<PAGE>
As filed with the Securities and Exchange Commission on February 28, 1997
Registration No. 33-26032
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Post-Effective Amendment No. 11 / X /
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 15 / X /
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT E
-------------------------------------------
(Exact Name of Registrant)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
-------------------------------------------
(Name of Depositor)
1300 South Clinton Street
Fort Wayne, Indiana 46802
--------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (219)455-2000
JACK D. HUNTER, ESQ.
200 East Berry Street
Fort Wayne, Indiana 46802
-------------------------
(Name and Address of Agent for Service)
Copy to:
Susan S. Krawczyk
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004
---------------------------------------
DECLARATION PURSUANT TO RULE 24F-2
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 , , pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
X On April 30, 1997 Pursuant to paragraph (a)(1) of Rule 485
---
<PAGE>
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT E
CROSS REFERENCE SHEET
(PURSUANT TO RULE 495 OF REGULATION C
UNDER THE SECURITIES ACT OF 1933)
RELATING TO ITEMS REQUIRED BY FORM N-4
(POST-EFFECTIVE AMENDMENT NO. 11)
<TABLE>
<CAPTION>
N-4 ITEM CAPTION IN PROSPECTUS (PART A)
- -------- ------------------------------
<S> <C>
1. Cover Page
2. Special terms
3. (a) Expense Table
(b) Not Applicable
(c) Not Applicable
(d) For Your Information (top of page 2)
4. (a) Condensed Financial Information
(b) Not Applicable
(c) Financial Statements
5. (a) Cover Page; The Lincoln National Life Insurance Company;
(b) Variable Account; Investments of the Variable Account; Cover Page
(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
(g) Not Applicable
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)
- ---------- ------------------------------
<S> <C>
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. Legal Proceedings
14. Table of Contents to the Statement of Additional Information
(SAI) for Lincoln National Variable Annuity Account E
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-4 ITEM CAPTION IN STATEMENT OF ADDITIONAL
- -------- INFORMATION (PART B)
----------------------------------
<S> <C>
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 The
Lincoln National Life Insurance
Company Lincoln Life (Lincoln Life)
</TABLE>
CROSS REFERENCE SHEET TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM CAPTION IN STATEMENT OF ADDITIONAL
- ---------- INFORMATION (PART B)
----------------------------------
<S> <C>
18. (a) Not Applicable
(b) Not Applicable
(c) Services
(d) Not Applicable
(e) Not Applicable
(f) Not Applicable
19. (a) Purchase of Securities Being Offered
(b) Purchase of Securities Being Offered
20. (a) Not Applicable
(b) Underwriters
(c) Not Applicable
(d) Not Applicable
21. Not Applicable
22. Annuity Payments [Also see that heading in the Prospectus]
23. (a) Financial Statements -- Lincoln National Variable Annuity Account E
(b) Consolidated Financial Statements -- The Lincoln National Life
Insurance Company
</TABLE>
<PAGE>
AMERICAN LEGACY
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT E
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
issued by:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
This Prospectus describes the individual flexible premium deferred variable
annuity contract (contract or variable annuity contract) issued by Lincoln Na-
tional Life Insurance Co. (Lincoln Life). It is for use with the following re-
tirement plans qualified for special tax treatment (qualified plans) under the
Internal Revenue Code of 1986, as amended (the code):
1. Public school systems and certain tax-exempt organizations 403(b);
2. Qualified corporate employee pension and profit-sharing trusts and quali-
fied 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).
Section 403(b) business under number (1.) will normally be accepted only for
purchase payments qualifying as 403(b) lump sum transfers or rollovers.
The contract described in this Prospectus is also offered to plans established
by persons who are not entitled to participate in one of the previously men-
tioned plans (nonqualified contracts).
The contract offers you the accumulation of contract value and payment of pe-
riodic annuity benefits. These benefits may be paid on a variable or fixed ba-
sis or a combination of both. Benefits start at an annuity commencement date
which you select. If the annuitant dies before the annuity commencement date,
the greater of: 1) the contract value; or 2) the guaranteed minimum death ben-
efit (GMDB) or, if in effect, the enhanced guaranteed minimum death benefit
(EGMDB) will be paid to the beneficiary. (See Death benefit before the annuity
commencement date)
The minimum initial purchase payment for the contract is:
1. $1,500 for a nonqualified plan and a 403(b) transfer/rollover or
2. $300 for a qualified plan.
The minimum subsequent purchase payment for the contract is $25 per payment,
subject to a $300 annual minimum.
All investments (purchase payments) for benefits on a variable basis will be
placed in Lincoln National Variable Annuity Account E (Variable annuity ac-
count [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 shares of a class of one or more specified
funds of the American Variable Insurance Series (series): Global Growth Fund,
Growth Fund, International Fund, Growth-Income Fund, Asset Allocation Fund,
High-Yield Bond Fund, Bond Fund, U.S. Government/AAA-Rated Securities Fund and
Cash Management Fund. (See Description of the series). Both the value of a
contract before the annuity commencement date and the amount of payouts after-
ward will depend upon the investment performance of the fund(s) selected. In-
vestments in these funds are neither insured or guaranteed by the U.S. Govern-
ment nor 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 Pro-
spectus deals only with those elements of the contracts relating to the VAA,
except where reference to the fixed side is made.
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 booklet also includes a current Prospectus of the se-
ries. Both should be read carefully before investing and kept for future ref-
erence.
A statement of additional information (SAI), dated April 30, 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, complete and mail the enclosed
card, or call 1-800-942-5500. A table of contents for the SAI appears on the
last page of this Prospectus.
This Prospectus is dated April 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- ----------------------------------------------------------------------
<S> <C>
Special terms 3
- ----------------------------------------------------------------------
Expense tables 4
- ----------------------------------------------------------------------
Synopsis 6
- ----------------------------------------------------------------------
Condensed financial information for the variable annuity account 8
- ----------------------------------------------------------------------
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 11
- ----------------------------------------------------------------------
The contracts 12
- ----------------------------------------------------------------------
Annuity payouts 16
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------
<S> <C>
Federal tax status 17
- --------------------------------------------------------------
Voting rights 19
- --------------------------------------------------------------
Distribution of the contracts 19
- --------------------------------------------------------------
Return privilege 19
- --------------------------------------------------------------
State regulation 19
- --------------------------------------------------------------
Restrictions under the Texas Optional Retirement Program 19
- --------------------------------------------------------------
Records and reports 20
- --------------------------------------------------------------
Other information 20
- --------------------------------------------------------------
Statement of Additional Information
table of contents for
Separate Account E 20
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
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.
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 booklet also includes a current Prospectus of the
series. Both should be read carefully before investing and kept for future
reference.
A statement of additional information (SAI), dated April 30, 1996, 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, complete and mail the enclosed
card, or call 1-800-942-5500, Ext. 4912. A table of contents for the SAI
appears on the last page of this Prospectus.
This Prospectus is dated April 30, 1996
1
Table of contents
<TABLE>
<CAPTION>
Page
- ------------------------------------------------
<S> <C>
Special terms 3
Expense tables 4
Synopsis 6
Condensed financial information for
the variable annuity account 8
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 10
The contracts 12
Annuity payouts 15
</TABLE>
<PAGE>
EXPENSE TABLES
CONTRACTOWNER TRANSACTION EXPENSES:
The maximum contingent deferred sales charge
(as a percentage of purchase payments surrendered/withdrawn): 6%
The contingent deferred sales charge percentage is reduced over time. The later
a redemption occurs, the lower the contingent deferred sales charge with re-
spect to that surrender or withdrawal. See Contingent deferred sales charges.
(Note: This charge may be waived in certain cases. See Contingent deferred
sales charges.)
- --------------------------------------------------------------------------------
ANNUAL CONTRACT FEE: $35
This is a single charge assessed against the contract value on the last valua-
tion date of each contract year and upon full surrender; it is not a separate
charge for each subaccount.
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT E 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 1.25% 1.25%
EGMDB charge 0.15% --
----- -----
Total Account E annual expenses 1.40% 1.25%
</TABLE>
ANNUAL EXPENSES OF THE FUNDS
(as a percentage of each fund's average net assets for fiscal year ended
November 30, 1996):
<TABLE>
<CAPTION>
Management + Other = Total
fees expenses expenses
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Global Growth** . % . % . %
- --------------------------------------------------------------------------
2. Growth .42 .02 .44
- --------------------------------------------------------------------------
3. International .61 .08 .69
- --------------------------------------------------------------------------
4. Growth-Income .39 .02 .41
- --------------------------------------------------------------------------
5. Asset Allocation .47 .02 .49
- --------------------------------------------------------------------------
6. High-Yield Bond .50 .03 .53
- --------------------------------------------------------------------------
7. Bond .51 .01 .52
- --------------------------------------------------------------------------
8. U.S. Govt./AAA-Rated Securities .51 .02 .53
- --------------------------------------------------------------------------
9. Cash Management .45 .02 .47
</TABLE>
- --------------------------------------------------------------------------------
*The VAA is divided into nine separately-named subaccounts, which are available
under the contracts. Each subaccount, in turn, invests purchase payments in its
respective fund.
**These expenses are estimated amounts for the current fiscal year. [TO BE
PROVIDED BY AMENDMENT]
4
<PAGE>
EXAMPLES
(reflecting expenses both of The American Legacy subaccounts and of the funds):
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
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Global Growth** $ $ $ $
- -------------------------------------------------------------------
2. Growth 77 103 122 199
- -------------------------------------------------------------------
3. International 80 111 135 226
- -------------------------------------------------------------------
4. Growth-Income 77 102 120 196
- -------------------------------------------------------------------
5. Asset Allocation 78 105 124 205
- -------------------------------------------------------------------
6. High-Yield Bond 78 106 126 209
- -------------------------------------------------------------------
7. Bond 77 104 123 202
- -------------------------------------------------------------------
8. U.S. Govt./AAA-Rated Securities 78 106 126 209
- -------------------------------------------------------------------
9. Cash Management 77 104 123 202
</TABLE>
- --------------------------------------------------------------------------------
If you do not surrender your contract, 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. Global Growth** $ $ $ $
- -------------------------------------------------------------------
2. Growth 17 53 92 199
- -------------------------------------------------------------------
3. International 20 61 105 226
- -------------------------------------------------------------------
4. Growth-Income 17 52 90 196
- -------------------------------------------------------------------
5. Asset Allocation 18 55 94 205
- -------------------------------------------------------------------
6. High-Yield Bond 18 56 96 209
- -------------------------------------------------------------------
7. Bond 17 54 93 202
- -------------------------------------------------------------------
8. U.S. Govt./AAA-Rated Securities 18 56 96 209
- -------------------------------------------------------------------
9. Cash Management 17 54 93 202
</TABLE>
- --------------------------------------------------------------------------------
*These expenses, calculated as mandated by the SEC, reflect the annual contract
fee as the ratio of the total contract fees collected in the most recent fiscal
year to the total average net assets of the account.
**These expenses are estimated for the current fiscal year.
[TO BE PROVIDED BY AMENDMENT]
All of the figures provided under the subheading annual expenses of the funds
and part of the data used to produce the figures in the examples were supplied
by the underlying portfolio company (series) through the VAA's principal under-
writer, American Funds Distributors, Inc. We have not independently verified
this information.
These examples are provided to assist you in understanding the various costs
and expenses that you will bear directly or indirectly. These examples reflect
expenses both of the VAA and of the nine funds. These examples reflect expenses
assuming that the EGMDB is NOT in effect. If the EGMDB is in effect, these ex-
penses will be higher.
For more complete descriptions of the various costs and expenses involved, see
Charges and other deductions in this Prospectus, and Fund organization and man-
agement in the Prospectus for the series. 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. These examples are unaudited.
5
<PAGE>
SYNOPSIS
WHAT TYPE OF CONTRACT AM I BUYING? It is an individual annuity contract issued
by Lincoln Life. It may provide for a fixed annuity and/or a variable annuity.
This Prospectus is intended to provide disclosure only about the variable por-
tion of the contract. See The contracts.
WHAT IS THE VARIABLE ANNUITY ACCOUNT (VAA)? It is a segregated asset account
established under Indiana insurance law, and registered with the SEC as a unit
investment trust. The assets of the VAA are allocated to one or more
subaccounts, according to your investment choice. Those assets are not charge-
able with liabilities arising out of any other business which Lincoln Life may
conduct. See Variable annuity account.
WHAT ARE MY INVESTMENT CHOICES? Through its various subaccounts, the VAA uses
your purchase payments to purchase series shares, at your direction, in one or
more of the following investment funds of the series: Global Growth, Growth,
International, Growth-Income, Asset Allocation, High-Yield Bond, Bond, U.S.
Government/ AAA-Rated Securities and Cash Management. In turn, each fund holds
a portfolio of securities consistent with its own particular investment poli-
cy. See Investments of the variable annuity account and Description of the se-
ries.
WHO INVESTS MY MONEY? The investment advisor for the series is CRMC, Los Ange-
les, California. CRMC is a long-established investment management organiza-
tion, and is registered as an investment advisor with the SEC. See Investments
of the variable annuity account and Investment advisor.
HOW DOES THE CONTRACT WORK? Once we approve your application, you will be is-
sued your individual annuity contract. During the accumulation period, while
you are paying in, purchase payments will buy accumulation units under the
contract. Should you decide to annuitize (that is, change your contract to a
payout mode rather than an accumulation mode), your accumulation units will be
converted to annuity units. Your periodic annuity payout will be based upon
the number of annuity units to which you became entitled at the time you de-
cided to annuitize, and the value of each unit on the valuation date. See The
contracts.
WHAT CHARGES ARE ASSOCIATED WITH THIS CONTRACT? At the end of each contract
year and at the time of surrender, we will deduct $35 from your contract value
as a maintenance charge.
Should you decide to withdraw contract value before your purchase payments
have been in your contract for a certain minimum period, you will incur a con-
tingent deferred sales charge of anywhere from 1% to 6%, depending upon how
many full contract years those payments have been in the contract. (Note: This
sales charge is not assessed upon: the first withdrawal of contract value dur-
ing a contract year to the extent the withdrawal does not exceed 10% of the
purchase payments (this 10% withdrawal exception does not apply to a surrender
of the contract); automatic withdrawals, not in excess of 10% of the purchase
payments during a contract year, made by non-trustee contractowners who are at
least 59 1/2; a surrender of a contract or withdrawal of contract value as a
result of the annuitant's permanent and total disability [as defined in sec-
tion 22(e)(3) of the code], after the effective date of the contract and be-
fore the annuitant's 65th birthday; a surrender of the contract as a result of
the death of the annuitant; or annuitization.
If your state assesses a premium tax with respect to your contract, then at
the time the tax is incurred (or at such other time as we may choose), we will
deduct those amounts from purchase payments or contract value, as applicable.
See Charges and other deductions and Deductions for premium taxes.
We assess an annual charge in the amount of 1.25% as a mortality and expense
risk charge against the daily net asset value of the VAA, including that por-
tion of the account attributable to your purchase payments. If the EGMDB is in
effect, the aggregate charge against the VAA is 1.40% consisting of a 1.25%
mortality and expense risk charge and a 0.15% risk charge for the EGMDB. For a
complete discussion of the charges associated with the contract, see Charges
and other deductions.
The Series pays a fee to its investment advisor, CRMC, based upon the average
daily net asset value of each fund in the series. (See Investments of the
variable annuity account-Investment advisor.) In addition, there are other ex-
penses associated with the daily operations of the series. These are more
fully described in the Prospectus for the series.
HOW MUCH MUST I PAY, AND HOW OFTEN? Subject to the minimum and maximum pay-
ments stated on the first page of the Prospectus, the amount and frequency or
your payments are completely flexible. See The contracts--Purchase payments.
HOW WILL MY ANNUITY PAYOUTS BE CALCULATED? If you decide to annuitize, you
elect an annuity payout option. Once you have done so, your periodic payout
will be based upon a number of factors. If you participate in the VAA, the
changing values of the funds in which you have invested will be one factor.
See Annuity payouts. REMEMBER THAT PARTICIPANTS IN THE VAA BENEFIT FROM ANY
GAIN, AND TAKE A RISK OF ANY DROP, IN THE VALUE OF THE SECURITIES IN THE
FUNDS' PORTFOLIOS.
WHAT HAPPENS IF I DIE BEFORE I ANNUITIZE? If you are the annuitant and also
the contractowner, then the beneficiary whom you designate will receive either
the GMDB, or the then current value of the contract, which-
6
<PAGE>
ever is greater. If the EGMDB is in effect, the beneficiary will receive either
the EGMDB or the then current value of the contract, whichever is greater. Your
beneficiary will have certain options for how the money is to be paid out. If a
contractowner is not also the annuitant, certain special rules apply. See The
contracts--Death benefit before the annuity commencement date and Death of
contractowner.
MAY I TRANSFER CONTRACT VALUE BETWEEN FUNDS IN THE SERIES? Yes; however, there
are limits on how often you may do so. See The contracts--Transfers of accumu-
lation units between subaccounts and Transfers on or following the annuity com-
mencement date.
MAY I TRANSFER CONTRACT VALUE FROM THE FIXED TO THE VARIABLE SIDE OF THE CON-
TRACT, AND VICE-VERSA? Yes, subject once again to specific restrictions in the
contract. See The contracts--Transfers of accumulation units to and from the
General Account.
MAY I SURRENDER THE CONTRACT OR MAKE A WITHDRAWAL? Yes, subject to contract re-
quirements and to restrictions imposed under certain qualified retirement plans
for which the contract is purchased.
If you surrender the contract or make a withdrawal, certain charges may be as-
sessed, as discussed above and under Charges and other deductions. In addition,
the Internal Revenue Service (IRS) may assess a 10% premature withdrawal pen-
alty tax. A surrender or a withdrawal may be subject to 20% withholding. See
Federal tax status and withholding.
DO I GET A FREE LOOK AT THIS CONTRACT? Yes. If within 20 days (or a longer pe-
riod if required by law) of the date you first receive the contract you return
it, postage pre-paid to the home office of Lincoln Life, it will be canceled.
However, except in some states, during this period, you assume the risk of a
market drop with respect to purchase payments which you allocate to the vari-
able side of the contract. See Return privilege.
7
<PAGE>
CONDENSED FINANCIAL INFORMATION FOR THE VARIABLE ANNUITY ACCOUNT ACCUMULATION
UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information relating to accumulation unit values and number of
accumulation units for The American Legacy subaccounts for each of the ten
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 state-
ments and notes which are all included in the SAI.
<TABLE>
<CAPTION>
1987* 1988 1989 1990 1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth subaccount
Accumulation unit value
.Beginning of period $ 1.000 .818 .925 1.200 1.133 1.492 1.632 1.875 1.861 2.450
.End of period $ .818 .925 1.200 1.133 1.492 1.632 1.875 1.861 2.450 2.743
Number of accumulation
units
.End of period (000's
omitted) 28,656 54,124 93,979 99,094 106,335 110,169 111,230 105,312 101,710 90,842
- ---------------------------------------------------------------------------------------------------------
International
subaccount**
Accumulation unit value
.Beginning of period $ 1.000 1.001 1.114
.End of period $ 1.001 1.114 1.294
Number of accumulation
units
.End of period (000's
omitted) 27,787 31,592 38,351
- ---------------------------------------------------------------------------------------------------------
Growth-Income subaccount
Accumulation unit value
.Beginning of period $ 1.000 .842 .952 1.180 1.136 1.392 1.484 1.646 1.659 2.180
.End of period $ .842 .952 1.180 1.136 1.392 1.484 1.646 1.659 2.180 2.556
Number of accumulation
units
.End of period (000's
omitted) 58,406 111,918 195,478 199,880 203,868 201,913 199,178 183,608 172,288 158,861
- ---------------------------------------------------------------------------------------------------------
Asset Allocation
subaccount**
Accumulation unit value
.Beginning of period $ 1.000 .986 1.262
.End of period $ .986 1.262 1.443
Number of accumulation
units
.End of period (000's
omitted) 3,807 5,168 7,199
- ---------------------------------------------------------------------------------------------------------
High-Yield Bond
subaccount
Accumulation unit value
.Beginning of period $ 1.000 .974 1.103 1.204 1.234 1.543 1.714 1.971 1.819 2.188
.End of period $ .974 1.103 1.204 1.234 1.543 1.714 1.971 1.819 2.188 2.447
Number of accumulation
units
.End of period (000's
omitted) 9,304 23,858 34,050 29,430 28,254 27,823 29,951 25,988 23,867 20,767
- ---------------------------------------------------------------------------------------------------------
Bond subaccount***
Accumulation unit value
.Beginning of period 1.000
.End of period 1.046
Number of accumulation
units
.End of period (000's
omitted) 1,681
- ---------------------------------------------------------------------------------------------------------
U.S. Government/AAA-Rated
subaccount
Accumulation unit value
.Beginning of period $ 1.000 .948 1.012 1.108 1.187 1.359 1.444 1.586 1.498 1.707
.End of period $ .948 1.012 1.108 1.187 1.359 1.444 1.586 1.498 1.707 1.738
Number of accumulation
units
.End of period (000's
omitted) 11,177 26,477 42,915 43,779 44,335 42,291 39,387 31,118 29,062 22,652
- ---------------------------------------------------------------------------------------------------------
Cash Management
subaccount
Accumulation unit value
.Beginning of period $ 1.000 1.037 1.097 1.179 1.256 1.309 1.335 1.353 1.388 1.447
.End of period $ 1.037 1.097 1.179 1.256 1.309 1.335 1.353 1.388 1.447 1.502
Number of accumulation
units
.End of period (000's
omitted) 8,749 26,381 31,446 29,312 19,913 21,963 13,982 14,312 10,001 9,605
</TABLE>
- --------------------------------------------------------------------------------
*The VAA began operations on March 9, 1987. Therefore, the figures for 1987
represent experience of less than one year.
**The International subaccount and Asset Allocation subaccount began operations
on January 3, 1994.
***The Bond subaccount began operations on January 2, 1996 so the figures for
1996 represent experience of less than one year.
There is a Global Growth subaccount but it is not in the chart because it did
not begin activity until 1997.
8
<PAGE>
FINANCIAL STATEMENTS
The financial statements for the VAA and Lincoln Life are located in the SAI.
If you would like a free copy, complete and mail the enclosed card, or call 1-
800-942-5500.
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 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 September 26, 1986, 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 in-
vestment account, meaning that its assets may not be charged with liabilities
resulting from any other business that we may conduct. Income, gains and loss-
es, whether realized or not, from assets allocated to the VAA are, in accor-
dance 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 perfor-
mance of the VAA. Any investment gain or loss depends on the investment perfor-
mance of the funds. 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 class of each fund in the se-
ries. You may change your allocation without penalty or charges. Shares of the
funds will be sold at net asset value with no initial sales charge to the VAA
in order to fund the contracts. The series is required to redeem fund shares at
net asset value upon our request. We reserve the right to add, delete or sub-
stitute funds.
INVESTMENT ADVISOR
The investment advisor for the series is CRMC, 333 South Hope Street, Los Ange-
les, California 90071. CRMC is one of the nation's largest and oldest invest-
ment management organizations. As compensation for its services to the series,
the investment advisor receives a fee from the series which is accrued daily
and paid monthly. This fee is based on the net assets of each fund, as defined
under Purchases and Redemptions of Shares, in the Prospectus for the series.
DESCRIPTION OF THE SERIES
The series was organized as a Massachusetts business trust in 1983 and is reg-
istered as a diversified, open-end management investment company under the 1940
Act. Diversified means not owning too great a percentage of the securities of
any one company. An open-end company is one which, in this case, permits Lin-
coln Life to sell its shares back to the series when you make a withdrawal,
surrender the contract or transfer from one fund to another. Management invest-
ment company is the legal term for a mutual fund. These definitions are very
general. The precise legal definitions for these terms are contained in the
1940 Act.
The series has nine separate portfolios of funds. The series has adopted a plan
pursuant to Rule 18f-3 under the 1940 Act to permit the series to establish a
multiple class distribution system for all of its portfolios. The series' Board
of Trustees may at any time establish additional funds or classes, which may or
may not be available to the VAA. Fund assets are segregated and a shareholder's
interest is limited to those funds in which the shareholder owns shares.
Under the multi-class system adopted by the series, shares of each multi-class
fund represent an equal pro rata interest in that fund and, generally, have
identical voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except
that: (1) each class has a different designation; (2) each class of shares
bears its "class expenses;" (3) each class has exclusive voting rights on any
matter submitted to shareholders that relates solely to its distribution ar-
rangement; and (4) each class has separate voting rights on any matter submit-
ted to shareholders in which the interests of one class differ from the inter-
ests of any other class. Expenses currently designated as "class expenses" by
the series' Board of Trustees under the plan pursuant to Rule 18f-3 include,
for example, service fees paid under a 12b-1 plan to cover servicing fees paid
to dealers selling the contracts.
Each fund has two classes of shares, designated as class 1 and class 2 shares.
Class 1 and 2 differ primarily in that class 2 but not class 1 shares are sub-
ject to a 12b-1 plan. Only class 1 shares are available under the contracts.
9
<PAGE>
Following are brief summaries of the investment objectives and policies of the
funds. Each fund is subject to certain investment policies and restrictions
which may not be changed without a majority vote of shareholders of that fund.
More detailed information may be obtained from the current Prospectus for the
series, which is included in this booklet. PLEASE BE ADVISED THAT THERE IS NO
ASSURANCE THAT ANY OF THE FUNDS WILL ACHIEVE THEIR STATED OBJECTIVES.
1. Global Growth Fund--The investment objective is to achieve long-term growth
of capital by investing in securities of issuers domiciled around the world.
The fund will invest primarily in common stocks but may invest in other se-
curities such as preferred stock, debt securities and securities convertible
into common stock. PLEASE NOTE: THIS FUND IS NOT YET AVAILABLE IN ALL
STATES. PLEASE CONSULT YOUR INVESTMENT DEALER FOR CURRENT INFORMATION ABOUT
THE GLOBAL GROWTH FUND'S AVAILABILITY.
2. Growth Fund--This fund seeks to provide growth of capital. Whatever current
income is generated by the fund is likely to be incidental to the objective
of capital growth. Ordinarily, accomplishment of the fund's objective of
capital growth will be sought by investing primarily in common stocks or se-
curities with common stock characteristics.
3. International Fund--The investment objective is long-term growth of capital
by investing primarily in securities of issuers domiciled outside the United
states.
4. Growth-Income Fund--The investment objective is growth of capital and in-
come. In the selection of securities for investment, the possibilities of
appreciation and potential dividends are given more weight than current
yield. Ordinarily, the assets of the Growth-Income Fund consist principally
of a diversified group of common stocks, but other types of securities may
be held when deemed advisable including preferred stocks and corporate
bonds, including convertible bonds.
5. Asset Allocation Fund--This fund seeks total return (including income and
capital gains) and preservation of capital over the long-term by investing
in a diversified portfolio of securities. These securities can include com-
mon stocks and other equity-type securities (such as convertible bonds and
preferred stocks), bonds and other intermediate and long-term fixed-income
securities and money market instruments.
6. High-Yield Bond Fund--The investment objective is a fully managed, diversi-
fied bond portfolio. It seeks high current income and secondarily seeks cap-
ital appreciation. This fund will generally be invested substantially in in-
termediate-and long-term corporate obligations, with emphasis on higher
yielding, higher risk, lower rated or unrated securities.
7. Bond Fund--The fund seeks a high level of current income as is consistent
with the preservation of capital by investing in a broad variety of fixed
income securities including: marketable corporate debt securities, loan par-
ticipations, U.S. Government Securities, mortgage-related securities, other
asset-backed securities and cash or money market instruments.
8. U.S. Government/AAA-Rated Securities Fund--This fund seeks a high level of
current income consistent with prudent investment risk and preservation of
capital by investing primarily in a combination of securities guaranteed by
the U.S. Government and other debt securities rated AAA or Aaa.
9. Cash Management Fund--The investment objective is high yield while preserv-
ing capital by investing in a diversified selection of money market instru-
ments.
SALE OF FUND SHARES BY THE SERIES
We will purchase shares of the funds at net asset value and direct them to the
appropriate subaccounts of the VAA. We will redeem sufficient shares of the ap-
propriate funds to pay annuity payouts, death benefits, surrender/ withdrawal
proceeds or for other purposes described in the contract. If you want to trans-
fer all or part of your investment from one subaccount to another, we may
redeem shares held in the first and purchase shares of the other. The shares
are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to Lincoln Life, and may be sold to other insurance companies, for investment
of the assets of the subaccounts established by those insurance companies to
fund variable annuity and variable life insurance contracts.
When the series sells shares in any of its funds both to variable annuity and
to variable life insurance separate accounts, it is said to engage in mixed
funding. When the series sells shares in any of its funds to separate accounts
of unaffiliated life insurance companies, it is said to engage in shared fund-
ing.
The series currently engages in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interests of various contractowners participating in a fund could conflict. The
series' Board of Trustees will monitor for the existence of any material con-
flicts, and determine what action, if any, should be taken. See the Prospectus
for the series.
10
<PAGE>
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
All dividend and capital gain distributions of the funds are automatically re-
invested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as addi-
tional units, but are reflected in changes in unit values.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, within the law, to make additions, deletions and substi-
tutions for the series and/or any funds within the series in which the VAA par-
ticipates. (We may substitute shares of other funds for shares already pur-
chased, or to be purchased in the future, under the contract. This substitution
might occur if shares of a fund should no longer be available, or if investment
in any fund's shares should become inappropriate, in the judgment of our man-
agement, for the purposes of the contract.) No substitution of the shares at-
tributable to your account may take place without notice to you and before ap-
proval of the SEC, in accordance with the 1940 Act.
CHARGES AND OTHER DEDUCTIONS
We will deduct the charges described below to cover our costs and expenses,
services provided and risks assumed under the contract. We incur certain costs
and expenses for the distribution and administration of the contracts and for
providing the benefits payable thereunder. Our administrative services include:
processing applications for and issuing the contracts, processing purchases and
redemptions of fund shares as required (including automatic withdrawal servic-
es), maintaining records, administering annuity payouts, furnishing accounting
and valuation services (including the calculation and monitoring of daily
subaccount values), reconciling and depositing cash receipts, providing con-
tract confirmations, providing toll-free inquiry services and furnishing tele-
phone fund transfer services. The benefits we provide include death benefits,
annuity payout benefits and cash surrender value benefits. The risks we assume
include: the risk that the actual life span of persons receiving annuity
payouts under contract guarantees will exceed the assumptions reflected in our
guaranteed rates (these rates are incorporated in the contract and cannot be
changed); the risk that death benefits paid under the EGMDB or GMDB, will ex-
ceed actual contract value; the risk that more owners than expected will qual-
ify for waivers of the contingent deferred sales charge; and the risk that our
costs in providing the services will exceed our revenues from contract charges
(which cannot be changed by us). The amount of a charge may not necessarily
correspond to the costs associated with providing the services or benefits
indicated by the designation of the charge or associated with a particular con-
tract. For example, the contingent deferred sales charge collected may not
fully cover all of the sales and distribution expenses actually incurred by us.
MAINTENANCE CHARGE
We will deduct a contract maintenance charge of $35 per contract year. This
charge will be deducted from the contract value on the last valuation date of
each contract year. This charge will also be deducted from the contract value
upon surrender.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge applies (except as described below) to sur-
renders and withdrawals of purchase payments that have been invested for the
periods indicated as follows:
<TABLE>
<CAPTION>
Number of complete contract years that
a
purchase
payment
has
been
invested
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less At
than least
2 2 3 4 5 6 7+
Contingent deferred sales
charge as a percentage of
the surrendered or withdrawn purchase
payments 6% 5 4 3 2 1 0
</TABLE>
A contingent deferred sales charge does not apply to:
1. A surrender or withdrawal of purchase payments that have been invested at
least seven full contract years.
2. The first withdrawal of contract value during a contract year to the extent
the withdrawal does not exceed 10% of the purchase payments (this 10% with-
drawal exception does not apply to a surrender of a contract);
3. Automatic withdrawals, not in excess of 10% of the purchase payments during
a contract year, made by non-trustee contractowners who are at least 59 1/2;
4. A surrender of a contract or withdrawal of contract value as a result of the
annuitant's permanent and total disability [as defined in Section 22(e)(3)
of the code], after the effective date of the contract and before the
annuitant's 65th birthday.
5. A surrender of a contract or withdrawal of contract value of a contract is-
sued to employees and registered representatives of any member of the sell-
ing group and their spouses and minor children, or to officers, directors,
trustees or bona-fide full-time employees of Lincoln National Corp. or The
Capital Group, Inc. or their affiliated or managed companies (based upon the
contractowner's status at the time the contract was purchased); and
6. A surrender of the contract as a result of the death of the annuitant.
However, the contingent deferred sales charge is not waived as a result of the
death of a contractowner who is not the annuitant.
11
<PAGE>
The contingent deferred sales charge is calculated separately for each con-
tract 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 contingent deferred sales charges associated
with surrender or withdrawal are paid to us to compensate us for the loss we
experience on contract distribution costs when contractowners surrender or
withdraw before distribution costs have been recovered.
DEDUCTIONS 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 1.25% of the daily net asset value as a mortality and expense risk
charge. For those contracts which include the EGMDB, the aggregate charge
against the VAA is 1.40% consisting of a 1.25% mortality and expense risk
charge and a 0.15% risk charge for the EGMDB.
DEDUCTIONS FOR PREMIUM TAXES
Any premium tax or other tax levied by any governmental entity as a result of
the existence of the contracts or the VAA will be deducted from the contract
value when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. These premium taxes gen-
erally depend upon the law of your state of residence. The tax ranges from
0.5% to 4.0%.
OTHER CHARGES AND DEDUCTIONS
There are deductions from and expenses paid out of the assets of the under-
lying series that are described in the Prospectus for the series.
ADDITIONAL INFORMATION
The administrative and contingent deferred sales 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 distribu-
tion and/or administrative expenses, or that we perform fewer sales or admin-
istrative 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 proce-
dures, (2) the performance of administrative or sales functions by the employ-
er, (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 administrative and contingent deferred sales charges applicable to a
particular contract will be stated in that contract.
THE CONTRACTS
PURCHASE OF CONTRACTS
If you wish to purchase a contract, you must apply for it through a sales rep-
resentative authorized by us. The completed application is sent to us and we
decide whether to accept or reject it. If the application is accepted, a con-
tract is prepared and executed by our legally authorized officers. The con-
tract is then sent to you through your sales representative. See Distribution
of the contracts.
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 com-
pleted within those five days, you will be informed of the reasons, and the
purchase payment will be returned immediately (unless you specifically autho-
rize 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 contract, you must be of legal age in a state where the con-
tracts may be lawfully sold and also be eligible to participate in any of the
qualified or nonqualified plans for which the contracts are designed. The an-
nuitant cannot be older than age 85 (or older than age 80 in Pennsylvania).
PURCHASE PAYMENTS
Purchase payments are payable to us at a frequency and in an amount selected
by you in the application. The minimum initial purchase payment is $1,500 for
nonqualified contracts and Section 403(b) transfers/rollovers; and $300 for
qualified contracts. The minimum annual amount for subsequent purchase pay-
ments is $300 for nonqualified and qualified contracts, with a minimum of $25
per payment. Purchase payments in total may not exceed $1 million for each an-
nuitant. 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
$300. Payments may be resumed at any time until the annuity commencement date,
the surrender of the contract, the maturity date, the death of the
contractowner or the death of the annuitant, whichever comes first.
VALUATION DATE
Accumulation and annuity units will be valued once daily at the close of trad-
ing (currently 4:00 p.m., New York time) on each day the New York Stock Ex-
change is
12
<PAGE>
open (valuation date). On any date other than a valuation date, the accumula-
tion unit value and the annuity unit value will not change.
ALLOCATION OF PURCHASE PAYMENTS
Purchase payments are placed into the VAA's subaccounts, each of which invests
in shares of the class of its corresponding fund of the series, according to
your instructions.
The minimum amount of any purchase payment which can be put into any one
subaccount is $20 under the contract. Upon allocation to the appropriate
subaccount, purchase payments are converted into accumulation units. The num-
ber of accumulation units credited is determined by dividing the amount allo-
cated 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 ac-
cumulation unit value computed on the next valuation date. The number of accu-
mulation 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 expenses of the VAA and the underlying funds.
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
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 perfor-
mance 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 valua-
tion period to the next, adjusted for the daily deduction of the mortality and
expense risk charge 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.
Because a different daily charge is made for contracts with the EGMDB than for
those without, a different net investment factor is calculated for each of the
two types of contracts, resulting in different corresponding accumulation unit
values on any given day.
TRANSFERS BETWEEN SUBACCOUNTS ON OR BEFORE THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment from one subaccount to
another. A transfer involves the surrender of accumulation units in one
subaccount and the purchase of accumulation units in the other subaccount. A
transfer will be done using the respective accumulation unit values as of the
valuation date we receive your request provided that your request is received
by 4 p.m. New York time. If your request is received after 4 p.m. New York
time, the transfer will be done using the accumulation unit values as of the
next valuation date. Currently, there is no charge to you for a transfer. How-
ever, we reserve the right to impose a charge in the future for transfers.
Transfers between subaccounts are restricted to six times every contract year.
We reserve the right to waive this six-time limit. The minimum amount which
may be transferred between subaccounts is $300 (or the entire amount in the
subaccount, if less than $300). If the transfer from a subaccount would leave
you with less than $300 in the subaccount, we may transfer the total balance
of the subaccount. A transfer may be made by writing to 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 fraudu-
lent telephone transfers, we may require the caller to provide certain identi-
fying information before we will act upon their instructions. We may also as-
sign 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 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 valua-
tion date that they are received when they are received at our customer serv-
ice center before 4 p.m. New York time.
When thinking about a transfer of contract value, you should consider the in-
herent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time.
TRANSFERS TO AND FROM THE GENERAL ACCOUNT ON OR BEFORE THE ANNUITY
COMMENCEMENT DATE
You may transfer all or any part of the contract value from the subaccount(s)
to the fixed side of the contract. These transfers cannot be elected more than
six times every contract year. We reserve the right to waive this six-time
limit. The minimum amount which can be transferred to the fixed side is $300
or the total amount in the subaccount, if less than $300. However, if a trans-
fer from a subaccount would leave you with less than $300 in the subaccount,
we may transfer the total
13
<PAGE>
amount to the fixed side. Currently, there is no charge to you for a transfer.
However, we reserve the right to impose a charge in the future for any trans-
fers to and from the General Account.
You may also transfer all or any part of the contract value from the fixed
side of your contract to the various subaccount(s) subject to the following
restrictions: (1) the sum of the percentages of fixed value transferred is
limited to 25% of the value of the fixed side in any 12 month period; (2) the
minimum amount which can be transferred is $300 or the amount in the fixed ac-
count; and (3) a transfer cannot be made during the first 30 days after the
issue date of the contract and cannot be elected more than six times every
contract year. We reserve the right to waive any of these restrictions.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment in one subaccount to an-
other subaccount or to the fixed side of the contract. Those transfers will be
limited to three times per contract year. However, 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 re-
quest that you send us the contract for endorsement of a change of beneficia-
ry.
If the annuitant dies before the annuity commencement date, a death benefit
equal to the greater of: (1) the GMDB or, if elected, the EGMDB; or (2) the
current value of the contract, will be paid to your designated beneficiary.
The value of the death benefit will be determined as of the date on which the
death claim is approved for payment. This payment will occur upon receipt of:
(1) Proof, satisfactory to us, of the death of the annuitant; (2) Written au-
thorization for payment; and (3) Our receipt of all required claim forms,
fully completed.
The GMDB is equal to the sum of all purchase payments plus any attributable
gain, minus any withdrawals, partial annuitizations and premium taxes in-
curred. We determine the attributable gain separately for each contract year
on its seventh anniversary (once its surrender charge period has expired). The
attributable gain consists of the earnings on a contract year's net purchase
payment(s) [purchase payment(s) minus any withdrawals and partial
annuitizations, applied on a first-in-first-out basis] as of the valuation
date just before its seventh anniversary. This amount will then be included in
the GMDB calculation.
If contract conditions are met, the GMDB will be increased automatically by us
according to the prescribed formula based upon the contract's internal rate of
return. For this to occur, the annuitant, as of the seventh anniversary of
each eligible contract year, must still be living and must be less than 81
years of age. For more information about GMDB calculations, please refer to
the SAI.
The EGMDB is an alternative to the GMDB for owners of non-qualified contracts
or contracts used under an IRA Plan. Under the EGMDB, the death benefit pay-
able is the amount equal to the greater of: (1) contract value as of the day
on which Lincoln Life approves the payment of the claim; or (2) the highest
contract value which the contract attains on any policy anniversary date (in-
cluding the inception date) from the time the EGMDB takes effect up to and in-
cluding the annuitant's age up to and including 75. The highest contract value
so determined is then increased by purchase payments and decreased by partial
withdrawals, partial annuitizations, and any premium taxes made, effected or
incurred subsequent to the anniversary date on which the highest contract
value is obtained.
You can elect the EGMDB during a limited period ending six months after the
benefit is approved in your state or ending December 31, 1997, whichever is
later. Please see your investment dealer for assistance.
If you elect the EGMDB during this limited period, the benefit will take ef-
fect as of the valuation time on the next policy anniversary date following
our receipt of the election of this benefit, and we will begin deducting the
charge for the EGMDB as of that date. If we receive an election for this bene-
fit on a policy anniversary date, the EGMDB will take effect and we will begin
deducting the charge for the benefit at the valuation time on that date.
If you elect the EGMDB, you may discontinue the benefit at any time by sending
a written request to Lincoln Life. The benefit will be discontinued effective
at the valuation time on the next policy anniversary date after we receive the
request, and we will cease deducting the charge for the benefit as of that
date. If the benefit is discontinued on the policy anniversary date, the bene-
fit and the charge will terminate at the valuation time on that date. If you
discontinue the benefit, it cannot be reinstated. If you do not elect the
EGMDB or you discontinue the benefit after electing it, the GMDB will apply
instead and will determine what death benefit is payable.
If the death benefit becomes payable, the beneficiary may elect to receive
payment either in the form of a lump-sum settlement or an annuity payout. Fed-
eral tax law requires that an annuity election be made no later than 60 days
after we receive satisfactory notice of death as discussed previously.
If a lump-sum settlement is requested, the proceeds will be mailed within
seven days of receipt of satisfactory claim documentation as discussed previ-
ously, sub-
14
<PAGE>
ject to the laws and regulations governing payment of death benefits. If an
election has not been made by the end of the 60-day period, a lump-sum settle-
ment will be made to the beneficiary at that time. This payment may be post-
poned as permitted by the 1940 Act.
Payment will be made in accordance with applicable laws and regulations gov-
erning payment of death benefits.
Unless otherwise provided in the beneficiary designation, one of the following
procedures will take place on the death of a beneficiary:
1. If any beneficiary dies before the annuitant, that beneficiary's interest
will go to any other beneficiaries named, according to their respective in-
terests (There are no restrictions on the beneficiary's use of the pro-
ceeds.); 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 a joint owner is named in the application, the joint owners shall be
treated as having equal undivided interests in the contract. Either owner, in-
dependently of the other, may exercise any ownership rights in this contract.
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 com-
mencement 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 cash surrender value
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 con-
tract regarding death of annuitant will control. If the beneficiary is the
surviving spouse of the contractowner, the contract may be continued in the
name of that spouse as the new contractowner. If the surviving spouse
elects to continue the contract, the contract will continue as though no
death benefit had been payable.
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 designated period not exceeding the beneficiary's life ex-
pectancy.
SURRENDERS AND WITHDRAWALS
Before the annuity commencement date, we will allow the surrender of the con-
tract or a withdrawal of the contract value upon your written request, subject
to the rules discussed below. Surrender or withdrawal rights after the annuity
commencement date depend upon the annuity option you select.
Special restrictions on surrenders/withdrawals apply if your contract is pur-
chased as part of a retirement plan of a public school system or 501(c)(3) or-
ganization under Section 403(b) of the code. Beginning January 1, 1989, in or-
der for a contract to retain its tax-qualified status, Section 403(b) prohib-
its a withdrawal from a 403(b) contract of post-1988 contributions (and earn-
ings on those contributions) pursuant to a salary reduction agreement. Howev-
er, this restriction does not apply if the annuitant (a) attains age 59 1/2,
(b) separates from service, (c) dies, (d) becomes totally and permanently dis-
abled and/or (e) experiences financial hardship (in which event the income at-
tributable to those contributions may not be withdrawn).
Pre-1989 contributions and earnings through December 31, 1988, are not subject
to the previously stated restriction. Funds transferred to the contract from a
403(b)(7) custodial account will be subject to the restrictions.
The contract value available upon surrender/ withdrawal is the cash surrender
value of the contract at the end of the valuation period during which the
written request for surrender/withdrawal is received at the home office. Un-
less a request for withdrawal specifies otherwise, withdrawals will be made
from all subaccounts within the VAA and from the General Account in the same
proportion that the amount of withdrawal bears to the total contract value.
The minimum amount which can be withdrawn is $300, and the remaining contract
value must be at least $300. Unless prohibited, surrender/withdrawal payments
will be mailed within seven days after we receive a valid written request at
the home office. The payment may be postponed as permitted by the 1940 Act.
There are charges associated with the surrender of a contract or withdrawal of
contract value. You may specify whether these charges are deducted from the
amount you request to be withdrawn or from the remaining contract value. See
Charges and other deductions.
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal tax status.
Participants in the Texas Optional Retirement Program should refer to Restric-
tions under the Texas Optional Retirement Program, later in this Prospectus
booklet.
If the total contract value is less than $300, and if no purchase payments
have been made for at least two years, we reserve the right to terminate the
contract.
15
<PAGE>
REINVESTMENT PRIVILEGE
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal, and we will recredit the surrender/withdrawal charges
previously deducted. This election must be made within 30 days of the date of
the surrender/withdrawal, and the repurchase must be of a contract covered by
this Prospectus. A representation must be made that the proceeds being used to
make the purchase have retained their tax-favored status under an arrangement
for which the contracts offered by this Prospectus are designed. The number of
accumulation units which will be credited when the proceeds are reinvested
will be based on the value of the accumulation unit(s) on the next valuation
date. This computation will occur following receipt of the proceeds and re-
quest for reinvestment at the 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 trans-
actions. You should consult a tax advisor before you request a
surrender/withdrawal or subsequent reinvestment purchase.
AMENDMENT OF CONTRACT
We reserve the right to amend the contract to meet the requirements of the
1940 Act or other applicable federal or state laws or regulations. You will be
notified in writing of any changes, modifications or waivers.
COMMISSIONS
The maximum commission which will be paid to dealers is equal to 4.0% of each
purchase payment; plus an annual continuing commission equal to 0.25% of the
value of contract purchase payments invested for at least 15 months; plus an
annual persistency bonus equal to 0.40% of each contract year's increased GMDB
(regardless of whether or not the EGMDB is in effect), paid over a period of
eight years. At times, additional sales incentives (up to 0.30% of purchase
payments and up to 0.05% of the contract value in the VAA while the EGMDB is
in effect) may be provided to dealers maintaining certain sales volume levels.
In addition, the equivalent of 4.0% of contract value can be paid to dealers
upon annuitization. These commissions are not deducted from purchase payments
or contract value; they are paid by us.
OWNERSHIP
As contractowner, you have all rights under the contract. According to 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 per-
mitted 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 about your contract should be directed to us at 1-800-942-5500.
ANNUITY PAYOUTS
When you apply for a contract, you may select any annuity commencement date
permitted by law. (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 an-
nuity payouts to start at the date and under the option specified in the
plan.)
The contract provides optional forms of payouts of annuities (annuity op-
tions), each of which is payable on a variable basis, a fixed basis or a com-
bination of both. The contract provides that all or part of the contract value
may be used to purchase an annuity.
You may elect annuity payouts in monthly, quarterly, semiannual or annual in-
stallments. If the payouts from any subaccount would be or become less than
$50, we have the right to reduce their frequency until the payouts are at
least $50 each. Following are explanations of the annuity options available:
ANNUITY OPTIONS
LIFE ANNUITY. This option offers a periodic payout during the lifetime of the
annuitant and ends with the last payout before the death of the annuitant.
This option offers the highest periodic payout since there is no guarantee of
a minimum number of payouts or provision for a death benefit for beneficia-
ries. HOWEVER, THERE IS THE RISK UNDER THIS OPTION THAT THE ANNUITANT WOULD
RECEIVE NO PAYOUTS IF HE/SHE DIES BEFORE THE DATE SET FOR THE FIRST PAYOUT;
ONLY ONE PAYOUT IF DEATH OCCURS BEFORE THE SECOND SCHEDULED PAYOUT, AND SO ON.
LIFE INCOME WITH PAYOUTS GUARANTEED FOR DESIGNATED PERIOD. This option guaran-
tees periodic payouts during a designated period, usually 10 or 20 years, and
then continues throughout the lifetime of the annuitant. The designated period
is selected by the contractowner.
JOINT LIFE ANNUITY. This option offers a periodic payout during the joint
lifetime of the annuitant and a designated joint annuitant. The payouts con-
tinue during the lifetime of the survivor.
JOINT LIFE ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic
payouts during a designated period, usually 10 or 20 years, and continues dur-
ing the joint lifetime of the annuitant and a designated
16
<PAGE>
joint annuitant. The payouts continue during the lifetime of the survivor. The
designated period is selected by the contractowner.
JOINT-AND-TWO-THIRDS SURVIVOR ANNUITY. This option provides a periodic payout
during the joint lifetime of the annuitant and a designated joint annuitant.
When one of the joint annuitants dies, the survivor receives two thirds of the
periodic payout made when both were alive.
UNIT REFUND LIFE ANNUITY. This option offers a periodic payout during the
lifetime of the annuitant with the guarantee that upon death a payout will be
made of the value of the number of annuity units (see Variable annuity
payouts) equal to the excess, if any, of: (a) the total amount applied under
this option divided by the annuity unit value for the date payouts begin, di-
vided by (b) the annuity units represented by each payout to the annuitant
multiplied by the number of payouts paid before death. The value of the number
of annuity units is computed on the date the death claim is approved for pay-
ment by the home office.
None of the options listed above currently provide withdrawal features, per-
mitting the contractowner to withdraw commuted values as a lump sum payment.
Other options, with or without withdrawal features, may be made available by
us. Options are only available to the extent they are consistent with the re-
quirements of the contract and Section 72(s) of the code, if applicable. The
mortality and expense risk charge will be assessed on all variable annuity
payouts, including options that may be offered that do not have a life contin-
gency and therefore no mortality risk.
The annuity commencement date is usually on or before the annuitant's 85th
birthday. You may change the annuity commencement date, change the annuity op-
tion or change the allocation of your 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 annuity (on a fixed, variable or combination fixed and variable basis, in
proportion to the account allocations at the time of annuitization) with 120
monthly payouts guaranteed 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 case of a joint life annuity) will be paid to your beneficiary as
payouts become due.
VARIABLE ANNUITY PAYOUTS
Variable annuity payouts will be determined using:
1. The contract value on the annuity commencement date;
2. The annuity tables contained in the contract;
3. The annuity option selected; and
4. The investment performance of the fund(s) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of annuity units equal to the first
periodic payout divided by the annuity unit value; and
3. Calculate the value of the annuity units each period thereafter.
We assume an investment return of 4% per year, as applied to the applicable
mortality table. The amount of each payout after the initial payout will de-
pend upon how the underlying fund(s) perform, relative to the 4% 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 AD-
VICE. This section does not discuss the Federal tax consequences resulting
from every possible situation. No attempt has been made to consider any appli-
cable state, local or foreign tax law, other than the imposition of any state
premium taxes (See Deductions for premium taxes). 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 pres-
ent Federal income tax laws as they are currently interpreted by the 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 assign-
ment 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
17
<PAGE>
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 distribu-
tion occurs. [See Section 72(u) of the code.] 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. 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 deter-
mined 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 to-
tal 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 circum-
stances, which generally are distributions:
1. Received on or after the contractowner attaining age 59 1/2;
2. Made as a result of death or disability of the contractowner;
3. Received in substantially equal periodic payments such as a life annuity
(subject to special recapture rules if the series of payouts is subse-
quently modified);
4. Under a qualified funding asset in a structured settlement;
5. Under an immediate annuity contract as defined in the code;
6. 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 (normally
for transfers or rollovers only);
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;
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 contribu-
tions and benefits, taxation of distributions and any tax penalties, vary ac-
cording 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 conse-
quences.
MULTIPLE CONTRACTS
All contracts entered into after October 21, 1988, and issued by the same in-
surance company (or its affiliates) to the same contractowner during any cal-
endar 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 invest-
ments underlying the contract. They may consider the number of investment op-
tions 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 regulations that the Treasury De-
partment has adopted require that assets underlying a variable annuity con-
tract be adequately diversified. The regulations provide that a variable annu-
ity contract which does not satisfy the diversification standards will not be
treated as an annuity contract, unless the failure to satisfy the regulations
was in -
18
<PAGE>
advertent, 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
failure to diversify is not corrected in this manner, the contractowner of an
annuity contract will be deemed to be 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 Unemployment Compensation Amendments of 1992 (UCA),
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 UCA 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 series shares held in the VAA at meetings
of the shareholders of the series. The voting will be done according to the
instructions of contractowners who have interests in any subaccounts which in-
vest in funds of the 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 series shares in our own right, we
may elect to do so.
The number of votes which you have the right to cast will be determined by ap-
plying your percentage interest in a subaccount to the total number of votes
attributable to the subaccount. In determining the number of votes, fractional
shares will be recognized. After the annuity commencement date, the votes at-
tributable to a contract will decrease.
Series shares of a class held in a subaccount for which no timely instructions
are received will be voted by us in proportion to the voting instructions
which are received for all contracts participating in that subaccount. Voting
instructions to abstain on any item to be voted on will be applied on a pro-
rata basis to reduce the number of votes eligible to be cast.
Whenever a shareholder's meeting is called, each person having a voting inter-
est in a subaccount will receive proxy voting material, reports and other ma-
terials relating to the series. Since the series engages in shared funding,
other persons or entities beside Lincoln Life may vote series shares. See Sale
of fund shares by the series.
DISTRIBUTION OF THE CONTRACTS
American Funds Distributors, Inc. (AFD), 333 South Hope Street, Los Angeles,
Ca 90071, is the distributor and principal underwriter of the contracts. They
will be sold by properly licensed registered representatives of independent
broker-dealers which in turn have selling agreements with AFD and have been
licensed by state insurance departments to represent us. AFD is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and
is 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 receive the contract, you may cancel it
for any reason by delivering or mailing it postage pre-paid, to the home of-
fice at P.O. Box 2348, 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 con-
tract maintenance and administrative fees and any premium taxes which had been
deducted. No contingent deferred sales charge will be assessed. A purchaser
who participates in the VAA is subject to the risk of a market loss during the
free-look period.
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 pur-
chase 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.
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<PAGE>
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 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 partic-
ipants 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 de-
fined 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.
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF
CONTENTS FOR
SEPARATE ACCOUNT E
<TABLE>
<CAPTION>
Item
- -----------------------------------------
<S> <C>
General Information and History of
Lincoln Life
- -----------------------------------------
Special Terms
- -----------------------------------------
Services
- -----------------------------------------
Principal Underwriter
- -----------------------------------------
Purchase of Securities Being Offered
- -----------------------------------------
</TABLE>
For a free copy of the SAI please see page one of this booklet.
RECORDS AND REPORTS
As presently required by the 1940 Act and applicable regulations, we are re-
sponsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Mar-
ket Street, Philadelphia, PA 19203, to provide accounting services, to the
VAA. We will mail to you, at your last known address of record at the home of-
fice, at least semiannually after the first contract year, reports containing
information required by that Act or any other applicable law or regulation.
OTHER INFORMATION
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered here. This Prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further informa-
tion about the VAA, 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 con-
tracts and instruments, please refer to those documents as filed with the SEC.
Lincoln National Variable Annuity Account H and Lincoln National Flexible Pre-
mium Variable Life Accounts F, G and J (all registered as investment companies
under the 1940 Act) and Lincoln National Flexible Premium Group Variable Annu-
ity Accounts 50, 51 and 52 are all segregated investment accounts of Lincoln
Life which also invest in the series. The series also offers shares of the
funds to other segregated investment accounts.
<TABLE>
<CAPTION>
Item
- -------------------------------------------------
<S> <C>
Annuity Payments
- -------------------------------------------------
Federal Tax Status
- -------------------------------------------------
Automatic Increase in the Guaranteed Minimum
Death Benefit
- -------------------------------------------------
Financial Statements
- -------------------------------------------------
</TABLE>
20
<PAGE>
THE AMERICAN LEGACY
LINCOLN NATIONAL
VARIABLE ANNUITY ACCOUNT E (REGISTRANT)
LINCOLN NATIONAL
LIFE INSURANCE COMPANY (DEPOSITOR)
STATEMENT OF ADDITIONAL INFORMATION (SAI)
This Statement of Additional Information should be read in conjunction with the
Prospectus of Lincoln National Variable Annuity Account E dated April 30, 1997.
You may
obtain a copy of the Account E Prospectus on request and without charge. Please
write
American Legacy Customer Service, Lincoln National Life Insurance Co.,
P.O. Box 2348, Fort Wayne, Indiana 46801 or call 1-800-942-5500.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- ------------------------------------------
<S> <C>
GENERAL INFORMATION AND HISTORY OF
LINCOLN LIFE B-2
- ------------------------------------------
SPECIAL TERMS B-2
- ------------------------------------------
SERVICES B-2
- ------------------------------------------
PRINCIPAL UNDERWRITER B-2
- ------------------------------------------
PURCHASE OF SECURITIES BEING OFFERED B-2
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Page
-
<S> <C>
ANNUITY PAYMENTS B-2
-
FEDERAL TAX STATUS B-3
-
AUTOMATIC INCREASE IN THE GUARANTEED
MINIMUM DEATH BENEFIT B-6
-
FINANCIAL STATEMENTS B-8
-
</TABLE>
THIS SAI IS NOT A PROSPECTUS.
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 fil-
ing with state insurance departments and for inclusion in the securities regis-
tration 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 re-
quires 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 efforts, we have reviewed the SEC's requirements
for the mode of presentation of the insurer's financial statements in this reg-
istration 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) ex-
clusively, both for the insurance regulators and for our securities registra-
tion statements. This is consistent with the current practice of many other in-
surers.
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 im-
portant 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 dif-
ferences between Statutory and GAAP statements. BEGINNING NEXT YEAR WE SHALL
PRESENT ONLY THE STATUTORY STATEMENTS.
The date of this SAI is April 30, 1997.
<PAGE>
GENERAL INFORMATION AND HISTORY OF LINCOLN NATIONAL LIFE INSURANCE CO.
(LINCOLN LIFE)
The prior Depositor of the Account, Lincoln National Pension Insurance Compa-
ny, was merged into Lincoln Life, effective January 1, 1989. Lincoln Life, or-
ganized in 1905, is an Indiana stock insurance corporation, engaged primarily
in the direct issuance of annuities and life and health insurance contracts,
and is also a professional reinsurer. Lincoln Life is wholly owned by Lincoln
National Corporation (LNC), a publicly held insurance holding company domi-
ciled in Indiana.
SPECIAL TERMS
The special terms used in this SAI are the ones defined in the Prospectus. In
connection with the term, "Valuation Date", the New York Stock Exchange is
currently closed on weekends and on these holidays: New Year's Day, Presi-
dent's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiv-
ing Day, and Christmas Day. If any of these holidays occurs on a weekend day,
the Exchange may also be closed on the business day occurring just before or
just after the holiday.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Variable Annuity Account (VAA) and the finan-
cial statements and schedules of Lincoln Life appearing in this SAI and regis-
tration statement have been audited by Ernst & Young LLP, independent audi-
tors, as set forth in their reports which also appear elsewhere in this docu-
ment 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 or by third parties re-
sponsible to Lincoln Life. We have entered into an agreement with the Delaware
Management Company, 2005 Market Street, Philadelphia, PA 19203, to provide
accounting services to the VAA. No separate charge against the assets of the
VAA is made by Lincoln Life for this service.
PRINCIPAL UNDERWRITER
Lincoln Life has contracted with American Funds Distributors, Inc. (AFD), 333
South Hope St., Los Angeles, California 90071, a licensed broker-dealer, to
distribute the contracts through certain legally authorized sales persons and
organizations (brokers). AFD and its brokers are compensated under a standard
compensation schedule.
PURCHASE OF SECURITIES BEING OFFERED
The contracts are no longer being offered. Although there are no special pur-
chase plans for any class of prospectus buyers, the contingent deferred sales
charge normally assessed upon surrender or withdrawal of contract value will
be waived for officers, directors, or bona fide full time employees of the
LNC, the Capital Group, Inc., their affiliated or managed companies, and cer-
tain other persons. See Contingent deferred sales charges in the Prospectus.
Both before and after the annuity commencement date, there are exchange privi-
leges between subaccounts, and from the VAA to the General Account, subject to
restrictions set out in the Prospectus. See The contracts, in the Prospectus.
No exchanges are permitted between the VAA and other separate accounts.
ANNUITY PAYMENTS
VARIABLE ANNUITY PAYMENTS
Variable annuity payments will be determined on the basis of: (1) the dollar
value of the contract prior to the annuity commencement date; (2) the annuity
tables contained in the contract; (3) the type of annuity option selected; and
(4) the investment results of the fund(s) selected. In order to determine the
amount of variable annuity payments, Lincoln Life makes the following calcula-
tion: first, it determines the dollar amount of the first payout; second, it
credits the contract with a fixed number of annuity units based on the amount
of the first payout; and third, it calculates the value of the annuity units
each period thereafter. These steps are explained below.
The dollar amount of the first periodic variable annuity payout is determined
by applying the total value of the accumulation units credited under the con-
tract valued as of the fourteenth day prior to the annuity commencement date
(less any premium taxes) to the annuity tables contained in the contract.
Amounts shown in the tables are based on the 1971 Individual Annuity Mortality
Tables, modified, with an assumed invest-
B-2
<PAGE>
ment return at the rate of 4% per annum. The first annuity payout is deter-
mined by multiplying the benefit per $1,000 of value shown in the contract ta-
bles by the number of thousands of dollars of value accumulated under the con-
tract. These annuity tables vary according to the form of annuity selected and
the age of the annuitant at the annuity commencement date. The 4% interest
rate stated above is the measuring point for subsequent annuity payouts. If
the actual net investment rate (annualized) exceeds 4%, the payment will in-
crease at a rate equal to the amount of such excess. Conversely, if the actual
rate is less than 4%, annuity payouts will decrease. If the assumed rate of
interest were to be increased, annuity payments 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 as-
sociated with employer sponsored plans and where not prohibited by law.
At the annuity commencement date, the contract is credited with annuity units
for each subaccount on which variable annuity payments are based. The number
of annuity units to be credited is determined by dividing the amount of the
first periodic payout by the value of an annuity unit in each subaccount se-
lected. Although the number of annuity units is fixed by this process, the
value of such units will vary with the value of the underlying fund. The
amount of the second and subsequent annuity payouts is determined by multiply-
ing the contractowner's fixed number of annuity units in each subaccount by
the appropriate annuity unit value for the valuation date ending 14 days prior
to the date that payment is due.
The value of each subaccount's annuity unit will be 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 immedi-
ately preceding valuation date by the product of:
a. The net investment factor of the subaccount for the valuation period for
which the annuity unit value is being determined, and
b. A factor to neutralize the assumed investment return in the annuity table.
The value of the annuity units is determined as of a valuation date 14 days
prior to the payment date in order to permit calculation of amounts of annuity
payouts and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
PROOF OF AGE, SEX AND SURVIVAL
Lincoln Life may require proof of age, sex, or survival of any payee upon
whose age, sex, or survival payments depend.
FEDERAL TAX STATUS
GENERAL
The operations of the VAA form a part of, and are taxed with, the operations
of 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 cap-
ital gain are automatically retained as part of the reserves under the con-
tract. Under existing federal income tax law, Lincoln Life believes that the
VAA investment income and realized net capital gain are not taxed to the ex-
tent they are retained as part of the reserves under the contract. According-
ly, 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 gain attributable to the VAA, then Lincoln Life may
impose a charge against the VAA (with respect to some or all contracts) in or-
der to make provision for payment of such taxes.
TAX STATUS OF NONQUALIFIED CONTRACTS
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund the shares of which are owned by separate ac-
counts of insurance companies) underlying the contract be "adequately diversi-
fied" in accordance with Treasury regulations in order for the contract to
qualify as an annuity contract under Section 72 of the Code. The VAA, through
each of the funds, intends to comply with the diversification requirements
prescribed in regulations, which affect how the assets in each of the funds in
which the VAA invests may be invested. Capital Research and Management Company
is not affiliated with Lincoln Life and Lincoln Life does not have control
over the Series or its investments. However, Lincoln Life believes that each
fund in which the VAA owns shares will meet the diversification requirements
and that therefore the contracts will be treated as annuities under the Code.
The regulations relating to diversification requirements do not provide guid-
ance concerning the extent to which contractowners may direct their invest-
ments to particular subaccounts of a separate account. When guidance is pro-
vided, the contract may need to be modified to comply with that guidance. For
these reasons, Lincoln Life reserves the right to modify the contract as nec-
essary to prevent the contractowner from being considered the owner of the as-
sets of the VAA.
In addition, Section 72(s) of the Code provides that contracts issued after
January 18, 1995, will not be treated
B-3
<PAGE>
as annuity contracts for purposes of Section 72 unless the contract provides
that (1) if any contractowner dies on or after the annuity starting date prior
to the time the entire interest in the contract has been distributed, the re-
maining portion of such interest must be distributed at least as rapidly as
under the method of distribution in effect at the time of the contractowner's
death; and (2) if any contractowner dies prior to the annuity starting date,
the entire interest must be distributed within five years after the death of
the contractowner. These requirements are considered satisfied if any portion
of the contractowner's interest that is payable to or for the benefit of a
"designated beneficiary" is distributed over that designated beneficiary's
life, or a period not extending beyond the designated beneficiary's life ex-
pectancy, and if that distribution begins within one year of the
contractowner's death. The "designated beneficiary" must be a natural person.
However, the contract may be continued in the name of the contractowner's sur-
viving spouse as the contractowner. Contracts issued after January 18, 1995,
contain provisions intended to comply with these Code requirements. No regula-
tions interpreting these requirements have yet been issued. Thus, no assurance
can be given that the provisions contained in contracts issued after January
18, 1995 satisfy all such Code requirements. However, Lincoln Life believes
that such provisions in such contracts meet these requirements. Lincoln Life
intends to review such provisions and modify them as necessary to assure that
they comply with the requirements of Section 72(s) when clarified by Regula-
tion or otherwise.
TAX STATUS OF CONTRACTS USED WITH CERTAIN PLANS
The rules governing the tax treatment of contributions and distributions under
qualified plans, as set forth in the Code and applicable rulings and regula-
tions, are complex and subject to change. These rules also vary according to
the type of plan and the terms and conditions of the plan itself. Therefore,
no attempt is made herein to provide more than general information about the
use of contracts with the various types of plans, based on Lincoln Life's un-
derstanding of the current federal tax laws as interpreted by the Internal
Revenue Service. Purchasers of contracts for use with such a plan and plan
participants and beneficiaries should consult counsel and other competent ad-
visers as to the suitability of the plan and the contract to their specific
needs, and as to applicable Code limitations and tax consequences. Partici-
pants under such plans, as well as contractowners, annuitants, and beneficia-
ries, 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 501(C)(3)
ORGANIZATIONS [SECTION 403(B) PLANS]
Payments made to purchase annuity contracts by public school systems or
501(c)(3) organizations for their employees are excludable from the gross in-
come 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 payments, in a single sum, or a withdrawal.
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 dis-
tributed. However, the employee may be required to include these amounts in
gross income prior to distribution if the qualified plan or trust loses its
qualification. Corporate plans qualified under Section 401(a) or 403(a) of the
Code are subject to extensive rules, including limitations on maximum contri-
butions or benefits. For plan years beginning after December 31, 1996, tax ex-
empt organizations, except state and local governments, may have 401(k) plans.
Distributions of amounts in excess of non-deductible employee contributions
are generally taxable as ordinary income. If an employee or beneficiary re-
ceives a "lump-sum distribution," that is, if the employee or beneficiary re-
ceives in a single tax year the total amounts payable with respect to that em-
ployee, and the benefits are paid as a result of the employee's death or sepa-
ration from service or after the employee attains 59 1/2, taxable gain may be
eligible for special "lump sum averaging" treatment. 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
B-4
<PAGE>
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 for use with H.R. 10 plans should seek com-
petent 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 Individual Retirement Annuity (IRA). An individual may make
an annual IRA contribution of up to the lesser of $2,000 (or $4,000 if IRAs
are maintained for both the individual and his nonworking spouse) or 100% of
compensation. However, IRA contributions may be non-deductible in whole or in
part if (1) the individual or his spouse is an active participant in certain
other retirement programs and (2) the income of the individual (or of the in-
dividual and his spouse) exceeds a specified amount. Distributions from cer-
tain other IRA plans or qualified plans may be "rolled over" to an IRA on a
tax deferred basis without regard to the limit on contributions, provided cer-
tain requirements are met. Distributions from IRA's are subject to certain re-
strictions. Deductible IRA contributions and all IRA earnings will be taxed as
ordinary income when distributed. The failure to satisfy certain Code require-
ments with respect to an IRA may result in adverse tax consequences.
DEFERRED COMPENSATION PLANS
(SECTION 457 PLANS)
Under the Code provisions, employees and independent contractors (partici-
pants) performing services for state and local governments and tax-exempt or-
ganizations may establish deferred compensation plans. 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 sponsor-
ing employer and are subject to the claims of its creditors. Plans of state or
local governments established on August 20, 1996, or later, must hold all as-
sets 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. 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 bene-
ficiary. 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 which can be deferred in any one year is the lesser of $7,500
or 33 1/3% of the participant's includable compensation. However, in the lim-
ited circumstances, up to $15,000 may be deferred in each of the last three
years before retirement.
SIMPLIFIED EMPLOYEE PENSION PLANS [SECTION 408(K)]
An employer may make contributions on behalf of employees to a Simplified Em-
ployee Pension Plan ("SEPP") as provided by Section 408(k) of the Code. The
contributions and distribution dates are limited by the Code provisions. All
distributions from the plan will be taxed as ordinary income. Any distribution
before the employee attains age 59 1/2 (except in the event of death or dis-
ability) or the failure to satisfy certain other Code requirements may result
in adverse tax consequences. For tax years after 1996, salary reductions SEPs
(SAR/SEP) may no longer be established. However, SAR/SEPs in existence prior
to January 1, 1997 may continue to receive contributions.
TAX ON DISTRIBUTIONS FROM QUALIFIED CONTRACTS
The following rules generally apply to distributions from contracts purchased
in connection with the plans discussed above, other than 457 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 (gen-
erally, the employee's own non-deductible contributions) constitutes his "in-
vestment in the contract." If a distribution is made in the form of annuity
payments, the employee's "investment in the contract" (adjusted for certain
refund provisions) divided by his life expectancy (or other period for which
annuity payments are expected to be made) constitutes a tax-free return of
capital each year. The dollar amount of annuity payments received in any year
in excess of such return is taxable as ordinary income. However, for employees
whose annuity starting date is after December 31, 1986, all distributions will
be fully taxable once the employee is deemed to have recovered the dollar
amount of his investment in the Contract. Notwithstanding the above, if the
employee's annuity starting date was on or before July 1, 1986 and if his in-
vestment in the contract will be recovered within three years of his annuity
starting date, no amount is included in income until he has fully recovered
such investment. For amounts distributed after 1986, new rules generally pro-
vide that all distributions which are not received as an annuity will be taxed
as a pro rata distribution of taxable and non-taxable amounts (rather than as
a distribution first of non-taxable amounts).
If a surrender of or withdrawal from the contract is effected and a distribu-
tion is made in a single payment, the proceeds may qualify for special "lump-
sum distribution" treatment under certain qualified plans, as discussed above.
Otherwise, the amount by which the payment exceeds the "investment in the con-
tract" (adjusted for any prior withdrawals) allocated to that pay-
B-5
<PAGE>
ment, if any, will be taxed as ordinary income in the year of receipt.
Distributions from qualified plans, 403(b) plans and IRAs will be subject to
(1) a 10% penalty tax if made before age 59 1/2 unless certain other excep-
tions apply, and (2) except during 1997, 1998, and 1999, a 15% penalty tax on
combined annual distributions in excess of $150,000 (as indexed), subject to
various special rules. Failure to meet certain minimum distribution require-
ments 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 annuitant's death, the taxation of benefits payable to his beneficiary
generally follow these same principles, subject to a variety of special rules.
OTHER CONSIDERATIONS
It should be understood that the foregoing comments about the federal tax con-
sequences under these contracts are not exhaustive and that special rules are
provided with respect to other tax situations not discussed herein. Further,
the foregoing discussion does not address any applicable state, local, or for-
eign tax laws. In recent years, numerous changes have been made in the federal
income tax treatment of contracts and retirement plans, which are not fully
discussed above. Before an investment is made in any of the above plans, a tax
adviser should be consulted.
AUTOMATIC INCREASE IN THE GUARANTEED MINIMUM DEATH BENEFIT
Subject to the following terms and conditions, once a contract has been in
force for a certain period, Lincoln National Life Insurance Co. (Lincoln Life)
will automatically increase the Guaranteed Minimum Death Benefit (GMDB):
Lincoln Life will automatically increase the GMDB, separately for each con-
tract year's purchase payment(s), effective upon the seventh anniversary of
each eligible contract year in which those payments were made (as the contin-
gent deferred sales charge expires on those payments).
The Attributable Gain (AG), used to increase the GMDB, will be calculated
based on the contract value at the close of business on the last valuation
date preceding the seventh anniversary of the contract year for which the in-
crease is made. The AG will be the amount which results from allocating the
total appreciation in the contract to each contract year's purchase payments
adjusted by withdrawals on a first-in-first out (FIFO) basis based on Lincoln
Life's internal rate of return (IRR) calculation (as described below).
If a single purchase payment was deposited or multiple deposits were made in
the first contract year only, then, upon adjustment, the increased GMDB will
be the contract value on the seventh contract anniversary. However, if con-
tract value is less than net purchase payments, the GMDB will not be adjusted.
If purchase payments have been deposited in multiple contract years, then,
upon adjustment, the increased GMDB will be the sum of all purchase payments
plus any attributable gain, as calculated for each contract year which has
reached its seventh anniversary, minus any withdrawals, partial
annuitizations, and premium taxes incurred.
The IRR is the level compound rate of return, calculated by Lincoln Life, at
which purchase payments less withdrawals will accumulate to the contract value
on the contract anniversary beginning with the seventh anniversary. The appli-
cation of the IRR methodology to any particular contract year could allocate
gain, if any, in a manner which does not precisely correlate with the con-
tract's actual investment experience for a particular contract year or
subaccount. The calculation of the IRR assumes all purchase payments and with-
drawals occur at the beginning of the year in which they were made. Once the
IRR has been determined, the gain attributable to each contract year is calcu-
lated by applying the IRR to the purchase payments, less any withdrawals ap-
plied on a FIFO basis.
FINANCIAL STATEMENTS
Financial statements for the VAA and the company appear on the following
pages. For more information about the financial statements for the company
provided in this SAI, please see the cover page of this SAI.
[FINANCIAL STATEMENTS TO BE INCLUDED BY AMENDMENT]
B-6
<PAGE>
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT E
POST-EFFECTIVE AMENDMENT ON FORM N-4
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) List of Financial Statements
1. Part A. The Table of Condensed Financial Information is included in
Part A of this Registration Statement.
2. Part B. The following Financial Statements of Account E are included
in Part B of this Registration Statement:(TO BE FILED BY AMENDMENT)
Statement of Assets and Liabilities -- December 31, 1996
Statement of Operations -- Year ended December 31, 1996
Statements of Changes in Net Assets -- Years ended December 31, 1996
and 1995
Notes to Financial Statements -- December 31, 1996
Report of Ernst & Young LLP, Independent Auditors
3. Part B. The following Consolidated Financial Statements and Schedules
of The Lincoln National Life Insurance Company are included in Part B
of the Registration Statement: (TO BE FILED BY AMENDMENT)
Consolidated Balance Sheets -- December 31, 1995 and 1994
Consolidated Statements of Income -- Years ended December 31, 1995,
1994 and 1992
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
(b) List of Exhibits
(4) Form of Rider to Variable Annuity Contract
(8) Services Agreement with the Delaware Management Company.
(9) Consent and Opinion of Jeremy Sachs, Senior Counsel, Lincoln National
Life Insurance Company (TO BE FILED BY AMENDMENT)
(10) Consent of Ernst & Young LLP, Independent Auditors. (TO BE FILED BY
AMENDMENT)
(14) Financial Data Schedules (TO BE FILED BY AMENDMENT)
(15) Other Exhibits:
(a) Organizational Chart of the Lincoln National Insurance
Holding Company System
(b) Books and Records Report. (TO BE FILED BY
AMENDMENT)
<PAGE>
Item 25.
DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name Positions and Offices with LNL
- ---- ------------------------------
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
*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 14(a): Organizational Chart of the Lincoln National Insurance
Holding Company System
Item 27.
NUMBER OF CONTRACTOWNERS
As of December 31, 1996, there were 15,489 Contract Owners (fixed and
variable).
Item 28. Indemnification
Refer to the initial Registration Statement.
Item 29. Principal Underwriter
(a) American Funds Distributors, Inc., is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American
Funds Income Series, The American Funds Tax-Exempt Series I, The
American Funds Tax-Exempt Series II, American High-Income Municipal
Bond Fund, Inc., American High-Income Trust, American Mutual Fund,
Inc., The Bond Fund of America, Inc., Capital Income Builder, Inc.,
Capital World Bond Fund, Inc., Capital World Growth and Income Fund,
Inc., The Cash Management Trust of America, EuroPacific Growth Fund,
Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., The Intermediate Bond Fund of America,
The Investment Company of America, Limited Term Tax-Exempt Bond Fund of
America, The New Economy Fund, New Perspective Fund, Inc., SMALLCAP
World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The Tax-
Exempt Money Fund of America, The U.S. Treasury Money Fund of America
and Washington Mutual Investors Fund, Inc.
(b)
(1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
*David L. Abzug Regional Vice President
5657 Lemona Avenue
Van Nuys, CA 91411
John A. Agar Regional Vice President
1501 N. University Drive
Little Rock, AR 72207
Robert B. Aprison Vice President
2983 Bryn Wood Drive
Madison, WI 53711
%Richard Armstrong Assistant Vice President
*William W. Bagnard Vice President
Steven L. Barnes Senior Vice President
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Vice President
4160 Gateswalk Drive
Smyrna, GA 30080
Item 29. Principal Underwriter (continued)
(b) (continued)
(1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ ---------------------
Joseph T. Blair Senior Vice President
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Regional Vice President
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President
3100 West End Avenue, Suite 870
Nashville, TN 37215
Michael L. Brethower Vice President
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President
4619 McPherson Avenue
St. Louis, MO 63108
*Daniel C. Brown Senior Vice President
@J. Peter Burns Vice President
Brian C. Casey Regional Vice President
9508 Cable Drive
Kensington, MO 20895
Victor C. Cassato Vice President
609 W. Littleton Blvd.
Suite 310
Littleton, CO 80121
Christopher J. Cassin Senior Vice President
111 West Chicago Avenue
Suite G3
Hinsdale, IL 60521
Denise M. Cassin Regional Vice President
1301 Stoney Creek Drive
San Ramon, CA 94538
*Larry P. Clemmensen Director
*Kevin G. Clifford Director, Senior Vice President
Ruth M. Collier Vice President
145 West 67th Street, Suite #12K
New York, NY 10023
Thomas E. Cournoyer Vice President
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Vice President
4116 Woodbine St.
Chevy Chase, MD 20815
*Carl D. Cutting Vice President
Dan J. Delianedis Regional Vice President
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President
P.O. Box 661
Ramsey, NJ 07446
Item 29. Principal Underwriters (continued)
(b) (continued)
(1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
- --------------------- ---------------------
G. Michael Dill Senior Vice President
505 East Main Street
Jenks, OK 74037
Kirk D. Dodge Vice President
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President
1205 Franklin Avenue
Garden City, NY 11530
*Michael J. Downer Secretary
Robert W. Durbin Vice President
74 Sunny Lane
Tiffin, OH 44883
&Lloyd G. Edwards Vice President
*Paul H. Fieberg Senior Vice President
John Fodor Regional Vice President
15 Latisquana Road
Southborough, MA 01772
*Mark P. Freeman, Jr. Director and President
Clyde E. Gardner Senior Vice President
Route 2, Box 3162
Osage Beach, MO 65065
#Evelyn K. Glassford Vice President
Jeffrey J. Greiner Regional Vice President
5898 Heather Glen Court
Dublin, OH 43017
David E. Harper Senior Vice President
R.D.1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President
1225 Vista Del Mar Dr.
Delray Beach, Fl 33483
*Robert L. Johansen Vice President and Controller
Michael J. Johnston Chairman of the Board
630 Fifth Ave., 36th Floor
New York, NY 10111
Victor J. Kriss Senior Vice President
P. O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President
12558 Highlands Place
Fishers, IN 46038
Item 29. Principal Underwriters (continued)
(b) (continued)
(1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ ------------------------
#Karl A. Lewis Assistant Vice President
T. Blake Liberty Regional Vice President
1940 Blake Street, Ste. 303
Denver, Co 80202
*Lorin E. Liesy Assistant Vice President
*Susan G. Lindgren Vice President - Institutional
Investment Services Division
%Stella Lopez Vice President
+Robert W. Lovelace Director
Stephen A. Malbasa Regional Vice President
13405 Lake Shore Boulevard
Cleveland, OH 44110
Steven M. Markel Vice President
5241 South Race St.
Littleton, CO 80121
*John C. Massar Director and Senior Vice President
*E. Lee McClennahan Senior Vice President
Laurie B. McCurdy Regional Vice President
3500 W. Camino de Urania
Tucson, AZ 85255
%John V. McLaughlin Senior Vice President
Terry W. McNabb Vice President
2002 Barrett Station Road
St. Louis, MO 63131
*R. William Melinat Vice President
Institutional Investment
Services Division
David R. Murray Vice President
25701 S. E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President
7215 Trevor Road
Charlotte, NC 28226
William E. Noe Regional Vice President
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President
62 Park Drive
Glenview, IL 60025
Frederic Phillips Vice President
32 Ridge Avenue
Newton Centre, MA 02159
#Candance D. Pilgrim Assistant Vice President
Item 29. Principal Underwriters (continued)
- -------
(b) (continued)
(1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ ---------------------
Carl S. Platou Regional Vice President
4021 96th Avenue, SE
Mercer Island, WA 98040
*John O. Post, Jr. Vice President
Steven J. Reitman Vice President
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President
12025 Delmahoy Drive
Charlotte, NC 28277
George S. Ross Vice President
55 Madison Avenue
Morristown, NJ 07962
*Julie D. Roth Vice President
*James F. Rothenberg Director
Douglas F. Rowe Regional Vice President
30309 Oak Tree Drive
Georgetown, TX 78628
Christopher Rowey Regional Vice President
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President
4604 Glencoe Ave., #4
Marina Del Rey, CA 90292
Joe D. Scarpitti Regional Vice President
31465 St. Andrews
Westlake, OH 44145
*Daniel B. Seivert Assistant Vice President
*R. Michael Shanahan Director
David W. Short Director and Senior Vice President
1000 RIDC Plaza, Suite 212
Pittsburgh, PA 15238
William P. Simon, Jr. Vice President
554 Canterbury Lane
Berwyn, PA 19312
*John C. Smith Assistant Vice President
Institutional Investment Services
Division
*Mary E. Smith Assistant Vice President
Institutional Investment Services
Division
Rodney G. Smith Regional Vice President
100 N. Central Expressway
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President
855 Markley Woods Way
Cincinnati, OH 45230
Item 29. Principal Underwriters (continued)
- --------
(b) (continued)
(1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ ---------------------
Daniel S. Spradling Senior Vice President
#4 West Fourth Avenue, Suite 406
San Mateo, CA 94402
Thomas A. Stout Regional Vice President
12913 Kendale Lane
Bowie, MD 20715
Craig R. Strausser Regional Vice President
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President
31641 Saddletree Drive
Westlake Village, CA 91361
*Drew Taylor Assistant Vice President
%James P. Toomey Assistant Vice President
&Christopher E. Trede Assistant Vice President
George F. Truesdail Vice President
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President
606 Glenwood Avenue
Mill Valley, CA 94941
*David M. Ward Assistant Vice President
Institutional Investment Services
Division
Thomas E. Warren Regional Vice President
4001 Crockers Lake Blvd.
Sarasota, FL 34238
*J. Kelly Webb Senior Vice President and Treasurer
Gregory J. Weimer Vice President
125 Surrey Drive
Canonsburg, PA 15317
#Timothy W. Weiss Director
**N. Dexter Williams Vice President
Timothy J. Wilson Regional Vice President
113 Farmview Place
Venetia, PA 15367
#Laura L. Wimberly Assistant Vice President
*Marshall D. Wingo Director and Senior Vice President
*Robert L. Winston Director and Senior Vice President
William Yost Regional Vice President
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President
209 Robinson Drive
Tustin Ranch, CA 92782
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
**Business Address, One Market Plaza, Steuart Tower, Suite 1800, San Francisco,
CA 94111
+ Business Address, 11100 Santa Monica Blvd., Los Angeles, CA 90025
# Business Address, 135 South State College Blvd., Brea, CA 92821
% Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
<PAGE>
Item 30. Location of Accounts and Records
Exhibit 14(b) is hereby expressly incorporated herein by this reference.
Item 31. Management Services
Not Applicable.
50
Item 32. Undertakings
- ---------------------
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual Contract
offered by the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request to Lincoln Life
at the address or phone number listed in the Prospectus.
(d) Lincoln 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 initial Registration Statement.
51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant duly has caused this Registration
Statement to be signed on its behalf, in the City of Fort Wayne, and State of
Indiana on this 28th day of February, 1997.
LINCOLN NATIONAL VARIABLE ANNUITY
ACCOUNT E, (Registrant)
By: /s/ Stephen H. Lewis
-----------------------------
Stephen H. Lewis
(Signature-Officer of Depositor)
Senior Vice President, LNL
(Title)
By: THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY (LNL)
(Depositor)
By: /s/ Jon A. Boscia
-----------------------------
Jon A. Boscia
President
(Title)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Jon A. Boscia President, Chief Executive
- ----------------- Officer & Director February 28, 1997
Jon A. Boscia (Principal Executive
Officer)
Director
- ------------------
Ian M. Rolland ----------------
*/s/ O. Douglas Worthington Vice President and Controller
- --------------------------- February 28, 1997
O. Douglas Worthington
/s/ Keith J. Ryan Vice President, and Assistant
- ------------------- Treasurer and Chief February 28, 1997
Keith J. Ryan Financial Officer (Principal
Financial Officer)
- ------------------- Executive Vice President
Lawrence T. Rowland and Director ----------------
/s/ Richard C. Vaughan Director
- ---------------------- February 28, 1997
Richard C. Vaughan
/s/ H. Thomas McMeekin
- ---------------------- Director February 28, 1997
H. Thomas McMeekin
/s/ Jack D. Hunter Executive Vice President,
- ---------------------- General Counsel & Director February 28, 1997
Jack D. Hunter
*/s/ Jeremy Sachs
- ---------------------- , pursuant to a Power of Attorney filed with
Jeremy Sachs Post-Effective Amendment No. 5 to this
Registration Statement.
<PAGE>
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 OF ANNUITANT. It
replaces the first paragraph of Section 2.13. It also replaces the "Increased
Guaranteed Minimum Death Benefit" rider Form DBA-2 which was attached to your
Contract.
The payment of the death benefit will occur upon 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 current value of the Contract as of the date on which the death
claim is approved for payment as described above; or
b) for Annuitant ages up to and including 75: the highest account value
at the time of fund valuation on any policy anniversary date following
election of this rider.
for Annuitant ages over 75: the highest account value at the time of
fund valuation on any policy anniversary date up to and including age
75 following election of this rider.
The highest account value is adjusted for certain transactions. It is
increased by Purchase Payments and is decreased by partial
withdrawals, partial annuitizations, and premium taxes incurred
subsequent to such policy anniversary date on which the highest
account value occurred.
For benefits to be payable under the EGMDB, due proof of the death of the
Annuitant must be received before a choice is made to receive proceeds under
an Annuity Payment Option. Once the Annuity Payment Option has been elected,
the EGMDB will be discontinued and the charge for this benefit will cease.
Due proof of death may be a certificate of death, 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 as of the time of fund valuation on the next policy
anniversary date following the election of this benefit. For an election of
this benefit made on any policy anniversary date or at Contract inception,
the EGMDB takes effect at the time of fund valuation on that date.
There is a daily charge for this benefit at an annual rate of 0.15% which is
deducted from the Gross Investment Rate of each sub-account. The charge will
begin at the time of fund valuation on the policy anniversary date following
the election of this rider. This charge will continue for all future Contract
years, including years following age 75, unless the Owner elects to
discontinue this benefit.
After this benefit has been elected, the Owner may discontinue it at any
time. If discontinued, the benefit will terminate at the time of fund
valuation on the next policy anniversary date. The 0.15% annual charge will
also cease when the benefit terminates. If the Owner elects to discontinue
this benefit, the first paragraph of Section 2.13 will be reinstated in its
original form prior to election of this rider. Rider Form DBA-2 will also be
reinstated in its entirety. If the owner elects to discontinue this benefit
on a policy anniversary date, the benefit and the charge will terminate at
the time of fund valuation on that date. Once discontinued, the Owner may not
re-elect this benefit.
The following shall be inserted into Section 1.04 NET INVESTMENT RATE AND NET
INVESTMENT FACTOR following the fifth paragraph:
For any 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 1.40% 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 1.40% consists of 1.25% for mortality and distribution
expense risks and 0.15% for the EGMDB Rider.
The Lincoln National Life Insurance Company
Nancy J. Alford, Vice President
Form DBA-5 4/97
<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 13
Lincoln National Life Account E
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 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
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>
Separate Account E - Standardized 1 Year Returns
<TABLE>
<CAPTION>
ONE YEAR RETURNS PERIOD ENDING 12/31/1995:
Growth Growth High Yield Cash Gov't
Series Income Bond
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fund Value $1,316.51 $1,313.73 $1,202.75 $1,042.41 $1,139.65
Fee $0.90 $0.90 $0.86 $0.79 $0.83
====================================================================
Surr Charge $60.00 $60.00 $60.00 $60.00 $60.00
Final Value $1,255.61 $1,252.83 $1,141.89 $981.62 $1,078.82
====================================================================
Annual Return 25.56% 25.28% 14.19% -1.84% 7.88%
- --------------------------------------------------------------------
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
Growth Growth High Yield Cash Gov't
Date Series Income Bond
- ---------------------------------------------------------------------
31-Dec-94 1.861048 1.659234 1.819492 1.388448 1.497848
31-Dec-95 2.450095 2.179784 2.188394 1.447338 1.707018
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
Separate Account E - Standardized 5 Year Returns
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
FIVE YEAR RETURNS PERIOD ENDING 12/31/1995:
- ---------------------------------------------------------------
Growth Growth High Yield Cash Gov't
Series Income Bond
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year $1,316.44 $1,225.59 $1,250.26 $1,042.54 $1,145.16
Fee $1.27 $1.22 $1.24 $1.12 $1.18
Final Value $1,315.17 $1,224.37 $1,249.02 $1,041.41 $1,143.98
- ---------------------------------------------------------------
Two Year $1,438.98 $1,305.13 $1,387.49 $1,061.66 $1,215.75
Fee $1.34 $1.23 $1.28 $1.02 $1.14
Final Value $1,437.64 $1,303.91 $1,386.22 $1,060.64 $1,214.61
- ---------------------------------------------------------------
Three Year $1,651.74 $1,446.25 $1,594.07 $1,075.43 $1,333.67
Fee $1.39 $1.24 $1.34 $0.96 $1.15
Final Value $1,650.35 $1,445.01 $1,592.73 $1,074.47 $1,332.52
- ---------------------------------------------------------------
Four Year $1,637.89 $1,456.72 $1,470.00 $1,102.25 $1,258.81
Fee $1.43 $1.26 $1.33 $0.95 $1.13
Final Value $1,636.47 $1,455.46 $1,468.67 $1,101.31 $1,257.68
- ---------------------------------------------------------------
Five Year $2,154.43 $1,912.08 $1,766.44 $1,148.02 $1,433.31
Fee $1.47 $1.31 $1.26 $0.87 $1.04
===============================================================
Surr Charge $20.00 $20.00 $20.00 $20.00 $20.00
Final Value $2,132.96 $1,890.78 $1,745.18 $1,127.14 $1,412.27
===============================================================
Annual Return 16.36% 13.59% 11.78% 2.42% 7.15%
- ---------------------------------------------------------------
Calculation of Annual Return
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
Unit Values
- ---------------------------------------------------------------
Growth Growth High Yield Cash Gov't
Date Series Income Bond
- ---------------------------------------------------------------
31-Dec-90 1.133137 1.135838 1.234347 1.255956 1.186530
31-Dec-91 1.491709 1.392074 1.543252 1.309382 1.358769
31-Dec-92 1.632137 1.483902 1.714346 1.334831 1.444011
31-Dec-93 1.875199 1.645896 1.971403 1.353448 1.585561
31-Dec-94 1.861048 1.659234 1.819492 1.388448 1.497848
31-Dec-95 2.450095 2.179784 2.188394 1.447338 1.707018
- ---------------------------------------------------------------
</TABLE>
<PAGE>
Separate Account E - Standardized 10 Year Returns
<TABLE>
<CAPTION>
10 YEAR/LIFETIME RETURNS PERIOD ENDING 12/31/1995:
- --------------------------------------------------------------------
Growth Growth High Yield Cash Gov't
Series Income Bond
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year One $1,288.38 $1,206.95 $1,178.86 $1,048.99 $1,131.92
Fee $1.26 $1.21 $1.20 $1.13 $1.17
Final Value $1,287.12 $1,205.74 $1,177.66 $1,047.87 $1,130.75
- --------------------------------------------------------------------
Year Two $1,377.39 $1,198.59 $1,220.12 $1,096.47 $1,099.58
Fee $1.47 $1.32 $1.32 $1.18 $1.23
Final Value $1,375.92 $1,197.27 $1,218.80 $1,095.29 $1,098.35
- --------------------------------------------------------------------
Year Three $1,557.43 $1,353.57 $1,380.29 $1,158.10 $1,172.73
Fee $1.61 $1.40 $1.43 $1.24 $1.25
Final Value $1,555.81 $1,352.17 $1,378.86 $1,156.86 $1,171.48
- --------------------------------------------------------------------
Year Four $2,017.09 $1,675.56 $1,504.81 $1,242.99 $1,282.09
Fee $1.97 $1.67 $1.59 $1.32 $1.35
Final Value $2,015.13 $1,673.90 $1,503.23 $1,241.67 $1,280.74
- --------------------------------------------------------------------
Year Five $1,903.19 $1,610.99 $1,541.62 $1,323.21 $1,371.43
Fee $2.16 $1.81 $1.67 $1.41 $1.46
Final Value $1,901.03 $1,609.18 $1,539.95 $1,321.79 $1,369.97
- --------------------------------------------------------------------
Year Six $2,502.60 $1,972.20 $1,925.33 $1,378.02 $1,568.84
Fee $2.42 $1.97 $1.91 $1.48 $1.62
Final Value $2,500.18 $1,970.23 $1,923.43 $1,376.54 $1,567.22
- --------------------------------------------------------------------
Year Seven $2,735.54 $2,100.20 $2,136.67 $1,403.29 $1,665.54
Fee $2.54 $1.97 $1.97 $1.35 $1.57
Final Value $2,733.00 $2,098.23 $2,134.70 $1,401.94 $1,663.97
- --------------------------------------------------------------------
Year Eight $3,140.01 $2,327.28 $2,454.78 $1,421.50 $1,827.08
Fee $2.64 $1.99 $2.06 $1.27 $1.57
Final Value $3,137.37 $2,325.29 $2,452.72 $1,420.23 $1,825.51
- --------------------------------------------------------------------
Year Nine $3,113.69 $2,344.14 $2,263.72 $1,456.95 $1,724.52
Fee $2.72 $2.03 $2.05 $1.25 $1.54
Final Value $3,110.98 $2,342.11 $2,261.67 $1,455.70 $1,722.98
- --------------------------------------------------------------------
Year Ten $4,095.64 $3,076.90 $2,720.22 $1,517.44 $1,963.59
Fee $2.80 $2.10 $1.93 $1.15 $1.43
====================================================================
Surr Charge $0.00 $0.00 $0.00 $0.00 $0.00
Final Value $4,092.84 $3,074.79 $2,718.29 $1,516.29 $1,962.16
====================================================================
Period 10 10 10 10 10
Annual Return 15.13% 11.89% 10.52% 4.25% 6.97%
- --------------------------------------------------------------------
</TABLE>
<PAGE>
Separate Account E - Standardized 10 Year Returns
Calculation of Annual Return
<TABLE>
<S> <C>
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
</TABLE>
Annual Return = (Final Value Year Ten / 1,000) . (1/10) - 1
Unit Values
<TABLE>
<CAPTION>
Growth Growth High Yield Cash Gov't
Series Income Bond
<S> <C> <C> <C> <C> <C>
31-Dec-85 0.59298 0.702141 0.797334 0.945119 0.8614917
31-Dec-86 0.763981 0.84745 0.939944 0.991424 0.9751435
31-Dec-87 0.817563 0.842430 0.973831 1.037405 0.948262
30-Dec-88 0.925411 0.952406 1.102860 1.096903 1.012471
31-Dec-89 1.199783 1.180190 1.203604 1.178565 1.108071
31-Dec-90 1.133137 1.135838 1.234347 1.255956 1.186530
31-Dec-91 1.491709 1.392074 1.543252 1.309382 1.358769
30-Dec-92 1.632137 1.483902 1.714346 1.334831 1.444011
31-Dec-93 1.875199 1.645896 1.971403 1.353448 1.585561
31-Dec-94 1.861048 1.659234 1.819492 1.388448 1.497848
31-Dec-95 2.450095 2.179784 2.188394 1.447338 1.707018
</TABLE>
<PAGE>
B. NON-STANDARDIZED QUOTATIONS
This schedule present the formulas and calculation employed in producing the
performance quotations set out in the SAI, under the heading, "NON-STANDARDIZED
INVESTMENT RESULTS--SUN-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>
Non-standardized Performance - Separate Account E
Amount
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Base Period
---------------------- Growth Growth High Yield Cash Gov't
Years Start Date End Date Series Income Bond
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 31-Dec-94 31-Dec-95 13,165 13,137 12,027 10,424 11,396
2 31-Dec-93 31-Dec-95 13,066 13,244 11,101 10,694 10,766
3 31-Dec-92 31-Dec-95 15,012 14,690 12,765 10,843 11,821
4 31-Dec-91 31-Dec-95 16,425 15,659 14,180 11,054 12,563
5 31-Dec-90 31-Dec-95 21,622 19,191 17,729 11,524 14,387
Life See Below 31-Dec-95 58,059 52,023 43,944 19,745 21,472
- --------------------------------------------------------------------------------------------
</TABLE>
Amount = (End Date Unit Value / Start Date Unit Value) * 10,000
Compound Growth Rate
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Base Period Growth Growth High Yield Cash Gov't
Years Start Date End Date Series Income Bond
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 31-Dec-94 31-Dec-95 31.65% 31.37% 20.27% 4.24% 13.96%
2 31-Dec-93 31-Dec-95 14.31% 15.08% 5.36% 3.41% 3.76%
3 31-Dec-92 31-Dec-95 14.50% 13.68% 8.48% 2.73% 5.74%
4 31-Dec-91 31-Dec-95 13.21% 11.86% 9.12% 2.54% 5.87%
5 31-Dec-90 31-Dec-95 16.68% 13.93% 12.13% 2.88% 7.55%
Life See Below 31-Dec-95 15.93% 14.86% 13.24% 5.88% 7.84%
- --------------------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
<TABLE>
<CAPTION>
Non-standardized Performance - Separate Account E
Unit Values Growth Growth High Yield Cash Gov't
Series Income Bond
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
31-Dec-95 2.450095 2.179784 2.188394 1.447338 1.707018
31-Dec-94 1.861048 1.659234 1.819492 1.388448 1.497848
31-Dec-93 1.875199 1.645896 1.971403 1.353448 1.585561
31-Dec-92 1.632137 1.483902 1.714346 1.334831 1.444011
31-Dec-91 1.491709 1.392074 1.543252 1.309382 1.358769
31-Dec-90 1.133137 1.135838 1.234347 1.255956 1.186530
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Life Returns Growth Growth High Yield Cash Gov't
Series Income Bond
- -----------------------------------------------------------------------------
Inception/Start Date 02/08/84 02/08/84 02/08/84 02/08/84 11/19/85
Unit Value 0.422000 0.419000 0.498000 0.733000 0.795000
Period (years) 11.90 11.90 11.90 11.90 10.12
- -----------------------------------------------------------------------------
</TABLE>
<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
