VAA and the underlying funds and series.
VALUATION OF ACCUMULATION UNITS
Accumulation units for each subaccount are valued separately. Initially, the
value of each accumulation unit was set at $1.00. Thereafter, the value of an
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accumulation unit in any subaccount on any valuation date equals the value of
an accumulation unit in that subaccount as of the preceding valuation date
multiplied by the net investment factor of that subaccount for the current
valuation period.
The net investment factor is an index used to measure the investment
performance of a subaccount from one valuation date to the next. The net
investment factor for any subaccount for any valuation date reflects the change
in the net asset value per share of the fund held in the subaccount from one
valuation period to the next, adjusted for the daily deduction of the
administrative and mortality and expense risk charges from assets in the
subaccount. If any "ex-dividend" date occurs during the valuation period, the
per share amount of any dividend or capital gain distribution is taken into
account. Also, if any taxes need to be reserved, a per share charge or credit
for any taxes reserved for, which is determined by us to have resulted from the
operations of the subaccount, is taken into account.
TRANSFERS ON OR BEFORE THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment from one subaccount to
another. A transfer involves the surrender of accumulation units in one
subaccount and the purchase of accumulation units in the other subaccount. A
transfer will be done using the respective accumulation unit values as of the
valuation date immediately following receipt of the transfer request.
Transfers between subaccounts are restricted to once every 30 days; although,
we reserve the right to waive this 30-day period. The minimum amount which may
be transferred between subaccounts is $500 or the entire amount in the
subaccount, if less than $500. If the transfer from a subaccount would leave
you with less than $100 in the subaccount, we may transfer the total balance of
the subaccount. (We have the right to reduce these minimum amounts.)
A transfer may be made by writing to the home office or, if a Telephone
Exchange Authorization form (available from us) is on file with us, by a toll-
free telephone call. In order to prevent unauthorized or fraudulent telephone
transfers, we may require a contractowner to provide certain identifying
information before we will act upon their instructions. We may also assign the
contractowner a Personal Identification Number (PIN) to serve as
identification. We will not be liable for following telephone instructions we
reasonably believe are genuine. Telephone tranfer requests may be recorded and
written confirmation of all transfer requests will be mailed to the
contractowner on the next valuation date. Telephone transfers will be processed
on the valuation date that they are received when they are received at our
customer service center before 4:00 PM New York Time.
You may also transfer all or any part of the contract value from the
subaccount(s) to the fixed side of the contract. Transfers from the fixed side
of the contract to the various subaccount(s) are allowed subject to the
following restrictions: (1) the sum of the percentages of the fixed value
transferred is limited to 25% of the value of the fixed side in any 12 month
period; and (2) the minimum amount which can be transferred is $500 or the
amount in the fixed account. We reserve the right to waive any of these
restrictions.
When thinking about a transfer of contract value, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time.
There is no charge to you for a transfer. However, we reserve the right to
impose a charge in the future for any transfers.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment in one subaccount to
another subaccount or to the fixed side of the contract. Those transfers will
be limited to three times per contract year. HOWEVER, AFTER THE ANNUITY
COMMENCEMENT DATE, NO TRANSFERS ARE ALLOWED FROM THE FIXED SIDE OF THE CONTRACT
TO THE SUBACCOUNTS.
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
You may designate a beneficiary during the life of the annuitant and change the
beneficiary by filing a written request with the home office. Each change of
beneficiary revokes any previous designation. We reserve the right to request
that you send us the contract for endorsement of a change of beneficiary.
If the annuitant dies before the annuity commencement date and the EGMDB is not
in effect, a death benefit equal to the contract value will be paid to your
designated beneficiary.
An optional EGMDB is available for nonqualified and IRA flexible premium
deferred annuity contracts, for annuitants up to age 75. (Please check with
your representative for availability to current contractowners.) The EGMDB will
take effect on the valuation date when the EGMDB election form is approved at
our home office, if before 4:00 p.m. New York Time. The owner may discontinue
the EGMDB at any time. If discontinued, the EGMDB will terminate on the
valuation date written notice is received at our home office, if before 4:00
p.m. New York Time. If after 4:00 p.m. New York Time, the EGMDB election or
termination will be effective with the next valuation date. The owner may not
reelect the EGMDB once it is discontinued. As of the annuity commencement date
the EGMDB will be discontinued and the charge for the EGMDB will cease. See
Charges and other deductions--Deduction for the EGMDB.
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If the annuitant dies before the annuity commencement date and the EGMDB is in
effect, the death benefit paid to your designated beneficiary will be the
greater of:
1. the contract value at the end of the valuation period when the death claim
is approved for payment by Lincoln Life, or
2. the higher of:
(a) the contract value at the end of the valuation period when the EGMDB
becomes effective and;
(b) the highest contract value at the end of the valuation period that
includes any contract anniversary date up to and including age 75
following election of the EGMDB;
increased by purchase payments and decreased by any withdrawals,
annuitizations, and premium taxes incurred after the contract anniversary or
EGMDB effective date the highest contract value occurred.
The contract value available upon death is the value of the contract at the end
of the valuation period during which the death claim is approved for payment by
Lincoln Life. The approval of the death claim payment will occur after receipt
of: (1) proof, satisfactory to us, of the death of the annuitant; (2) written
authorization for payment; and (3) our receipt of all required claim forms
fully completed.
The EGMDB may not be elected on or after the annuity commencement date.
At any time during a 60-day period the beneficiary may elect to receive payment
either in the form of a lump sum settlement or an annuity payout.
If a lump sum settlement is requested, the proceeds will be mailed within seven
days of receipt of satisfactory claim documentation, as discussed previously,
subject to the laws and regulations governing payment of death benefits. If an
election has not been made by the end of the 60-day period, a lump sum
settlement will be made to the beneficiary at that time. This payment may be
postponed as permitted by the 1940 Act.
Annuity payments will be made in accordance with applicable laws and
regulations governing payment of death benefits.
Unless otherwise provided in the beneficiary designation, one of the following
procedures will take place on the death of a beneficiary:
1. If any beneficiary dies before the annuitant, that beneficiary's interest
will go to any other beneficiaries named, according to their respective
interests. There are no restrictions on the beneficiary's use of the
proceeds; and/or
2. If no beneficiary survives the annuitant, the proceeds will be paid to the
contractowner or to his/her estate, as applicable.
JOINT/CONTINGENT OWNERSHIP
If joint owners are named in the application, the joint owners shall be treated
as having equal undivided interests in the contract. Either owner,
independently of the other, may exercise any ownership rights in this contract.
Only the spouse can be a joint owner on multifund 4, flexible premium deferred
annuity contracts.
A contingent owner may exercise ownership rights in this contract only after
the contractowner dies.
DEATH OF CONTRACTOWNER
If the contractowner of a nonqualified contract dies before the annuity
commencement date, then, in compliance with the code, the cash surrender value
of the contract will be paid as follows:
1. Upon the death of a non-annuitant contractowner, the proceeds shall be paid
to any surviving joint or contingent owner(s). If no joint or contingent
owner has been named, then the cash surrender value shall be paid to the
annuitant named in the contract; and
2. Upon the death of a contractowner, who is also the annuitant, the death will
be treated as death of the annuitant and the provisions of this contract
regarding death of annuitant will control. If the recipient of the proceeds
is the surviving spouse of the contractowner, the contract may be continued
in the name of that spouse as the new contractowner.
The code requires that any distribution be paid within five years of the death
of the contractowner unless the beneficiary begins receiving, within one year
of the contractowner's death, the distribution in the form of a life annuity or
an annuity for a period certain not exceeding the beneficiary's life
expectancy.
SURRENDERS AND WITHDRAWALS
Before the annuity commencement date, we will allow the surrender of the
contract or a withdrawal of the contract value upon your written request,
subject to the rules below.
Special restrictions on surrenders/withdrawals apply if your contract is
purchased as part of a retirement plan of a public school system or Section
501(c)(3) organization under Section 403(b) of the code. Beginning January 1,
1989, in order for a contract to retain its tax-qualified status, Section
403(b) prohibits a withdrawal from a Section 403(b) contract of post-1988
contributions (and earnings on those contributions) pursuant to a salary
reduction agreement. However, this restriction does not apply if the annuitant
attains age (a) 59 1/2 (b) separates from service, (c) dies, (d) becomes
totally and permanently disabled and/or (e) experiences financial hardship (in
which event the income attributable to those contributions may not be
withdrawn).
A surrender/withdrawal after the annuity commencement date depends upon the
annuity option selected.
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Pre-1989 contributions and earnings through December 31, 1988, are not subject
to the previously stated restriction.
The contract value available upon surrender/withdrawal is the cash surrender
value at the end of the valuation period during which the written request for
surrender/withdrawal is received at the home office. Unless a request for
withdrawal specifies otherwise, withdrawals will be made from all subaccounts
within the VAA and from the general account in the same proportion that the
amount of withdrawal bears to the total contract value. The minimum amount
which can be withdrawn is $100, and the remaining contract value must be at
least $300. Where permitted by contract, surrender/withdrawal payments will be
mailed within seven days after we receive a valid written request at the home
office. The payment may be postponed as permitted by the 1940 Act. You may
specify that the charges be deducted from the amount you request withdrawn or
from the remaining contract value.
There are charges associated with surrender of a contract or withdrawal of
contract value before the annuity commencement date. See Charges and other
deductions.
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal tax status.
If the total contract value is less than $600, and if no purchase payments have
been made for at least two years, we reserve the right to terminate the
contract.
REINVESTMENT PRIVILEGE
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal, and we will recredit the surrender/withdrawal charges
previously deducted. This election must be made within 30 days of the date of
the surrender/withdrawal, and the repurchase must be of a contract covered by
this Prospectus. In the case of a qualified contract, a representation must be
made that the proceeds being used to make the purchase have retained their tax-
favored status under an arrangement for which the contracts offered by this
Prospectus are designed. The number of accumulation units which will be
credited when the proceeds are reinvested will be based on the value of the
accumulation unit(s) on the next valuation date. This computation will occur
following receipt of the proceeds and request for reinvestment at the home
office. You may utilize the reinvestment privilege only once. For tax reporting
purposes, we will treat a surrender/withdrawal and a subsequent reinvestment
purchase as separate transactions. You should consult a tax advisor before you
request a surrender/withdrawal or subsequent reinvestment purchase.
AMENDMENT OF CONTRACT
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. You will be
notified in writing of any changes, modifications or waivers.
COMMISSIONS
For the flexible premium deferred annuity Multi Fund 2 and 3 contracts, the
maximum commission which could be paid to dealers is equal to 5.25% on each
purchase payment; plus up to 0.10% of the value of purchase payments in the
variable annuity account while the EGMDB is in effect. For flexible premium
deferred annuity Multi Fund 4 contracts, the maximum commission which could be
paid to dealers is equal to 4.50% on each purchase payment; plus an annual
continuing commission up to .40% of the value of the contract purchase payments
invested for at least 15 months; plus up to 0.10% of the value of purchase
payments in the variable annuity account while the EGMDB is in effect.
For the periodic premium deferred annuity contract, the maximum commission
which could be paid to dealers is 9% on the total purchase payments received
during the first contract year and 5.25% on each purchase payment in renewal
contract years (or an equivalent schedule).
OWNERSHIP
As contractowner, you have all rights under the contract. According to Indiana
law, the assets of the VAA are held for the exclusive benefit of all
contractowners and their designated beneficiaries. The assets of the VAA are
not chargeable with liabilities arising from any other business that we may
conduct. Qualified contracts may not be assigned or transferred except as
permitted by the Employee Retirement Income Security Act (ERISA) of 1974 and
upon written notification to us. We assume no responsibility for the validity
or effect of any assignment. Consult your tax advisor about the tax
consequences of an assignment.
CONTRACTOWNER QUESTIONS
The obligations to purchasers under the contracts are those of Lincoln Life.
Your questions and concerns should be directed to us at 1-800-4Lincoln (454-
6265).
ANNUITY PAYOUTS
When you apply for a contract, you may select any annuity commencement date
permitted by law. (PLEASE NOTE THE FOLLOWING EXCEPTION: Contracts issued under
qualified employee pension and profit-sharing trusts [described in Section
401(a) and tax exempt under Section 501(a) of the code] and qualified annuity
plans [described in Section 403(a) of the code], including H.R. 10 trusts and
plans covering self-employed individuals and their employees, provide for
annuity payouts to start at the date and under the option specified in the
plan.)
The contract provides that all or part of the contract value may be used to
purchase an annuity. Optional forms of payout of annuities (annuity options)
are available, each of which is payable on a variable basis, a fixed basis or a
combination of both. We may choose to make other annuity options available in
the future.
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You may elect annuity payouts in monthly, quarterly, semiannual or annual
installments. If the payouts from any subaccount would be or become less than
$50, we have the right to reduce their frequency until the payouts are at least
$50 each. Following are explanations of the annuity options available.
ANNUITY OPTIONS
LIFE ANNUITY. This option offers a periodic payout during the lifetime of the
annuitant and ends with the last payout before the death of the annuitant. This
option offers the highest periodic payout since there is no guarantee of a
minimum number of payouts or provision for a death benefit for beneficiaries.
HOWEVER, THERE IS THE RISK UNDER THIS OPTION THAT THE ANNUITANT WOULD RECEIVE
NO PAYOUTS IF DEATH OCCURS BEFORE THE DATE SET FOR THE FIRST PAYOUT; ONLY ONE
PAYOUT IF DEATH OCCURS BEFORE THE SECOND SCHEDULED PAYOUT, AND SO ON.
LIFE INCOME WITH PAYOUTS GUARANTEED FOR DESIGNATED PERIOD. This option
guarantees periodic payouts during a designated period, usually 10 or 20 years,
and then continues throughout the lifetime of the annuitant. The designated
period is selected by the contractowner.
JOINT LIFE ANNUITY. This option offers a periodic payout during the joint
lifetime of the annuitant and a designated joint annuitant. The payouts
continue during the lifetime of the survivor.
JOINT LIFE ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic
payouts during a designated period, usually 10 or 20 years, and continues
during the joint lifetime of the annuitant and a designated joint annuitant.
The payouts continue during the lifetime of the survivor. The designated period
is selected by the contractowner.
JOINT-AND-TWO-THIRDS SURVIVOR ANNUITY. This option provides a periodic payout
during the joint lifetime of the annuitant and a designated joint annuitant.
When one of the joint annuitants dies, the survivor, during their lifetime,
receives two thirds of the periodic payout made when both were alive.
UNIT REFUND LIFE ANNUITY. This option offers a periodic payout during the
lifetime of the annuitant with the guarantee that upon death a payout will be
made of the value of the number of annuity units (see Variable annuity payouts)
equal to the excess, if any, of: (a) the total amount applied under this option
divided by the annuity unit value for the date payouts begin, divided by (b)
the annuity units represented by each payout to the annuitant multiplied by the
number of payouts paid before death. The value of the number of annuity units
is computed on the date the death claim is approved for payment by the home
office.
None of the options listed above currently provide withdrawal features,
permitting the contractowner to withdraw commuted values as a lump sum payment.
Other options may be made available by us. Options are only available to the
extent they are consistent with the requirements of the contract and Section
72(s) of the code, if applicable. The mortality and expense risk charge and the
charge for administrative services will be assessed on all variable annuity
payouts, including options that do not have a life contingency and therefore no
mortality risk.
The annuity commencement date is usually on or before the annuitant's 85th
birthday; however you may change the annuity commencement date, change the
annuity option, or change the allocation of the investment among subaccounts up
to 30 days before the scheduled annuity commencement date, upon written notice
to the home office. You must give us at least 30 days notice before the date on
which you want payouts to begin. If proceeds become available to a beneficiary
in a lump sum, the beneficiary may choose any annuity payout option.
Unless you select another option, the contract automatically provides for a
life with a 10 year guaranteed period annuity (on a fixed, variable or
combination fixed and variable basis, in proportion to the account allocation
at the time of annuitization), except when a joint life payout is required by
law. Under any option providing for guaranteed payouts, the number of payouts
which remain unpaid at the date of the annuitant's death (or surviving
annuitant's death in the case of a joint life annuity) will be paid to your
beneficiary as payouts become due.
The contract contains no provision under which an annuitant or a beneficiary
may surrender their contract or make a withdrawal and receive a lump-sum
settlement once annuity payouts have begun. See Surrenders and withdrawals.
Options are only available to the extent they are consistent with the
requirements of Section 72(s) of the code, if applicable.
VARIABLE ANNUITY PAYOUTS
Variable annuity payouts will be determined using:
1. The contract value on the annuity commencement date;
2. The annuity tables contained in the contract;
3. The annuity option selected; and
4. The investment performance of the fund(s) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of annuity units equal to the first
periodic payout divided by the annuity unit value; and
3. Calculate the value of the annuity units each month thereafter.
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We assume an investment return of 5% per year, as applied to the applicable
mortality table. The amount of each payout after the initial payout will depend
upon how the underlying fund(s) and series perform, relative to the 5% assumed
rate. There is a more complete explanation of this calculation in the SAI.
FEDERAL TAX STATUS
This section is a discussion of the Federal income tax rules applicable to the
contracts as of the date of this
Prospectus. More information is provided in the SAI. THESE DISCUSSIONS AND
THOSE IN THE SAI ARE NOT INTENDED AS TAX ADVICE. This section does not discuss
the Federal tax consequences resulting from every possible situation. No
attempt has been made to consider any applicable state, local or foreign tax
law, other than the imposition of any state premium taxes (See Charges and
other deductions). If you are concerned about the tax implications with respect
to the contracts, you should consult a tax advisor. The following discussion is
based upon our understanding of the present Federal income tax laws as they are
currently interpreted by the Internal Revenue Service (IRS). No representation
is made about the likelihood of continuation of the present Federal income tax
laws or their current interpretations by the IRS.
TAXATION OF NONQUALIFIED CONTRACTS
You are generally not taxed on increases in the value of your contract until a
distribution occurs. This distribution can be in the form of a lump sum payout
received by requesting all or part of the cash surrender value (i.e.
surrenders/withdrawals) or as annuity payouts. For this purpose, the assignment
or pledge of, or the agreement to assign or pledge, any portion of the value of
a contract will be treated as a distribution. A transfer of ownership of a
contract, or designation of an annuitant (or other beneficiary) who is not also
the contractowner, may also result in tax consequences. The taxable portion of
a distribution (in the form of a lump sum payout or an annuity) is taxed as
ordinary income. For purchase payments made after February 28, 1986, a
contractowner who is not a natural person (for example, a corporation) [subject
to limited exceptions] will be taxed on any increase in the contract's cash
value over the investment in the contract during the taxable year, even if no
distribution occurs. The next discussion applies to contracts owned by natural
persons.
In the case of a surrender under the contract or withdrawal of contract value,
generally amounts received are first treated as taxable income to the extent
that the cash value of the contract immediately before the surrender exceeds
the investment in the contract at that time. Any additional amount withdrawn is
not taxable. In the case of a surrender under a contract issued before August
14, 1982, and allocable to an investment in the contract made before that date,
amounts received are treated as taxable income only to the extent that they
exceed the investment in the contract. The investment in the contract generally
equals the portion, if any, of any purchase payment paid by or on behalf of an
individual under a contract which is not excluded from the individual's gross
income.
Even though the tax consequences may vary depending on the form of annuity
payout selected under the contract, the contractowner of an annuity payout
generally is taxed on the portion of such payout that exceeds the investment in
the contract. For variable annuity payouts, the taxable portion is determined
by a formula that establishes a specific dollar amount of each payout that is
not taxed. The dollar amount is determined by dividing the investment in the
contract by the total number of expected periodic payouts. For fixed annuity
payouts, there generally is no tax on the portion of each payout that
represents the same ratio that the investment in the contract bears to the
total expected value of payouts for the term of the annuity; the remainder of
each payout is taxable. For individuals whose annuity starting date is after
December 31, 1986, the entire distribution (whether fixed or variable) will be
fully taxable once the recipient is deemed to have recovered the dollar amount
of the investment in the contract.
There may be imposed a penalty tax on distributions equal to 10% of the amount
treated as taxable income. The penalty tax is not imposed in certain
circumstances, which generally are distributions:
1. Received on or after age 59 1/2;
2. Made as a result of death or disability of contractowner;
3. Received in substantially equal periodic payments as a life annuity (subject
to special recapture rules if the series of payouts is subsequently
modified);
4. Allocable to the investment in the contract before August 14, 1982;
5. Under a qualified funding asset in a structured settlement;
6. Under an immediate annuity contract as defined in the code; and/or
7. Under a contract purchased in connection with the termination of certain
retirement plans.
TAXATION OF QUALIFIED CONTRACTS
The contracts may be purchased in connection with the following types of tax-
favored retirement plans:
1 Contracts purchased for employees of public school systems and certain tax-
exempt organizations, qualified under Section 403(b) of the code;
2. Pension and profit-sharing plans of self-employed individuals (H.R. 10 or
Keogh plans) or corporations, qualified under Section 401(a) or 403(a) of
the code;
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3. IRAs, qualified under Section 408 of the code;
4. Deferred compensation plans of state or local governments, qualified under
Section 457 of the code; and/or
5. SEPs, qualified under Section 408(k) of the code.
The tax rules applicable to these plans, including restrictions on
contributions and benefits, taxation of distributions and any tax penalties,
vary according to the type of plan and its terms and conditions. Participants
under such plans, as well as contractowners, annuitants and beneficiaries,
should be aware that the rights of any person to any benefits under such plans
may be subject to the terms and conditions of the plans themselves, regardless
of the terms and conditions of the contracts. Purchasers of contracts for use
with any qualified plan, as well as plan participants and beneficiaries, should
consult counsel and other advisors as to the suitability of the contracts to
their specific needs, and as to applicable code limitations and tax
consequences.
MULTIPLE CONTRACTS
All contracts entered into after October 21, 1988, and issued by the same
insurance company (or its affiliates) to the same contractowner during any
calendar year will be treated as a single contract for tax purposes.
INVESTOR CONTROL
The Treasury Department has indicated that guidelines may be issued under which
a variable annuity contract will not be treated as an annuity contract for tax
purposes if the contractowner has excessive control over the investments
underlying the contract. They may consider the number of investment options or
the number of transfer opportunities available between options as relevant when
determining excessive control. The issuance of those guidelines may require us
to impose limitations on your right to control the investment. We do not know
whether any such guidelines would have a retroactive effect.
Section 817(h) of the Code and the related regulation that the Treasury
Department has adopted require that assets underlying a variable annuity
contract be adequately diversified. The regulations provide that a variable
annuity contract which does not satisfy the diversification standards will not
be treated as an annuity contract, unless the failure to satisfy the
regulations was inadvertent, the failure is corrected, and the contractowner or
we pay an amount to the Internal Revenue Service. The amount will be based on
the tax that would have been paid by the contractowner if the income, for the
period the contract was not diversified, had been received by the
contractowner. If the faulure to diversify is not corrected in this manner, the
contractowner of an annuity contract will be deemed the owner of the underlying
securities and will be taxed on the earnings of his or her account. We believe,
under our interpretation of the code and regulations thereunder, that the
investments underlying this contract meet these diversification standards.
WITHHOLDING
Generally, pension and annuity distributions are subject to withholding for the
recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Under the Code, 20% income tax withholding may apply to eligible
rollover distributions. All taxable distributions from qualified plans and
Section 403(b) annuities are eligible rollover distributions, except (1)
annuities paid out over life or life expectancy, (2) installments paid for a
period spanning 10 years or more, and (3) required minimum distributions. The
Code imposes a mandatory 20% income tax withholding on any eligible rollover
distribution that the contractowner does not elect to have paid in a direct
rollover to another qualified plan, Section 403(b) annuity or individual
retirement account.
Distributions from Section 457 plans are subject to the general wage
withholding rules.
VOTING RIGHTS
As required by law, we will vote the fund and series shares held in the VAA at
meetings of the shareholder of the various funds and series. The voting will be
done according to the instructions of contractowners who have interests in any
subaccounts which invest in a fund or funds and series. If the 1940 Act or any
regulation under it should be amended or if present interpretations should
change, and if as a result we determine that we are permitted to vote the fund
shares in our own right, we may elect to do so.
The number of votes which you have the right to cast will be determined by
applying your percentage interest in a subaccount to the total number of votes
attributable to the subaccount. In determining the number of votes, fractional
shares will be recognized. After the annuity commencement date, the votes
attributable to a contract will decrease.
Fund shares held in a subaccount for which no timely instructions are received
will be voted by us in proportion to the voting instructions which are received
for all contracts participating in that subaccount. Voting instructions to
abstain on any item to be voted on will be applied on a pro rata basis to
reduce the number of votes eligible to be cast.
Maryland law and the bylaws of each fund and series allow investment companies
registered under the 1940 Act to dispense with annual meetings of shareholders
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Account C
in certain cases where the meetings are only a formality. The Board of
Directors of each fund will decide each year whether or not to hold the
shareholder's annual meeting for that year.
The dispensing with annual meetings of the shareholder in effect results in
retaining the existing Directors in office. Consequently, the SEC requires the
funds to assure contractowners that a majority of those Directors have at some
point been elected by the shareholder. The SEC also requires that the funds
comply with Section 16(c) of the 1940 Act, concerning procedures by which
shareholders may remove Directors. For a more detailed explanation of this
procedure, see Description of shares in the Appendix to the Prospectuses for
the funds; also see the Prospectus for the series.
Annual meetings of each fund and of the series fund normally will not be held,
unless the Board of Directors decides to hold them. Special meetings of the
shareholder may be called for any valid purpose. Whenever a shareholder's
meeting is called, each person having a voting interest in a subaccount will
receive proxy voting material, reports and other materials relating to the
fund, and/or series involved.
DISTRIBUTION OF THE CONTRACTS
We are the distributor of the contracts. They will be sold by our registered
representatives who have been licensed by state insurance departments. The
contracts will also be sold by independent broker-dealers who have been
licensed by state insurance departments to represent us and who have selling
agreements with us. We are registered with the SEC under the Securities
Exchange Act of 1934 as a broker-dealer and are a member of the National
Association of Securities Dealers (NASD). Lincoln Life will offer contracts in
all states where it is licensed to do business.
RETURN PRIVILEGE
Within the free-look period after you first receive the contract, you may
cancel it for any reason by delivering or mailing it postage prepaid, to the
home office at P.O. Box 2340, 1300 South Clinton Street, Fort Wayne, Indiana,
46801. A contract canceled under this provision will be void. With respect to
the fixed portion of a contract, we will return purchase payments. With respect
to the VAA, except as explained in the following paragraph, we will return the
contract value as of the date of receipt of the cancellation, plus any account
charge and any premium taxes which had been deducted. No surrender charge will
be made. A PURCHASER WHO PARTICIPATES IN THE VAA IS SUBJECT TO THE RISK OF A
MARKET LOSS DURING THE FREE-LOOK PERIOD.
For contracts written in those states whose laws require that we assume this
market risk during the free-look period, a contract may be canceled, subject to
the conditions explained before, except that we will return only the purchase
payment(s).
STATE REGULATION
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the Indiana
Insurance Department at all times. A full examination of our operations is
conducted by that Department at least once every five years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Title 8, Section 830.105 of the Texas Government Code, consistent with prior
interpretations of the Attorney General of the State of Texas, permits
participants in the Texas Optional Retirement Program (ORP) to redeem their
interest in a variable annuity contract issued under the ORP only upon:
1. Termination of employment in all institutions of higher education as
defined in Texas law;
2. Retirement; or
3. Death.
Accordingly, participants in the ORP will be required to obtain a certificate
of termination from their employer(s) before accounts can be redeemed.
RECORDS AND REPORTS
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to the VAA. We
will mail to you, at your last known address of record at the home office, at
least semiannually after the first contract year, reports containing
information required by the 1940 Act or any other applicable law or regulation.
We have entered into an agreement with the Delaware Management Co., 2005 Market
Street, Philadelphia, PA 19203, to provide accounting services to the VAA.
21
<PAGE>
Account C
OTHER INFORMATION
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered by this Prospectus. This
Prospectus does not contain all the information in the Registration Statement,
its amendments and exhibits. Please refer to the Registration Statement for
further information about the VAA, Lincoln Life and the contracts offered.
Statements in this Prospectus about the content of contracts and other legal
instruments are summaries. For the complete text of those contracts and
instruments, please refer to those documents as filed with the SEC.
Lincoln National Flexible Premium Variable Life Accounts D, G and K, segregated
investment accounts of ours registered under the 1940 Act, are authorized to
invest assets in the following funds and series: Bond, Growth and Income,
Managed, Money Market and Special Opportunities (for Account D); Growth and
Income and Special Opportunities (for Account G) and all funds and series for
Account K. Through the VAA and the Variable Life Accounts we are the sole
shareholder in the eleven funds. However, we are not the sole shareholder of
series shares in the Delaware Group Premium Fund, Inc. Collectively, the VAA
and the Variable Life Accounts may be referred to in this booklet and in the
SAI as the variable accounts.
Due to differences in redemption rates, tax treatment or other considerations,
the interests of contractowners under the Variable Life Accounts could conflict
with those of contractowners under the VAA. In those cases where assets from
variable life and variable annuity separate accounts are invested in the same
fund or funds or series (i.e., where mixed funding occurs), the Boards of
Directors of the funds involved will monitor for any material conflicts and
determine what action, if any, should be taken. If it becomes necessary for any
separate account to replace shares of any fund or series with another
investment, that fund or series may have to liquidate securities on a
disadvantageous basis. Refer to the Prospectus for each fund and for the series
fund for more information about mixed funding.
In the future, we may purchase shares in the funds and series for one or more
unregistered segregated investment accounts.
ADVERTISEMENTS/SALES LITERATURE
In marketing the variable annuity contracts, we and our various sales
representatives may refer to certain ratings assigned to us under the Rating
System of the A.M. Best Co., Oldwick, New Jersey. The objective of Best's
Rating System is to evaluate the various factors affecting the overall
performance of an insurance company in order to provide Best's opinion about
that company's relative financial strength and ability to meet its contractual
obligations. The procedure includes both a quantitative and qualitative review
of the insurance company. In marketing the contracts and the underlying funds
and series, we may at times use data published by other nationally-known
independent statistical services. These service organizations provide relative
measures of such factors as an insurer's claim-paying ability, the features of
particular contracts, and the comparative investment performance of the funds
and series with other portfolios having similar objectives. A few such services
are: Duff & Phelps, the Lipper Group, Moody's, Morningstar, Standard and Poor's
and VARDS. There is more information about each of these services under
Advertising and sales literature in the SAI. Marketing materials may employ
illustrations of compound interest and dollar-cost averaging; discuss automatic
withdrawal services; describe our customer base, assets, and our relative size
in the industry. They may also discuss other features of Lincoln Life, the VAA,
the funds, the series, and their investment management.
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS FOR VAA
<TABLE>
<CAPTION>
Item
- ------------------------------------------------------
<S> <C>
General information and history of Lincoln Life
Special terms
Services
Purchase of securities being offered Underwriters
Calculation of performance data
</TABLE>
For a free copy of the SAI please see page one of this booklet.
<TABLE>
<CAPTION>
Item
- ---------------------------------------------------------
<S> <C>
Annuity payments
Federal tax status
Determination of accumulation and annuity unit value
Advertising and sales literature/graphics
Financial statements
</TABLE>
22
<PAGE>
Account C
LINCOLN NATIONAL
VARIABLE ANNUITY ACCOUNT C (VAA) (REGISTRANT)
LINCOLN NATIONAL
LIFE INSURANCE COMPANY (DEPOSITOR)
STATEMENT OF ADDITIONAL INFORMATION (SAI)
This SAI should be read in conjunction with the Prospectus of the VAA dated May
1, 1997.
You may obtain a copy of the VAA Prospectus on request and without charge.
Please
write Lincoln National Life Insurance Co., P.O. Box 2340, Fort Wayne, Indiana
46801
or call 1-800-4Lincoln (454-6265).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- ------------------------------------------
<S> <C>
GENERAL INFORMATION AND HISTORY
OF LINCOLN LIFE B-2
- ------------------------------------------
SPECIAL TERMS B-2
- ------------------------------------------
SERVICES B-2
- ------------------------------------------
PURCHASE OF SECURITIES BEING OFFERED B-2
- ------------------------------------------
UNDERWRITERS B-2
- ------------------------------------------
CALCULATION OF PERFORMANCE DATA B-2
</TABLE>
<TABLE>
<CAPTION>
Page
------------------------------------------------
<S> <C>
ANNUITY PAYOUTS B- 5
------------------------------------------------
FEDERAL TAX STATUS B- 5
------------------------------------------------
DETERMINATION OF ACCUMULATION AND ANNUITY
UNIT VALUE B- 8
------------------------------------------------
ADVERTISING AND SALES LITERATURE/GRAPHICS B- 8
------------------------------------------------
FINANCIAL STATEMENTS B-12
</TABLE>
SPECIAL NOTICE TO CONTRACTOWNERS ABOUT THIS YEAR'S LINCOLN LIFE FINANCIAL
STATEMENTS. Each year Lincoln Life is required by law to prepare financial
statements for different purposes. Two of the most important purposes are for
filing with state insurance departments and for inclusion in the securities
registration statements for our variable products, like this one. In the past
we have interpreted the prevailing regulations as requiring presentation of
these statements according to two different sets of accounting principles--one
for the insurance regulators (known as Statutory Accounting Principles, or
STAP) and one for the SEC (known as Generally Accepted Accounting Principles,
or GAAP).
When we create two sets of financial statements for the same insurer it
requires nearly double the time commitment of our internal accounting staff,
and two separate audits by our independent auditors. In an effort to control
costs and eliminate duplication of effort, we have reviewed the SEC's
requirements for the mode of presentation of the insurer's financial statements
in this registration statement, and we have discussed these requirements with
the SEC staff. As a result of these discussions and on advice of counsel, we
shall now begin to use the STAP-basis statements (which we call Statutory
Statements) exclusively, both for the insurance regulators and for our
securities registration statements. This is consistent with the current
practice of many other insurers.
We believe that both Statutory and GAAP statements fairly present the financial
position of Lincoln Life for the periods indicated, in accordance with those
respective accounting principles. However, between the two there are some
important differences in accounting theory and financial statement
presentation. FOR THAT REASON, IN THIS TRANSITION YEAR WE INCLUDE HERE BOTH
STATUTORY AND GAAP STATEMENTS. This should permit you to evaluate the financial
position of Lincoln Life from both points of view, and should help you
understand the differences between Statutory and GAAP statements. BEGINNING
NEXT YEAR WE SHALL PRESENT ONLY THE STATUTORY STATEMENTS.
THIS SAI IS NOT A PROSPECTUS.
The date of this SAI is May 1, 1997
B-1
<PAGE>
Account C
GENERAL INFORMATION
AND HISTORY OF LINCOLN NATIONAL LIFE
INSURANCE CO. (LINCOLN LIFE)
The prior Depositor of the account, Lincoln National Pension Insurance Co., was
merged into Lincoln Life, effective January 1, 1989. Lincoln Life, organized in
1905, is an Indiana stock insurance corporation, engaged primarily in insurance
and financial services. Lincoln Life is owned by Lincoln National Corp., a
publicly held insurance holding company domiciled in Indiana.
SPECIAL TERMS
The special terms used in this SAI are the ones defined in the Prospectus. They
are italicized to make this document more understandable.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Variable Annuity Account (VAA) and the
financial statements and schedules of Lincoln Life appearing in this SAI and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports which also appear elsewhere in this
document and in the registration statement. The financial statements and
schedules have been included in this document in reliance upon the reports
given upon the authority of Ernst & Young, LLP as experts in accounting and
auditing.
KEEPER OF RECORDS
All accounts, books, records and other documents which are required to be
maintained for the VAA are maintained by Lincoln Life. No separate charge
against the assets of the VAA is made by Lincoln Life for this service. We have
entered into an agreement with Delaware Management Co., 2005 Market Street,
Philadelphia, PA 19203, to provide accounting services to the VAA.
PRINCIPAL UNDERWRITER
Lincoln Life is the principal underwriter for the variable annuity contracts.
PURCHASE OF SECURITIES BEING OFFERED
The variable annuity contracts are offered to the public through licensed
insurance agents who specialize in selling Lincoln Life products; through
independent insurance brokers; and through certain securities broker/dealers
selected by Lincoln Life whose personnel are legally authorized to sell annuity
products. There are no special purchase plans for any class of prospective
buyers. However, under certain limited circumstances described in the
Prospectus under the section Charges and other deductions, the contract and/or
the surrender charges may be waived.
There are exchange privileges between subaccounts, and between the VAA and
Lincoln Life's General Account (See Transfers of accumulation units between
subaccounts in the Prospectus.) No exchanges are permitted between the VAA and
other separate accounts.
UNDERWRITERS
Lincoln Life has contracted with some broker/dealers, and may contract with
others, to sell the variable annuity contracts through certain legally
authorized persons and organizations. These dealers are
compensated under a standard Compensation Schedule.
Lincoln Life is the principal underwriter for the variable annuity contracts.
We may not offer a contract continuously or in every state. Lincoln Life
retains no underwriting commissions from the sale of the variable annuity
contracts.
CALCULATION OF PERFORMANCE DATA
A. MONEY MARKET FUNDED SUBACCOUNTS:
1. Seven-day yield: xxx%
Length of base period used in computing the yield: 7 days
Last Day in the base period: December 31, 1996
2. The yield reported above and in the table of condensed financial
information in the Prospectus is determined by calculating the change in
unit value for the base period (the 7-day period ended December 31,
1996); then dividing this figure by the account value at the beginning of
the period; then annualizing this result by the factor of 365/7. This
yield includes all deductions charged to the contractowner's account, and
excludes any
realized gains and losses from the sale of securities.
B-2
<PAGE>
Account C
B. OTHER SUBACCOUNTS:
1. TOTAL RETURN -- the tables below show, for the various subaccounts of the
VAA, an average annual total return as of the stated periods, based upon
a hypothetical initial purchase payment of $1,000, calculated according
to the formula set out after the table.
C. CONTRACTS AND EGMDB
The first table below sets out performance data for each of the subaccounts for
contracts without the EGMDB. The second table below sets out hypothetical
performance data for each of the subaccounts for contracts with the EGMDB. The
hypothetical performance shown in the second table is based on the actual
performance of the subaccounts, but reflects the charges that hypothetically
would have been made had the EGMDB been available under the contracts for the
period indicated.
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING DECEMBER 31, 1996 CONTRACTS WITHOUT EGMDB
<TABLE>
<CAPTION>
1-year 5-year 10-year
Single & Single & Single &
Periodic Flexible Periodic Flexible Periodic Flexible
Pymt. Prem. Pymt. Prem. Pymt. Prem.
Contracts Contracts Contracts Contracts Contracts Contracts
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bond
Commenced Activity on
December 21, 1981 -6.87% -4.84% 5.20% 5.63% 7.01% 7.01%
- ------------------------------------------------------------------------------------
Growth and Income
Commenced Activity on
December 21, 1981 8.92% 11.29% 11.98% 12.44% 13.24% 13.24%
- ------------------------------------------------------------------------------------
International
Commenced Activity on
May 1, 1991 0.05% 2.22% 7.55% 7.99% 6.41%* 6.80%*
- ------------------------------------------------------------------------------------
Managed
Commenced Activity on
April 29, 1983 2.36% 4.58% 8.48% 8.93% 10.00% 10.00%
- ------------------------------------------------------------------------------------
Global Asset Allocation
Commenced Activity on
August 3, 1987 5.16% 7.45% 9.83% 10.28% 8.68%* 9.51%*
- ------------------------------------------------------------------------------------
Social Awareness
Commenced Activity on
May 2, 1988 17.66% 20.21% 14.74% 15.21% 15.42%* 15.96%*
- ------------------------------------------------------------------------------------
Special Opportunities
Commenced Activity on
December 21, 1981 6.47% 8.78% 12.08% 12.54% 13.19% 13.19%
- ------------------------------------------------------------------------------------
Aggressive Growth
Commenced Activity on
January 3, 1994 6.46% 8.78% * * 8.34%* 9.50%*
- ------------------------------------------------------------------------------------
Capital Appreciation
Commenced Activity on
January 3, 1994 8.01% 10.36% * * 11.76%* 12.96%*
- ------------------------------------------------------------------------------------
Equity-Income
Commenced Activity on
January 3, 1994 9.95% 12.34% * * 15.16%* 16.40%*
- ------------------------------------------------------------------------------------
DE Emerging Growth
Commenced Activity on
May 1, 1996 -8.86% -7.87% * * * *
- ------------------------------------------------------------------------------------
DE Equity/Income
Commenced Activity on
May 1, 1996 3.56% 4.69% * * * *
- ------------------------------------------------------------------------------------
DE Global Bond
Commenced Activity on
May 1, 1996 2.11% 3.22% * * * *
- ------------------------------------------------------------------------------------
</TABLE>
* The lifetime of this subaccount is less than the complete period indicated.
The performance shown is for the period from commencement of activity.
B-3
<PAGE>
Account C
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING DECEMBER 31, 1996CONTRACTS WITH EGMDB
<TABLE>
<CAPTION>
1-year 5-year 10-year
Single & Single & Single &
Periodic Flexible Periodic Flexible Periodic Flexible
Pymt. Prem. Pymt. Prem. Pymt. Prem.
Contracts Contracts Contracts Contracts Contracts Contracts
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bond
Commenced Activity on
December 21, 1981 -6.87% -4.84% 5.20% 5.63% 7.01% 7.01%
- ------------------------------------------------------------------------------------
Growth and Income
Commenced Activity on
December 21, 1981 8.92% 11.29% 11.98% 12.44% 13.24% 13.24%
- ------------------------------------------------------------------------------------
International
Commenced Activity on
May 1, 1991 0.05% 2.22% 7.55% 7.99% 6.41%* 6.80%*
- ------------------------------------------------------------------------------------
Managed
Commenced Activity on
April 29, 1983 2.36% 4.58% 8.48% 8.93% 10.00% 10.00%
- ------------------------------------------------------------------------------------
Global Asset Allocation
Commenced Activity on
August 3, 1987 5.16% 7.45% 9.83% 10.28% 8.68%* 9.51%*
- ------------------------------------------------------------------------------------
Social Awareness
Commenced Activity on
May 2, 1988 17.66% 20.21% 14.74% 15.21% 15.42%* 15.96%*
- ------------------------------------------------------------------------------------
Special Opportunities
Commenced Activity on
December 21, 1981 6.47% 8.78% 12.08% 12.54% 13.19% 13.19%
- ------------------------------------------------------------------------------------
Aggressive Growth
Commenced Activity on
January 3, 1994 6.46% 8.78% * * 8.34%* 9.50%*
- ------------------------------------------------------------------------------------
Capital Appreciation
Commenced Activity on
January 3, 1994 8.01% 10.36% * * 11.76%* 12.96%*
- ------------------------------------------------------------------------------------
Equity-Income
Commenced Activity on
January 3, 1994 9.95% 12.34% * * 15.16%* 16.40%*
- ------------------------------------------------------------------------------------
DE Emerging Growth
Commenced Activity on
May 1, 1996 -8.86% -7.87% * * * *
- ------------------------------------------------------------------------------------
DE Equity/Income
Commenced Activity on
May 1, 1996 3.56% 4.69% * * * *
- ------------------------------------------------------------------------------------
DE Global Bond
Commenced Activity on
May 1, 1996 2.11% 3.22% * * * *
- ------------------------------------------------------------------------------------
</TABLE>
* The lifetime of this subaccount is less than the complete period indicated.
The performance shown is for the period from commencement of activity.
The length of the periods and the last day of each period used in the above
tables are set out in the table headings. The Average annual total return for
each period was determined by finding the average annual compounded rate of
return over each period that would equate the initial amount invested to the
ending redeemable value for that period, according to the following formula --
P (1 + T)n = ERV
Where: P = a hypothetical initial purchase payment of $1,000
T = average annual total return for the period in question
n = number of years
ERV = redeemable value (as of the end of the period in question) of a
hypothetical $1,000 purchase payment made at the beginning of the 1-year, 5-
year, or 10-year period in question (or fractional portion thereof)
The formula assumes that: 1) all recurring fees have been charged to
contractowner accounts; 2) all applicable non- recurring charges are deducted
at the end of the period in question; and 3) there will be a complete
redemption at the end of the period in question. The performance figures shown
in the tables above relate to the contract form containing the highest level of
charges.
B-4
<PAGE>
Account C [/R]
C. NONSTANDARDIZED PERFORMANCE DATA
The VAA advertises the performance of its various subaccounts by observing how
they perform over various time periods--monthly, year-to-date, yearly (fiscal
year); and over periods of three years and more. Monthly, year-to-date and
yearly performance are computed on a cumulative basis; performance for a three-
year period and for greater periods is computed both on a cumulative and on an
annualized basis.
Cumulative quotations are arrived at by calculating the change in the
accumulation unit value between the first and last day of the base period being
measured, and expressing the difference as a percentage of the unit value at
the beginning of the base period. The calculation reflects the mortality and
expense risk fees under the contracts and the management fees and other
expenses of the fund and series. The calculation does not include surrender
charges or the account charge, which, if included, would decrease the
performance.
Annualized quotations are arrived at by applying a formula which determines the
level rate of return which, if earned over the entire base period, would
produce the cumulative return.
The first table below sets out performance data for each of the subaccounts for
contracts without the EGMDB. The second table below sets out hypothetical
performance data for each of the subaccounts for contracts with the EGMDB. The
hypothetical performance shown in the second table is based on the actual
performance of the subaccounts, but reflects the charges that hypothetically
would have been made had the EGMDB been available under the contracts for the
period indicated.
The tables below set out representative performance quotations, according to
the definitions above, for each of the subaccounts, for the following base
periods: 1) monthly; 2) year-to-date; 3) yearly; and 4) a three-year period.
For all quotations except 2), the end of the base period is December 31, 1996.
For quotation 2, the end of the base period is November 30, 1996. (The year-to-
date quotation would equal the yearly quotation if the end of the base period
selected for the former were December 31.) In addition, the account may
advertise by quotations with base periods of more than three years. These will
be calculated in an identical manner to the method used to calculate the
quotation for the three-year period; the only difference is that the base
period utilized in the formula will be longer.
NONSTANDARDIZED PERFORMANCE DATA SUBACCOUNTS OF ACCOUNT C+ (CONTRACTS WITHOUT
EGMDB)
<TABLE>
<CAPTION>
Type of
performance Subaccount
data AG B CA EI GAA GI I M
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly
(12/31/96) -0.19% -1.30% -0.76% -1.02% -0.45% -2.24% 0.20% -1.41%
Year-to-Date
(11/30/96) 16.01 2.62 18.37 20.80 14.89 21.18 8.59 12.92
Yearly
(12/31/96) 15.79 1.29 17.47 19.57 14.37 18.46 8.81 11.32
3-Year Cumulative * 13.29 * * 36.25 62.79 19.75 38.41
3-Year Annualized * 4.25 * * 10.86 17.64 6.19 11.44
<CAPTION>
Type of
performance Subaccount
data MM SA SO DEG DEI DGB
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly
(12/31/96) 0.30% -1.93% -0.04% -0.42% -1.26% -0.53%
Year-to-Date
(11/30/96) 3.68 30.48 15.84 -0.45* 14.06* 11.65*
Yearly
(12/31/96) 3.99 27.96 15.79 -0.87* 12.63* 11.06*
3-Year Cumulative 11.79 79.99 48.12 * * *
3-Year Annualized 3.79 21.64 13.99 * * *
</TABLE>
+ - Table excludes surrender charges.
Key: AG=Aggressive Growth; B=Bond; CA=Capital Appreciation; EI=Equity-Income;
GAA=Global Asset Allocation; GI=Growth and Income; I=International; M=Managed;
MM=Money Market; SA=Social Awareness; SO=Special Opportunities; DEG=Delaware
Emerging Growth; DEI=Delaware Equity/Income; DGB=Delaware Global Bond
* The lifetime of this subaccount is less than the complete period indicated.
The performance shown is for the period from commencement of activity.
All performance quotations may be advertised on a cumulative basis; performance
quotations with a base period of two years or longer may also be advertised on
an annualized basis.
B-5
<PAGE>
Account C
NONSTANDARDIZED PERFORMANCE DATA SUBACCOUNTS OF ACCOUNT C+ (CONTRACTS WITH
EGMDB)
<TABLE>
<CAPTION>
Type of
performance Subaccount
data AG B CA EI GAA GI I M
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly
(12/31/96) -0.19% -1.30% -0.76% -1.02% -0.45% -2.24% 0.20% -1.41%
Year-to-Date
(11/30/96) 16.01 2.62 18.37 20.80 14.89 21.18 8.59 12.92
Yearly
(12/31/96) 15.79 1.29 17.47 19.57 14.37 18.46 8.81 11.32
3-Year Cumulative * 13.29 * * 36.25 62.79 19.75 38.41
3-Year Annualized * 4.25 * * 10.86 17.64 6.19 11.44
<CAPTION>
Type of
performance Subaccount
data MM SA SO DEG DEI DGB
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly
(12/31/96) 0.30% -1.93% -0.04% -0.42% -1.26% -0.53%
Year-to-Date
(11/30/96) 3.68 30.48 15.84 -0.45* 14.06* 11.65*
Yearly
(12/31/96) 3.99 27.96 15.79 -0.87* 12.63* 11.06*
3-Year Cumulative 11.79 79.99 48.12 * * *
3-Year Annualized 3.79 21.64 13.99 * * *
</TABLE>
+ - Table excludes surrender charges.
Key: AG=Aggressive Growth; B=Bond; CA=Capital Appreciation; EI=Equity-Income;
GAA=Global Asset Allocation; GI=Growth and Income; I=International; M=Managed;
MM=Money Market; SA=Social Awareness; SO=Special Opportunities; DEG=Delaware
Emerging Growth; DEI=Delaware Equity/Income; DGB=Delaware Global Bond
* The lifetime of this subaccount is less than the complete period indicated.
The performance shown is for the period from commencement of activity.
All performance quotations may be advertised on a cumulative basis; performance
quotations with a base period of two years or longer may also be advertised on
an annualized basis.
ANNUITY PAYOUTS
VARIABLE ANNUITY PAYOUTS
Variable annuity payouts will be determined on the basis of: (1) the value of
the contract on the annuity commencement date; (2) the annuity tables contained
in the contract; (3) the type of annuity option selected; and (4) the
investment performance of the eligible fund(s) selected. In order to determine
the amount of variable annuity payouts, Lincoln Life makes the following
calculation: first, it determines the dollar amount of the first payout;
second, it credits the annuitant with a fixed number of annuity units based on
the amount of the first payout; and third, it calculates the value of the
annuity units each period thereafter. These steps are explained below.
The dollar amount of the first variable annuity payout is determined by
applying the total value of the accumulation units credited under the contract
valued as of the annuity commencement date (less any premium taxes) to the
annuity tables contained in the contract. The first variable annuity payout
will be paid 14 days after the annuity commencement date. This date will become
the date on which all future annuity payouts will be paid. Amounts shown in the
tables are based on the 1971 Individual Annuity Mortality Tables for the single
premium, periodic premium and flexible premium (Multi Fund 2 and 3) annuity
contracts and the 1983(a) Individual Mortality Table for Multi Fund 4 flexible
premium annuity contract, modified, with an assumed investment return at the
rate of 5% per annum. The first annuity payout is determined by multiplying the
benefit per $1,000 of value shown in the contract tables by the number of
thousands of dollars of contract value under the contract. These annuity tables
vary according to the form of annuity selected and the age of the annuitant at
the annuity commencement date. The 5% interest rate stated above is the
measuring point for subsequent annuity payouts. If the actual Net Investment
Rate (annualized) exceeds 5%, the payment will increase at a rate equal to the
amount of such excess.
B-6
<PAGE>
Account C
Conversely, if the actual rate is less than 5%, annuity payouts will decrease.
If the assumed rate of interest were to be increased, annuity payouts would
start at a higher level but would decrease more rapidly or increase more
slowly.
Lincoln Life may use sex distinct annuity tables in contracts that are not
associated with employer sponsored plans where not prohibited by law.
At an annuity commencement date, the annuitant is credited with annuity units
for each subaccount on which variable annuity payouts are based. The number of
annuity units to be credited is determined by dividing the amount of the first
payout by the value of an annuity unit in each subaccount selected. Although
the number of annuity units is fixed by this process, the value of such units
will vary with the value of the underlying eligible funds. The amount of the
second and subsequent annuity payouts is determined by multiplying the
contractowner's fixed number of annuity units in each subaccount by the
appropriate annuity unit value for the valuation date ending 14 days before the
date that payment is due.
The value of each subaccount annuity unit was set initially at $1.00. The
annuity unit value for each subaccount at the end of any valuation date is
determined by multiplying the subaccount annuity unit value for the immediately
preceding valuation date by the product of:
a. The net investment factor of the subaccount for the valuation period for
which the annuity unit value is being determined, and
b. A factor to neutralize the assumed investment return in the annuity table.
The value of the annuity units is determined as of a valuation date 14 days
before the payout date in order to permit calculation of amounts of annuity
payouts and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
PROOF OF AGE, SEX AND SURVIVAL
Lincoln Life may require proof of age, sex or survival of any payee upon whose
age, sex or survival payouts depend.
FEDERAL TAX STATUS
GENERAL
The operations of the VAA form a part of, and are taxed with, the operations of
Lincoln Life under the Internal Revenue Code of 1986, as amended (the code).
Investment income and realized net capital gains on the assets of the VAA are
reinvested and taken into account in determining the accumulation and annuity
unit values. As a result, such investment income and realized net capital gains
are automatically retained as part of the reserves under the contract. Under
existing federal income tax law, Lincoln Life believes that VAA investment
income and realized net capital gains are not taxed to the extent they are
retained as part of the reserves under the contracts. Accordingly, Lincoln Life
does not anticipate that it will incur any federal income tax liability
attributable to the VAA, and therefore it does not intend to make any provision
for such taxes. However, if changes in the federal tax laws or interpretations
thereof result in Lincoln Life's being taxed on income or gains attributable to
the VAA, then Lincoln Life may impose a charge against the VAA in order to make
provision for payment of such taxes.
TAX STATUS OF NONQUALIFIED CONTRACTS
The code (Section 72(s)) provides that contracts issued after January 18, 1985,
will not be treated as annuity contracts for purposes of Section 72 unless the
contract provides that (A) if any contractowner dies on or after the annuity
starting date, but before the time the entire interest in the contract has been
distributed, the remaining portion of such interest must be distributed at
least as rapidly as under the method of distribution in effect at the time of
the contractowner's death; and (B) if any contractowner dies before the annuity
starting date, the entire interest must be distributed within five years after
the death of the contractowner. These requirements are considered satisfied to
the extent that any portion of the contractowner's interest that is payable to
or for the benefit of a designated beneficiary is distributed over that
designated beneficiary's life, or a period not extending beyond the designated
beneficiary's life expectancy, and if that distribution begins within one year
of the contractowner's death. The designated beneficiary must be a natural
person. Contracts issued after January 18, 1985 contain provisions intended to
comply with these code requirements, although regulations interpreting these
requirements have yet to be issued. Lincoln Life intends to review such
provisions and modify them if necessary to assure that they comply with the
requirements of Section 72(s) when clarified by regulation or otherwise.
QUALIFIED CONTRACTS
The rules governing the tax treatment of contributions and distributions under
qualified plans, as set forth in the code and applicable rulings and
regulations, are complex and subject to change. These rules also vary according
to the type of plan and the terms and conditions of the plan itself. Therefore,
no attempt is made herein to provide more than general information about the
use of contracts with the various types of plans, based on Lincoln Life's
understanding of the current federal tax laws as interpreted by the Internal
Revenue Service (IRS). Purchasers of contracts for use with such a plan and
plan participants and beneficiaries should consult counsel and other competent
advisors as to the suitability of the plan and the contract to their
B-7
<PAGE>
Account C
specific needs, and as to applicable code limitations and tax consequences.
Participants under such plans, as well as contractowners, annuitants and
beneficiaries, should also be aware that the rights of any person to any
benefits under such plans may be subject to the terms and conditions of the
plans themselves regardless of the terms and conditions of the contract.
Following are brief descriptions of the various types of
plans and of the use of contracts in connection therewith.
PUBLIC SCHOOL SYSTEMS AND SECTION 501(C)(3) ORGANIZATIONS (403(B))
Payments made to purchase annuity contracts by public school systems or certain
Section 501(c)(3) organizations for their employees are excludable from the
gross income of the employee to the extent that aggregate payments for the
employee do not exceed the exclusion allowance provided by Section 403(b) of
the code, the over-all limits for excludable contributions of Section 415 of
the code or the limit on elective contributions. Furthermore, the investment
results of the fund credited to the account are not taxable until benefits are
received either in the form of annuity payouts or in a single sum.
If an employee's individual account is surrendered, usually the full amount
received would be includable in income for that year at ordinary rates.
QUALIFIED CORPORATE EMPLOYEE'S PENSION AND PROFIT-SHARING TRUSTS AND QUALIFIED
ANNUITY PLANS
Payments made by a corporate employer and the increments on all payments for
qualified corporate plans are not taxable as income to the employee until
distributed. However, the employee may be required to include these amounts in
gross income before distribution if the qualified plan or trust loses its
qualification. Corporate plans qualified under Sections 401(a) or 403(a) of the
code are subject to extensive rules, including limitations on maximum
contributions or benefits.
Distributions of amounts in excess of nondeductible employee contributions
allocated to such distributions are generally taxable as ordinary income. If an
employee or beneficiary receives a lump sum distribution, that is, if the
employee or beneficiary receives in a single tax year the total amounts payable
with respect to that employee and the benefits are paid as a result of the
employee's death or separation from service or after the employee attains 59
1/2, taxable gain may be either eligible for special lump sum averaging
treatment or, if the recipient was age 50 before January 1, 1986, eligible for
taxation at a 20% rate to the extent the distribution reflects payouts made
before January 1, 1974. For plan years beginning after December 31, 1996, tax
exempt organizations (except state or local governments) may have 401(k) plans.
These special tax rules are not available in all cases.
SELF-EMPLOYED INDIVIDUALS (H.R. 10 OR KEOGH)
Under code provisions, self-employed individuals may establish plans commonly
known as H.R.10 or Keogh plans for themselves and their employees. The tax
consequences to participants under such plans depend upon the plan itself. Such
plans are subject to special rules in addition to those applicable to qualified
corporate plans, although certain of these rules have been repealed or modified
effective in 1984. Purchasers of the contracts to use with H.R. 10 plans should
seek competent advice as to suitability of plan documents and the funding
contracts.
INDIVIDUAL RETIREMENT ANNUITIES (IRA)
Under Section 408 of the code, individuals may participate in a retirement
program known as an IRA. An individual may make an annual IRA contribution of
up to the lesser of $2,000 (or $4,000 if IRAs are maintained for both the
individual and the nonworking spouse and they file a joint tax return) or 100%
of compensation. However, IRA contributions may be nondeductible in whole or in
part if (1) the individual or the spouse is an active participant in certain
other retirement programs and (2) the income of the individual (or of the
individual and the spouse) exceeds a specified amount. Distributions from
certain types of retirement plans may be rolled over to an IRA on a tax-
deferred basis if certain requirements are met. Distributions from IRA's are
subject to certain restrictions. Deductible IRA contributions and all earnings
will be taxed as ordinary income when distributed. The failure to satisfy
certain code requirements with respect to an IRA results in adverse tax
consequences.
DEFERRED COMPENSATION PLANS (457 PLANS)
Under the code provisions, employees and independent contractors (participants)
performing services for state and local governments and tax-exempt
organizations may establish deferred compensation plans. Plans of state or
local governments established on August 20, 1996, or later, must hold all
assets and income in trust (or custodial accounts or an annuity contract) for
the exclusive benefit of participants and their beneficiaries. Section 457
plans that were in existence before August 20, 1996 are allowed until January
1, 1999 to meet this requirement. While participants in such plans may be
permitted to specify the form of investment in which their plan accounts will
participate, all such investments are owned by the sponsoring employer and are
subject to the claims of its creditors. The amounts deferred under a plan which
meet the requirements of Section 457 of the code are not taxable as income to
the participant until paid or otherwise made available to the participant or
beneficiary. Deferrals are taxed as compensation from the employer when they
are actually or constructively received by the employee. As a general rule, the
maximum amount
B-8
<PAGE>
Account C
which can be deferred in any one year is the lesser of $7,500 (as indexed) or
33 1/3% of the participant's includable compensation. However, in the limited
circumstances, up to $15,000 may be deferred in each of the last three years
before retirement.
SIMPLIFIED EMPLOYEE PENSION PLANS (SEP)
An employer may make contributions on behalf of employees to a SEP as provided
by Section 408(k) of the code. The contributions and distribution dates are
limited by the code provisions. All distributions from the plan will be taxed
as ordinary income. For tax years after 1996, salary reduction SEP's (SAR/SEP)
may no longer be established. However, SAR/SEPs in existence prior to January
1, 1997 may continue to receive contributions.
Any distribution before the employee attains age 59 1/2 (except in the event of
death or disability) or the failure to satisfy certain other code requirements
may result in adverse tax consequences.
SAVINGS INCENTIVE MATCHED PLAN FOR EMPLOYEES (SIMPLE)
Employers with 100 or fewer employees who earned $5,000 during the proceeding
year, may establish SIMPLEs. For tax years beginning after December 31, 1996,
SIMPLE plans are available and may be in the form of an IRA or part of a 401(k)
plan. Under a SIMPLE IRA, employees are permitted to make elective
contributions to an IRA, stated as a percentage of the employees compensation,
but not to exceed $6,000 annually as indexed. Such deferrals are not subject to
income tax until withdrawn. Withdrawals made by an employee in the first two
years of the employees participation are subject to a 25% penalty. Later
withdrawals are subject to penalties applicable to IRAs. Under a SIMPLE 401(k),
employee deferrals are limited to no more than $6,000 annually. Employer
contributions are usually required for each type of SIMPLE.
TAX ON DISTRIBUTIONS FROM QUALIFIED CONTRACTS
The following rules generally apply to distributions from contracts purchased
in connection with the plans discussed previously, other than deferred
compensation plans.
The portion, if any, of any contribution under a contract made by or on behalf
of an individual which is not excluded from the employee's gross income
(generally, the employee's own nondeductible contributions) constitutes the
investment in the contract. If a distribution is made in the form of annuity
payouts, the employee's investment in the contract (adjusted for certain refund
provisions) divided by the life expectancy (or other period for which annuity
payouts are expected to be made) constitutes a tax-free return of capital each
year. The dollar amount of annuity payouts received in any year in excess of
such return is taxable as ordinary income. All distributions will be fully
taxable once the employee is deemed to have recovered the dollar amount of the
investment in the contract.
If a surrender of or withdrawal from the contract is effected and distribution
is made from the plan in a single payout, the proceeds may qualify for special
lump sum distribution treatment under certain qualified plans, as discussed
above. Otherwise, the amount by which the payment exceeds the investment in the
contract (adjusted for any prior withdrawal) allocated to that payment, if any,
will be taxed as ordinary income in the year of receipt. Rules generally
provide that all distributions which are not received as an annuity will be
taxed as a pro rata distribution of taxable and nontaxable amounts (rather than
as a distribution first of nontaxable amounts).
Distributions from qualified plans, Keoghs, SEPs, 403(b) plans and IRAs will be
subject to (1) a 10% penalty tax if made before age 59 1/2 unless certain other
exceptions apply, and (2) a 15% penalty tax on combined annual distributions in
excess of $150,000 (as indexed), which will not be imposed on distributions in
1997, 1998 and 1999, subject to various special rules. Failure to meet certain
minimum distribution requirements for the above plans, as well as for Section
457 plans, will result in a 50% excise tax. Various other adverse tax
consequences may also be potentially applicable in certain circumstances to
these types of plans.
Upon an employee's death, the taxation of benefits payable to the beneficiary
generally follows these same principles, subject to a variety of special rules.
OTHER CONSIDERATIONS
It should be understood that the foregoing comments about the federal tax
consequences under these contracts are not exhaustive and that special rules
are provided with respect to other tax situations not discussed herein.
Further, the foregoing discussion does not address any applicable state, local
or foreign tax laws. Finally, in recent years numerous changes have been made
in the federal income tax treatment of contracts and retirement plans, which
are not fully discussed above. Before an investment is made in any of the
contracts, a competent tax advisor should be consulted.
DETERMINATION OF ACCUMULATION AND ANNUITY UNIT VALUE
A description of the days on which accumulation and annuity units will be
valued is given in the Prospectus. The New York Stock Exchange's (NYSE) most
recent
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<PAGE>
Account C
announcement (which is subject to change) states that in 1997 it will be closed
on New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. It may also be closed on
other days.
Since the portfolios of some of the funds and series will consist of securities
primarily listed on foreign exchanges or otherwise traded outside the United
States, those securities may be traded (and the net asset value of those funds
and series and of the variable account could therefore be significantly
affected) on days when the investor has no access to those funds and series.
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, Lincoln Life may refer to the following
organizations (and others) in its marketing materials:
A.M. BEST'S RATING SYSTEM evaluates the various factors affecting the overall
performance of an insurance company in order to provide an opinion as to an
insurance company's relative financial strength and ability to meet its
contractual obligations. The procedure includes both a quantitative and
qualitative review of each company.
DUFF & PHELPS insurance company claims paying ability (CPA) service provides
purchasers of insurance company policies and contracts with analytical and
statistical information on the solvency and liquidity of major U.S licensed
insurance companies, both mutual and stock.
EAFE Index is prepared by Morgan Stanley Capital International (MSCI). It
measures performance of securities in Europe, Australia and the Far East. The
index reflects the movements of world stock markets by representing the
evolution of an unmanaged portfolio. The EAFE Index offers international
diversification with over 1000 companies across 20 different countries.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
MOODY'S insurance claims-paying rating is a system of rating insurance
company's financial strength, market leadership and ability to meet financial
obligations. The purpose of Moody's ratings is to provide investors with a
simple system of gradation by which the relative quality of insurance companies
may be noted.
MORNINGSTAR is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuity contracts.
STANDARD & POOR's CORP. insurance claims-paying ability rating is an assessment
of an operating insurance company's financial capacity to meet obligations
under an insurance policy in accordance with the terms. The likelihood of a
timely flow of funds from the insurer to the trustee for the bondholders is a
key element in the rating determination for such debt issues.
VARDS (Variable Annuity Research Data Service) provides a comprehensive guide
to variable annuity contract features and historical fund performance. The
service also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable
contracts.
STANDARD & POOR'S 500 INDEX (S&P 500) -- broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks; commonly known as the S&P 500. The selection of stocks, their
relative weightings to reflect differences in the number of outstanding shares
and publication of the index itself are services of Standard & Poor's Corp., a
financial advisory, securities rating and publishing firm.
NASDAQ-OTC Price Index -- this index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted and
was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA) -- price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but including American Express
Co. and American Telephone and Telegraph Co. Prepared and published by Dow
Jones & Co., it is the oldest and most widely quoted of all the market
indicators. The average is quoted in points, not dollars.
INTERNET -- As an electronic communications network may be used to provide
information regarding Lincoln Life performance of the subaccounts and
advertisement literature.
In its advertisements and other sales literature for the VAA and the eligible
funds, Lincoln Life intends to illustrate the advantages of the contracts in a
number of ways:
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several advantages of the
variable annuity contract. For example, but not by way of limitation, the
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<PAGE>
Account C
literature may emphasize the potential savings through tax deferral; the
potential advantage of the variable account over the fixed side; and the
compounding effect
when a client makes regular contributions to his or her account.
DOLLAR-COST AVERAGING ILLUSTRATIONS. These illustrations will generally discuss
the price-leveling effect of making regular purchases in the same subaccounts
over a period of time, to take advantage of the trends in market prices of the
portfolio securities purchased for those subaccounts.
AUTOMATIC WITHDRAWAL SERVICE. A service provided by Lincoln Life, through which
a contractowner may take any distribution allowed by code Section 401(a)(9) in
the case of qualified contracts, or permitted under code Section 72 in the case
of nonqualified contracts, by way of an automatically generated payment.
EARNINGS SWEEP. A service provided by Lincoln Life which allows a client to
designate one of the variable subaccounts or the fixed side as a holding
account, and to transfer earnings from that side to any other variable
subaccount. The contractowner chooses a specific fund as the holding account.
At specific intervals, account value in the holding account fund that exceeds a
certain designated baseline amount is automatically transferred to another
specified fund(s). The minimum account value required for the Earnings Sweep
feature is $10,000.
LINCOLN LIFE'S CUSTOMERS. Sales literature for the VAA, the funds and series
may refer to the number of employers and the number of individual annuity
clients which Lincoln Life serves. As of March 31, 1997, Lincoln Life was
serving over xxxxx organizations and had more than xxxxxx annuity clients.
LINCOLN LIFE'S ASSETS, SIZE. Lincoln Life may discuss its general financial
condition (see, for example, the reference to A.M. Best Co., above); it may
refer to its assets; it may also discuss its relative size and/or ranking among
companies in the industry or among any subclassification of those companies,
based upon recognized evaluation criteria. For example, at year-end 1995,
Lincoln Life was the 12th largest U.S. life insurance company based upon
overall assets.
Sales literature may reference the Multi Fund newsletter which is a newsletter
distributed quarterly to clients of the VAA. The contents of the newsletter
will be a commentary on general economic conditions and, on some occasions,
referencing matters in connection with the Multi Fund annuity.
Sales literature and advertisements may reference these and other similar
reports from Best's or other similar publications which report on the insurance
and financial services industries.
The graphs below compare accumulations attributable to contributions to
conventional savings vehicles such as savings accounts at a bank or credit
union, nonqualified contracts purchased with after tax contributions, and
qualified contracts purchased with pre-tax contributions under tax-favored
retirement programs.
THE POWER OF TAX DEFERRED GROWTH
The hypothetical chart below compares the results of contributing $1,200 per
year ($100 per month) during the time periods illustrated. Each graph assumes a
28% tax rate and an 8% fixed rate of return (before fees
[GRAPH APPEARS HERE]
and charges). For tax deferred annuities (TDA), the results are based on
contributing $1,666.66 ($138.88 per month) during the time periods illustrated.
The additional $38.88 per month is the amount of federal taxes paid by those
contributing to the conventional savings accounts or nonqualified contracts. In
this example, it has been invested by the contributors to the qualified
contracts. The deduction of fees and charges is also indicated in the graph.
The dotted lines represent the amount remaining after deducting any taxes due
and all fees (including surrender charges). Additionally, a 10% tax penalty
(not included here) may apply to withdrawals before age 59 1/2.
The contributions and interest earnings on conventional savings accounts are
usually taxed currently. For nonqualified contracts contributions are usually
taxed currently, while earnings are not usually subject to income tax until
withdrawn. However, contributions to and earnings on qualified plans are
ordinarily not subject to income tax until withdrawn. Therefore, having greater
amounts re-invested in a qualified or nonqualified plan increases the
accumulation power of savings over time.
As you can see, a tax deferred plan can provide a much higher account value
over a long period of time. Therefore, tax deferral is an important component
of a retirement plan or other long-term financial goals. (The above chart is
for illustrative purposes and should not be construed as representative of
actual results, which may be more or less).
B-11
<PAGE>
Preface/Directory
TAX BENEFITS TODAY
When you put a portion of
your salary in a tax
deferred retirement plan,
your contributions don't
appear as taxable income on
your W-2 form at the end of
the calendar year. So while
you are contributing, you
can reduce your taxes and
increase your take-home
pay.
Here's an example: Let's
assume you are single, your
taxable income is $50,000,
and you are in the 28% tax
bracket.
<TABLE>
<CAPTION>
Traditional Savings of
savings plan pre-tax dollars
- ----------------------------------------------------------------------
<S> <C> <C>
Your income $50,000 $50,000
Tax-deferred savings -0- 2,400
Taxable income 50,000 47,600
*Estimated federal income taxes 10,481 9,809
Income after taxes 39,519 37,791
After-tax savings 2,400 -0-
Remaining income after savings and taxes 37,119 37,791
</TABLE>
With a tax-deferred plan, you have $672 more
spendable income each year because you are
paying less taxes currently.
*The above chart assumes a 28% marginal
federal tax rate on conventional
contributions. TDA contributions are
generally taxed as ordinary income when
withdrawn. Federal tax penalties generally
apply to distributions before age 59 1/2.
For illustrative purposes only.
B-12
<PAGE>
PART C--OTHER INFORMATION
Item 24.
- --------
(a) LIST OF FINANCIAL STATEMENTS
(1) Part A The Table of Condensed Financial Information is included in
Part A of this Registration Statement.
(2) Part B
The following financial statements of Account C are included in the
SAI: (to be filed by amendment)
Statement of Assets and Liability -- December 31, 1996
Statement of Operations -- Year ended December 31, 1996
Statements of Changes in Net Assets -- Years ended
December 31, 1996 and 1995
Note to Financial Statements -- December 31, 1996
Report of Ernst & Young LLP, Independent Auditors
(3) Part B
The following GAAP Consolidated Financial Statements and Schedules
of Lincoln National Life Insurance Company are included in the SAI:
(to be filed by amendment)
Consolidated Balanced Sheets -- December 31, 1995 and 1994
Consolidated Statements of Income -- Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Shareholder's Equity -- Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements -- December 31, 1995
Schedule I -- Summary of Investments -- Other than Investments
In Related Parties -- December 31, 1995
Schedule III -- Supplementary Insurance Information -- Years
Ended December 31, 1995, 1994 and 1993
Schedule IV -- Reinsurance -- Years Ended December 31, 1995, 1994
and 1993
Schedule V -- Valuation and Qualifying Accounts -- Years Ended
December 31, 1995, 1994 and 1993
Report of Ernst & Young LLP, Independent Auditors
The following Statutory Financial Statements and Schedules
of Lincoln National Life Insurance Company are included in the SAI:
(to be filed by amendment)
Balance Sheets -- Statutory Basis -- Years ended
December 31, 1996 and 1995
Statements of Income -- Statutory Basis -- Years ended
December 31, 1996, 1995 and 1994
Statements of Capital and Surplus -- Statutory Basis --
Years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements -- December 31, 1996
Supplemental Schedule of Selected Statutory Basis
Financial Data -- December 31, 1996
Report of Ernst & Young LLP, Independent Auditors
24 (b) LIST OF EXHIBITS
(4) Variable Annuity Contract
(a) Multi Fund - Single Premium Contract*
(b) Multi Fund 1 - Periodic*
(c) Multi Fund 2 - Flexible**
(d) Multi Fund 3 - Flexible
(e) Multi Fund 4 - Flexible
(f) Contract Rider - Multi Fund 2 & Multi Fund 3
(g) Contract Rider - Multi Fund 4
(5) Application (to be filed by amendment.)
(8) Services Agreement between Delaware Management Holdings, Inc.,
Delaware Service Company, Inc. and Lincoln National Life Insurance
Company dated 8/29/96.
(9) Opinion and Consent of Jeremy Sachs, Senior Counsel (to be filed by
amendment).
(10) Opinion and Consent of Ernst & Young LLP, Independent Auditors
(To be filed by amendment.)
(13) Schedule of Computation.
(14) Financial Data Schedule (to be filed by amendment.)
(15)
(a) Organizational Chart of Lincoln National Life Insurance
Holding Company System
(b) Memorandum Concerning Books and Records (to be filed by
amendment)
* Filed with registration statement in 1981.
** Previously filed with registration statement.
<PAGE>
Item 25.
- --------
DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Positions and Offices with Lincoln National
Name Life Insurance Company
- ---- ----------------------
<S> <C>
Ian M. Rolland** Director
Jon A. Boscia* President, Chief Executive Officer and Director
Carolyn P. Brody* Vice President
Thomas L. Clagg* Vice President and Associate General Counsel
Kelly D. Clevenger* Vice President
Jeffrey K. Dellinger* Vice President
Jack D. Hunter** Executive Vice President and General Counsel
Donald E. Keller* Vice President
H. Thomas Mc Meekin** Director
Reed P. Miller* Vice President
Stephen H.Lewis* Senior Vice President
Lawrence T. Rowland*** Executive Vice President
Keith J. Ryan* Vice President, Asst. Treasurer and Chief Financial Officer
Richard C. Vaughan** Director
Roy V. Washington* Vice President
Janet C. Whitney** Vice President and Treasurer
C. Suzanne Womack** Assistant Vice President and Secretary
O. Douglas Worthington* Vice President, Controller and Assistant Treasurer
</TABLE>
* Principal business address is 1300 South Clinton Street, Fort Wayne, Indiana
46802.
** Principal business address is 200 East Berry Street, Fort Wayne, Indiana
46802-2706.
*** Principal business address is 1700 Magnavox Way, One Reinsurance Place, Fort
Wayne, Indiana 46804.
Item 26.
- --------
PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR REGISTRANT
See Exhibit 15(a): The Organizational Chart of The Lincoln National
Insurance Holding Company System is hereby incorporated herein by this
reference.
Item 27.
- --------
NUMBER OF CONTRACT OWNERS
As of January 31, 1997, there were 446,849 Contract Owners under Account
C.
Item 28.
- --------
INDEMNIFICATION--UNDERTAKING
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of The Lincoln National Life
Insurance Company (LNL) provides that LNL will indemnify certain
persons against expenses, judgments and certain other specified costs
incurred by any such person if he/she is made a party or is threatened
to be made a party to a suit or proceeding because he/she was a
director, officer, or employee of LNL, as long as he/she acted in good
faith and in a manner he/she reasonably believed to be in the best
interests of, or not opposed to the best interests of, LNL. Certain
additional conditions apply to indemnification in criminal proceedings.
In particular, separate conditions govern indemnification of directors,
officers, and employees of LNL in connection with suits by, or in the
rights of, LNL.
Please refer to Article VII of the By-Laws of LNL (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements of,
Indiana law.
(b) 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.
Item 29.
- --------
PRINCIPAL UNDERWRITER
(a) Lincoln National Variable Annuity Fund A (Group); Lincoln National
Variable Annuity Fund A (Individual); Lincoln National Flexible Premium
Variable Life Account D; Lincoln National Variable Annuity Account E;
Lincoln National Flexible Premium Variable Life Account F; Lincoln
National Flexible Premium Variable Life Account G; Lincoln National
Variable Annuity Account H; Lincoln Life Flexible Premium Variable Life
Account K; Lincoln National Variable Annuity Accounts 50 and 51;
(b) See Item 25.
(c) Commissions and Other Compensation Received by Lincoln National Life
Insurance Company from Account C during the fiscal year which ended
December 31, 1996:
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting
Name of Principal Discounts and Compensation Brokerage
Underwriter Commissions or Redemption Commission Compensation
- ----------------- ---------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
The Lincoln National
Life Insurance a b
Company None $7,757,400 None $55,971,371
</TABLE>
Notes:
(a) These figures represent compensation received by Lincoln National Life
Insurance Company for surrender, withdrawal and contract charges. See Charges
and other deductions, in the Prospectus.
(b) These figures represent compensation received by Lincoln National Life
Insurance Company for mortality and expense guarantees. See Charges and other
deductions, in the Prospectus.
Item 30.
- --------
LOCATION OF ACCOUNTS AND RECORDS
Exhibit 15(b) is hereby expressly incorporated herein by this reference.
Item 31.
- --------
Item 32. Undertakings
- --------
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual Contract offered by
the Prospectus, a space that an applicant can check to request a Statement
of Additional Information, or (2) a post cared or similar written
communication affixed to or included in the Prospectus that the applicant
can remove to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statement required to be made available under this Form
promptly upon written or oral request to Lincoln Life at the address or
phone number listed in the Prospectus.
(d) The Lincoln National Life Insurance company hereby represents that the fees
and charges deducted under the contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by The Lincoln National Life Insurance Company.
Item 33.
- --------
(Additional Item) - Undertaking Concerning the Texas Optional Retirement
Program
Refer to the initial Registration Statement.
Item 34.
- --------
(Additional Item) - Undertaking Concerning Withdrawal Restrictions on IRC
Section 403(b) Plan Participants
Refer to the initial Registration Statement.
<PAGE>
EXHIBIT INDEX
(4) Variable Annuity Contract
(a) Multi Fund - Single Premium Contract*
(b) Multi Fund 1 - Periodic*
(c) Multi Fund 2 - Flexible**
(d) Multi Fund 3 - Flexible**
(e) Multi Fund 4 - Flexible
(f) Contract Rider - Multi Fund 2 & Multi Fund 3
(g) Contract Rider - Multi Fund 4
(5) Application (to be filed by amendment.)
(8) Services Agreement between Delaware Management Holdings, Inc.,
Delaware Service Company, Inc. and Lincoln National Life Insurance
Company dated 8/29/96.
(9) Opinion and Consent of Jeremy Sachs, Senior Counsel (to be filed by
amendment.)
(10) Opinion and Consent of Ernst & Young LLP, Independent Auditors
(to be filed by amendment.)
(13) Schedule of Computation.
(14) Financial Data Schedule (to be filed by amendment.)
(15)
(a) Organizational Chart of Lincoln National Life Insurance
Holding Company System
(b) Memorandum Concerning Books and Records (to be filed by
amendment.)
*Filed with registration statement in 1981.
**Previously filed with registration statement.
<PAGE>
EXHIBIT 4(e)
Multi Fund 4 Contract
ARTICLE 1
DEFINITIONS
ACCOUNT or VARIABLE ACCOUNT -- The segregated investment account into which the
Lincoln National Life Insurance Company sets aside and invests the variable
assets attributable to this Variable Annuity Contract.
ACCUMULATION UNIT -- A unit of measure used to calculate the variable Contract
Value during the accumulation period.
ANNUITANT -- The person upon whose life the annuity benefit payments made after
the Annuity Commencement Date will be based.
ANNUITY COMMENCEMENT DATE -- The Valuation Date when money is withdrawn for
payment of annuity benefits under the Annuity Payment Option selected.
ANNUITY PAYMENT OPTION -- An optional form of payment of the annuity provided
for under this Contract.
ANNUITY UNIT -- A unit of measure used after the Annuity Commencement Date to
calculate the amount of variable annuity payments.
BENEFICIARY -- The person or entity designated by the Owner to receive the Death
Benefit, if any, payable upon the death of the Annuitant.
CODE -- The Internal Revenue Code (IRC) of 1986, as amended.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Charges assessed on premature
surrender of the Contract, calculated according to the Contract provisions.
CONTRACT -- The agreement between LNL and the Owner in which LNL provides a
variable annuity.
CONTRACT VALUE -- The sum of the values of all the Accumulation Units
attributable to this Contract at a given time and the value of monies in the
Fixed Account.
CONTRACT YEAR -- The period from the anniversary of the Contract Date on your
Contract Data Page 3 to the anniversary in the following year.
DEATH BENEFIT -- The amount payable upon death of the Annuitant, or Owner or
Joint Owner.
FUNDS -- the mutual fund into which Purchase Payments allocated to the Variable
Account are invested.
FIXED ACCOUNT -- The fixed portion of this Contract which is invested in the
general account of LNL.
HOME OFFICE -- The principal office of LNL located at 1300 South Clinton Street,
Fort Wayne, Indiana 46802.
LNL -- The Lincoln National Life Insurance Company.
MATURITY DATE -- The date specified on Page 3 of this Contract.
NET ASSET VALUE PER SHARE -- The market value of a fund share calculated at the
close of the exchanges each day by taking the closing market value of all
securities owned, adding all other assets (such as cash), subtracting all
liabilities, and then dividing the result (total net assets) by the number of
shares outstanding.
OWNER -- The individual or entity who exercises rights of ownership under this
Contract.
PURCHASE PAYMENTS -- Amounts paid into this Contract.
QUALIFIED PLAN -- A retirement plan qualified for special tax treatment under
the Internal Revenue Code of 1986, as amended, including Sections 401, 403, 408
and 457. All other plans are considered to be Non-Qualified.
SERIES -- Any of the underlying portfolios of the Delaware Group Premium Fund,
Inc. in which Purchase Payments allocated to the Variable Account are invested.
SUB-ACCOUNT -- That portion of the Variable Account which pertains to
investments in the Accumulation Units and Annuity Units of a particular Fund or
Series.
VALUATION DATE -- Each day the New York Stock
<PAGE>
Exchange (NYSE) is open for trading.
VALUATION PERIOD -- The period commencing at the close of trading on each day
that the New York Stock Exchange is open for trading (Valuation Date) and ending
at the close of such trading on the next succeeding Valuation Date.
ARTICLE 2
PURCHASE PAYMENTS, OPTIONS, AND
BENEFITS
2.01 WHERE PAYABLE
All Purchase Payments must be made to LNL at its Home Office.
2.02 AMOUNT AND FREQUENCY
Purchase Payments are made in an amount and at the frequency shown on page 3.
The Owner may change the frequency or amount of Purchase Payments subject to
LNL's rules in effect at the time of the change.
The minimum initial Purchase Payment is $1,000 for Individual Retirement Annuity
(IRA) Plans under Code Section 408 and $3,000 for all other Contracts. Minimum
subsequent Purchase Payments for all plans are $100.00 per payment.
Purchase Payments may be made until the earliest of the Annuity Commencement
Date, the surrender of the Contract, the Maturity Date, or payment of any Death
Benefit.
2.03 VARIABLE ACCOUNT
Purchase Payments under the Contract may be allocated to the Lincoln National
Variable Annuity Account C (Variable Account) and/or to the Fixed Account of the
Contract. The Variable Account is for the exclusive benefit of persons entitled
to receive benefits under variable annuity contracts. The Variable Account will
not be charged with the liabilities arising from any other part of LNL's
business. The Owner may direct Purchase Payments under the Contract to any of
the available Sub-accounts subject to the following limitations. A minimum
payment to any one Sub-account must be at least $100. If the Owner elects to
direct Purchase Payments to a new Sub-account not previously selected, the
election must be in writing to LNL or by telephone transfer provided LNL has
received the appropriate authorization. The amounts allocated to each Sub-
account will be invested at net asset value in the shares of one of the
regulated investment companies (the Funds or Series). The Funds and Series are
listed on the Contract Data Page 3 of your Contract.
LNL reserves the right to eliminate the shares of any of the Funds or Series and
substitute the securities of a different investment company if the shares of a
Fund or Series are no longer available for investment, or, if in the
judgment of LNL, further investment in any Fund or Series should become
inappropriate in view of the purposes of the Contract. LNL may add a Fund or
Series in order to invest the assets of a new Sub-account in the Variable
Account. LNL shall give the Owner written notice of the elimination and
substitution of any Fund or Series within fifteen days after such substitution
occurs.
LNL shall use each Purchase Payment allocated to the Variable Account by the
Owner to buy Accumulation Units in the Sub-account(s) selected by the Owner. The
number of Accumulation Units bought shall be determined by dividing the amount
directed to the Sub-account by the dollar value of an Accumulation Unit in such
Sub-account as of the point of the next valuation of such Sub-account
immediately following receipt of the Purchase Payment at the Home Office of
LNL. The number of Accumulation Units held for the Variable Account of an Owner
shall not be changed by any change in the dollar value of Accumulation Units in
any Sub-account.
<PAGE>
2.04 VALUATION OF ACCUMULATION UNITS
The variable Contract Value of an Owner's Contract at any time prior to the
Annuity Commencement Date equals the sum of the values of the Accumulation Units
credited in the Variable Account under the Contract.
The value of a Sub-account is the number of units in the Sub-account multiplied
by the value of an Accumulation Unit of the Sub-account.
Accumulation Units for each Sub-account are valued separately. Initially, the
value of an Accumulation Unit was set at $1.00. Thereafter, the value of an
Accumulation Unit in any Sub-account on any Valuation Date equals the value of
an Accumulation Unit in that Sub-account as of the immediately preceding
Valuation Date, multiplied by the "Net Investment Factor" of that Sub-account
for the current Valuation Period.
The Net Investment Factor is an index which measures the investment performance
of a Sub-account from one Valuation Period to the next. The Net Investment
Factor for any Sub-account for any Valuation Period is equal to (1) divided by
(2) and subtracting (3) from the result, where:
(1) is the result of:
(a) the Net Asset Value Per Share of the Fund or Series held in the Sub-
account, determined at the end of the current Valuation Date; plus
(b) the per share amount of any dividend or capital gain distribution made
by the Fund or Series in the Sub-account, if the "ex-dividend" date occurs
during the Valuation Period; plus or minus
(c) a per share charge or credit for any taxes reserved for;
(2) is the Net Asset Value Per Share of the Fund or Series held in the Sub-
account, determined at the end of the prior Valuation Date;
(3) is a daily factor representing the mortality and expense risk and
administrative charge deducted from the Sub-account adjusted for the number of
days in the Valuation Period. On an annual basis, this charge will not exceed
1.002%.
The Accumulation Unit value and Annuity Unit value may increase or decrease the
dollar value of benefits under the Contract. The dollar value of benefits will
not be adversely affected by expenses incurred by LNL.
2.05 FIXED ALLOCATIONS
Purchase Payments under the Contract may be allocated to the Variable Account
and/or to the Fixed Account of the Contract. A minimum allocation to the Fixed
Account must be at least $100.
2.06 CREDITING OF INTEREST ON FIXED ALLOCATIONS
Interest shall be credited daily on all Purchase Payments that are allocated to
the Fixed Account of this Contract.
Prior to the Annuity Commencement Date, payment of any Death Benefit, or
surrender of this Contract, whichever occurs first, LNL guarantees that it will
credit interest on fixed allocations at an effective annual rate not less than
3.0% during all years. A table of guaranteed values for the fixed allocations
may be found in Article 8.
LNL may credit interest at rates in excess of the guaranteed rates at any time.
2.07 AUTOMATIC NONFORFEITURE OPTION
In the event that Purchase Payments are stopped, this Contract will continue as
a paid-up Contract until the earlier of the Maturity Date, surrender of the
Contract, payment of any Death Benefit, or the Annuity Commencement Date.
Purchase Payments may be resumed at any time prior to the Maturity Date,
surrender of the Contract, payment of any Death Benefit, or the Annuity
Commencement Date. LNL reserves the right to surrender this Contract in
accordance with the terms set forth in the nonforfeiture law, applicable in your
state, for individual deferred annuities.
2.08 TRANSFERS
Prior to the earlier of the Maturity Date, surrender of the Contract, payment of
any Death Benefit, or the
<PAGE>
Annuity Commencement Date, the Owner may direct a transfer of assets from one
Sub-account to another Sub-account or to the Fixed Account of the Contract. The
Owner may also direct a transfer of assets from the Fixed Account of the
Contract to one or more Sub-accounts of the Variable Account, subject to the
limitations described later in this section. Such a transfer request must be in
writing or by telephone provided LNL has received the appropriate authorization
from the Owner. Amounts transferred to the Sub-account(s) will purchase
Accumulation Units as described in Section 2.03.
A transfer will result in the purchase of Accumulation Units in one Sub-account
and the redemption of Accumulation Units in the other Sub-account. Such a
transfer will be accomplished at relative Accumulation Unit values as of the
Valuation Date the transfer request is received. The valuation of Accumulation
Units is described in Section 2.04.
LNL reserves the right to impose a charge in the future for transfers between
Sub-accounts.
The minimum transfer amount is $500 or the entire amount in the Sub-
account/Fixed Account, whichever is less. If, after the transfer, the amount
remaining under this Contract in the Sub-account/Fixed Account from which the
transfer is taken is less than $500, the entire amount held in that Sub-
account/Fixed Account will be transferred.
For transfers between Sub-accounts and from the Sub-account(s) to the Fixed
Account of the Contract, there are no restrictions on the maximum amount which
may be transferred. For transfers from the Fixed Account of the Contract to the
Variable Account, the sum of the percentages of fixed value transferred will be
limited to 25% in any 12 month period. Transfers cannot be made during the first
30 days after the Contract Date and no more than six transfers will be allowed
in any Contract Year. LNL reserves the right to waive any of these restrictions.
2.09 WITHDRAWAL OPTION
The Owner may withdraw a part of the surrender value of this Contract, subject
to the charges outlined under Surrender Option (see Section 2.10). The first
partial withdrawal of Contract Value during a Contract Year will be free of
Contingent Deferred Sales Charges to the extent that the withdrawal does not
exceed 15% of total Purchase Payments. Withdrawals will be treated as "first in-
first out (FIFO)" for purposes of calculating the Contingent Deferred Sales
Charge (see Section 2.11). Withdrawals will be effective on the Valuation Date
on which LNL receives a written request at its Home Office.
The minimum withdrawal is $100. LNL reserves the right to surrender this
Contract if any withdrawal reduces the Contract Value to a level in which this
Contract may be surrendered in accordance with the terms set forth in the
nonforfeiture law, applicable in your state, for individual deferred annuities.
The remaining value will be subject to the charges as provided under Surrender
Option (see Section 2.10). The request should specify from which Sub-account the
withdrawal will be made. If no Sub-account is specified, LNL will withdraw, on a
pro-rata basis from each Sub-account, the amount requested.
Any cash payment will be mailed from LNL's Home Office within seven days after
the date of withdrawal; however, LNL may be permitted to defer such payment
under the Investment Company Act of 1940, as in effect at the time such request
for withdrawal is received in its Home Office.
For purposes of this Section, the Fixed Account of the Contract is considered a
Sub-account.
The Withdrawal Option is not available after the Annuity Commencement Date.
2.10 SURRENDER OPTION
The Owner may surrender this Contract for its surrender value. On surrender,
this Contract terminates. Surrender will be effective on the Valuation Date on
which LNL receives a written request at its Home Office. The surrender value
will be the total Contract Value on the Valuation Date, less a Contingent
Deferred Sales Charge.
Any cash payment will be mailed from LNL's Home Office within seven days after
the date of surrender; however, LNL may be permitted to defer such payment under
the Investment Company Act of 1940, as in effect at the time a request for
surrender is received in its Home Office.
The Surrender Option is not available after the Annuity
<PAGE>
Commencement Date.
2.11 CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge (CDSC) is calculated separately for each
Contract Year's Purchase Payments to which a charge applies. Charges are
applied as follows:
Number of complete Contract Years that
a Purchase Payment has been invested.
Less
than At least
--------------------------------------
1 yr 1 2 3 4 5 6 7+
CDSC as a percentage 7% 6 5 4 3 2 1 0%
of the surrendered or
withdrawn Purchase
Payments.
A CDSC will be waived under certain circumstances (see Section 2.12 for
details).
For purposes of calculating CDSC, LNL assumes that Purchase Payments are
withdrawn on a "first in-first out (FIFO)" basis, and that all Purchase Payments
are withdrawn before any earnings are withdrawn.
2.12 WAIVER OF CONTINGENT DEFERRED SALES CHARGES
A surrender of this Contract or withdrawal of Contract Value prior to the
Annuity Commencement Date may be subject to a Contingent Deferred Sales Charge
as described in Sections 2.09 and 2.10, except that such charges do not apply
to: (1) the first withdrawal of Contract Value during a Contract Year to the
extent that the amount withdrawn does not exceed 15% of total Purchase Payments
(this 15% withdrawal exception does not apply to a surrender of a Contract); (2)
a surrender of the Contract as a result of "permanent and total disability"of
the Annuitant as defined in section 22(e)(3) of the Internal Revenue Code
subsequent to the effective date of this Contract and prior to the 65th birthday
of the Annuitant; (3) the assumption of Contract ownership by the surviving
spouse as Beneficiary of the Contract as a result of the death of the Annuitant
(in such case, the CDSC would be waived on the Contract Value as of the date
which the surviving spouse assumed the Contract ownership); (4) a surrender of
the Contract as a result of the death of the Annuitant; (5) annuitization.
The Contingent Deferred Sales Charge will only be waived if LNL is in receipt of
proof, satisfactory to LNL, of the exception.
2.13 DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
A. Entitlement and Determination of Death Benefit.
Upon the death of the Annuitant, including an Owner/Annuitant or Joint
Owner/Annuitant, a Death Benefit equal to the Contract Value will be paid to the
Beneficiary.
Upon the Death of the non-Annuitant/Owner, or non-Annuitant/Joint Owner, a
Death Benefit equal to the surrender value will be paid to the surviving Joint
Owner, if any. If no Joint Owner survives, the surrender value will be paid to
the Contingent Owner, if any. If no Joint or Contingent Owner exists, the
surrender value will be paid to the Annuitant.
All Death Benefit payments will be subject to the laws and regulations governing
death benefits.
B. Proof of Death.
The Death Benefit will be payable after LNL is in receipt of: (1) proof,
satisfactory to LNL, of the death; (2) written authorization for payment; and
(3) all claim forms, fully completed.
Due proof of death may be a certified copy of a death certificate, a certified
copy of the statement of death from the attending physician, a certified copy of
a decree of a court of competent jurisdiction as to the finding of death, or any
other proof of death acceptable to LNL.
C. Payment of Death Benefits.
1. Death of Owner or Owner / Annuitant
Notwithstanding any provision of this Contract to the contrary, no payment of
Death Benefits provided upon the death of the Owner or Joint Owner will be
allowed that does not satisfy the requirements of Code Section 72(s) or
401(a)(9) as applicable, as amended from time to time.
The Death Benefit payable on the death of the Owner, including the Owner/
Annuitant, or after the death of the first Joint Owner including a Joint
Owner/Annuitant, will be distributed as follows:
a. the Death Benefit must be completely distributed within five years of the
Owner's or Joint Owner's date of death; or
<PAGE>
b. the designated recipient may elect, within the one year period after the
Owner's or Joint Owner's date of death, to receive the Death Benefit in
substantially equal installments over the life of such designated recipient or
over a period not extending beyond the life expectancy of such designated
recipient; provided that such distributions begin not later than one year
after the Owner's or Joint Owner's date of death.
If the Owner is a corporation or other non-individual (non-natural person), the
death of the Annuitant will be treated as the death of the Owner for purposes of
distributing the Death Benefit payments described in a. and b. above.
If a lump sum settlement is elected, the proceeds will be paid within seven days
of approval by LNL of the claim. This payment may be postponed as permitted by
the Investment Company Act of 1940.
If the surviving spouse is the designated Beneficiary of the Death Benefit of
the deceased Owner/Annuitant, or is the surviving Joint Owner or Contigent
Owner, the surviving spouse may elect to continue the Contract as the new Owner.
If the Annuitant is deceased, the surviving spouse will also become the
Annuitant.
2. Death of Non-Owner/Annuitant
Upon the death of the non-Owner/Annuitant or non-Joint Owner/Annuitant, Death
Benefits will be paid to the Beneficiary in a lump sum. The Beneficiary then may
select one of the Annuity Payment Options within 60 days of the lump sum
becoming payable.
If a lump sum settlement is elected, the proceeds will be paid within seven days
of approval by LNL of the claim. This payment may be postponed as permitted by
the Investment Company Act of 1940.
ARTICLE 3
ANNUITY PAYMENT OPTION BENEFITS
3.01 ANNUITY PAYMENTS
An election to receive payments under an Annuity Payment Option must be made by
the Maturity Date.
If an Annuity Payment Option is not chosen prior to the Maturity Date,
payments will commence to the Owner on the Maturity Date under the Annuity
Payment Option providing a Life Annuity with annuity payments guaranteed for 10
years.
The Maturity Date is set forth on Page 3. Upon written request by the Owner and
any Beneficiary who cannot be changed, the Maturity Date may be deferred.
Purchase Payments may be made until the new Maturity Date.
If the new Maturity Date extends beyond age 85, LNL reserves the right to
restrict the availability of certain Annuity Payment Options.
3.02 CHOICE OF ANNUITY PAYMENT OPTION
By Owner
Prior to the Annuity Commencement Date, the Owner may choose or change any
Annuity Payment Option.
By Recipient of Death Benefit
Prior to the Annuity Commencement Date, at the time a Death Benefit is payable,
a recipient may choose or change any Annuity Payment Option if the Death Benefit
is available to the recipient in a lump sum. If the Owner, Owner/Annuitant, or
Joint Owner is the deceased, the Annuity Payment Option must meet the
requirements of Code Section 72(s) or 401(a)(9) as applicable.
A choice or change must be in writing to LNL.
For a 100% fixed annuity payment, the Annuity Commencement Date must be at least
thirty days prior to the first payment date. For a combination fixed and
variable annuity payment or a 100% variable annuity payment, the Annuity
Commencement Date will be fourteen days prior to the first payment date.
After the Annuity Commencement Date, the Annuity Payment Option may not be
changed.
3.03 ANNUITY PAYMENT OPTIONS
A. Life Annuity /Life Annuity with Guaranteed Period
<PAGE>
- -- Payments will be made for the life of the Annuitant with no certain period,
or with a 10 years certain period, or with a 20 years certain period. Upon the
death of the Annuitant, payments will continue to the Beneficiary for the
remainder, if any, of the certain period.
B. Unit Refund Life Annuity -- Payments will be made for the life of the
Annuitant with the guarantee that upon the death of the Annuitant a payment to
the Beneficiary will be made of the value of the number of Annuity Units equal
to the excess, if any, of (a) over (b) where (a) is the total amount applied
under the option divided by the Annuity Unit Value at the Annuity Commencement
Date and (b) is the product of the number of Annuity Units represented by each
payment and the number of payments paid prior to death.
C. Joint Life Annuity/Joint Life Annuity with Guaranteed Period -- Payments will
be made for the joint lives of the Annuitant and a Joint Annuitant of the
Owner's choice with no certain period, or with a 10 years certain period, or
with a 20 years certain period. Payments continue for the life of the survivor
at the death of the Annuitant or Joint Annuitant. Upon the deaths of both
Annuitant's, payments will continue to the Beneficiary for the remainder, if
any, of the certain period.
D. Other options may be available as agreed upon in writing by LNL.
At the time an Annuity Payment Option is selected under the provisions of this
Contract, the Owner may elect to have the total Contract Value applied to
provide a variable annuity payment, a fixed annuity payment, or a combination
fixed and variable annuity payment. If no election is made, the value of the
Owner's Variable Account shall be used to provide a variable annuity payment and
the value of the Owner's Fixed Account shall be used to provide a fixed annuity
payment.
The amount of annuity payment will depend on the age and sex (except in cases
where unisex rates are required) of the Annuitant as of the Annuity Commencement
Date. A choice may be made to receive payments once each month, four times each
year, twice each year, or once each year. The Contract Value and Annuity Unit
value used to effect benefit payments will be calculated as of the Annuity
Commencement Date.
Article 6 of this Contract illustrates the minimum payment amounts and the age
adjustments which will be used to determine the first monthly payment under a
variable annuity payment option. The tables show the dollar amount of the first
monthly payment which can be purchased with each $1,000 of Contract Value,
after deduction of any applicable premium taxes. Amounts shown use the 1983 'a'
Individual Annuity Mortality Table, modified, with an assumed rate of return
of 5% per year.
Article 7 of this Contract illustrates the minimum payment amounts and the age
adjustments which will be used to determine the monthly payments under a fixed
annuity payment option. The tables show the dollar amount of the guaranteed
monthly payments which can be purchased with each $1,000 of Contract Value,
after deduction of any applicable premium tax. Amounts shown use the 1983 'a'
Individual Annuity Mortality Table, modified, with an interest rate of 3.0% per
year and a 2.0% expense load.
3.04 DETERMINATION OF THE AMOUNT OF VARIABLE ANNUITY PAYMENTS AFTER THE FIRST
PAYMENT
The first variable annuity payment is sub-divided into components each of which
represents the product of: (a) the percentage elected by the Contract Owner of a
specific Sub-account the performance of which will determine future variable
annuity payments, and (b) the entire first variable annuity payment. Each
variable annuity payment after the first payment attributable to a specific Sub-
account will be determined by multiplying the Annuity Unit value for that Sub-
account for the date each payment is due by a constant number of Annuity Units.
This constant for each specific Sub-account is determined by dividing the
component of the first payment attributable to such Sub-account as described
above by the Annuity Unit value for that Sub-account on the Annuity Commencement
Date. The total variable annuity payment will be the sum of the payments
attributable to each Sub-account.
The Annuity Unit value for any Valuation Period for any Sub-account is
determined by multiplying the Annuity Unit value for the immediately preceding
Valuation Period by the product of (a) 0.999866337 raised to a power equal to
the number of days in the current Valuation Period and (b) the Net Investment
Factor of the Sub-account for the Valuation Period for
<PAGE>
which the Annuity Unit value is being determined.
The valuation of all assets in the Sub-account shall bedetermined in accordance
with the provisions of applicable laws, rules, and regulations. The method of
determination by LNL of the value of an Accumulation Unit and of an Annuity Unit
will be conclusive upon the Owner and any recipient of Death Benefits.
LNL guarantees that the dollar amount of each installment after the first shall
not be affected by variations in mortality experience from mortality assumptions
on which the first installment is based.
After the Annuity Commencement Date, if any portion of the annuity payment is a
variable annuity payment, the Owner may direct a transfer of assets from one
Sub-account to another Sub-account or to a fixed annuity payment. Such
transfers will be limited to three (3) times per Contract Year. Assets may not
be transferred from a fixed annuity payment to a variable annuity payment.
A transfer from one Sub-account to another Sub-account will result in the
purchase of Annuity Units in one Sub-account, and the redemption of Annuity
Units in the other Sub-account. Such a transfer will be accomplished at
relative Annuity Unit values as of the Valuation Date the transfer request is
received. The valuation of Annuity Units is described above. A transfer from
one Sub-account to a fixed annuity payment will result in the redemption of
Annuity Units in one Sub-account and the purchase of a fixed annuity payment.
3.05 PROOF OF AGE
Payment will be subject to proof of age that LNL will accept such as a certified
copy of a birth certificate.
3.06 MINIMUM ANNUITY PAYMENT REQUIREMENTS
If the Annuity Payment Option chosen results in payments of less than $50 per
Sub-account, the frequency will be changed so that payments will be at least
$50.
For the purposes of this Section, the fixed annuity payment of the Contract is
considered a Sub-account.
3.07 EVIDENCE OF SURVIVAL
LNL has the right to ask for proof that the person on whose life the payment is
based is alive when each payment is due.
3.08 CHANGE IN ANNUITY PAYMENT OPTION
The Annuity Payment Option may not be changed after the Annuity Commencement
Date.
ARTICLE 4
BENEFICIARY
4.01 DESIGNATION
The Owner may designate a Beneficiary(s). The designated Beneficiary(s) will
receive the Death Benefit proceeds upon the death of the Annuitant.
Unless otherwise stated in the Beneficiary designation, if there is more than
one Beneficiary they are presumed to share equally.
4.02 CHANGE
The Owner may change any Beneficiary unless otherwise provided in the previous
designation.
A change of Beneficiary will revoke any previous designation.
A change may be made by filing a written request, in a form acceptable to LNL,
at its Home Office. The change will become effective upon receipt of the written
request by LNL at its Home Office.
LNL reserves the right to request the Contract for endorsement of the change.
4.03 DEATH OF BENEFICIARY
Unless otherwise provided in the Beneficiary designation, if any Beneficiary
dies before the Annuitant, that Beneficiary's interest will go to any other
Beneficiaries named, according to their respective
<PAGE>
interests. If there are no Beneficiaries, benefits will be paid to a Contingent
Beneficiary(s), if any. If no Beneficiary or Contingent Beneficiary survives
the Annuitant, the proceeds will be paid to the Owner if living; otherwise, to
the Owner's estate.
Once a Beneficiary is entitled to death proceeds, the Beneficiary may name his
or her own Beneficiary(s) to receive any remaining benefits due under the
Contract, should the original Beneficiary die prior to receipt of all benefits.
If no Beneficiary is named by the original Beneficiary, any remaining benefits
will be paid to the original Beneficiary's estate. This designation must be made
to the LNL Home Office.
ARTICLE 5
GENERAL PROVISIONS
5.01 THE CONTRACT
The Contract, the application, and any riders attached constitute the entire
Contract. Only the President, a Vice President, the Secretary or an Assistant
Secretary of LNL has the power, on behalf of LNL, to change, modify, or waive
any provisions of this Contract.
LNL reserves the right to unilaterally change the Contract for the purpose of
keeping the Contract in compliance with federal or state law.
Any changes, modifications, or waivers must be in writing. No representative
or person other than the above named officers has authority to change or modify
this Contract or waive any of its provisions. All terms used in this Contract
will have their usual and customary meaning except when specifically defined.
5.02 OWNERSHIP
The Owner is the person who has the ability to exercise the rights within this
Contract.
The Owner may name only his or her spouse as a Joint Owner. Joint Owner(s)
shall be treated as having equal, undivided interests in the Contract, including
rights of survivorship. Either Joint Owner, independently of the other, may
exercise any ownership rights in the Contract.
The Owner may name a Contingent Owner. A Contingent Owner cannot exercise any
ownership rights in this Contract while the Contract Owner or Joint Owner are
alive.
5.03 ASSIGNMENTS
If this Contract is used with a Qualified Plan, the Contract will not be
transferable. It may not be sold, assigned, discounted or pledged as collateral
for a loan or as security for the performance of an obligation or for any other
purpose.
5.04 INCONTESTABILITY
This Contract will not be contested by LNL.
5.05 MISSTATEMENT OF AGE AND/OR SEX
If the age and/or sex of the Annuitant has been misstated, the benefits
available under this Contract will be those which the Purchase Payments would
have purchased using the correct age and/or sex. Any underpayment already made
by LNL shall be made up immediately and any overpayments already made by LNL
shall be charged against the annuity payments falling due after the correction
is made.
5.06 NONPARTICIPATING
The Contract is nonparticipating and will not share in the surplus earnings of
LNL.
5.07 VOTING RIGHTS
The Owner shall have the right to vote only at the meetings of the Fund(s) or
Series invested in by the Owner due to the Owner's interest in the Sub-accounts
of the Variable Account. Ownership of this Contract shall not entitle any
person to vote at any meeting of shareholders of LNL. Votes attributable to the
Contract shall be cast in conformity with applicable law.
5.08 OWNERSHIP OF THE ASSETS
LNL shall have exclusive and absolute ownership and control of its assets,
including all assets in the Variable Account.
<PAGE>
5.09 REPORTS
At least once each Contract Year LNL shall mail a report to the Owner. The
report shall be mailed to the last address known to LNL. Prior to the Annuity
Commencement Date, the report shall include a statement of the number of
Accumulation Units credited to the Variable Account under this Contract and the
dollar value of such units as well as a statement of the value of the fixed
portion of this Contract. The information in the report shall be as of a date
not more than two months prior to the date of mailing the report. LNL shall
also mail to the Owner at least once in each Contract Year a report of the
investments held in the Sub-accounts under this Contract.
5.10 PREMIUM TAX
State and local government premium tax, if applicable, will be deducted from
Purchase Payments or Contract Value. This will be deducted when incurred by
LNL or at another time of LNL's choosing.
5.11 MAXIMUM ISSUE AGE
This Contract will not be issued with an Annuitant over the age of 84.
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 6
ANNUITY PURCHASE RATES UNDER A VARIABLE PAYMENT OPTION
- -----------------------------------------------------------------------------------------------------------------------------------
DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS
PURCHASED WITH EACH $1,000 APPLIED
- ------------------------------------------------------------------------------------------------------------------------------------
SINGLE LIFE ANNUITIES
No 120 240
Period Months Months Cash
age Certain Certain Certain Refund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
60 5.54 5.48 5.29 5.36
61 5.63 5.56 5.35 5.43
62 5.73 5.65 5.42 5.51
63 5.84 5.75 5.48 5.59
64 5.95 5.85 5.54 5.68
65 6.07 5.96 5.60 5.78
66 6.21 6.07 5.67 5.88
67 6.35 6.19 5.73 5.98
68 6.50 6.32 5.79 6.09
69 6.66 6.45 5.85 6.21
70 6.84 6.60 5.91 6.34
71 7.03 6.75 5.97 6.47
72 7.24 6.90 6.02 6.61
73 7.47 7.07 6.07 6.76
74 7.71 7.24 6.11 6.91
75 7.98 7.41 6.15 7.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JOINT AND SURVIVOR ANNUITIES
Joint and Full to Survivor Joint and Two-Thirds Survivor
Certain Period Joint Certain Period
None 120 240 Age None 120 240
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5.11 5.10 5.07 60 5.54 5.49 5.30
5.18 5.17 5.13 61 5.64 5.57 5.36
5.25 5.25 5.19 62 5.74 5.66 5.42
5.33 5.32 5.26 63 5.84 5.75 5.48
5.42 5.41 5.32 64 5.96 5.86 5.54
5.51 5.50 5.39 65 6.08 5.96 5.61
5.60 5.59 5.46 66 6.21 6.07 5.67
5.71 5.70 5.54 67 6.35 6.19 5.73
5.82 5.80 5.61 68 6.50 6.32 5.79
5.95 5.92 5.68 69 6.66 6.45 5.85
6.08 6.05 5.75 70 6.83 6.59 5.91
6.22 6.18 5.82 71 7.02 6.73 5.97
6.37 6.32 5.89 72 7.22 6.89 6.02
6.53 6.47 5.95 73 7.43 7.04 6.07
6.71 6.63 6.01 74 7.67 7.21 6.11
6.90 6.79 6.07 75 7.92 7.38 6.15
- ------------------------------------------------------------------------------------------------------------------------------------
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
- ------------------------------------------------------------------------------------------------------------------------------------
Before 1920 + 2 1960-1969 - 3
1920-1929 + 1 1970-1979 - 4
1930-1939 0 1980-1989 - 5
1940-1949 - 1 1990-1999 - 6
1950-1959 - 2 ETC. ETC.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 7
ANNUITY PURCHASE RATES UNDER A FIXED PAYMENT OPTION
- -------------------------------------------------------------------------------------------
DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS
PURCHASED WITH EACH $1,000 APPLIED
- -------------------------------------------------------------------------------------------
SINGLE LIFE ANNUITIES
No 120 240
Period Months Months Cash
age Certain Certain Certain Refund
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
60 4.42 4.38 4.22 4.18
61 4.52 4.47 4.29 4.26
62 4.62 4.56 4.36 4.34
63 4.73 4.66 4.43 4.42
64 4.85 4.77 4.50 4.51
65 4.97 4.89 4.57 4.60
66 5.11 5.01 4.64 4.69
67 5.25 5.13 4.71 4.79
68 5.41 5.27 4.78 4.90
69 5.57 5.41 4.85 5.01
70 5.75 5.56 4.91 5.13
71 5.95 5.71 4.98 5.25
72 6.16 5.88 5.04 5.38
73 6.38 6.05 5.09 5.52
74 6.63 6.23 5.14 5.66
75 6.90 6.42 5.19 5.81
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JOINT AND SURVIVOR ANNUITIES
Joint and Full to Survivor Joint and Two-Thirds Survivor
Certain Period Joint Certain Period
None 120 240 Age None 120 240
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4.01 4.01 3.98 60 4.43 4.38 4.22
4.09 4.08 4.05 61 4.52 4.47 4.29
4.17 4.16 4.12 62 4.63 4.57 4.36
4.25 4.25 4.19 63 4.74 4.67 4.43
4.34 4.34 4.26 64 4.85 4.78 4.50
4.44 4.43 4.34 65 4.98 4.89 4.57
4.54 4.54 4.42 66 5.11 5.01 4.64
4.66 4.64 4.50 67 5.26 5.13 4.71
4.77 4.76 4.58 68 5.41 5.27 4.78
4.90 4.88 4.66 69 5.57 5.41 4.85
5.04 5.01 4.74 70 5.75 5.55 4.91
5.18 5.15 4.82 71 5.94 5.70 4.98
5.34 5.30 4.89 72 6.14 5.86 5.03
5.51 5.45 4.96 73 6.35 6.03 5.09
5.69 5.62 5.03 74 6.59 6.20 5.14
5.89 5.79 5.09 75 6.84 6.38 5.18
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Before 1920 + 2 1960-1969 - 3
1920-1929 + 1 1970-1979 - 4
1930-1939 0 1980-1989 - 5
1940-1949 - 1 1990-1999 - 6
1950-1959 - 2 ETC. ETC.
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ARTICLE 8
GUARANTEED ACCUMULATED VALUES AND SURRENDER VALUES
FOR FIXED ALLOCATIONS*
<TABLE>
<CAPTION>
$1,000 Annual Contribution $100 Monthly Contribution
- ----------------------------------------------- -------------------------------------------
Guaranteed Guaranteed Guaranteed Guaranteed
End of Accumulated Surrender End of Accumulated Surrender
Year Value Value Year Value Value
- ----------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
1 1,030.00 960.00 1 1,219.41 1,135.41
2 2,090.90 1,960.90 2 2,475.41 2,319.41
3 3,183.63 3,003.63 3 3,769.08 3,553.08
4 4,309.14 4,089.14 4 5,101.56 4,837.56
5 5,468.41 5,218.41 5 6,474.02 6,174.02
6 6,662.46 6,392.46 6 7,887.66 7,563.66
7 7,892.34 7,612.34 7 9,343.70 9,007.70
8 9,159.11 8,879.11 8 10,843.42 10,507.42
9 10,463.88 10,183.88 9 12,388.14 12,052.14
10 11,807.80 11,527.80 10 13,979.19 13,643.19
11 13,192.03 12,912.03 11 15,617.98 15,281.98
12 14,617.79 14,337.79 12 17,305.93 16,969.93
13 16,086.32 15,806.32 13 19,044.52 18,708.52
14 17,598.91 17,318.91 14 20,835.27 20,499.27
15 19,156.88 18,876.88 15 22,679.74 22,343.74
16 20,761.59 20,481.59 16 24,579.54 24,243.54
17 22,414.44 22,134.44 17 26,536.34 26,200.34
18 24,116.87 23,836.87 18 28,551.84 28,215.84
19 25,870.37 25,590.37 19 30,627.81 30,291.81
20 27,676.49 27,396.49 20 32,766.06 32,430.06
21 29,536.78 29,256.78 21 34,968.45 34,632.45
22 31,452.88 31,172.88 22 37,236.91 36,900.91
23 33,426.47 33,146.47 23 39,573.43 39,237.43
24 35,459.26 35,179.26 24 41,980.05 41,644.05
25 37,553.04 37,273.04 25 44,458.86 44,122.86
26 39,709.63 39,429.63 26 47,012.04 46,676.04
27 41,930.92 41,650.92 27 49,641.81 49,305.81
28 44,218.85 43,938.85 28 52,350.48 52,014.48
29 46,575.42 46,295.42 29 55,140.41 54,804.41
30 49,002.68 48,722.68 30 58,014.03 57,678.03
31 51,502.76 51,222.76 31 60,973.86 60,637.86
32 54,077.84 53,797.84 32 64,022.49 63,686.49
33 56,730.18 56,450.18 33 67,162.58 66,826.58
34 59,462.08 59,182.08 34 70,396.87 70,060.87
35 62,275.94 61,995.94 35 73,728.18 73,392.18
36 65,174.22 64,894.22 36 77,159.44 76,823.44
37 68,159.45 67,879.45 37 80,693.64 80,357.64
38 71,234.23 70,954.23 38 84,333.86 83,997.86
39 74,401.26 74,121.26 39 88,083.29 87,747.29
40 77,663.30 77,383.30 40 91,945.20 91,609.20
41 81,023.20 80,743.20 41 95,922.96 95,586.96
42 84,483.89 84,203.89 42 100,020.07 99,684.07
43 88,048.41 87,768.41 43 104,240.08 103,904.08
44 91,719.86 91,439.86 44 108,586.69 108,250.69
45 95,501.46 95,221.46 45 113,063.71 112,727.71
</TABLE>
*Guaranteed Accumulated Values and Guaranteed Surrender Values may be more or
less than shown in the table because of the variable of the day of receipt of
the Purchase Payment at the Home Office from period to period and the crediting
of interest to the Annuitant's account on a daily basis. Values shown are based
upon contributions equally spaced with interest occurring at the beginning of
the year. These values do not provide for premium tax, if any.
<PAGE>
EXHIBIT 4(f)
ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (EGMDB)
Made a part of the Contract to which it is attached ("this Contract").
The following shall be inserted into Section 2.15 DEATH OF ANNUITANT. It
replaces the first paragraph of Section 2.15.
The payment of the Death Benefit will occur after receipt of: (1) Proof,
satisfactory to LNL, of the death of the Annuitant; (2) Written authorization
for payment; and (3) Receipt by LNL of all required claim forms, fully
completed. LNL will then pay to the Beneficiary a Death Benefit equal to the
greater of the following two amounts:
a. the Contract Value at the end of the Valuation Period when the death
claim is approved for payment as described above; or
b. the higher of:
1. the Contract Value at the end of the Valuation Period when the
EGMDB becomes effective; and
2. the highest Contract Value at the end of the Valuation Period that
includes any Contract anniversary date up to and including age 75
following election of this rider;
increased by Purchase Payments and decreased by any withdrawals,
annuitizations, and premium taxes incurred after the EGMDB effective
date or Contract anniversary date the highest Contract Value occurred.
The EGMDB will only be in effect, unless terminated by the owner, for Non-
Qualified Contracts and Contracts sold as Individual Retirement Annuities (IRA)
under Internal Revenue Code Section 408, as may be amended from time to time.
For benefits to be payable under the EGMDB, due proof of the death of the
Annuitant prior to the Annuity Commencement Date must be received by LNL. As of
the Annuity Commencement Date, the EGMDB will be discontinued and the charge for
the EGMDB will cease. The EGMDB may not be elected on or after the Annuity
Commencement Date.
Due proof of death may be a certified copy of a death certificate, a certified
copy of the statement of death from the attending physician, a certified copy of
a decree of a court of competent jurisdiction as to the finding of death, or any
other proof of death that is acceptable to LNL.
The EGMDB takes effect on the Valuation Date at the end of the Valuation Period
during which the EGMDB election form is approved by the LNL Home Office.
There is a daily charge for the EGMDB at an annual rate of 0.30% which is
deducted from the Gross Investment Rate of each Sub-account. The charge will
start at the beginning of the next Valuation Period after which the EGMDB
becomes effective. This charge will continue for all future Contract years,
including years following age 75, unless the Owner elects to discontinue the
EGMDB.
After the EGMDB has been elected, the Owner may discontinue it at any time. If
discontinued, the EGMDB will terminate on the Valuation Date at the end of the
Valuation Period after the written request to discontinue the EGMDB is received
in the LNL Home Office. The 0.30% annual charge will cease at the end of the
Valuation Period during which the EGMDB is terminated. If the Owner elects to
discontinue the EGMDB, the first paragraph of Section 2.14 will be reinstated in
its original form as it existed prior to election of this rider. Once
discontinued, the Owner may not re-elect the EGMDB.
The following shall be inserted into Section 1.03 NET INVESTMENT RATE AND NET
INVESTMENT FACTOR following the fifth paragraph:
For any Valuation Period in which the EGMDB is in effect, the Net
Investment Rate for each Sub-account is equal to the Gross Investment Rate
of the Fund less a daily charge. The daily charge is deducted at an annual
rate of 1.302% on each day of the Valuation Period. The Net Investment Rate
is then adjusted, plus or minus, for any taxes imposed due to the operation
of the Variable Account. This daily charge of 1.302% consists of 1.002% for
mortality and expense risks and administrative charges and 0.300% for the
EGMDB rider.
The Lincoln National Life Insurance Company
<PAGE>
EXHIBIT 4(g)
ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (EGMDB)
Made a part of the Contract to which it is attached ("this Contract").
The following shall be inserted into Section 2.13 DEATH BEFORE THE ANNUITY
COMMENCEMENT DATE. It replaces the first paragraph of Section 2.13 (A).
Upon the death of the Annuitant, including an Owner/Annuitant, LNL will pay to
the Beneficiary a Death Benefit equal to the greater of the following two
amounts:
a. the Contract Value at the end of the Valuation Period when the death
claim is approved for payment as described in Section 2.13 (B); or
b. the higher of:
1. the Contract Value at the end of the Valuation Period when the
EGMDB becomes effective; and
2. the highest Contract Value at the end of the Valuation Period that
includes any Contract anniversary date up to and including age 75
following election of this rider;
increased by Purchase Payments and decreased by any withdrawals,
annuitizations, and premium taxes incurred after the EGMDB effective
date or Contract anniversary date on which the highest Contract Value
occurred.
The EGMDB will only be in effect, unless terminated by the owner, for Non-
Qualified Contracts and Contracts sold as Individual Retirement Annuities (IRA)
under Code Section 408.
For benefits to be payable under the EGMDB, due proof of death of the Annuitant
prior to the Annuity Commencement Date must be received by LNL. As of the
Annuity Commencement Date, the EGMDB will be discontinued and the charge for
this benefit will cease. The EGMDB may not be elected on or after the Annuity
Commencement Date.
The EGMDB takes effect on the Valuation Date at the end of the Valuation Period
during which the EGMDB election form is approved by the LNL Home Office.
There is a daily charge for the EGMDB at an annual rate of 0.30% which is
deducted in addition to the mortality and expense risk and administrative
charge. The charge will start at the beginning of the next Valuation Period
after the EGMDB becomes effective. This charge will continue for all future
Contract years, including years following age 75, unless the Owner elects to
discontinue the EGMDB.
After the EGMDB has been elected, the Owner may discontinue it at any time. If
discontinued, the EGMDB will terminate on the Valuation Date at the end of the
Valuation Period during which the written request to discontinue the EGMDB is
received in the LNL Home Office. The 0.30% annual charge will cease at the end
of the Valuation Period during which the EGMDB is terminated. If the Owner
elects to discontinue the EGMDB, the first paragraph of Section 2.13 (A) will be
reinstated in its original form as it existed prior to the election of this
rider. Once discontinued, the Owner may not re-elect the EGMDB.
The following shall be inserted into Section 2.04 VALUATION OF ACCUMULATION
UNITS. It replaces (3) found in the fourth paragraph of Section 2.04.
(3) is a daily factor representing the mortality and expense risk,
administrative charge, and EGMDB charge deducted from the Sub-account
adjusted for the number of days in the Valuation Period. On an annual
basis, this charge will not exceed 1.302%.
The Lincoln National Life Insurance Company
Form DBA-6 5/97
<PAGE>
Exhibit 13
Lincoln National Life Account C
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
A. STANDARDIZED PERFORMANCE
The Average Annual Total Return for each period was determined by finding
the average annual compounded rate of return over each period that would equate
the inial amount invested to the ending redeemable value for that period,
according to the following formula:
n
P * ( 1 + T ) = ERV
Where:
P = a hypothetical inial purchase payment of $1,000
T = average annual total return for the period in question
n = number of years
ERV = redeemable value (as of the end of the period in question) of a
hypothetical $1,000 purchase payment made at the beginning of the 1-
year, 5-year, or 10-year period in question (or fractional portion
thereof).
The formula assumes that : 1) all recurring fees have been charged to
Contract Owner accounts; 2) all applicable non-recurring charges are deducted at
the end of the period in questions; 3) there will be a complete redemption at
the end of the period in question. The performance figures shown in the table
above relate to the contract form containing the highest level of charges.
<PAGE>
B. NON-STANDARDIZED QUOTATIONS
This schedule presents the formulas and calculation employed in producing
the performance quotations set out in the SAI, under the heading, "NON-
STANDARDIZED INVESTMENT RESULTS--SUB-ACCOUNTS OF ACCOUNT H". Amount and Compound
Growth Rate calculations are shown for all base periods disclosed.
The formula for calculating the current Amount of an originally invested
$10,000 for a particular base period is:
CP = ( X / Y ) * $10,000
where:
CP = Amount at End of Base Period
X = Accumulation Unit Value at End of Base Period
Y = Accumulation Unit Value at Beginning of Base Period
The formula for calculating the Compound Growth Rate for a particular base
period is:
( 1 / N )
GR = ( X / Y ) - 1
where:
GR = Annualized Return
X = Accumulation Unit Value at End of Base Period
Y = Accumulation Unit Value at Beginning of Base Period
N = Number of Years of Fund Performance Being Evaluated
<PAGE>
<TABLE>
<CAPTION>
Separate Account C - Standardized 1 Year Returns
ONE YEAR RETURNS PERIOD ENDING 12/31/1995:
Corporate Growth Special Money Putnam Social Capital
Bond Equity Opportunities Market Managed Master Awareness International Appreciation
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Value $1,179.58 $1,369.95 $1,305.43 $1,046.22 $1,279.67 $1,225.88 $1,418.15 $1,076.00 $1,272.01
Fee $0.74 $0.81 $0.79 $0.70 $0.78 $0.76 $0.83 $0.71 $0.78
Surr Charge $70.73 $82.15 $78.28 $62.73 $76.73 $73.51 $85.04 $64.52 $76.27
Final Value $1,108.11 $1,287.00 $1,226.37 $982.79 $1,202.16 $1,151.61 $1,332.29 $1,010.77 $1,194.96
Annual Return 10.811% 28.700% 22.637% -1.721% 20.216% 15.161% 33.229% 1.077% 19.496%
---------------------------------------------------------------------------------------------------------------------
Equity Aggressive
Income Growth
----------------------------------------
<S> <C> <C>
Fund Value $1,328.73 $1,334.16
Fee $0.80 $0.80
Surr Charge $79.68 $80.00
Final Value $1,248.26 $1,253.36
Annual Return 24.826% 25.336%
----------------------------------------
Calculation of Annual Return
Final Value = 1,000* (31-Dec-95 Unit Value/31-Dec-94 Unit Value) - Annual Fee - Surrender Charge
Annual Return = Final Value/1,000 - 1
Unit Values
Corporate Growth Special Money Putnam Social Capital
Date Bond Equity Opportunities Market Managed Master Awareness International Appreciation
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Dec-94 3.584562 4.592949 4.303441 2.136966 2.746985 1.641774 2.004706 1.271301 1.017063
31-Dec-95 4.228295 6.292128 5.617853 2.235727 3.515239 2.012612 2.842977 1.367916 1.293716
---------------------------------------------------------------------------------------------------------------------
Equity Aggressive
Date Income Growth
---------------------------------------
<S> <C> <C>
31-Dec-94 1.046491 0.896242
31-Dec-95 1.390502 1.195731
---------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Separate Account C - Standardized 5 Year Returns
FIVE YEAR RETURNS PERIOD ENDING 12/31/1995:
---------------------------------------------------------------------------------------------------------
Corporate Growth Special Money Putnam Social
Bond Equity Opportunities Market Managed Master Awareness
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year $1,162.11 $1,296.06 $1,418.27 $1,046.76 $1,206.62 $1,174.27 $1,362.23
Fee $0.97 $1.03 $1.08 $0.92 $0.99 $0.97 $1.06
Final Value $1,161.14 $1,295.03 $1,417.18 $1,045.85 $1,205.64 $1,173.30 $1,361.17
---------------------------------------------------------------------------------------------------------
Two Year $1,240.52 $1,305.89 $1,506.16 $1,071.16 $1,237.73 $1,237.01 $1,396.48
Fee $0.96 $1.04 $1.17 $0.84 $0.97 $0.96 $1.10
Final Value $1,239.56 $1,304.85 $1,505.00 $1,070.32 $1,236.75 $1,236.05 $1,395.38
---------------------------------------------------------------------------------------------------------
Three Year $1,379.06 $1,463.00 $1,767.10 $1,088.67 $1,367.01 $1,437.24 $1,570.59
Fee $1.01 $1.07 $1.27 $0.84 $1.01 $1.04 $1.15
Final Value $1,378.05 $1,461.93 $1,765.84 $1,087.83 $1,366.01 $1,436.21 $1,569.44
---------------------------------------------------------------------------------------------------------
Four Year $1,306.65 $1,466.52 $1,730.40 $1,118.11 $1,327.15 $1,395.70 $1,556.70
Fee $0.99 $1.08 $1.29 $0.81 $0.99 $1.04 $1.15
Final Value $1,305.66 $1,465.44 $1,729.11 $1,117.29 $1,326.15 $1,394.66 $1,555.55
---------------------------------------------------------------------------------------------------------
Five Year $1,540.13 $2,007.59 $2,257.23 $1,168.93 $1,697.04 $1,709.68 $2,206.00
Fee $0.97 $1.19 $1.36 $0.78 $1.03 $1.06 $1.28
Surr Charge $30.78 $40.13 $45.12 $23.36 $33.92 $34.17 $44.09
Final Value $1,508.38 $1,966.28 $2,210.75 $1,144.79 $1,662.09 $1,674.45 $2,160.62
Annual Return 8.568% 14.480% 17.195% 2.741% 10.696% 10.860% 16.658%
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
Capital Equity Aggressive
International Appreciation Income Growth
<S> <C> <C> <C>
-----------------------------------------------------------
N/A N/A N/A N/A
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Calculation of Annual Return
<S> <C> <C> <C>
Final Value Year One = 1,000* (31-Dec-91 Unit Value / 31-Dec-90 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (31-Dec-92 Unit Value / 31-Dec-91 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (31-Dec-93 Unit Value / 31-Dec-92 Unit Value) - Annual Fee Year Three
Final Value Year Four = 1,000* (31-Dec-94 Unit Value / 31-Dec-93 Unit Value) - Annual Fee Year Four
Final Value Year Five = 1,000* (31-Dec-95 Unit Value / 31-Dec-94 Unit Value) - Annual Fee Year Five - Surrender Charge
Annual Return = (Final Value Year Five / 1,000) . (1/5) - 1
</TABLE>
<TABLE>
<CAPTION>
Unit Values
---------------------------------------------------------------------------------------------------------
Corporate Growth Special Money Putnam Social
Date Bond Equity Opportunities Market Managed Master Awareness
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-90 2.736912 3.124600 2.481365 1.906589 2.064995 1.173570 1.284839
31-Dec-91 3.180588 4.049672 3.519237 1.995749 2.491670 1.378093 1.75024
31-Dec-92 3.398011 4.083620 3.740191 2.044051 2.557996 1.452923 1.795646
31-Dec-93 3.780437 4.578547 4.391576 2.079097 2.827418 1.689416 2.021120
31-Dec-94 3.584562 4.592949 4.303441 2.136966 2.746985 1.641774 2.004706
31-Dec-95 4.228295 6.292128 5.617853 2.235727 3.515239 2.012612 2.842977
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
Capital Equity Aggressive
International Appreciation Income Growth
----------------------------------------------------------
<S> <C> <C> <C> <C>
N/A N/A N/A N/A
----------------------------------------------------------
</TABLE>
<PAGE>
Separate Account C - Standardized 10 Year/Lifetime Returns
10 YEAR/LIFETIME RETURNS PERIOD ENDING 12/31/1995:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Corporate Growth Special Money Putnam Social
Bond Equity Opportunities Market Managed Master Awareness
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year One $1,161.85 $1,160.82 $964.58 $1,055.28 $1,133.17 $975.63 $1,181.94
Fee $1.51 $1.51 $1.37 $1.44 $1.49 $1.38 $1.40
Final Value $1,160.34 $1,159.31 $963.20 $1,053.84 $1,131.68 $974.25 $1,180.54
---------------------------------------------------------------------------------------------------------
Year Two $1,163.87 $1,325.72 $1,030.17 $1,111.27 $1,217.58 $1,137.45 $1,320.84
Fee $1.63 $1.74 $1.39 $1.51 $1.64 $1.35 $1.38
Final Value $1,162.24 $1,323.98 $1,028.78 $1,109.76 $1,215.93 $1,136.10 $1,319.46
---------------------------------------------------------------------------------------------------------
Year Three $1,242.73 $1,418.97 $1,058.41 $1,179.79 $1,313.16 $1,187.98 $1,551.33
Fee $1.54 $1.76 $1.34 $1.46 $1.62 $1.28 $2.06
Final Value $1,241.19 $1,417.22 $1,057.07 $1,178.33 $1,311.55 $1,186.69 $1,549.26
---------------------------------------------------------------------------------------------------------
Year Four $1,391.03 $1,697.06 $1,394.25 $1,272.69 $1,521.04 $1,296.76 $1,676.65
Fee $1.45 $1.72 $1.35 $1.35 $1.57 $1.78 $1.44
Final Value $1,389.57 $1,695.34 $1,392.89 $1,271.33 $1,519.47 $1,294.97 $1,675.20
---------------------------------------------------------------------------------------------------------
Year Five $1,467.85 $1,694.48 $1,275.61 $1,359.51 $1,557.45 $1,408.24 $1,811.36
Fee $2.05 $2.43 $1.92 $1.89 $2.21 $1.21 $1.39
Final Value $1,465.80 $1,692.05 $1,273.69 $1,357.62 $1,555.25 $1,407.03 $1,809.97
---------------------------------------------------------------------------------------------------------
Year Six $1,703.42 $2,192.99 $1,806.44 $1,421.11 $1,876.59 $1,582.56 $2,020.46
Fee $1.42 $1.74 $1.38 $1.24 $1.54 $1.19 $1.48
Final Value $1,702.00 $2,191.26 $1,805.06 $1,419.86 $1,875.06 $1,581.36 $2,018.98
---------------------------------------------------------------------------------------------------------
Year Seven $1,818.35 $2,209.62 $1,918.39 $1,454.23 $1,924.97 $1,650.07 $2,247.37
Fee $1.40 $1.76 $1.49 $1.15 $1.52 $1.25 $1.57
Final Value $1,816.94 $2,207.87 $1,916.90 $1,453.08 $1,923.45 $1,648.82 $2,245.79
---------------------------------------------------------------------------------------------------------
Year Eight $2,021.43 $2,475.46 $2,250.75 $1,477.99 $2,126.04 $1,863.19 $2,824.21
Fee $1.49 $1.81 $1.61 $1.14 $1.57 $1.30 $1.73
Final Value $2,019.94 $2,473.64 $2,249.13 $1,476.86 $2,124.47 $1,861.89 $2,822.48
---------------------------------------------------------------------------------------------------------
Year Nine $1,915.28 $2,481.43 $2,204.00 $1,517.96 $2,064.04 $1,996.31
Fee $1.45 $1.83 $1.64 $1.10 $1.55 $1.32
Final Value $1,913.83 $2,479.60 $2,202.35 $1,516.86 $2,062.49 $1,994.99
---------------------------------------------------------------------------------------------------------
Year Ten $2,257.52 $3,396.93 $2,875.02 $1,586.96 $2,639.31
Fee $1.42 $2.01 $1.73 $1.06 $1.61
Period 10.0000 10.0000 10.0000 10.0000 10.0000 8.4137 7.6685
---------------------------------------------------------------------------------------------------------
Final Value $2,256.10 $3,394.93 $2,873.29 $1,585.90 $2,637.71 $1,994.99 $2,822.48
And Return 8.477% 13.001% 11.132% 4.720% 10.185% 8.555% 14.489%
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Capital Equity Aggressive
International Appreciation Income Growth
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year One $958.98 $1,014.40 $1,047.92 $886.33
Fee $0.88 $0.74 $0.76 $0.70
Final Value $958.10 $1,013.65 $1,047.17 $885.64
---------------------------------------------------------------------------------------------------------
Year Two $1,048.58 $1,292.77 $1,389.50 $1,194.79
Fee $0.80 $0.79 $0.83 $0.71
Final Value $1,047.78 $1,291.98 $1,388.67 $1,194.08
---------------------------------------------------------------------------------------------------------
Year Three $1,271.47
Fee $0.90
Final Value $1,270.57
---------------------------------------------------------------------------------------------------------
Year Four $1,282.26
Fee $0.94
Final Value $1,281.32
---------------------------------------------------------------------------------------------------------
Year Five $1,363.65
Fee $0.90
Final Value $1,362.75
---------------------------------------------------------------------------------------------------------
Year Six
Fee
Final Value
---------------------------------------------------------------------------------------------------------
Year Seven
Fee
Final Value
---------------------------------------------------------------------------------------------------------
Year Eight
Fee
Final Value
---------------------------------------------------------------------------------------------------------
Year Nine
Fee
Final Value
---------------------------------------------------------------------------------------------------------
Year Ten
Fee
Period 4.6712 1.9945 1.9945 1.9945
---------------------------------------------------------------------------------------------------------
Final Value $1,321.87 $1,214.46 $1,305.35 $1,122.44
And Return 6.156% 10.232% 14.294% 5.962%
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Separate Account C - Standardized 10 Year/Lifetime Returns
Calculation of Annual Return
For the Corporate Bond Fund, Growth Equity Fund, Special Opportunities Fund, Money Market Fund, and Managed Fund
----------------------------------------------------------------------------------------------------------------
Final Value Year One = 1,000* (31-Dec-86 Unit Value/31-Dec-85 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (31-Dec-87 Unit Value/31-Dec-86 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (31-Dec-88 Unit Value/31-Dec-87 Unit Value) - Annual Fee Year Three
Final Value Year Four = 1,000* (31-Dec-89 Unit Value/31-Dec-88 Unit Value) - Annual Fee Year Four
Final Value Year Five = 1,000* (31-Dec-90 Unit Value/31-Dec-89 Unit Value) - Annual Fee Year Five
Final Value Year Six = 1,000* (31-Dec-91 Unit Value/31-Dec-90 Unit Value) - Annual Fee Year Six
Final Value Year Seven = 1,000* (31-Dec-92 Unit Value/31-Dec-91 Unit Value) - Annual Fee Year Seven
Final Value Year Eight = 1,000* (31-Dec-93 Unit Value/31-Dec-92 Unit Value) - Annual Fee Year Eight
Final Value Year Nine = 1,000* (31-Dec-94 Unit Value/31-Dec-93 Unit Value) - Annual Fee Year Nine
Final Value Year Ten = 1,000* (31-Dec-95 Unit Value/31-Dec-94 Unit Value) - Annual Fee Year Ten - Surrender Charge
Annual Return = (Final Value Year Ten / 1,000) _ (1/10) - 1
Calculation of Annual Return for Putnam Master Fund
---------------------------------------------------
Final Value Year One = 1,000* (01-Aug-88 Unit Value/01-Aug-87 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (01-Aug-89 Unit Value/01-Aug-88 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (01-Aug-90 Unit Value/01-Aug-89 Unit Value) - Annual Fee Year Three
Final Value Year Four = 1,000* (01-Aug-91 Unit Value/01-Aug-90 Unit Value) - Annual Fee Year Four
Final Value Year Five = 1,000* (01-Aug-92 Unit Value/01-Aug-91 Unit Value) - Annual Fee Year Five
Final Value Year Six = 1,000* (01-Aug-93 Unit Value/01-Aug-92 Unit Value) - Annual Fee Year Six
Final Value Year Seven = 1,000* (01-Aug-94 Unit Value/01-Aug-93 Unit Value) - Annual Fee Year Seven
Final Value Year Eight = 1,000* (01-Aug-95 Unit Value/01-Aug-94 Unit Value) - Annual Fee Year Eight
Final Value Year Nine = 1,000* (31-Dec-95 Unit Value/01-Aug-95 Unit Value) - Annual Fee Year Nine - Surrender Charge
Annual Return = (Final Value Year Ten / 1,000) _ (1/period) - 1
Calculation of Annual Return for Social Awareness Fund
------------------------------------------------------
Final Value Year One = 1,000* (01-May-89 Unit Value/01-May-88 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (01-May-90 Unit Value/01-May-89 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (01-May-91 Unit Value/01-May-90 Unit Value) - Annual Fee Year Three
Final Value Year Four = 1,000* (01-May-92 Unit Value/01-May-91 Unit Value) - Annual Fee Year Four
Final Value Year Five = 1,000* (01-May-93 Unit Value/01-May-92 Unit Value) - Annual Fee Year Five
Final Value Year Six = 1,000* (01-May-94 Unit Value/01-May-95 Unit Value) - Annual Fee Year Six
Final Value Year Seven = 1,000* (31-Dec-95 Unit Value/01-May-95 Unit Value) - Annual Fee Year Seven - Surrender Charge
Annual Return = (Final Value Year Ten / 1,000) _ (1/period) - 1
Calculation of Annual Return for International Fund
---------------------------------------------------
Final Value Year One = 1,000* (01-May-92 Unit Value/01-May-91 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (01-May-93 Unit Value/01-May-92 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (01-May-94 Unit Value/01-May-93 Unit Value) - Annual Fee Year Three
Final Value Year Four = 1,000* (01-May-95 Unit Value/01-May-94 Unit Value) - Annual Fee Year Four
Final Value Year Five = 1,000* (31-Dec-95 Unit Value/01-May-95 Unit Value) - Annual Fee Year Five - Surrender Charge
Annual Return = (Final Value Year Ten / 1,000) _ (1/period) - 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calculation of Annual Return for Capital Appreciation Fund, Equity Income Fund, and Aggressive Growth Fund
- ----------------------------------------------------------------------------------------------------------
Final Value Year One = 1,000* (03-May-95 Unit Value/01-May-94 Unit Value) -- Annual Fee Year One
Final Value Year Two = 1,000* (31-Dec-95 Unit Value/03-Jan-95 Unit Value) -- Annual Fee Year Two -- Surrender Charge
Annual Return = (Final Value Year Ten/1,000) . (1/period) -- 1
- ---------------------------------------------------------------------------------------------
Unit Values
- ---------------------------------------------------------------------------------------------
Corporate Growth Special Money Putnam
Bond Equity Opportunities Market Managed Master
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-85 1.855298 1.835034 1.935506 1.395369 1.319356
31-Dec-86 2.155587 2.130152 1.866948 1.472499 1.495060
31-Dec-87 2.162140 2.435905 1.996745 1.552750 1.608536 03-Aug-87 1.000000
31-Dec-88 2.311872 2.610685 2.054261 1.650743 1.737162 03-Aug-88 0.975631
31-Dec-89 2.590959 3.126185 2.709503 1.782935 2.014633 03-Aug-89 1.139060
31-Dec-90 2.736912 3.124600 2.481365 1.906589 2.064995 03-Aug-90 1.191079
31-Dec-91 3.180588 4.049672 3.519237 1.995749 2.491670 03-Aug-91 1.301548
31-Dec-92 3.398011 4.083620 3.740191 2.044051 2.557996 03-Aug-92 1.415390
31-Dec-93 3.780437 4.578547 4.391576 2.079097 2.827418 03-Aug-93 1.591958
31-Dec-94 3.584562 4.592949 4.303441 2.136966 2.746985 03-Aug-94 1.661127
31-Dec-95 4.228295 6.292128 5.617853 2.235727 3.515239 03-Aug-95 1.877092
31-Dec-95 2.012612
Period (in years) 10.0000 10.0000 10.0000 10.0000 10.0000 8.4137
- ---------------------------------------------------------------------------------------------
Unit Values
- ------------------------------------------------------------------------------------------------------------------------
Social Awareness International Capital Appreciation Equity Income Aggressive Growth
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
02-May-88 1.000000
02-May-89 1.181935
02-May-90 1.322406
02-May-91 1.554787 01-May-91 1.000000
02-May-92 1.682623 01-May-92 0.95898
02-May-93 1.819383 01-May-93 1.049537
02-May-94 2.030969 01-May-94 1.273608 03-Jan-94 1.000000 03-Jan-94 1.000000 03-Jan-94 1.000000
02-May-95 2.260718 01-May-95 1.285326 03-Jan-95 1.014396 03-Jan-95 1.047921 03-Jan-95 0.886332
31-Dec-95 2.842977 31-Dec-95 1.367916 31-Dec-95 1.293716 31-Dec-95 1.390502 31-Dec-95 1.195731
7.6685 4.6712 1.9945 1.9945 1.9945
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>
Non-standardized Performance - Separate Account C
Accumulated Amounts
Base Period Corporate Growth Special Money Putnam Social
Years Start Date End Date Bond Equity Opportunities Market Managed Master Awareness
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
1 31-Dec-94 31-Dec-95 11,796 13,700 13,054 10,462 12,797 12,259 14,182
2 31-Dec-93 31-Dec-95 11,185 13,743 12,792 10,753 12,433 11,913 14,066
3 31-Dec-92 31-Dec-95 12,443 15,408 15,020 10,938 13,742 13,852 15,833
4 31-Dec-91 31-Dec-95 13,294 15,537 15,963 11,202 14,108 14,604 16,243
5 31-Dec-90 31-Dec-95 15,449 20,137 22,640 11,726 17,023 17,149 22,127
Life See Below 31-Dec-95 42,283 62,921 56,179 22,357 35,152 20,126 28,430
-------------------------------------------------------------------------------------------------------------------------------
Accumulated Amounts = (End Date Unit Value/Start Date Unit Value)* 10,000
Compound Growth Rate
Base Period Corporate Growth Special Money Putnam Social
Years Start Date End Date Bond Equity Opportunities Market Managed Master Awareness
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
1 31-Dec-94 31-Dec-95 17.96% 37.00% 30.54% 4.62% 27.97% 22.59% 41.82%
2 31-Dec-93 31-Dec-95 5.76% 17.23% 13.10% 3.70% 11.50% 9.15% 18.60%
3 31-Dec-92 31-Dec-95 7.56% 15.50% 14.52% 3.03% 11.18% 11.47% 16.55%
4 31-Dec-91 31-Dec-95 7.38% 11.65% 12.40% 2.88% 8.98% 9.93% 12.89%
5 31-Dec-90 31-Dec-95 9.09% 15.03% 17.75% 3.24% 11.23% 11.39% 17.22%
Life See Below 31-Dec-95 15.51% 20.19% 18.84% 8.38% 13.40% 8.67% 14.60%
-------------------------------------------------------------------------------------------------------------------------------
One Year Return = (31-Dec-95 Unit Value/31-Dec-94 Unit Value) - 1
Two Year Return = (31-Dec-95 Unit Value/31-Dec-93 Unit Value) - (1/2) - 1
Three Year Return = (31-Dec-95 Unit Value/31-Dec-92 Unit Value) - (1/3) - 1
Four Year Return = (31-Dec-95 Unit Value/31-Dec-91 Unit Value) - (1/4) - 1
Five Year Return = (31-Dec-95 Unit Value/31-Dec-90 Unit Value) - (1/5) - 1
Life Return = (31-Dec-95 Unit Value/Inception Date Unit Value) - (1/period) - 1
Non-standardized Performance - Separate Account C
Unit Values Corporate Growth Special Money Putnam Social
Bond Equity Opportunities Market Managed Master Awareness International
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
31-Dec-95 4.228295 6.292128 5.617853 2.235727 3.515239 2.012612 2.842977 1.367916
31-Dec-94 3.584562 4.592949 4.303441 2.136966 2.746985 1.641774 2.004706 1.271301
31-Dec-93 3.780437 4.578547 4.391576 2.079097 2.827418 1.689416 2.021120 1.242929
31-Dec-92 3.398011 4.083620 3.740191 2.044051 2.557996 1.452923 1.795646 0.901308
31-Dec-91 3.180588 4.049672 3.519237 1.995749 2.491670 1.378093 1.750240 0.989705
31-Dec-90 2.736912 3.124600 2.481365 1.906589 2.064995 1.173570 1.284839 N/A
---------------------------------------------------------------------------------------------------------------------
Life Returns Corporate Growth Special Money Putnam Social
Bond Equity Opportunities Market Managed Master Awareness International
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
Inception/Start Date 12/28/81 12/28/81 12/28/81 01/07/82 04/27/83 08/03/87 02/08/88 01/05/91
Unit Value 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000
Period (years) 10.0000 10.0000 10.0000 10.0000 10.0000 8.4137 7.6685 4.6712
-------------------------------------------------------------------------------------------------------------------------------
Capital Equity
International Appreciation Income
<C> <C> <C>
--------------------------------------
10,760 12,720 13,287
11,006 N/A N/A
15,177 N/A N/A
13,821 N/A N/A
N/A N/A N/A
13,679 12,937 13,905
--------------------------------------
Capital Equity
International Appreciation Income
<C> <C> <C>
--------------------------------------
7.60% 27.20% 32.87%
4.91% N/A N/A
14.92% N/A N/A
8.43% N/A N/A
N/A N/A N/A
6.94% 13.78% 17.97%
--------------------------------------
Capital Equity Aggressive
Appreciation Income Growth
<C> <C> <C>
----------------------------------
1.293716 1.390502 1.195731
1.017063 1.046491 0.896242
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
----------------------------------
Capital Equity Aggressive
Appreciation Income Growth
<C> <C> <C>
----------------------------------
03/01/94 03/01/94 03/01/94
1.000000 1.000000 1.000000
1.9945 1.9945 1.9945
----------------------------------
</TABLE>
<PAGE>
SERVICES AGREEMENT
------------------
(Exhibit B and Schedules Omitted)
THIS SERVICES AGREEMENT (the "Agreement") is made as of August 15, 1996, by
and among Delaware Management Holdings, Inc., a Delaware corporation
("Holdings"), Delaware Service Company, Inc., a Delaware corporation and a
wholly owned subsidiary of Holdings ("Delaware"), Lincoln National Life
Insurance Company, an Indiana insurance corporation ("Lincoln Life"), and each
of the investment companies listed in Exhibit A hereto, each a Maryland
corporation (together with any other investment company designated in accordance
with Section 5.1, the "Funds," or individually, a "Fund").
The parties hereto, in consideration of the mutual covenants hereinafter
expressed, agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Definitions. The following terms shall have the respective
meanings set forth in this Section 1.1 for all purposes of this Agreement except
where the application of such definitions is limited by reference in this
Section 1.1 to a specific Article of this Agreement (such definitions to be
equally applicable to both the singular and plural forms of the terms herein
defined):
"Acceptance Test" means a test, reasonably acceptable to Lincoln Life,
Delaware and the Funds, of the performance of the Value Calculation Services for
the Accounts included in the respective Phases, to be conducted in accordance
with Article 4.
"Accounting Services" means the services listed in the Cutover Schedule
with respect to the Accounts.
"Accounts" means the Funds and the Separate Accounts, collectively.
"Affiliate" means, with respect to any entity, any other entity
controlling, controlled by or under common control with such entity.
"Business Day" means a day on which the New York Stock Exchange is open for
trading.
"Calculation Losses" means any losses suffered by a Contractowner, Third
Party Administrator, Fund or Separate Account directly caused by an error in a
Net Asset Value or Unit Value, or by the delivery to Lincoln Life or any Fund of
a Net Asset Value or Unit Value after the applicable deadline provided for in
Section 2.1; provided, however, that such losses shall not include any
consequential damages.
<PAGE>
"Contractowner" means the present or former owner of an insurance or
annuity contract supported by a Separate Account, or any beneficiary or
annuitant thereof.
"Cutover Date," with respect to any Phase, means the date, which shall be a
Business Day, on which Delaware actually commences providing the Accounting
Services with respect to such Phase in accordance with Section 4.2. The planned
Cutover Date for each Phase is set forth in the Cutover Schedule.
"Cutover Schedule" means Schedule 1.1(a) hereto, which sets forth the
accounting services to be rendered pursuant to this Agreement and the planned
Cutover Dates, as such Schedule may be amended from time to time pursuant to
Section 16.1.
"Delaware" has the meaning set forth in the preamble to this Agreement.
"Delaware Affiliate" means Holdings and any entity that is directly or
indirectly controlled by Holdings.
"Fee Schedule" means Schedule 6.1 hereto, as such Schedule may be amended
from time to time pursuant to Section 16.1.
"Fund" has the meaning set forth in the preamble to this Agreement.
"Holdings" has the meaning set forth in the preamble to this Agreement.
"Lincoln Affiliate" means any Affiliate of Lincoln Life other than a
Delaware Affiliate.
"Lincoln Life" has the meaning set forth in the preamble to this Agreement.
"Net Asset Value" means the daily net asset value per share of the
respective Funds for each Business Day, all determined in accordance with the
terms of the Cutover Schedule and with any applicable prospectus or regulatory
requirement.
"Phase" means a set of Accounts comprising the Phase I Accounts, the Phase
II Accounts or the Phase III Accounts.
"Phase I Account" means an Account designated as such on the Cutover
Schedule.
"Phase II Account" means an Account designated as such on the Cutover
Schedule.
"Phase III Account" means an Account designated as such on the Cutover
Schedule.
"Renewal Term" means each successive one-year term occurring
<PAGE>
after the expiration of the initial term of this Agreement as described in
Section 11.1.
"Separate Account" means a separate account of Lincoln Life identified as
such on the Cutover Schedule, and any additional separate account or sub-account
of Lincoln Life or any Lincoln Affiliate (or of any other person if Lincoln Life
or any Lincoln Affiliate has administrative responsibilities with respect to
such separate account or sub-account pursuant to any reinsurance agreement or
otherwise) designated in accordance with Section 5.1.
"Test Period" means, with respect to each Phase, a period of time prior to
the Cutover Date for such Phase, commencing on the date specified by Delaware
pursuant to Section 4.1 and having a duration of three weeks or such longer
period as may be determined pursuant to Section 4.1.
"Third Party Administrator" means an administrator of insurance or annuity
contracts acting on behalf of Contractowners.
"Unit Value" means the daily unit value per unit of the respective Separate
Accounts or sub-accounts thereof for each Business Day, all determined in
accordance with the terms of the Cutover Schedule and with any applicable
prospectus or regulatory requirement.
"Value Calculation Services" means those Accounting Services consisting of
or incidental to the calculation and communication of Unit Values and Net Asset
Values in accordance with the terms of this Agreement.
ARTICLE 2
SCOPE OF SERVICES; CUTOVER
--------------------------
Section 2.1 Scope of Services. Delaware shall provide the Accounting
Services to each of the Funds and to Lincoln Life with respect to each of the
Separate Accounts, all in accordance with the terms of this Agreement. Without
limiting the generality of the foregoing, from and after the Cutover Date for
each respective Phase, Delaware, no later than 6:00 p.m. (New York City time) on
each Business Day, shall in accordance with the terms of this Agreement provide
to Lincoln Life and to the Funds the Value Calculation Services for each of the
Accounts included in such Phase. In the event of any error in the Value
Calculation Services, the parties hereto will follow the procedures set forth in
Schedule 2.1, without prejudice to any other rights described in this Agreement.
Section 2.2 Cutover Schedule. Delaware, Lincoln Life and the Funds shall
use their respective best efforts to cause the Cutover Date to occur no later
than (a) August 15, 1996, with respect to the Phase I Accounts, (b) October 31,
1996, with
<PAGE>
respect to the Phase II Accounts and (c) January 1, 1997 with respect to the
Phase III Accounts.
ARTICLE 3
LINCOLN LIFE'S SUPPORT OBLIGATIONS
----------------------------------
Section 3.1 Provision of Data. Lincoln Life shall use its best efforts to
provide or cause to be provided to Delaware the data identified in Schedule 3.1
during the periods and in accordance with the procedures identified in such
Schedule, it being understood that Delaware shall not be responsible for any
Calculation Losses or other claims, suits, hearings, actions, damages,
liabilities, fines, penalties, costs, losses or expenses, including reasonable
attorney's fees, which any party may sustain or incur, directly or indirectly,
in each case to the extent caused by or arising from Lincoln Life's failure to
provide such data in accordance with such Schedule 3.1.
Section 3.2 Data to Be Provided by Third Parties. With respect to each of
the mutual funds identified in Schedule 3.2 as an available investment of one or
more of the Separate Accounts (other than mutual funds managed by Lincoln Life
or Delaware or their respective Affiliates) and each third party service
provider identified in such Schedule, Lincoln Life shall direct each of the
managers of such funds or such service provider, as the case may be, to provide
or cause to be provided to Delaware the data identified in Schedule 3.2 in
accordance with the procedures and time deadlines identified in such Schedule.
Section 3.3 Information for Periods Prior to Cutover Date. Lincoln Life
will provide appropriate financial and other information with respect to the
Accounts to Delaware, and will cooperate with Delaware, in connection with the
preparation of data for 1996 annual reports to Contractowner and other elements
of the Accounting Services that relate to periods prior to the Cutover Dates for
the respective Accounts. In addition, Lincoln Life will provide to Delaware
appropriate financial and other information regarding the Accounts for periods
prior to 1996 to the extent relevant to the performance of the Accounting
Services for 1996 and subsequent periods.
ARTICLE 4
ACCEPTANCE TEST; CUTOVER DATE
-----------------------------
Section 4.1 Acceptance Testing. Delaware shall notify Lincoln Life of the
date, which shall be a Business Day, on which the Value Calculation Services for
each respective Phase will be ready for the commencement of the Acceptance Test
for such Phase. During the Test Period for each Phase, Delaware, Lincoln Life
and the Funds shall cooperate in performing the Acceptance Test for such Phase,
and Delaware and Lincoln Life, respectively, shall use its best efforts to
remedy any failure in the performance of the Value Calculation Services caused
by such party. In the event that, during the Test Period with respect to any
Phase,
<PAGE>
performance of the Value Calculation Services is suspended for such Phase in
order to effect such remedy or for any other reason, the Test Period for such
Phase shall be extended by the number of days of such suspension. Further, if
at the date that would otherwise be the end of the Test Period for any Phase
Delaware is not performing the Value Calculation Services with respect to such
Phase to the reasonable satisfaction of Lincoln Life, and Lincoln Life shall so
notify Delaware, the Test Period shall be extended until the date on which
Lincoln Life notifies Delaware that the Value Calculation Services are being
performed to the reasonable satisfaction of Lincoln Life. All references in this
Section 4.1 to the performance of the Value Calculation Services shall refer to
the performance thereof in a test mode.
Section 4.2 Cutover Date. With respect to each Phase, upon the
termination of the Test Period, Lincoln Life, the Funds and Delaware shall
execute a written acknowledgment in the form of Exhibit B hereto confirming such
termination and specifying the Cutover Date, which shall be the Business Day
immediately following the date of such termination unless Lincoln Life, the
Funds and Delaware shall agree upon a different date.
ARTICLE 5
NEW ACCOUNTS; NEW INVESTMENT MANAGERS
-------------------------------------
Section 5.1 Additional Accounts. Lincoln Life may from time to time
designate (i) one or more additional investment companies or separate accounts
to constitute Funds or Separate Accounts, as the case may be, for all purposes
of this Agreement, or (ii) one or more newly established sub-accounts of any
Separate Account. Such designation shall be:
(a) subject to Delaware's consent, which shall not be unreasonably
withheld; provided, that such consent shall be considered to be
unreasonably withheld if Delaware does not make reasonable
efforts to accept such new investment companies, separate
accounts and sub-accounts, which efforts shall include, but not
be limited to, reasonable consideration of the expansion of
Delaware's infrastructure to handle such new investment
companies, separate accounts and sub-accounts; and
(b) evidenced by a writing executed by Lincoln Life, Delaware and, if
applicable, each such investment company, setting forth the name
of such investment company, separate account or new sub-account,
the applicable rate under the Fee Schedule that shall apply to
the Accounting Services for such investment company, separate
account or new sub-account, the effective date of the designation
thereof as a Fund, Separate Account or new sub-account, and any
other matters the parties wish to include.
<PAGE>
Notwithstanding clause (b) of the preceding sentence, if Delaware's performance
of the Accounting Services for such additional Funds, Separate Accounts, or sub-
accounts of such Separate Accounts would, in Delaware's reasonable opinion,
result in higher costs than the costs Delaware incurs for providing the
Accounting Services to the current Accounts, then the affected parties hereto
shall negotiate in good faith an addendum to the Fee Schedule for such
additional Funds, Separate Accounts and sub-accounts and Delaware shall not be
deemed to have unreason ably withheld its consent under clause (b) of this
Section 5.1 until such addendum has been agreed to. Except as otherwise
specified in such writing, from and after such effective date, Delaware shall
provide to such Fund, or to Lincoln Life with respect to a Separate Account or
new sub-account, the same Accounting Services as are specified in the Cutover
Schedule with respect to the other Funds, Separate Accounts or sub-account of a
Separate Account, as the case may be.
Section 5.2 New Investment Managers. If new investment managers are added
to provide investment advisory services to any of the Accounts, and Delaware's
performance of the Accounting Services is, as a result thereof, significantly
more costly to Delaware, the affected parties shall negotiate in good faith an
addendum to the Fee Schedule for such Accounts.
ARTICLE 6
FEES
----
Section 6.1 Accrual of Fees. From and after the Cutover Date with respect
to each Phase, Lincoln Life shall pay fees for the Accounting Services for each
of the Separate Accounts included in such Phase, and each Fund included in such
Phase shall pay fees for the Accounting Services for such Fund, in each case at
the respective rates per annum determined in accordance with the Fee Schedule.
Fees accrued pursuant to this Section 6.1 shall be payable in arrears on a
monthly basis.
Section 6.2 Payment of Fees by Lincoln Life. Delaware shall submit to
Lincoln Life an invoice for each month for all of the fees payable pursuant to
Section 6.1 with respect to each of the Separate Accounts, which invoice shall
be itemized to show the portion of such fees allocable to each of the Separate
Accounts in accordance with the Fee Schedule. Subject to the terms of this
Agreement, invoices for such fees shall be payable within 30 days of receipt.
Section 6.3 Payment of Fees by the Funds. Delaware shall submit to
each Fund, with a copy to Lincoln Life, an invoice for each month for all of the
fees payable pursuant to Section 6.1 with respect to such Fund. Subject to the
terms of this Agreement, invoices for such fees shall be payable within 30 days
of receipt.
<PAGE>
ARTICLE 7
STANDARD OF CARE; INDEMNIFICATION
---------------------------------
Section 7.1 Standard of Care. Delaware shall provide the Accounting
Services with a level of care equal to or greater than the level of care at
which it performs similar functions for mutual funds that are sponsored or
managed by any Delaware Affiliate, and in any event, Delaware shall always
exercise reasonable care in performing the Accounting Services.
Section 7.2 Indemnification
(a) Indemnification by Lincoln Life. Lincoln Life shall indemnify,
defend and hold harmless Delaware and any Delaware Affiliate, and the directors,
officers and employees of the fore going (each individually, a "Delaware
Indemnified Party"), against any and all claims, suits, hearings, actions,
damages, liabilities, fines, penalties, costs, losses or expenses, including
reasonable attorney's fees, which any Delaware Indemnified Party may sustain or
incur, directly or indirectly, in each case to the extent caused by or arising
from (i) the negligence, recklessness or intentional misconduct of Lincoln Life
or any Lincoln Affiliate, or any director, officer or employee thereof, in the
performance of this Agreement; or (ii) the failure of Lincoln Life to comply
with the terms of this Agreement.
(b) Indemnification by Delaware. Subject to Section 3.1, Delaware
shall indemnify, defend and hold harmless Lincoln Life, the Lincoln Affiliates
and the Funds, and the directors, officers and employees of the foregoing (each
individually, a "Lincoln Indemnified Party") against any and all claims, suits,
hearings, actions, damages, liabilities, fines, penalties, costs, losses
(including but not limited to (a) Calculation Losses reimbursed by Lincoln Life
and (b) any market fluctuation losses incurred by Lincoln Life in effecting such
reimbursement) or expenses, including reasonable attorney's fees, which any
Lincoln Indemnified Party may sustain or incur, directly or indirectly, in each
case to the extent caused by or arising from (i) the negligence, recklessness or
intentional misconduct of Delaware or any Delaware Affiliate, or any director,
officer or employee thereof, in the performance of this Agreement; or (ii) the
failure of Delaware to comply with the terms of this Agreement.
(c) Procedures. Subject to the provisions of Section 7.2(d), promptly
after receipt by a Delaware Indemnified Party or a Lincoln Indemnified Party
(each, an "Indemnified Party") of notice of the commencement of any action,
proceeding, investigation or claim by any Contractowner or other third party (a
"Proceeding"), the Indemnified Party shall, if a claim in respect thereof is to
be made pursuant to this Section 7.2 against another party to this Agreement
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof; but the failure so to notify the Indemnifying Party
<PAGE>
shall not relieve the Indemnifying Party from any liability under this Section
7.2, except to the extent that such failure to notify actually prejudices the
Indemnifying Party. In case any such Proceeding shall be brought against an
Indemnified Party, the Indemnifying Party shall be entitled to participate in
and to assume the defense thereof, with counsel satisfactory to the Indemnified
Party, and after notice from the Indemnifying Party to the Indemnified Party of
the Indemnifying Party's election to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if, in the reasonable judgment of the Indemnified Party, it is
advisable for the Indemnified Party to be represented by separate counsel other
than counsel for the Indemnifying Party, the Indemnified Party shall have the
right to employ a single counsel to represent the Indemnified Party, in which
event the reasonable fees and expenses of such separate single counsel shall be
borne by the Indemnifying Party, and (ii) in the case of any Proceeding brought
by any governmental authority, the Indemnifying Party shall have the right to
participate in, but not to assume the defense of, such Proceeding. The
Indemnifying Party shall not be obligated under any settlement agreement
relating to any Proceeding under this Section 7.2 to which it has not consented
in writing, which consent shall not be unreasonably withheld.
(d) Preserving Rights with Respect to Calculation Losses. Notwithstanding
Section 7.2(c), Lincoln Life may in its sole discretion elect to reimburse a
Contractowner, Third Party Administrator, Separate Account or Fund for
Calculation Losses out of Lincoln Life's own funds and such reimbursement shall
have no effect on the respective indemnification obligations of the parties
pursuant to Section 7.2(a) and (b).
(e) Overpayments. The parties agree that there may be circumstances in
which it would not be commercially reasonable for Lincoln Life and the Funds to
seek reimbursement from one or more Contractowners of overpayments made them,
taking into account relevant factors such as industry practice; the amount of
such overpayments; the number of Contractowners overpaid; the cost of seeking
reimbursement; and the implications for customer relations of seeking
reimbursement. In the event of any overpayment to a Contractowner for which
Lincoln Life or any Fund intends to seek indemnification from Delaware pursuant
to Section 7.2(b) without seeking reimbursement from the Contractowner, the
parties shall negotiate in good faith as to what effect, if any, the
determination not to seek such reimbursement should have under the circumstances
on the rights of Lincoln Life or the Funds to indemnification for the amounts
overpaid.
<PAGE>
ARTICLE 8
INSURANCE COVERAGE
------------------
Section 8.1 Insurance. Delaware and Holdings shall maintain
insurance coverage at a level at least equal to the insurance coverage held by
each of them at the time this Agreement becomes effective.
ARTICLE 9
FORCE MAJEURE AND DISASTER RECOVERY PLAN
----------------------------------------
Section 9.1 Force Majeure; Disaster Recovery Plan. No party shall be
liable to any other party for any damages caused by delays beyond its reasonable
control, including, without limitation, those delays occasioned by fire, strike,
labor dispute, acts of the other party, acts of any common carrier, pricing
service, corporate action service, or telephone network, acts of the power
supply company or its networks, restrictions by civil or military authorities,
acts of nature, or unforeseen transportation failures. In the event of any such
delay, the hindered party shall promptly notify the other parties and, upon the
giving of such notice, the period of time for performance of obligations
hereunder affected by such delays will be extended by the same number of days as
the delay. Notwithstanding the foregoing, Delaware shall maintain and implement
a customary disaster recovery plan and such plan shall be reasonably acceptable
to Lincoln Life and the Funds. This Article 9 shall not excuse any failure to
perform, or extend the time for performance of, any obligation of Delaware under
this Agreement to the extent that such failure or delay would have been avoided
by compliance with such disaster recovery plan, or by the use of reasonable,
readily available alternatives.
ARTICLE 10
EFFECTIVENESS
-------------
Section 10.1 Effectiveness.
(a) This Agreement shall become effective upon the later of:
(i) the date first set forth above; or
(ii) the date as of which Lincoln Life has complied with the
requirements of the Indiana insurance holding company laws
at Section 27-1-23-4 of the Indiana Code.
(b) Lincoln Life shall diligently and reasonably pursue the satisfaction
of the requirements of the Indiana insurance holding company laws at
Section 27-1-23-4 of the Indiana Code.
<PAGE>
ARTICLE 11
TERM AND TERMINATION
--------------------
Section 11.1 Term. The initial term of this Agreement shall end on
the fourth anniversary of the Cutover Date of Phase III, and this Agreement
shall be automatically renewed for subsequent Renewal Terms thereafter unless
sooner terminated under Section 11.2.
Section 11.2 Termination. Subject to the procedures set forth in
Article 12 and to Section 11.3, this Agreement may be terminated as follows:
(a) by Lincoln Life, Delaware, or any Fund, in each case upon notice
to each of the other parties at least 180 days prior to the
expiration of the initial term or any Renewal Term, with such
termination to become effective upon such expiration; and
(b) by Lincoln Life, Delaware or any Fund upon 30 days notice to each
of the other parties, for any material breach of this Agreement
unless such breach is cured within such notice period.
For the purpose of this Section 11.2(b) only, a "material breach" shall include,
but not be limited to, the failure by Delaware to provide Accounting Services
hereunder of a quality reasonably determined by Lincoln Life or any Fund to be
consistent with a superior level of service in the industry.
Section 11.3 Effect of Termination by a Fund. In the event one or
more Funds shall terminate this Agreement, this Agreement shall nonetheless
continue in full force and effect between and among those parties who have not
terminated this Agreement.
ARTICLE 12
PROCEDURES UPON TERMINATION
---------------------------
Section 12.1 Obligations Upon Termination. Upon termination of this
Agreement by any party under Article 11, each party shall be obligated to
cooperate with each other party to provide for the transfer of all
responsibilities, duties and obligations of this Agreement as may be necessary
to ensure the orderly, undisrupted business of each party. Such cooperation
shall include, but not be limited to, returning all papers, documents, materials
or equipment to the party owning such materials. In the event that this
Agreement is terminated by Lincoln Life or any Fund under Section 11.2(b),
Lincoln Life and the Funds shall have the right to require Delaware to continue
performing all or any part of its responsibilities, duties and obligations under
this Agreement until the earlier of (a) 210 days following the date notice of
such termination was given, or (b) the date that is 30 days after notice from
Lincoln Life or the Funds that
<PAGE>
Delaware shall cease such performance. For this purpose, (a) the terms of this
Agreement (including without limitation the obligation of Lincoln Life and the
Funds to pay Delaware's fees under Article 6, and the obligation of Delaware to
continue to exercise the standard of care required under Section 7.1 shall
remain in effect with respect to the period in which Delaware is obligated to
continue such performance, and (b) if any portion of Delaware's
responsibilities, duties and obligations during such period are not so extended
as required by Lincoln Life, the parties shall mutually agree in good faith on a
reduction of fees which reflects the termination of such responsibilities,
duties and obligations.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES
------------------------------
Each party represents and warrants to the other parties as follows:
Section 13.1 Organization and Authority. Such party is duly organized,
validly existing and in good standing as a corporation under the laws of the
state indicated on the first page of this Agreement, with the requisite
authority and power, in conformity with applicable laws, rules and regulations,
to execute and deliver this Agreement and to perform its obligations hereunder.
Such party has taken all necessary action to authorize such execution, delivery
and performance.
Section 13.2 No Conflict with Laws. The execution, delivery and
performance of this Agreement by such party do not conflict with or violate any
laws applicable to such party, any provision of its constituent documents, any
order or judgment of any court or governmental agency applicable to it or any of
its assets or any contractual restriction binding on it or its assets.
Section 13.3 Obligation. This Agreement constitutes a legal, valid and
binding obligation of such party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to the enforcement of creditors' rights generally and
subject to principles of equity.
ARTICLE 14
PARENT GUARANTY
---------------
Section 14.1 Parent Guaranty. Holdings hereby unconditionally guarantees
the full and punctual performance of the covenants, agreements and obligations
of Delaware under this Agreement, including but not limited to the payment when
due of all amounts that may from time to time be payable by Delaware pursuant to
Section 7.2(b) (the "Guaranteed Obligations").
Section 14.2 Guaranty Unconditional. The obligations of
<PAGE>
Holdings hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released or discharged by:
(a) any extension, settlement, compromise, waiver or release in
respect of any obligation of Delaware under this Agreement;
(b) any modification or amendment of or supplement to this
Agreement;
(c) any change in the corporate existence, structure or ownership of
Delaware, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Delaware or its assets; or
(d) any other act or omission to act or delay of any kind by
Delaware, Lincoln Life, any Fund or any other person which would, but for
the provisions of this paragraph (d), constitute a legal or equitable
discharge of Holding's obligations hereunder;
provided, however, that in the event of any extension, settlement, compromise,
waiver or release of any obligation of Delaware under this Agreement, or any
modification or amendment of or supplement to this Agreement, the guaranty
provided for in this Article 14 shall apply to the obligations of Delaware as so
extended, settled, compromised, waived, released, modified, amended or
supplemented.
Section 14.3 Discharge Only Upon Payment or Performance in Full;
Reinstatement in Certain Circumstances. Holding's obligations hereunder shall
remain in full force and effect until the Guaranteed Obligations shall have been
paid or performed in full. If at any time any payment of Guaranteed Obligations
by Delaware under this Agreement is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of Delaware or
otherwise, Holding's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
Section 14.4 Waiver by Holdings. Holdings irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any person
against Delaware or any other person.
Section 14.5 Subrogation. Upon making any payment with respect to
Delaware hereunder, Holdings shall be subrogated to the rights of the payee
against Delaware with respect to such payment; provided that Holdings shall not
enforce payment by way of subrogation until all Guaranteed Obligations have been
paid or performed in full.
<PAGE>
ARTICLE 15
DISPUTE RESOLUTION
------------------
Before commencing litigation of any dispute arising out of or relating to
this Agreement, the parties shall attempt in good faith to resolve the dispute
by the following means:
Section 15.1 Negotiation. The parties shall in good faith attempt to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy. A
party may give the other parties written notice of any dispute not resolved in
the normal course of business. Within 20 days after delivery of that notice,
executives of the affected parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the matter has
not been resolved within 60 days of the disputing party's notice, or if the
parties fail to meet within 20 days, either party may initiate mediation of the
controversy or claim as provided in Section 15.2. If a negotiator intends to be
accompanied at a meeting by an attorney, the other negotiator shall be given at
least 3 Business Days' notice of that intention and may also be accompanied by
an attorney.
Section 15.2 Mediation. If the dispute has not been resolved by
negotiation as provided in Section 15.1, the parties shall endeavor for an
additional period of 60 days to settle the dispute by mediation under the then-
current Center for Public Resources (CPR) Model Procedure for Mediation of
Business Disputes. The neutral third party will be selected from the CPR Panel
of Neutrals. If the parties encounter difficulty in agreeing on a neutral, they
will seek the assistance of CPR in the selection process.
Section 15.3 Confidentiality. All activities under this Article 15 are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
ARTICLE 16
MISCELLANEOUS
-------------
Section 16.1 Amendment. This Agreement, including any Exhibits or
Schedules, may be amended, modified or supplemented only in writing signed by
Delaware, Lincoln Life and any Fund affected thereby. This Agreement shall be
binding upon all successors, assigns or transferees of the parties to this
Agreement.
Section 16.2 Assignment. This Agreement and the rights, duties and
obligations of the parties hereto shall not be assign able by any party, except
assignment to successors in the case of mergers, sales of all or substantially
all of the assets of such
<PAGE>
party or transfer of ownership by reorganization or similar restructuring to a
successor in interest to the business of such party, without the prior written
consent of the other parties, and any purported assignment in the absence of
such consent shall be void.
Section 16.3 Notices. All notices given or submitted pursuant to this
Agreement shall be made in writing and shall be deemed given when (a) deposited
with the United States Postal Service, postage prepaid, registered or certified
mail, return receipt requested; (b) deposited with a nationally recognized
overnight mail delivery service; (c) sent by facsimile with electronic
confirmation of delivery or with a copy sent by mail as described in (a) or (b)
above; or (d) delivered in person; all to the last address of record of each
party being notified.
Any notice under this Agreement to Lincoln Life shall be given to:
ATTN: O. Douglas Worthington
Vice President and Controller
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46801
Phone: (219) 455-3669
Facsimile: (219) 455-1939
Any notice under this Agreement to Delaware or Holdings
shall be given to:
ATTN: Michael J. Bishof
Vice President and Treasurer
Delaware Management Company
1818 Market Street; 7th Floor
Philadelphia, PA 19103
Phone: (215) 255-2852
Facsimile: (215) 255-1645
With a copy to:
Richard J. Flannery
Managing Director, Corporate
& Tax Affairs
Delaware Management Company
2005 Market Street
Philadelphia, PA 19103
Phone: (215) 255-1244
Facsimile: (215) 255-2822
<PAGE>
Any notice under this Agreement to any Fund shall be given
to:
ATTN: Kelly D. Clevenger
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46801
Phone: (219) 455-5119
Facsimile: (219) 455-1773
Any party may, by means of written notice in compliance with this Section
16.3, change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
Section 16.4 Severability. If any provision of this Agreement, as applied
to any party or to any circumstances, shall be found by a court of competent
jurisdiction to be void, invalid or unenforceable, the same shall in no way
affect any other provision of this Agreement, the application of any such provi
sion in any other circumstances, or the validity or enforce ability of this
Agreement; provided, however, that nothing in this Section 16.4 shall adversely
affect the fundamental benefits received by the parties under this Agreement.
Section 16.5 Waiver. A waiver by any party of any of the terms and
conditions of this Agreement in any one instance shall not be deemed or
construed to be waiver of any such term or condition for the future, or of any
subsequent breach thereof, nor shall it be deemed a waiver of performance of any
other obligation hereunder. No waiver of any provision of this Agreement shall
be valid unless agreed to in writing by the party or parties against whom such
waiver is sought to be enforced.
Section 16.6 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter of this
Agreement and supersedes all prior and collateral agreements, understandings,
statements and negotiations of the parties.
Section 16.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without giving
effect to the conflict of law provisions thereof.
Section 16.8 Section and Paragraph Headings. The titles of the sections
and paragraphs of this Agreement are for convenience only and shall not in any
way affect the interpretation of any provision or condition of this Agreement.
Section 16.9 Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute the whole of the Agreement as between
the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
LINCOLN LIFE:
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: ____________________________
O. Douglas Worthington
Title: Vice President and
Controller
Date: __________________________
HOLDINGS:
DELAWARE MANAGEMENT HOLDINGS, INC.
By: ____________________________
Title: _________________________
Date: __________________________
DELAWARE:
DELAWARE SERVICE COMPANY, INC.
By: ____________________________
Title: _________________________
Date: __________________________
<PAGE>
FUNDS:
LINCOLN NATIONAL AGGRESSIVE GROWTH
FUND, INC.
LINCOLN NATIONAL BOND FUND, INC.
LINCOLN NATIONAL CAPITAL
APPRECIATION FUND, INC.
LINCOLN NATIONAL EQUITY-INCOME
FUND, INC.
LINCOLN NATIONAL GLOBAL ASSET
ALLOCATION FUND, INC.
LINCOLN NATIONAL GROWTH AND INCOME
FUND, INC.
LINCOLN NATIONAL INTERNATIONAL
FUND, INC.
LINCOLN NATIONAL MANAGED FUND, INC.
LINCOLN NATIONAL MONEY MARKET FUND,
INC.
LINCOLN NATIONAL SOCIAL AWARENESS
FUND, INC.
LINCOLN NATIONAL SPECIAL
OPPORTUNITIES FUND, INC.
By: ____________________________
Kelly D. Clevenger
In his capacity as President of each of
the above-named Funds.
Date: __________________________
<PAGE>
EXHIBIT A
---------
INVESTMENT COMPANIES
<PAGE>
EXHIBIT A
---------
INVESTMENT COMPANIES
Lincoln National Aggressive Growth Fund, Inc.
Lincoln National Bond Fund, Inc.
Lincoln National Capital Appreciation Fund, Inc.
Lincoln National Equity-Income Fund, Inc.
Lincoln National Global Asset Allocation Fund, Inc.
Lincoln National Growth and Income Fund, Inc.
Lincoln National International Fund, Inc.
Lincoln National Managed Fund, Inc.
Lincoln National Money Market Fund, Inc.
Lincoln National Social Awareness Fund, Inc.
Lincoln National Special Opportunities Fund, Inc.
<PAGE>
EXHIBIT B
---------
FORM OF WRITTEN ACKNOWLEDGEMENT OF CUTOVER DATE
<PAGE>
SCHEDULE 1.1(a)
---------------
CUTOVER SCHEDULE
<PAGE>
SCHEDULE 2.1
------------
PROCEDURES FOR CORRECTING ERRORS
<PAGE>
SCHEDULE 3.1
------------
DATA PROVIDED BY LINCOLN LIFE
<PAGE>
SCHEDULE 3.2
------------
UNAFFILIATED MUTUAL FUNDS
AND
SERVICE PROVIDERS
<PAGE>
SCHEDULE 6.1
------------
FEE SCHEDULE
<PAGE>
EXHIBIT
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with the
exception of American States Lloyds Insurance Company, Delaware Distributors,
L.P., Founders CBO, L.P., and Lincoln National Mezzanine Fund, L.P. For purposes
of compliance with securities laws, this chart also shows Lincoln National Life
Insurance Company Separate Accounts. These are not independent, legal entities;
they are accounting entries under state insurance law, and are used to support
variable annuity and variable insurance products.
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| ----------------------------------------
|--| American States Financial Corporation|
| | 83.3% - Indiana - Holding Company |
| ----------------------------------------
| |
| | ---------------------------------------
| --| American States Insurance Company |
| | 100% - Indiana - Property/Casualty |
| ---------------------------------------
| |
| ----------------------------------------
| |--| American Economy Insurance Company |
| | | 100% - Indiana - Property/Casualty |
| | ----------------------------------------
| | | ----------------------------------------------
| | |--| American States Insurance Company of Texas |
| | | 100% - Texas - Property/Casualty |
| | ----------------------------------------------
| | --------------------------------------------
| |--| American States Life Insurance Company |
| | | 100% - Indiana - Life/Health |
| | --------------------------------------------
| | -------------------------------------------------
| |--| American States Lloyds Insurance Company |
| | | Lloyds Plan - * - Texas - Property/Casualty |
| | ------------------------------------------------
| | -------------------------------------------------
| |--| American States Preferred Insurance Company |
| | | 100% - Indiana - Property/Casualty |
| | -------------------------------------------------
| | ---------------------------------
| |--| City Insurance Agency, Inc. |
| | | 100% - Indiana |
| | ---------------------------------
| | -------------------------------------------------
| |--| Insurance Company of Illinois |
| | 100% - Illinois - Fire & Casualty Insurance |
| -------------------------------------------------
| ---------------------------------------------------------
|--| Aseguradora InverLincoln, S.A. Compania de Seguros Y |
| | Reaseguros, Grupo Financiero InverMexico |
| | 49% - Mexico - Life, Property and Casualty Insurance |
| ---------------------------------------------------------
1
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| --------------------------------------------------
|--| The Insurers' Fund, Inc. # |
| | 100% - Maryland - Inactive |
| --------------------------------------------------
| --------------------------------------------------
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
| --------------------------------------------------
|
| ----------------------------------------
|--| The Richard Leahy Corporation |
| | 100% - Indiana - Insurance Agency |
| ----------------------------------------
| | -----------------------------------
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| | -----------------------------------
| | -----------------------------------------
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| | -----------------------------------------
| | -------------------------------------------
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| | -------------------------------------------
| | -------------------------------------------------
| | | Financial Investment Services, Inc. |
| |--| (formerly Financial Services Department, Inc.)|
| | | 100% - Indiana - Insurance Agency |
| | -------------------------------------------------
| | -------------------------------------------
| | | Financial Investments, Inc. |
| |--| (formerly Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| | -------------------------------------------
| | ---------------------------------------------
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| | ---------------------------------------------
| | -------------------------------------------
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| | -------------------------------------------
| | ----------------------------------------
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| | ----------------------------------------
| | ----------------------------------------
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
| | ----------------------------------------
| | --------------------------------------
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| | --------------------------------------
| | ------------------------------------------
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
| ------------------------------------------
2
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
| -------------------------------------------------
|--|LincAm Properties, Inc. |
| |50% - Delaware - Real Estate Investment |
| -------------------------------------------------
| -------------------------------------------------
| | Lincoln Financial Group, Inc. |
|--| (formerly Lincoln National Sales Corporation) |
| | 100% - Indiana - Insurance Agency |
| -------------------------------------------------
| |
| | ------------------------------------
| |--| LNC Equity Sales Corporation |
| | | 100% - Indiana - Broker-Dealer |
| | ------------------------------------
| |
| | ----------------------------------------------------------------
| | | Corporate agencies: Lincoln Financial Group, Inc. ("LFG") |
| |--| has subsidiaries of which LFG owns from 80%-100% of the |
| | | common stock (see Attachment #1). These subsidiaries serve |
| | | as the corporate agency offices for the marketing and |
| | | servicing of products of The Lincoln National Life Insurance |
| | | Company. Each subsidiary's assets are less than 1% of the |
| | | total assets of the ultimate controlling person. |
| | ----------------------------------------------------------------
| |
| | --------------------------------------------------
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
| --------------------------------------------------
|
| -----------------------------------------
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
| -----------------------------------------
|
| -------------------------------------------------
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
| -------------------------------------------------
| -------------------------------------------------
|--|Lincoln National (India) Inc. |
| |100% - Indiana - India Representative Office |
| -------------------------------------------------
| ----------------------------------------------
|--|Lincoln National Intermediaries, Inc. |
| |100% - Indiana - Reinsurance Intermediary |
|---------------------------------------------- |
| ----------------------------------------------
|--|Lincoln National Investments, Inc. |
| |(fka Lincoln National Investment Companies, |
| |Inc.) 100% - Indiana - Holding Company |
| ----------------------------------------------
| ----------------------------------------------
|--|Lincoln National Investment Companies, Inc. |
| |(fka Lincoln National Investment Companies, |
| |Inc.) 100% - Indiana - Holding Company |
| ----------------------------------------------
| | ------------------------------------
| |--|Delaware Management Holdings, Inc.|
| | |100% - Delaware - Holding Company |
| | ------------------------------------
| | | -------------------------------------
| | |--|DMH Corp. |
| | |100% - Delaware - Holding Company |
| | -------------------------------------
| | | ---------------------------------------
| | |--|Delaware Distributors, Inc. |
| | | |100% - Delaware - General Partner |
| | | ---------------------------------------
| |
3
<PAGE>
-------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
-------------------------------
|
| --------------------------------------------------
|__| Lincoln National Investment Companies, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| |
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | | (fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | --------------------------------------------
| | | -----------------------------------
| | |--| Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding, Company|
| | | -----------------------------------
| | | | ----------------------------------
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company|
| | | ----------------------------------
| | | | -----------------------------------
| | | |--| Delaware Distributors, Inc. |
| | | | | 100% - Delaware - General Partner |
| | | | -----------------------------------
| | | | -----------------------------------------------------
| | | |--| Delaware Distributors, L.P. |
| | | | | 100% - Delaware - Mutual Fund Distributor & Broker/ |
| | | | | Dealer |
| | | | -----------------------------------------------------
| | | | ---------------------------------------
| | | |--| Delaware International Advisers Ltd. |
| | | | | 81.1% - England - Investment Advisor |
| | | | ---------------------------------------
| | | | -------------------------------------------------
| | | |--| Delaware Capitol Management, Inc. |
| | | | | (formerly Delaware Investment Counselors, Inc.) |
| | | | | 100% - Delaware - Investment Advisor |
| | | | -------------------------------------------------
| | | | ------------------------------------------------
| | | |--| Delaware Investment & Retirement Services, Inc.|
| | | | | 100% - Delaware - Registered Transfer Agent |
| | | | ------------------------------------------------
| | | | -------------------------------------------
| | | |--| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Investment Advisor |
| | | | -------------------------------------------
| | | | ---------------------------------------
| | | |--| Delaware Management Company, Inc. |
| | | | | 100% - Delaware - Investment Advisor |
| | | | ---------------------------------------
| | | | | --------------------------------------
| | | | |--| Founders Holdings, Inc. |
| | | | | 100% - Delaware - General Partner |
| | | | --------------------------------------
| | | | | ------------------------------------------
| | | | |--| Founders CBO, L.P. |
| | | | | 100% - Delaware - Investment Partnership |
| | | | ------------------------------------------
| | | | | ----------------------------------------------
| | | | |--| Founders CBO Corporation |
| | | | | 100% - Delaware - Co-Issuer with Founders CBO|
| | | | ----------------------------------------------
| | | | ------------------------------------
| | | |--|Delaware Management Trust Company |
| | | | |100% - Pennsylvania - Trust Service |
| | | | ------------------------------------
| | | | -----------------------------------------------------
| | | |--| Delaware Service Company, Inc. |
| | | | | 100% - Delaware - Shareholder Services & Transfer |
| | | | | Agent |
| | | | -----------------------------------------------------
| | ----------------------------------------------------------
| | |Lincoln Investment Management, Inc. |
| |--|(formerly Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
----------------------------------------------------------
4
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| -----------------------------------------------------
|--| Lincoln National Investment Companies, Inc. |
| | (fka Lincoln National Investment Companies, Inc.) |
| | 100% - Indiana - Holding Company |
| -----------------------------------------------------
| |
| | -----------------------------------------------------
| |--| Lincoln National Investment Companies, Inc. |
| | | (fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | -----------------------------------------------------
| | --------------------------------------------------------------
| |--| Lincoln Investment Management, Inc. |
| | | (formerly Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
| | --------------------------------------------------------------
| | | ------------------------------------------------------------
| | | | Lincoln National Mezzanine Corporation |
| | |--| 100% - Indiana - General Partner for Mezzanine Financing |
| | | Limited Partnership |
| | ------------------------------------------------------------
| | | ------------------------------------------------------------
| | |--| Lincoln National Mezzanine Fund, L.P. |
| | | 50% - Delaware - Mezzanine Financing Limited Partnership |
| | ------------------------------------------------------------
| -----------------------------------------------------
| | Lincoln National Investments, Inc. |
|--| (fka Lincoln National Investment Companies, Inc.) |
| | 100% - Indiana - Holding Company |
| -----------------------------------------------------
| | -----------------------------------------------------
| |--| Lincoln National Investment Companies, Inc. |
| | | (fka Lincoln National Investment Companies, Inc.) |
| | | 100% - Indiana - Holding Company |
| | -----------------------------------------------------
| | | ----------------------------------------------
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | ----------------------------------------------
| | | | -------------------------------------------
| | | |--| Lynch & Mayer Asia, Inc. |
| | | | | 100% - Delaware - Investment Management |
| | | | -------------------------------------------
| | | | ---------------------------------------
| | | |--| Lynch & Mayer Securities Corp. |
| | | | | 100% - Delaware - Securities Broker |
| | | | ---------------------------------------
| | | -------------------------------------------------------
| | |--| Vantage Global Advisors, Inc. |
| | | | (formerly Modern Portfolio Theory Associates, Inc.) |
| | | | 100% - Delaware - Investment Adviser |
| | | -------------------------------------------------------
| -----------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -----------------------------------------------
| | ----------------------------------------------
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| | ----------------------------------------------
| | -----------------------------------------------
| | | Lincoln Life & Annuity Company of New York |
| |--| 100% - New York |
| | -----------------------------------------------
| | --------------------------------------------------
| | | Lincoln National Aggressive Growth Fund, Inc.+ |
| |--| 100% - Maryland - Mutual Fund |
| | --------------------------------------------------
| |
| | -------------------------------------
| | | Lincoln National Bond Fund, Inc.+ |
| |--| 100% - Maryland - Mutual Fund |
| | -------------------------------------
5
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| -------------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -------------------------------------------------
| | ------------------------------------------------------
| |--| Lincoln National Capital Appreciation Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------------
| | ----------------------------------------------
| |--| Lincoln National Equity-Income Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | ----------------------------------------------
| | ---------------------------------------------------------
| |--| Lincoln National Global Asset Allocation Fund, Inc.+ |
| | | (formerly Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ---------------------------------------------------------
| | ---------------------------------------------------
| |--| Lincoln National Growth and Income Fund, Inc.+ |
| | | (formerly Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ---------------------------------------------------
| | ----------------------------------------------------------
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| | ----------------------------------------------------------
| | -----------------------------------------------
| |--| Lincoln National International Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------------------
| |
| | -----------------------------------------
| |--| Lincoln National Managed Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------------
| | ----------------------------------------------
| |--| Lincoln National Money Market Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | ----------------------------------------------
| | -------------------------------------------------
| |--| Lincoln National Social Awareness Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | -------------------------------------------------
| | -------------------------------------------------------
| |--| Lincoln National Special Opportunities Fund, Inc.+ |
| | | 100% - Maryland - Mutual Fund |
| | -------------------------------------------------------
| | -----------------------------------------
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| -----------------------------------------
| | -------------------------------------------------
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
| -------------------------------------------------
| -----------------------------------------------------------
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
| -----------------------------------------------------------
|
| -----------------------------------------
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
| -----------------------------------------
| -------------------------------------------------------------
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
| -------------------------------------------------------------
6
<PAGE>
- ----------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
| ------------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| ------------------------------------------------
| |
| | ------------------------------------------
| | --| Lincoln European Reinsurance Company |
| | | 100% - Belgium |
| | ------------------------------------------
| |
| | -----------------------------------------------------------
| |--| Lincoln National Underwriting Serevices, Ltd. |
| | | 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| | -----------------------------------------------------------
| |
| | ---------------------------------------------------------
| | | Servicios de Evaluacion de Riesgo, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | | (Remaining 49% owned by Lincoln National Corp.) |
| ---------------------------------------------------------
|
| ---------------------------------------------
|--|Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
| ---------------------------------------------
|
| ------------------------------------------------
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
| ------------------------------------------------
|
| ------------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| ------------------------------------------
| |
| | ------------------------------------------
| |--| Allied Westminster & Company Limited |
| | | 100% - England/Wales - Sales Services |
| | ------------------------------------------
| |
| | -----------------------------------
| |--| Cannon Fund Managers Limited |
| | | 100% - England/Wales - Inactive |
| | -----------------------------------
| |
| | --------------------------------------------------------
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| | | -----------------------------------------------------
| |
| | -----------------------------------------------------------
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| | -----------------------------------------------------------
| |
| | -------------------------------------------
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| | -------------------------------------------
| |
| | -----------------------------------------
| |--| Laurentian Financial Group PLC |
| | | 100% - England/Wales - Holding Company |
| | ------------------------------------------
| | | ---------------------------------------------------
| | |--| Lincoln Financial Advisers Limited |
| | | | (formerly: Laurentian Financial Advisers Ltd.) |
| | | | 100% - England/Wales - Sales Company |
| | | ---------------------------------------------------
| | | ------------------------------------------------
| | |--| Lincoln Investment Management Limited |
| | | | (formerly: Laurentian Fund Management Ltd.) |
| | | | 100% - England/Wales - Investment Management |
| | | ------------------------------------------------
| | | --------------------------------------------------------------
| | |--| Lincoln Independent Limited |
| | | | (formerly: Laurentian Independent Financial Planning Ltd.) |
| | | | 100% - England/Wales - Independent Financial Adviser |
| | | --------------------------------------------------------------
7
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| -------------------------------------------
| | Lincoln National (UK) PLC |
|--| 100% - England/Wales - Holding Company |
| -------------------------------------------
| |
| | ------------------------------------------
| |--| Laurentian Financial Group PLC |
| | | 100% - England/Wales - Holding Company |
| | ------------------------------------------
| | | -----------------------------------------
| | |--| Laurentian Life PLC |
| | | | 100% - England/Wales - Life Insurance |
| | | -----------------------------------------
| | | |
| | | | -----------------------------------------
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Holding Company |
| | | | -----------------------------------------
| | | | |
| | | | | ---------------------------------------------
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development |
| | | | | ---------------------------------------------
| | | | | ----------------------------------------------
| | | | |--| Barnwood Properties Limited |
| | | | | 100% - England/Wales - Property Investment |
| | | | ----------------------------------------------
| | | | --------------------------------------------------------
| | | |--|IMPCO Properties Limited |
| | | |100% - England/Wales - Property Investment (Inactive) |
| | | --------------------------------------------------------
| | | ---------------------------------------------
| | |--| Laurentian Management Services Limited |
| | | | 100% - England/Wales - Management Services|
| | | ---------------------------------------------
| | | | --------------------------------------------------
| | | |--|Laurit Limited |
| | | |100% - England/Wales - Data Processing Systems |
| | | --------------------------------------------------
| | | -----------------------------------------
| | |--| Laurentian Milldon Limited |
| | | | 100% - England/Wales - Sales Company |
| | | -----------------------------------------
| | | ------------------------------------------------
| | |--| Laurentian Unit Trust Management Limited |
| | | | 100% - England/Wales - Unit Trust Management |
| | | ------------------------------------------------
| | | | -------------------------------------------
| | | |--| LUTM Nominees Limited |
| | | | 100% - England/Wales - Nominee Services |
| | | -------------------------------------------
| | | ------------------------------------------------------------
| | |--| Laurtrust Limited |
| | | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | | ------------------------------------------------------------
| | | -----------------------------------------
| | |--| The Money Club Direct Company Limited |
| | | 100% - Dormant |
| | -----------------------------------------
| |
| | ------------------------------------------
| |--| Liberty Life Assurance Limited |
| | | 100% - England/Wales - Inactive |
| | ------------------------------------------
| | -------------------------------------------------
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| | -------------------------------------------------
| | --------------------------------------------
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
| | --------------------------------------------
8
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
|
| ------------------------------------------
|--|Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| ------------------------------------------
| |
| | ----------------------------------------------
| |--|Lincoln Assurance Limited |
| | | 100% ** - England/Wales - Life Assurance |
| | ----------------------------------------------
| |
| | ---------------------------------------------------
| |--| Lincoln Fund Managers Limited |
| | | 100% - England/Wales - Unit Trust Management |
| | ---------------------------------------------------
| |
| | ------------------------------------------------------
| |--| Lincoln Insurance Services Ltd. |
| | | 100% - Holding Company |
| | ------------------------------------------------------
| | |
| | | -----------------------------------
| | |--| British National Life Sales Ltd.|
| | | | 100% - Inactive |
| | | -----------------------------------
| | |
| | | -------------------------------------------------
| | |--| BNL Trustees Limited |
| | | | 100% - England/Wales - Corporate Pension Fund |
| | | -------------------------------------------------
| | |
| | | ---------------------------------------
| | |--| Chapel Ash Financial Services Ltd. |
| | | | 100% - Direct Insurance Sales |
| | | ---------------------------------------
| | |
| | | ------------------------------------------------
| | | | Lincoln General Insurance Co. Ltd. |
| | | | 100% - Accident & Health Insurance |
| | | ------------------------------------------------
| | |
| | | ----------------------------
| | |--| P.N. Kemp-Gee & Co. Ltd. |
| | | 100% - Inactive |
| | ----------------------------
| |
| | ----------------------------------------------------
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| | ----------------------------------------------------
| |
| | ---------------------------------------------------
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| | ---------------------------------------------------
| |
| | -----------------------------------------------------------
| |--| LIV Limited (formerly Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | -----------------------------------------------------------
| | |
| | | -------------------------------------------------
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| | -------------------------------------------------
| |
| | ---------------------------------------------------
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services |
| | ----------------------------------------------------
| | |
| | | -------------------------------------
| | |--| UK Mortgage Securities Limited |
| | | 100% - England/Wales - Inactive |
| | -------------------------------------
| |
9
<PAGE>
- ----------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
- ----------------------------------
|
| -------------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -------------------------------------------
| |
| | --------------------------------------------
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| | --------------------------------------------
| |
| | -----------------------------------------------
| |--| Niloda Limited |
| | 100% - England/Wales - Investment Company |
| -----------------------------------------------
|
| ----------------------------------------------------
| | Linsco Reinsurance Company |
|--| (formerly Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
| ----------------------------------------------------
|
| ------------------------------------
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| ------------------------------------
| |
| | -----------------------------------------------------------
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| -----------------------------------------------------------
|
| ------------------------------------------------------------
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
| ------------------------------------------------------------
|
| ---------------------------------------------
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
---------------------------------------------
Footnotes:
- ----------
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
+ Ownership of the shares in the eleven funds is on behalf of variable life
and/or annuity contract owners who own interests in Lincoln Life Separate
Accounts established under IC 27-1-5-1, Class 1. These are: Variable Annuity
Accounts A, C, E, H and L; Variable Universal Life Accounts D, F, G, J, and K.
For Separate Account A [a/k/a Fund A] (Group) and Separate Account A [a/k/a
Fund A] (Individual), Lincoln Life is the "insurance company", as that term is
defined in Investment Company Act Form N-3.
For Separate Accounts C,E,H and L the respective Separate Account is the
"Registrant" and Lincoln Life is the "Depositor", as those terms are defined in
Investment Company Act Form N-4.
For Separate Accounts D,F,G,J and K the respective Separate Account is the "unit
investment trust" or "trust", and Lincoln Life is the "Depositor", as those
terms are defined in Investment Company Act Form N-8B-2.
10
<PAGE>
ATTACHMENT #1
LINCOLN FINANCIAL GROUP, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Southwest Financial Group, Inc. (Phoenix, AZ)
3) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3a) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport, LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln National Sales Corporation of Maryland (Baltimore, MD)
(formerly: Morgan Financial Group, Inc.)
12) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(formerly: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
13) Lincoln Financial Group of Michigan, Inc. (Troy, MI)
13a) Financial Consultants of Michigan, Inc. (Troy, MI)
14) Lincoln Financial Group of Missouri, Inc. (formerly: John J. Moore &
Associates, Inc.) (St. Louis, MO)
15) Beardslee & Associates, Inc. (Clifton, NJ)
16) Lincoln Financial Group, Inc. (formerly: Resources/Financial, Inc.)
(Albuquerque, NM)
17) Lincoln Cascades, Inc. (Portland, OR)
18) Lincoln Financial Services, Inc. (Pittsburgh, PA)
19) Lincoln National Financial Group of Philadelphia, Inc. (Philadelphia, PA)
20) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
11
