<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER , 1998
1933 Act Registration No. 333-
1940 Act Registration No. 811-05721
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO.
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT H
(EXACT NAME OF REGISTRANT)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1300 South Clinton Street, P.O. Box 1110, Fort Wayne, Indiana 46802
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE
(219)455-2000
COPY TO:
Jack D. Hunter, Esquire Kimberly J. Smith, Esquire
Lincoln National Corporation Sutherland, Asbill & Brennan LLP
200 East Berry Street 1275 Pennsylvania Ave., N.W.
Fort Wayne, Indiana 46802 Washington, DC 20004
(NAME AND ADDRESS OF
AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
Title of Securities: Interests in a separate account under individual flexible
payment deferred variable annuity contracts.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
<PAGE>
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT H (Shareholder's Advantage)
CROSS REFERENCE SHEET
(PURSUANT TO RULE 495 OF REGULATION C
UNDER THE SECURITIES ACT OF 1933)
RELATING TO ITEMS REQUIRED BY FORM N-4
N-4 ITEM CAPTION IN PROSPECTUS (PART A)
- -------- ------------------------------
1. Cover page
2. Special terms
3. (a) Expense table
(b) Synopsis
(c) Synopsis
(d) Not applicable
4. (a) Not applicable
(b) Investment Results
(c) Financial Statements
5. (a) Cover Page; Lincoln National Life Insurance Company
(b) Variable Annuity Account; Investments of the Variable Annuity
Account; Cover Page
(c) Investments of the Variable Annuity Account; Investment Advisor;
Investments of the variable annuity Description of the series
(d) Cover page
(e) Voting rights
(f) Not applicable
6. (a) Charges and other deductions
(b) Charges and other deductions
(c) Charges and other deductions
(d) The Contracts - commissions
(e) Charges and other deductions
(f) Charges and other deductions
(g) Not applicable
7. (a) The contracts; Investments of the variable annuity account; Annuity
payouts; Voting rights; Return privilege
(b) Investments of the variable annuity account; The Contracts; Cover
page
(c) The Contracts
(d) The Contracts
<PAGE>
CROSS REFERENCE SHEET TO ITEMS REQUIRED BY FORM N-4
N-4 ITEM CAPTION IN PROSPECTUS (PART A)
- -------- ------------------------------
8. (a) Annuity payouts
(b) Annuity payouts
(c) Annuity payouts
(d) Annuity payouts
(e) Annuity payouts
(f) The Contracts; Annuity payouts
9. (a) The contracts; Annuity payouts
(b) The contracts; Annuity payouts
10. (a) The contracts; Cover page; Charges and other deductions
(b) The contracts; Investments of the variable annuity 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 H American Legacy
<PAGE>
CAPTION IN STATEMENT OF ADDITIONAL
N-4 ITEM INFORMATION (PART B) (CONTINUED)
- -------- ----------------------------------
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)
<PAGE>
CROSS REFERENCE SHEET TO ITEMS REQUIRED BY FORM N-4
CAPTION IN STATEMENT OF ADDITIONAL
N-4 ITEM INFORMATION (PART B)
- -------- ----------------------------------
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) Principal underwriters
(c) Not applicable
(d) Not applicable
21. Calculation of investment results
22. Annuity payouts
23. (a) Financial statements -- Lincoln National Variable Annuity Account H
(to be filed by amendment)
(b) Financial statements -- The Lincoln National Life Insurance Company
(to be filed by amendment)
<PAGE>
AMERICAN LEGACY SHAREHOLDER'S ADVANTAGE
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT H
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 The Lincoln
National Life Insurance Company (LINCOLN LIFE). It is primarily for use with the
following retirement plans qualified for special tax treatment (qualified plans)
under the Internal Revenue Code of 1986, as amended (the CODE):
1. Lump sum transfers and rollovers for employees of public school systems and
certain tax-exempt organizations [403(b)];
2. Individual retirement annuities (IRA);
3. Roth IRAs.
Consult your investment dealer as to the availability of this CONTRACT for other
qualified plans.
The CONTRACT described in this Prospectus is also offered as a nonqualified
CONTRACT. A nonqualified CONTRACT can be owned jointly only by spouses.
The CONTRACT offers you the accumulation of CONTRACT VALUE and payment of
periodic annuity benefits. These benefits may be paid on a variable or fixed
basis or a combination of both. Annuity benefits start at an ANNUITY
COMMENCEMENT DATE which you select. If the CONTRACTOWNER dies before the ANNUITY
COMMENCEMENT DATE, the ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (EGMDB) will be
paid if in effect. If the EGMDB is not in effect, a DEATH BENEFIT equal to the
GUARANTEE OF PRINCIPAL will be paid to the BENEFICIARY. (See Death benefit
before annuity commencement date.) The EGMDB is not available under CONTRACTS
used for qualified plans (other than IRAs and Roth IRAs) or if the
CONTRACTOWNER'S issue age is 75 or more.
The minimum initial GROSS 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 GROSS PURCHASE PAYMENT to the CONTRACT is $100 per payment ($25 if
transmitted electronically), subject to a $300 annual minimum.
All investments (NET PURCHASE PAYMENTS) for benefits on a variable basis will be
placed in Lincoln National Variable Annuity Account H (VARIABLE ANNUITY ACCOUNT
[VAA]). The VAA is a segregated investment account of LINCOLN LIFE, which is the
DEPOSITOR. Based upon your instructions, the VAA invests NET PURCHASE PAYMENTS
(at net asset value) in Class 2 shares of one or more specified funds of the
American Variable Insurance Series (SERIES): Global Growth Fund, Global Small
Capitalization Fund, Growth Fund, Growth-Income Fund, International Fund, Asset
Allocation Fund, High-Yield Bond Fund, Bond Fund, U.S. Government/AAA-Rated
Securities Fund, and Cash Management Fund. Both the value of a CONTRACT before
the ANNUITY COMMENCEMENT DATE and the amounts applied for afterward will depend
upon the investment performance of the FUND(S) selected. Investments in these
FUNDS are neither insured nor guaranteed by the U.S. Government or by any other
person or entity.
NET PURCHASE PAYMENTS for benefits on a fixed basis will be placed in either the
GUARANTEED INTEREST ACCOUNT (GIA) or the DOLLAR COST AVERAGING (DCA) FIXED
ACCOUNT. The GIA is a segregated investment account of LINCOLN LIFE. Based upon
your instructions, NET PURCHASE PAYMENTS will be invested in GUARANTEED PERIOD
SUBACCOUNTS, each with its associated GUARANTEED INTEREST RATE. There may be a
market value adjustment applicable to any funds that are prematurely moved out
of a GUARANTEED PERIOD SUBACCOUNT or DCA FIXED ACCOUNT. Investments in these
CONTRACTS are neither insured nor guaranteed by the U.S. Government or by any
other person or entity.
The DCA FIXED ACCOUNT 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 DCA FIXED ACCOUNT or GIA 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 , 1998, 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 , 1998.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- ------------------------------------------------------
<S> <C>
Special terms 3
- ------------------------------------------------------
Expense tables 5
- ------------------------------------------------------
Synopsis 7
- ------------------------------------------------------
Investment results 9
- ------------------------------------------------------
Financial statements 9
- ------------------------------------------------------
Lincoln National Life Insurance Co. 9
- ------------------------------------------------------
Fixed side of the contract 9
- ------------------------------------------------------
Variable annuity account (VAA) 9
- ------------------------------------------------------
Investments of the variable annuity
account 10
- ------------------------------------------------------
Charges and other deductions 12
- ------------------------------------------------------
The contracts 13
- ------------------------------------------------------
Annuity payouts 17
- ------------------------------------------------------
<CAPTION>
PAGE
- ------------------------------------------------------
<S> <C>
Guaranteed Interest Account (GIA) 18
- ------------------------------------------------------
Federal tax status 20
- ------------------------------------------------------
Voting rights 21
- ------------------------------------------------------
Distribution of the contracts 21
- ------------------------------------------------------
Return privilege 22
- ------------------------------------------------------
State regulation 22
- ------------------------------------------------------
Restrictions under the Texas Optional
Retirement Program 22
- ------------------------------------------------------
Records and reports 22
- ------------------------------------------------------
Other information 22
- ------------------------------------------------------
Statement of additional information table
of contents for Variable Annuity Account
H American Legacy Shareholder's Advantage 24
- ------------------------------------------------------
</TABLE>
2
<PAGE>
SPECIAL TERMS
(Throughout this Prospectus, in order to make the following documents more
understandable to you, we have italicized the special terms.)
ACCUMULATION UNIT -- A measure used to calculate CONTRACT VALUE for the variable
side of the CONTRACT before the ANNUITY COMMENCEMENT DATE. See The contracts.
ADVISOR OR INVESTMENT ADVISOR -- Capital Research and Management Co. (CRMC),
which provides investment management services to the SERIES. See Investment
advisor.
ANNUITANT OR JOINT ANNUITANT -- The person(s) upon whose life the ANNUITY
BENEFIT PAYMENTS made after the ANNUITY COMMENCEMENT DATE will be based.
ANNUITY COMMENCEMENT DATE -- The VALUATION DATE when the CONTRACT VALUE,
adjusted by applicable market value adjustments, is withdrawn or converted into
ANNUITY UNITS or fixed dollar payout for payment of annuity benefits under the
ANNUITY PAYOUT OPTION selected. For purposes of determining whether an event
occurs before or after the ANNUITY COMMENCEMENT DATE, the ANNUITY COMMENCEMENT
DATE is deemed to begin at close of business on the VALUATION DATE.
ANNUITY PAYOUT OPTION -- An optional form of payout of the annuity available
within the CONTRACT. See Annuity payouts.
ANNUITY PAYOUT -- An amount paid at regular intervals after the ANNUITY
COMMENCEMENT DATE under one of several options available to the ANNUITANT and/or
any other payee. This amount may be paid on a variable or fixed basis, or a
combination of both.
ANNUITY UNIT -- A measure used to calculate the amount of ANNUITY PAYOUTS after
the ANNUITY COMMENCEMENT DATE. See Annuity payouts.
BENEFICIARY -- The person whom you designate to receive the DEATH BENEFIT, if
any, in case of the CONTRACTOWNER'S death.
CODE -- The Internal Revenue Code of 1986, as amended.
CONTRACT (VARIABLE ANNUITY CONTRACT) -- The agreement between you and us
providing a variable annuity.
CONTRACTOWNER (you, your, owner) -- The person who has the ability to exercise
the rights within the CONTRACT (decides on investment allocations, transfers,
payout option, designates the BENEFICIARY, etc.). Usually, but not always, the
owner is also the ANNUITANT.
CONTRACT VALUE -- At a given time, the total value of all ACCUMULATION UNITS for
a CONTRACT plus the value of the fixed side of the CONTRACT.
CONTRACT YEAR -- Each one-year period starting with the effective date of the
CONTRACT and starting with each CONTRACT anniversary after that.
DCA FIXED ACCOUNT -- An account, established to accept NET PURCHASE PAYMENTS or
transfers of CONTRACT VALUE, that may only be used for DOLLAR COST AVERAGING
purposes. The DCA FIXED ACCOUNT is a part of the GENERAL ACCOUNT of LINCOLN
LIFE.
DEATH BENEFIT -- The amount payable to your designated BENEFICIARY if the owner
dies before the ANNUITY COMMENCE-MENT DATE. See The contracts.
DEPOSITOR -- Lincoln National Life Insurance Co.
DOLLAR COST AVERAGING (DCA) -- An option that allows automatic transfers of NET
PURCHASE PAYMENTS or CONTRACT VALUE in equal periodic installments over a
defined period in accordance with LINCOLN LIFE procedures. The transfers are
from the DCA FIXED ACCOUNT or VARIABLE SUBACCOUNT(S) made available by LINCOLN
LIFE for this purpose to one or more VARIABLE SUBACCOUNT(S) or GUARANTEED PERIOD
SUBACCOUNTS available under this CONTRACT and selected by the OWNER. Any
interest credited or other gains, if any, attributable to the DCA FIXED ACCOUNT
or VARIABLE SUBACCOUNT will be transferred with the final DCA transfer.
ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (EGMDB) -- The EGMDB is the greater
of: (1) CONTRACT VALUE as of the day on which LINCOLN LIFE approves the payment
of a DEATH BENEFIT claim; or (2) the highest CONTRACT VALUE on any policy
anniversary date (including the inception date) from the time the EGMDB takes
effect up to and including the CONTRACTOWNER'S age 75. The highest CONTRACT
VALUE so determined is then increased by NET PURCHASE PAYMENTS and decreased by
partial WITHDRAWALS, and any premium taxes made, effected or incurred subsequent
to the anniversary date on which the highest CONTRACT VALUE is obtained.
EXPIRATION DATE(S) -- The date(s) on which the GUARANTEED PERIOD(S), if any,
will end.
FLEXIBLE PREMIUM DEFERRED CONTRACT -- An annuity CONTRACT with an initial
purchase payment, allowing additional purchase payments to be made, and with
ANNUITY PAYOUTS beginning at a future date.
FUND -- Any of the underlying investment options available in the SERIES in
which your NET PURCHASE PAYMENTS are invested.
GENERAL ACCOUNT -- An account consisting of all assets owned by LINCOLN LIFE
other than those assets in segregated investment accounts.
GROSS PURCHASE PAYMENT -- Amounts paid into this CONTRACT before deduction of
the SALES CHARGE.
GUARANTEE OF PRINCIPAL -- The DEATH BENEFIT payable if the EGMDB is not in
effect. The GUARANTEE OF PRINCIPAL is equal to the greater of: (1) the CONTRACT
VALUE as of the day on which LINCOLN LIFE approves the DEATH BENEFIT claim; or
(2) the sum of all NET PURCHASE PAYMENTS minus WITHDRAWALS and any premium taxes
made.
GUARANTEED INTEREST ACCOUNT (GIA) -- The segregated investment account into
which LINCOLN LIFE sets aside and invests assets allocated to GUARANTEED PERIOD
SUBACCOUNTS.
GUARANTEED INTEREST RATE -- The effective annual rate of interest LINCOLN LIFE
guarantees to credit on NET PURCHASE PAYMENTS or CONTRACT VALUE allocated to
each GUARANTEED PERIOD SUBACCOUNT.
GUARANTEED PERIOD -- The length, in years, of the period during which an initial
or subsequent GUARANTEED INTEREST
3
<PAGE>
RATE will be credited. The GUARANTEED PERIOD is selected by the OWNER from those
made available by LINCOLN LIFE at the time of selection.
GUARANTEED PERIOD SUBACCOUNT -- That portion of the GUARANTEED INTEREST ACCOUNT
which accepts NET PURCHASE PAYMENTS or transfers for each GUARANTEED PERIOD at
each GUARANTEED INTEREST RATE.
HOME OFFICE -- The headquarters of Lincoln National Life Insurance Co., located
at 1300 South Clinton Street, Fort Wayne, Indiana 46802.
LINCOLN LIFE (we, us, our) -- Lincoln National Life Insurance Co.
MATURITY DATE -- The date specified on the Contract Data Pages of the CONTRACT.
NET ASSET VALUE PER SHARE -- The market value of a FUND share calculated each
day by taking the closing market value of all securities owned, adding the value
of all other assets (such as cash), subtracting all liabilities, and then
dividing the result (total net assets) by the number of shares of the FUND
outstanding.
NET PURCHASE PAYMENT -- An amount equal to the GROSS PURCHASE PAYMENT less the
SALES CHARGE. The NET PURCHASE PAYMENTS is the amount allocated into the
GUARANTEED INTEREST ACCOUNT, the DCA FIXED ACCOUNT and/or the VARIABLE ACCOUNT.
QUALIFIED PLAN -- A retirement plan qualified for special tax treatment under
the Internal Revenue Code of 1986, as amended, including Sections 401, 403, 408,
408A and 457. All other plans are considered non-qualified.
SALES CHARGE -- A charge deducted from each GROSS PURCHASE PAYMENT prior to
allocation into the GUARANTEED INTEREST ACCOUNT, the DCA FIXED ACCOUNT and/or
the VARIABLE ACCOUNT, expressed as a percentage of the GROSS PURCHASE PAYMENT.
SERIES -- American Variable Insurance Series (SERIES), the FUNDS in which
PURCHASE PAYMENTS are invested.
STATEMENT OF ADDITIONAL INFORMATION (SAI) -- A document required by the SEC to
be provided upon request to a prospective purchaser of a CONTRACT, you. This
free document gives more information about LINCOLN LIFE, the GIA, the VAA and
the VARIABLE ANNUITY CONTRACT.
VALUATION DATE -- Each day the New York Stock Exchange (NYSE) is open for
trading.
VALUATION PERIOD -- The period starting at the close of trading (currently 4:00
p.m. New York time) on each day that the NYSE is open for trading (VALUATION
DATE) and ending at the close of such trading on the next VALUATION DATE.
VARIABLE ANNUITY ACCOUNT (VAA) -- The segregated investment account, Account H,
into which LINCOLN LIFE sets aside and invests the assets for the variable side
of the CONTRACT offered in this Prospectus.
VARIABLE SUBACCOUNT OR AMERICAN LEGACY SHAREHOLDER'S ADVANTAGE VARIABLE
SUBACCOUNT -- That portion of the VAA that reflects investments in ACCUMULATION
and ANNUITY UNITS of a class of a particular FUND available under the CONTRACTS.
There is a separate VARIABLE SUBACCOUNT which corresponds to each FUND.
WITHDRAWAL -- A CONTRACT right that allows you to obtain a portion of your CASH
VALUE.
4
<PAGE>
EXPENSE TABLES
CONTRACTOWNER TRANSACTION EXPENSES:
The maximum SALES CHARGE (as a percentage of GROSS PURCHASE
PAYMENTS): 5.75%.
The SALES CHARGE percentage decreases as the value accumulated under certain of
the owner's investment increases. (See Charges and other deductions).
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT H ANNUAL EXPENSES FOR AMERICAN LEGACY SHAREHOLDER'S
ADVANTAGE VARIABLE SUBACCOUNTS*:
(as a percentage of average account value for each VARIABLE SUBACCOUNT):
<TABLE>
<CAPTION>
FOR EACH SUBACCOUNT* FOR EACH SUBACCOUNT*
WITH EGMDB WITHOUT EGMDB
<S> <C> <C>
Mortality and expense risk fees 0.59% 0.50%
Administrative charge .10% .10%
------ ------
Total annual expenses for AMERICAN LEGACY SHAREHOLDER'S
ADVANTAGE VARIABLE SUBACCOUNTS 0.69% 0.60%
</TABLE>
ANNUAL EXPENSES OF THE FUNDS FOR THE YEAR ENDED NOVEMBER 30, 199 :
(as a percentage of each FUND'S average net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12b-1 OTHER TOTAL
FEES + FEES + EXPENSES = EXPENSES
- ----------------------------------------------------------------------------------------------------
<C><S> <C> <C> <C> <C> <C> <C> <C>
1. Global Growth % .25% % %
- ----------------------------------------------------------------------------------------------------
2. Global Small Capitalization** .25
- ----------------------------------------------------------------------------------------------------
3. Growth .25
- ----------------------------------------------------------------------------------------------------
4. International .25
- ----------------------------------------------------------------------------------------------------
5. Growth-Income .25
- ----------------------------------------------------------------------------------------------------
6. Asset Allocation .25
- ----------------------------------------------------------------------------------------------------
7. High-Yield Bond .25
- ----------------------------------------------------------------------------------------------------
8. Bond .25
- ----------------------------------------------------------------------------------------------------
9. U.S. Govt./AAA-Rated Securities .25
- ----------------------------------------------------------------------------------------------------
10. Cash Management .25
- ----------------------------------------------------------------------------------------------------
</TABLE>
* The VAA is divided into separately-named VARIABLE SUBACCOUNTS, ten of which
are available under the CONTRACTS. Each VARIABLE SUBACCOUNT, in turn, invests
NET PURCHASE PAYMENTS in shares of a class of its respective FUND.
** These expenses are estimated for the current fiscal year.
5
<PAGE>
EXAMPLES
(reflecting expenses both of the AMERICAN LEGACY SHAREHOLDER'S ADVANTAGE
VARIABLE SUBACCOUNTS and of the FUNDS and the maximum SALES CHARGE)
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
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1. Global Growth $ $
- -------------------------------------------------------------------------------------------------------------
2. Global Small Capitalization*
- -------------------------------------------------------------------------------------------------------------
3. Growth
- -------------------------------------------------------------------------------------------------------------
4. International
- -------------------------------------------------------------------------------------------------------------
5. Growth-Income
- -------------------------------------------------------------------------------------------------------------
6. Asset Allocation
- -------------------------------------------------------------------------------------------------------------
7. High-Yield Bond
- -------------------------------------------------------------------------------------------------------------
8. Bond
- -------------------------------------------------------------------------------------------------------------
9. U.S. Govt./AAA-Rated Securities
- -------------------------------------------------------------------------------------------------------------
10. Cash Management
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* These expenses are estimated amounts for the current fiscal year.
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
underwriter, 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 depending on whether or not
the EGMDB is in effect. These examples reflect expenses both of the VAA for the
AMERICAN LEGACY SHAREHOLDER'S ADVANTAGE VARIABLE SUBACCOUNTS and of the
underlying FUNDS. These examples reflect expenses assuming that the EGMDB is in
effect. If the EGMDB is NOT in effect, these expenses will be lower.
For more complete descriptions of the various costs and expenses involved, see
Charges and other deductions in this Prospectus, and Fund Organization and
Management in the Prospectus for the SERIES. Premium taxes may also be
applicable, although they do not appear in the examples. In addition, we reserve
the right to impose a charge on transfers between VARIABLE SUBACCOUNTS although
we do not currently do so. THESE 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.
6
<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
portion 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 VARIABLE
SUBACCOUNTS, according to your investment choice. Those assets are not
chargeable 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 VARIABLE SUBACCOUNTS, the
VAA uses your NET PURCHASE PAYMENTS to purchase SERIES shares, at your
direction, in one or more of the following investment FUNDS of the SERIES:
Global Growth, Global Small Capitalization, 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 policy. See Investments
of the variable annuity account and Description of the series.
WHO INVESTS MY MONEY? The INVESTMENT ADVISOR for the SERIES is CRMC, Los
Angeles, California. CRMC is a long-established investment management
organization, 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 issued
your individual annuity CONTRACT. During the accumulation period, while you are
paying in, your NET PURCHASE PAYMENTS deposited into the VAA will buy
ACCUMULATION UNITS under the CONTRACT. Your NET PURCHASE PAYMENTS made during
the accumulation period that are deposited into the GIA will be placed in
GUARANTEED PERIOD SUBACCOUNTS. Should you decide to annuitize (that is, change
your contract to a payout mode rather than an accumulation mode), you may choose
a variable or fixed annuity. A market value adjustment may be applied to
withdrawals of CONTRACT VALUE from the GUARANTEED PERIOD SUBACCOUNTS. If you
select a variable annuity, your CONTRACT VALUE 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 decided to annuitize and the
value of each unit on the VALUATION DATE. See The contracts.
WHAT CHARGES ARE ASSOCIATED WITH THIS CONTRACT?
This contract contains a front-end load that is assessed on each GROSS PURCHASE
PAYMENT as it is received. You may be eligible for a reduction in the amount of
the SALES CHARGE on any current GROSS PURCHASE PAYMENT, based on the assets you
accumulate under any individual American Legacy variable annuity contract and
most mutual funds offered by the American Funds Group. The maximum front-end
load that you would ever pay under the CONTRACT would be 5.75% of the GROSS
PURCHASE PAYMENT.
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 GROSS PURCHASE PAYMENTS or CONTRACT VALUE, as
applicable.
We assess annual charges in the aggregate amount of 0.69% against the daily net
asset value of the VAA, including that portion of the account attributable to
your NET PURCHASE PAYMENTS. These charges consist of 0.10% as an administrative
charge and 0.59% as a mortality and expense risk charge. If the EGMDB is not in
effect, the mortality and expense risk charge is 0.50%, resulting in an
aggregate charge against the VAA of 0.60%. 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. The class of shares of each SERIES
available under the CONTRACTS also bears expenses pursuant to a 12b-1 plan. In
addition, there are other expenses associated with the daily operation 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 payments
stated on the first page of the Prospectus, the amount and frequency of 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 the EGMDB is in effect, the
BENEFICIARY whom you designate will receive the EGMDB. If the EGMDB is not in
effect, the BENEFICIARY will receive the GUARANTEE OF PRINCIPAL. Your
BENEFICIARY will have certain options for how the money is to be paid out. See
Death benefit before the annuity commencement date.
7
<PAGE>
MAY I TRANSFER CONTRACT VALUE BETWEEN FUNDS IN THE SERIES OR FROM THE FIXED TO
THE VARIABLE SIDE OF THE CONTRACT, AND VICE-VERSA? Yes, subject to specific
restrictions in the contract. See The contracts--Transfers on or before the
annuity commencement date and transfers after the annuity commencement date.
MAY I SURRENDER THE CONTRACT OR MAKE A WITHDRAWAL? Yes, subject to CONTRACT
requirements and to restrictions imposed under certain qualified retirement
plans for which the CONTRACT is purchased. See Surrenders and withdrawals.
In certain situations, a transfer, WITHDRAWAL, SURRENDER or annuitization of
amounts from the GUARANTEED INTEREST ACCOUNT will be subject to a market value
adjustment. The market value adjustment, which is calculated for each affected
GUARANTEED PERIOD SUBACCOUNT, may be positive or negative. It reflects the
relationship between an interest rate based on an index published by the Federal
Reserve Board as to current yields on U.S. government securities of various
maturities at the time a transfer, WITHDRAWAL, SURRENDER or annuitization is
made ("Index Rate"), and the Index Rate at the time that the NET PURCHASE
PAYMENTS were allocated to the GUARANTEED PERIOD SUBACCOUNT. Generally, if the
Index Rate at the time of transfer, WITHDRAWAL, SURRENDER or annuitization is
lower than the Index Rate at the time the NET PURCHASE PAYMENT was allocated to
the GUARANTEED PERIOD SUBACCOUNT, then the application of the market value
adjustment will result in a higher payment upon transfer, WITHDRAWAL, SURRENDER
or annuitization. Similarly, if the Index Rate at the time of transfer,
WITHDRAWAL, SURRENDER or annuitization is higher than the Index Rate at the time
the NET PURCHASE PAYMENT was allocated, the application of the market value
adjustment will generally result in a lower payment upon transfer, WITHDRAWAL,
SURRENDER or annuitization. A market value adjustment is not applied against a
transfer, WITHDRAWAL, SURRENDER or annuitization taking place at the end of the
GUARANTEED PERIOD or on death. See the Guaranteed Interest Account--Market Value
Adjustment.
In addition, the Internal Revenue Service (IRS) may assess a 10% premature
withdrawal penalty 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 ten days (or a longer
period if required by law) of the date you first receive the CONTRACT you return
it, postage prepaid 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 NET PURCHASE PAYMENTS which you allocate to the
variable side of the CONTRACT. See Return privilege.
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INVESTMENT RESULTS
At times, the VAA may compare its investment results to various unmanaged
indices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods. Total returns include the reinvestment of all distributions,
which are reflected in changes in unit value. Results will be calculated without
sales charges. These results will be higher. See the SAI for further
information.
FINANCIAL STATEMENTS
The financial statements for the VAA, and LINCOLN LIFE are located in the SAI.
If you would like a free copy of the SAI, 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.
FIXED SIDE OF THE CONTRACT
NET PURCHASE PAYMENTS allocated to the fixed side of the CONTRACT become part of
the GUARANTEED INTEREST ACCOUNT (GIA), if allocated to one or more GUARANTEED
PERIOD SUBACCOUNTS or part of LINCOLN LIFE'S GENERAL ACCOUNT if allocated to the
DCA FIXED ACCOUNT, and DO NOT participate in the investment experience of the
VAA. The general account is subject to regulation and supervision by the Indiana
Insurance Department as well as the insurance laws and regulations of the
jurisdictions in which the CONTRACTS are distributed.
IN RELIANCE ON CERTAIN EXEMPTIONS, EXCLUSIONS AND RULES, LINCOLN LIFE HAS NOT
REGISTERED INTERESTS IN THE GENERAL ACCOUNT OR GIA AS A SECURITY UNDER THE
SECURITIES ACT OF 1933 AND HAS NOT REGISTERED THE GENERAL ACCOUNT OR GIA AS AN
INVESTMENT COMPANY UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE GENERAL ACCOUNT,
GIA, NOR ANY INTERESTS THEREIN ARE SUBJECT TO REGULATION UNDER THE 1933 ACT OR
THE 1940 ACT. LINCOLN LIFE HAS BEEN ADVISED THAT THE STAFF OF THE SEC HAS NOT
MADE A REVIEW OF THE DISCLOSURES WHICH ARE INCLUDED IN THIS PROSPECTUS WHICH
RELATE TO OUR GENERAL ACCOUNT, THE GIA AND TO THE FIXED ACCOUNT UNDER THE
CONTRACT. THESE DISCLOSURES, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES. THIS PROSPECTUS IS
GENERALLY INTENDED TO SERVE AS A DISCLOSURE DOCUMENT ONLY FOR ASPECTS OF THE
CONTRACT INVOLVING THE VAA, AND THEREFORE CONTAINS ONLY SELECTED INFORMATION
REGARDING THE FIXED SIDE OF THE CONTRACT. COMPLETE DETAILS REGARDING THE FIXED
SIDE OF THE CONTRACT ARE IN THE CONTRACT.
NET PURCHASE PAYMENTS allocated to the DCA FIXED ACCOUNT or GIA are guaranteed
to be credited with a minimum interest rate, specified in the CONTRACT, of at
least 3.0%. A NET PURCHASE PAYMENT allocated to the GIA or DCA FIXED ACCOUNT IS
CREDITED WITH INTEREST BEGINNING ON THE NEXT CALENDAR DAY FOLLOWING THE DATE OF
RECEIPT IF ALL DATA IS COMPLETE. LINCOLN LIFE may vary the way in which it
credits interest to the fixed side of the CONTRACT from time to time. See the
Guaranteed Interest Account (GIA) for additional information.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN LINCOLN LIFE'S
SOLE DISCRETION, CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0%
WILL BE DECLARED.
VARIABLE ANNUITY ACCOUNT
(VAA)
On February 7, 1989, the VAA was established as an insurance company separate
account under Indiana law. It is registered with the SEC as a unit investment
trust under the provisions of the Investment Company Act of 1940 (1940 Act). The
SEC does not supervise the VAA or LINCOLN LIFE. The VAA is a segregated
investment account, meaning that its assets may not be charged with liabilities
resulting from any other business that we may conduct. Income, gains and losses,
whether realized or not, from assets allocated to the VAA are, in accordance
with the applicable annuity CONTRACTS, credited to or charged against the VAA.
They are credited or charged without regard to any other income, gains or losses
of LINCOLN LIFE. The VAA satisfies the definition of separate account under the
federal securities laws. We do not guarantee the investment performance of the
VAA. Any investment gain or loss depends on the investment performance of the
FUNDS. You assume the full investment risk for all amounts placed in the VAA.
The VAA is used to support annuity contracts offered by LINCOLN LIFE other than
the CONTRACTS described in this prospectus. The other annuity contracts
supported by the VAA invest in the same portfolios of the SERIES as the
CONTRACTS described herein. These other annuity contracts may have different
charges that could affect performance of the VARIABLE SUBACCOUNT.
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<PAGE>
INVESTMENTS OF THE VARIABLE
ANNUITY ACCOUNT
You decide the VARIABLE SUBACCOUNT(S) to which you allocate NET PURCHASE
PAYMENTS. There is a separate VARIABLE SUBACCOUNT which corresponds to each FUND
of the SERIES. 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
substitute FUNDS.
INVESTMENT ADVISOR
The INVESTMENT ADVISOR for the SERIES is CRMC, 333 South Hope Street, Los
Angeles, California 90071. CRMC is one of the nation's largest and oldest
investment management organizations. As compensation for its services to the
SERIES, the INVESTMENT ADVISOR receives a fee from the SERIES which is accrued
daily and paid monthly. This fee is based on the net assets of each FUND, as
defined under Purchase and Redemption of Shares, in the Prospectus for the
SERIES.
DESCRIPTION OF THE SERIES
The SERIES was organized as a Massachusetts business trust in 1983 and is
registered 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
LINCOLN 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
investment 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 ten separate portfolios of FUNDS. FUND as sets are segregated and
a shareholder's interest is limited to those FUNDS in which the shareholder owns
shares. The SERIES has adopted a plan pursuant to Rule 18f-3 under the 1940 Act
to permit the SERIES to establish a multiple class distribution system for all
of its portfolios. The SERIES' Board of Trustees may at any time establish
additional FUNDS or classes, which may or may not be available to the VAA.
Under the multi-class system adopted by the SERIES, shares of each multi-class
FUND represent an equal pro rata interest in that FUND and, generally, have
identical voting, dividend, liquidation, and other rights, preferences, 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 arrangement;
and (4) each class has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. Expenses currently designated as class expenses by the SERIES'
Board of Trustees under the plan pursuant to Rule 18f-3 include, for example,
service fees paid under a 12b-1 plan to cover servicing fees paid to dealers
selling the CONTRACTS as well as related expenses incurred by LINCOLN LIFE.
Each FUND has two classes of shares, designated as Class 1 shares and Class 2
shares. Class 1 and 2 differ primarily in that Class 2 (but not Class 1) shares
are subject to a 12b-1 plan. Only Class 2 shares are available under the
CONTRACTS.
The investment objectives and policies of certain FUNDS are similar to the
investment objectives and policies of portfolios, other than the FUNDS, that are
advised by the ADVISOR. The investment results of the FUNDS, however, may be
higher or lower than the other portfolios that are advised by the ADVISOR. There
can be no assurance, and no representation is made, that the investment results
of any of the FUNDS will be comparable to the investment results of any other
portfolio advised by the ADVISOR.
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 securities such as preferred stock, debt securities and
securities convertible into common stock.
2. Global Small Capitalization Fund seeks long-term growth of capital by
investing primarily in equity securities of companies domiciled around the
world with relatively small market capitalizations (share price times the
number of equity securities outstanding.) The FUND may also invest in
securities convertible into common stocks, straight debt securities,
government securities or nonconvertible preferred stocks.
3. 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
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<PAGE>
common stocks or securities with common stock characteristics.
4. International Fund --The investment objective is long-term growth of
capital by investing primarily in securities of issuers domiciled outside
the United States.
5. Growth-Income Fund --The investment objective is growth of capital and
income. 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.
6. 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
common 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 (debt securities
maturing in one year or less).
7. High-Yield Bond Fund --The investment objective is a fully managed,
diversified bond portfolio. It seeks high current income and secondarily
seeks capital appreciation. This FUND will generally be invested
substantially in intermediate and long-term corporate obligations, with
emphasis on higher yielding, higher risk, lower rated or unrated
securities.
8. Bond Fund --This 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 participations, U.S. Government Securities,
mortgage-related securities, other asset-backed securities and cash or
money market instruments.
9. 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.
10. Cash Management Fund --The investment objective is high yield while
preserving capital by investing in a diversified selection of money market
instruments.
SALE OF FUND SHARES BY THE SERIES
We will purchase shares of the FUNDS at net asset value and direct them to the
appropriate SUBACCOUNTS of the VAA. We will redeem sufficient shares of the
appropriate FUNDS to pay ANNUITY PAYOUTS, DEATH BENEFITS, SURRENDER/WITHDRAWAL
proceeds or for other purposes described in the CONTRACT. If you want to
transfer all or part of your investment from one VARIABLE 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 VARIABLE 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
funding.
The SERIES currently engages in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interests of various CONTRACTOWNERS participating in a FUND could conflict. The
SERIES' Board of Trustees will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. See the
Prospectus for the SERIES.
REINVESTMENT OF DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS
All dividend and capital gain distributions of the FUNDS are automatically
reinvested in shares of the distributing FUNDS at their net asset value on the
date of distribution. Dividends are not paid out to CONTRACTOWNERS as additional
units, but are reflected as changes in unit values.
ADDITION, DELETION OR SUBSTITUTION OF
INVESTMENTS
We reserve the right, within the law, to make additions, deletions and
substitutions for the SERIES and/or any FUNDS within the SERIES in which the VAA
participates. (We may substitute shares of other funds for shares already
purchased, 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 management, for the purposes of the CONTRACT.) No substitution of the
shares attributable to your account may take place without notice to you and
before approval of the SEC, in accordance with the 1940 Act.
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CHARGES AND OTHER
DEDUCTIONS
We will deduct the charges described below to cover our costs and expenses,
services provided and risks assumed under the CONTRACTS. We incur certain costs
and expenses for the distribution and administration of the CONTRACTS and for
providing the benefits payable thereunder. More particularly, our administrative
services include: processing applications for and issuing the CONTRACTS,
processing purchases and redemptions of FUND shares as required (including
dollar cost averaging, cross-reinvestment, and automatic WITHDRAWAL services),
maintaining records, administering ANNUITY PAYOUTS, furnishing accounting and
valuation services (including the calculation and monitoring of daily VARIABLE
SUBACCOUNT values), reconciling and depositing cash receipts, providing CONTRACT
confirmations, providing toll-free inquiry services and furnishing telephone
FUND transfer services. 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, will exceed the actual CONTRACT VALUE; 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. For example, the SALES
CHARGE collected may not fully cover all of the sales and distribution expenses
actually incurred by us.
SALES CHARGE
A front-end load, or SALES CHARGE, will apply to all initial and subsequent
GROSS PURCHASE PAYMENTS that you may make. This charge is taken as a percentage
of the GROSS PURCHASE PAYMENT and is based on the owner's investment at the time
each GROSS PURCHASE PAYMENT is made according to the following scale:
<TABLE>
<CAPTION>
SALES
owner's investment CHARGE
- ----------------------------------------- ----------
<S> <C>
Under $50,000 5.75%
$50,000 or greater but less than $100,000 4.50%
$100,000 or greater but less than
$250,000 3.50%
$250,000 or greater but less than
$500,000 2.50%
$500,000 or greater but less than
$1,000,000 2.00%
$1,000,000 or greater 1.00%
</TABLE>
The owner's investment is defined as the sum of:
a. the account values for any of the following individual LINCOLN LIFE CONTRACTS
owned by an eligible owner (defined below) marketed under the names of: The
American Legacy Variable Annuity, American Legacy II Variable Annuity,
American Legacy III Variable Annuity, or American Legacy Shareholder's
Advantage Variable Annuity; plus
b. the amount (in dollars) of an eligible owner's investment in existing mutual
funds in The American Funds Group in accordance with the procedures
established by the American Funds Group; plus
c. the amount of the current GROSS PURCHASE PAYMENT you are making into this
CONTRACT.
American Funds Group will determine which of the mutual funds are included in
this program. Currently, direct purchases of money market funds are excluded.
In determining the account values for the LINCOLN LIFE annuity CONTRACTS, the
variable account values are valued as of the close of market on the last
previous day the market was open and are adjusted for current day transactions.
The GIA and the DCA FIXED ACCOUNT will include interest accrued through the
close of market on the last previous day the market was open.
An eligible owner includes you as the owner of your American Legacy
Shareholder's Advantage CONTRACT, your spouse, and any of your children under
the age of 21. If the owner of any contract under (a) above is a non-natural
owner and if you, your spouse, or any children of yours under the age of 21 are
the named annuitant, then you may include these account values in the
calculation of the owner's investment for the contracts issued in one of the
following IRS defined markets: Roth IRA, traditional IRA, non-qualified, SEP,
and 403(b) transfers. The non-natural owner will include the account values from
contracts in all other markets in its calculation of owner's investment.
DEDUCTIONS FROM THE VAA FOR AMERICAN
LEGACY SHAREHOLDER'S ADVANTAGE
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 0.69% (0.60% for CONTRACTS without the EGMDB) of the daily net asset
value. The charge consists of a 0.10% administrative charge and a 0.59% (0.50%
for CONTRACTS without the EGMDB) mortality and expense risk charge.
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 GROSS
PURCHASE PAYMENT 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
generally 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 underlying
SERIES that are more fully described in the Prospectus for the SERIES. Among
these
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deductions and expenses are 12b-1 fees which reimburse LINCOLN LIFE for certain
expenses incurred in connection with certain administrative and distribution
support services provided to the SERIES.
ADDITIONAL INFORMATION
The administrative charge and sales charge described previously may be reduced
or eliminated for any particular CONTRACT. However, this charge will be reduced
only to the extent that we anticipate lower distribution and/ or administrative
expenses, or that we perform fewer sales or administrative services than those
originally contemplated in establishing the level of this charge. Lower
distribution and administrative expenses may be the result of economies
associated with (1) the use of mass enrollment procedures, (2) the performance
of administrative or sales functions by the employer, (3) the use by an employer
of automated techniques in submitting deposits or information related to
deposits on behalf of its employees or (4) any other circumstances which reduce
distribution or administrative expenses. The exact amount of administrative
charge and sales charge 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
representative 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
CONTRACT is prepared and executed by our legally authorized officers. The
CONTRACT is then sent to you through your sales representative. See Distribution
of the contracts.
If a completed application and all other information necessary for processing a
purchase order are received, an initial GROSS 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 GROSS PURCHASE PAYMENT
for no more than five business days. If the incomplete application cannot be
completed within those five days, you will be informed of the reasons, and the
GROSS PURCHASE PAYMENT will be returned immediately (unless you specifically
authorize us to keep it until the application is complete). Once the application
is complete, the initial GROSS 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 CONTRACTS
may be lawfully sold and also be eligible to participate in any of the qualified
or nonqualified plans for which the CONTRACTS are designed. The CONTRACTOWNER
cannot be older than age 90.
PURCHASE PAYMENTS
GROSS PURCHASE PAYMENTS are payable to us at a frequency and in an amount
selected by you in the application. The minimum initial GROSS 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 GROSS
PURCHASE PAYMENTS is $300 for nonqualified and qualified CONTRACTS. The minimum
payment to the CONTRACT at any one time must be at least $100 ($25 if
transmitted electronically). GROSS PURCHASE PAYMENTS in total may not exceed $1
million for an owner or $500,000 for each joint owner. If you stop making GROSS
PURCHASE PAYMENTS, the CONTRACT will remain in force subject to our right to
terminate the CONTRACT in accordance with the terms set forth in your state's
nonforfeiture law for individual deferred annuities. Payments may be made or, if
stopped, resumed at any time until the ANNUITY COMMENCEMENT DATE, the SURRENDER
of the CONTRACT, maturity date or the death of the CONTRACTOWNER (or joint
owner, if applicable) that results in payment of any DEATH BENEFIT, whichever
comes first.
VALUATION DATE
ACCUMULATION and ANNUITY UNITS will be valued once daily at the close of trading
(currently 4:00 p.m., New York time) on each day the New York Stock Exchange is
open (VALUATION DATE). On any date other than a VALUATION DATE, the ACCUMULATION
UNIT value and the ANNUITY UNIT value will not change.
ALLOCATION OF PURCHASE PAYMENTS
NET PURCHASE PAYMENTS are placed into the VAA's VARIABLE SUBACCOUNTS, each of
which invests in shares of the class of its corresponding FUND of the SERIES,
according to your instructions. You may also allocate NET PURCHASE PAYMENTS into
the DCA FIXED ACCOUNT or to any of the available GUARANTEED PERIODS.
The minimum amount of any NET PURCHASE PAYMENT which can be put into any one
subaccount is $20 under the CONTRACT. Upon allocation to the appropriate
VARIABLE SUBACCOUNT, NET PURCHASE PAYMENTS are converted into ACCUMULATION
UNITS. The number of ACCUMULATION UNITS credited is determined by dividing the
amount allocated to each VARIABLE SUBACCOUNT by the value of an ACCUMULATION
UNIT for that VARIABLE SUBACCOUNT on the VALUATION DATE on which the PURCHASE
PAYMENT is received at our HOME OFFICE if received before 4:00 p.m., New York
time. If the GROSS PURCHASE PAYMENT is received at or after 4:00 p.m., New York
time, we will use the ACCUMULATION UNIT value computed on the next VALUATION
DATE. The number of ACCUMULATION UNITS determined in this way is not 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
underlying FUND'S investments perform, but also upon the expenses of the VAA and
the underlying FUNDS.
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VALUATION OF ACCUMULATION UNITS
NET PURCHASE PAYMENTS allocated to the VAA are converted into ACCUMULATION
UNITS. This is done by dividing each NET PURCHASE PAYMENT by the value of an
ACCUMULATION UNIT for the VALUATION PERIOD during which the NET PURCHASE PAYMENT
is allocated to the VAA. The ACCUMULATION UNIT value for each VARIABLE
SUBACCOUNT was or will be established at the inception of the VARIABLE
SUBACCOUNT. It may increase or decrease from VALUATION PERIOD to VALUATION
PERIOD. The ACCUMULATION UNIT value for a VARIABLE SUBACCOUNT for a later
valuation period is determined as follows:
(1) The total value of the FUND shares held in the VARIABLE SUBACCOUNT is
calculated by multiplying the number of FUND shares owned by the VARIABLE
SUBACCOUNT at the beginning of the VALUATION PERIOD by the net asset value
per share of the FUND at the end of the VALUATION PERIOD, and adding any
dividend or other distribution of the FUND if an ex-dividend date occurs
during the VALUATION PERIOD; minus
(2) The liabilities of the VARIABLE SUBACCOUNT at the end of the VALUATION
PERIOD; these liabilities include daily charges imposed on the VARIABLE
SUBACCOUNT, and may include a charge or credit with respect to any taxes
paid or reserved for by us that we determine result from the operations of
the VAA; and
(3) The result of (2) is divided by the number of VARIABLE SUBACCOUNT units
outstanding at the beginning of the VALUATION PERIOD.
The daily charges imposed on a VARIABLE SUBACCOUNT for any VALUATION PERIOD are
equal to the daily mortality and expense risk charge and the daily
administrative charge multiplied by the number of calendar days in the VALUATION
PERIOD. Because a different daily charge is made for CONTRACTS with the EGMDB
than for those without, each of the two types of CONTRACTS will have different
corresponding ACCUMULATION UNIT values on any given day.
TRANSFERS ON OR BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the earlier of:
a. the MATURITY DATE;
b. SURRENDER of the CONTRACT;
c. payment of any DEATH BENEFIT; or
d. the ANNUITY COMMENCEMENT DATE,
the OWNER may direct a transfer of CONTRACT VALUE;
a. from a VARIABLE SUBACCOUNT to another VARIABLE SUBACCOUNT, or to a
GUARANTEED PERIOD SUBACCOUNT, or to the DCA FIXED ACCOUNT; or
b. from a GUARANTEED PERIOD SUBACCOUNT to another GUARANTEED PERIOD SUBACCOUNT,
or to a VARIABLE SUBACCOUNT, or to the DCA FIXED ACCOUNT; or
c. from the DCA FIXED ACCOUNT (outside of the dollar cost averaging program) to
a VARIABLE SUBACCOUNT or to a GUARANTEED PERIOD SUBACCOUNT.
A transfer involves:
a. the surrender of ACCUMULATION UNITS in a VARIABLE SUBACCOUNT; or
b. a withdrawal of money from a GUARANTEED PERIOD SUBACCOUNT; or
c. a withdrawal of money from the DCA FIXED ACCOUNT
and
a. the purchase of ACCUMULATION UNITS in another VARIABLE SUBACCOUNT; or
b. the application of proceeds to a GUARANTEED PERIOD SUBACCOUNT; or
c. the application of proceeds to the DCA FIXED ACCOUNT.
A transfer to or from a VARIABLE SUBACCOUNT will be done using the respective
ACCUMULATION UNIT values determined at the end of the VALUATION DATE on which
the transfer request is received. Currently, there is no charge for a transfer.
However, we reserve the right to impose a charge in the future for transfers.
Transfers between subaccounts cannot be made during the first 30 days after the
issue date of the CONTRACT and are restricted to six times every CONTRACT year.
We reserve the right to waive these limits. The limit of six transfers does not
apply to transfers made under a dollar cost averaging or cross-reinvestment
program elected on forms available from us. (The SAI contains more information
about these programs.) 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.
There are no restrictions on the maximum amount which may be transferred from a
VARIABLE SUBACCOUNT. Only one transfer will be allowed from a GUARANTEED PERIOD
SUBACCOUNT and the DCA FIXED ACCOUNT in any 12 month period. The amount
available for transfer is limited to 25% of the GUARANTEED PERIOD SUBACCOUNT or
DCA FIXED ACCOUNT. These restrictions do not apply to a transfer at the
EXPIRATION DATE of the GUARANTEED PERIOD SUBACCOUNT, or to transfers under
dollar cost averaging or cross-reinvestment programs. For transfers from a
GUARANTEED PERIOD SUBACCOUNT, a MARKET VALUE ADJUSTMENT will generally apply
(see Market value adjustment on page 19.)
A transfer may be made by writing to our HOME OFFICE or, if a Telephone Exchange
Authorization form (available from us) is on file with us, by a toll-free
telephone call. Currently, there is no charge to you for a transfer. In order to
prevent unauthorized or fraudulent telephone transfers, we may require the
caller to provide certain identifying information before we will act upon their
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instructions. We may also assign the CONTRACTOWNER a Personal Identification
Number (PIN) to serve as identification. We will not be liable for following
telephone instructions we reasonably believe are genuine. Telephone requests may
be recorded and written confirmation of all transfer requests will be mailed to
the CONTRACTOWNER on the next VALUATION DATE. Telephone transfers will be
processed on the VALUATION DATE that they are received when they are received at
our customer service center before 4 p.m. New York time.
When thinking about a transfer of CONTRACT VALUE, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment in one VARIABLE SUBACCOUNT
to another VARIABLE SUBACCOUNT or to the fixed side of the CONTRACT. Those
transfers will be limited to three times per CONTRACT YEAR. Currently, there is
no charge for these transfers. However, we reserve the right to impose a charge.
No transfers are allowed from the fixed side of the CONTRACT to the VARIABLE
SUBACCOUNTS.
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
You may designate a BENEFICIARY during your lifetime and change the BENEFICIARY
by filing a written request with our HOME OFFICE. Each change of BENEFICIARY
revokes any previous designation. We reserve the right to request that you send
us the CONTRACT for endorsement of a change of BENEFICIARY.
If the CONTRACTOWNER dies before the ANNUITY COMMENCEMENT DATE and the EGMDB is
in effect, the DEATH BENEFIT paid to your designated BENEFICIARY will be the
greater of: (1) the CONTRACT VALUE 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 (including the inception date) on ages up
to, and including, the CONTRACTOWNER'S age 75. The highest CONTRACT VALUE is
increased by NET PURCHASE PAYMENTS and is decreased by partial WITHDRAWALS, and
any premium taxes made, effected or incurred subsequent to the anniversary date
on which the highest CONTRACT VALUE is obtained. If the EGMDB is not in effect,
the DEATH BENEFIT will be equal to the GUARANTEE OF PRINCIPAL. The GUARANTEE OF
PRINCIPAL is equal to the greater of: (1) the CONTRACT VALUE as of the day on
which LINCOLN LIFE approves the payment of the claim; or (2) the sum of all NET
PURCHASE PAYMENTS minus WITHDRAWALS and premium tax incurred.
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 OWNER; (2) written
authorization for payment; and (3) our receipt of all required claim forms,
fully completed.
When applying for a CONTRACT, an applicant can request a CONTRACT without the
EGMDB. The EGMDB is not available under CONTRACTS used for qualified plans
(other than IRAs) or CONTRACTS issued to a CONTRACTOWNER who is age 75 or older
at the time of issuance.
After a CONTRACT is issued, the CONTRACTOWNER may discontinue the EGMDB at any
time by completing the Enhanced Guaranteed Minimum Death Benefit Discontinuance
form and sending it to LINCOLN LIFE. The benefit will be discontinued effective
as of the VALUATION DATE we receive the request, and we will cease deducting the
charge for the benefit as of that date. See Charges and other deductions. If you
discontinue the benefit, it cannot be reinstated.
If the DEATH BENEFIT becomes payable, the BENEFICIARY may elect to receive
payment of the DEATH BENEFIT in one of several forms.
The DEATH BENEFIT payable to the BENEFICIARY must be distributed within five
years of the CONTRACTOWNER'S date of death 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 extending
beyond the BENEFICIARY'S life expectancy. If a lump sum settlement is elected,
the proceeds will be mailed within seven days of approval by us of the claim.
This payment may be postponed as permitted by the Investment Company Act of
1940.
Payment will be made in accordance with applicable laws and regulations
governing payment of DEATH BENEFITS.
Unless otherwise provided in the BENEFICIARY designation, one of the following
procedures will take place on the death of a BENEFICIARY:
1. If any BENEFICIARY dies before the CONTRACTOWNER, that BENEFICIARY'S
interest will go to any other BENEFICIARIES named, according to their
respective interests (There are no restrictions on the BENEFICIARY'S use
of the proceeds.); and/or
2. If no BENEFICIARY survives the CONTRACTOWNER, the proceeds will be paid to
the CONTRACTOWNER'S estate.
If the BENEFICIARY is the spouse of the CONTRACTOWNER, then the spouse may elect
to continue the CONTRACT as owner. If the CONTRACTOWNER is a corporation or
other non-individual (non-natural person), the death of the ANNUITANT will be
treated as death of the CONTRACTOWNER and the above distribution rules apply.
If there are joint owners, upon the death of the first joint owner, the
surviving joint owner will receive the DEATH BENEFIT. The surviving joint owner
will be treated as the primary, designated BENEFICIARY. Any other BENEFICIARY
designation on record at the time of death will be treated as a contingent
BENEFICIARY.
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If the surviving joint owner, as spouse of the decreased joint owner, elects to
continue the CONTRACT as the sole owner in lieu of receiving the DEATH BENEFIT,
then the designated BENEFICIARY(S) will receive the DEATH BENEFIT upon the death
of the surviving spouse.
JOINT OWNERSHIP
If a joint owner is named in the application, the joint owners shall be treated
as having equal undivided interests in the CONTRACT. Either owner, independently
of the other, may exercise any ownership rights in this CONTRACT. Only spouses
may be joint owners. Joint owners are not allowed in the states of New Jersey,
Oregon and Pennsylvania.
DEATH OF ANNUITANT
If the ANNUITANT is also the CONTRACTOWNER or a joint owner, then the DEATH
BENEFIT provided will be the DEATH BENEFIT subject to the provisions of this
CONTRACT regarding death of the CONTRACTOWNER. If the surviving spouse assumes
the CONTRACT, the contingent ANNUITANT becomes the ANNUITANT. If no contingent
ANNUITANT is named, the surviving spouse becomes the ANNUITANT.
If an ANNUITANT who is not the CONTRACTOWNER or joint owner dies, then the
contingent ANNUITANT, if any, becomes the ANNUITANT. If no contingent ANNUITANT
is named, the CONTRACTOWNER (or joint owner if younger) becomes the ANNUITANT.
SURRENDERS AND WITHDRAWALS
Before the ANNUITY COMMENCEMENT DATE, we will allow the SURRENDER of the
CONTRACT or a WITHDRAWAL of the CONTRACT VALUE upon your written request,
subject to the rules discussed below.
Special restrictions on SURRENDERS/WITHDRAWALS apply if your CONTRACT is
purchased as part of a retirement plan of a public school system or 501(c)(3)
organization under Section 403(b) of the CODE. Beginning January 1, 1989, in
order for a CONTRACT to retain its tax-qualified status, Section 403(b)
prohibits a WITHDRAWAL from a 403(b) CONTRACT of post-1988 contributions (and
earnings on those contributions) pursuant to a salary reduction agreement.
However, this restriction does not apply if the ANNUITANT (a) attains age 59
1/2, (b) separates from service, (c) dies, (d) becomes totally and permanently
disabled and/or (e) experiences financial hardship (in which event the income
attributable to those contributions may not be withdrawn).
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.
A SURRENDER/WITHDRAWAL will be effective as of the VALUATION DATE on which
LINCOLN LIFE received a written request at its HOME OFFICE.
The minimum WITHDRAWAL is $300. LINCOLN LIFE reserves the right to SURRENDER
this CONTRACT if any WITHDRAWAL reduces the total CONTRACT VALUE to a level at
which this CONTRACT may be SURRENDERED in accordance with applicable law for
individual deferred annuities.
Unless a request for WITHDRAWAL specifies otherwise, LINCOLN LIFE will withdraw
the amount requested on a pro-rata basis from each VARIABLE SUBACCOUNT, each
GUARANTEED PERIOD, (which includes all GUARANTEED PERIOD SUBACCOUNTS within the
GUARANTEED PERIOD) and the DCA FIXED ACCOUNT. Within each GUARANTEED PERIOD,
WITHDRAWALS will be made on a first in - first out basis.
If a WITHDRAWAL is taken from a GUARANTEED PERIOD SUBACCOUNT, a MARKET VALUE
ADJUSTMENT will apply at any time other than at an EXPIRATION DATE or during the
free look period (see Market value adjustment on page 19).
Any cash payment will be mailed from LINCOLN LIFE'S home office within seven
days after the date of SURRENDER/WITHDRAWAL; however, LINCOLN LIFE may be
permitted to defer such payment under the Investment Company Act of 1940, as in
effect at the time such request for SURRENDER/WITHDRAWAL is received.
The SURRENDER/WITHDRAWAL option is not available after the ANNUITY COMMENCEMENT
DATE.
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 the
Restrictions under the Texas Optional Retirement Program, later in this
Prospectus booklet.
REINVESTMENT PRIVILEGE
You may elect to make a reinvestment purchase with any part of the proceeds of a
SURRENDER/WITHDRAWAL, without new SALES CHARGES. 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 request for reinvestment at the HOME OFFICE. You may utilize the
reinvestment privilege only once. For tax reporting purposes, we will treat a
SURRENDER/WITHDRAWAL and a subsequent reinvestment purchase as separate
transactions. You should consult a tax advisor before you request a
SURRENDER/WITHDRAWAL or subsequent reinvestment purchase.
AMENDMENT OF CONTRACT
We reserve the right to amend the CONTRACT to meet the requirements of the 1940
Act or other applicable federal
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or state laws or regulations. You will be notified in writing of any changes,
modifications or waivers.
COMMISSIONS
The commissions paid to dealers are a maximum of 5.75% of each GROSS PURCHASE
PAYMENT; plus an annual continuing commission of up to 0.25% of CONTRACT VALUE.
At times, additional sales incentives (up to an annual continuing 0.10% of
CONTRACT VALUE) may be provided to dealers maintaining certain sales volume
levels. Upon annuitization, an annual continuing commission of up to 0.80% (or
up to 0.90% for dealers maintaining certain sales volume levels) of statutory
reserves can be paid to dealers. 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 and the GIA are held for the exclusive benefit of all
CONTRACTOWNERS and their designated BENEFICIARIES; and the assets of the VAA and
the GIA are not chargeable with liabilities arising from any other business that
we may conduct. Qualified CONTRACTS may not be assigned or transferred except as
permitted by the Employee Retirement Income Security Act (ERISA) of 1974 and
upon written notification to us. Non-qualified CONTRACTS may not be collaterally
assigned. 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.
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
ANNUITY PAYOUTS to start at the date and under the option specified in the
plan.)
The CONTRACT provides optional forms of payouts of annuities (ANNUITY OPTIONS),
each of which is payable on a variable basis, a fixed basis or a combination of
both as you specify. A market value adjustment may apply. (See Market value
adjustment on page 19).
You may elect ANNUITY PAYOUTS in monthly, quarterly, semiannual or annual
installments. If the payouts from any VARIABLE SUBACCOUNT would be or become
less than $50, we have the right to reduce their frequency until the payouts are
at least $50 each. Following are explanations of the ANNUITY OPTIONS available.
ANNUITY OPTIONS
LIFE ANNUITY. This option offers a periodic payout during the lifetime of the
ANNUITANT and ends with the last payout before the death of the ANNUITANT. This
option offers the highest periodic payout since there is no guarantee of a
minimum number of payouts or provision for a DEATH BENEFIT for BENEFICIARIES.
HOWEVER, THERE IS THE RISK UNDER THIS OPTION THAT THE RECIPIENT WOULD RECEIVE NO
PAYOUTS IF THE ANNUITANT DIES BEFORE THE DATE SET FOR THE FIRST PAYOUT; ONLY ONE
PAYOUT IF DEATH OCCURS BEFORE THE SECOND SCHEDULED PAYOUT, AND SO ON.
LIFE INCOME WITH PAYOUTS GUARANTEED FOR DESIGNATED PERIOD. This option
guarantees periodic payouts during a designated period, usually 10 or 20 years,
and then continues throughout the lifetime of the ANNUITANT. The designated
period is selected by the CONTRACTOWNER.
JOINT LIFE ANNUITY. This option offers a periodic payout during the joint
lifetime of the ANNUITANT and a designated joint ANNUITANT. The payouts continue
during the lifetime of the survivor.
JOINT LIFE ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic
payouts during a designated period, usually 10 or 20 years, and continues during
the joint lifetime of the ANNUITANT and a designated joint ANNUITANT. The
payouts continue during the lifetime of the survivor. The designated period is
selected by the CONTRACTOWNER.
JOINT-AND-TWO-THIRDS SURVIVOR ANNUITY. This option provides a periodic payout
during the joint lifetime of the ANNUITANT and a designated joint ANNUITANT.
When one of the joint ANNUITANTS dies, the survivor receives two thirds of the
periodic payout made when both were alive.
UNIT REFUND LIFE ANNUITY. This option offers a periodic payout during the
lifetime of the ANNUITANT with the guarantee that upon death a payout will be
made of the value of the number of ANNUITY UNITS (see Variable annuity payouts)
equal to the excess, if any, of: (a) the total amount applied under this option
divided by the ANNUITY UNIT value for the date payouts begin, divided by (b) the
ANNUITY UNITS represented by each payout to the ANNUITANT multiplied by the
number of payouts paid before death. The value of the number of ANNUITY UNITS is
computed on the date the death claim is approved for payment by the HOME OFFICE.
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GENERAL INFORMATION
None of the options listed above currently provide WITHDRAWAL features,
permitting 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
requirements of the CONTRACT as well as Sections 72(s) and 401(a)(9) of the
CODE, if applicable. The mortality and expense risk charge and the charge for
administrative services will be assessed on all variable annuity payouts,
including options that may be offered that do not have a life contingency and
therefore no mortality risk.
The ANNUITY COMMENCEMENT DATE is usually on or before the CONTRACTOWNER'S 90th
birthday. You may change the ANNUITY COMMENCEMENT DATE, change the ANNUITY
OPTION or change the allocation of the investment among SUBACCOUNTS up to 30
days before the scheduled ANNUITY COMMENCEMENT DATE, upon written notice to the
HOME OFFICE. You must give us at least 30 days notice before the date on which
you want payouts to begin. If proceeds become available to a BENEFICIARY in a
lump sum, the BENEFICIARY may choose any ANNUITY PAYOUT OPTION.
Unless you select another option, the CONTRACT automatically provides for a life
annuity with ANNUITY PAYOUTS guaranteed for 10 years (on a fixed, variable or
combination fixed and variable basis, in proportion to the account allocations
at the time of annuitization) except when a joint life payout is required by
law. Under any option providing for guaranteed period payouts, the number of
payouts which remain unpaid at the date of the ANNUITANT'S death (or surviving
ANNUITANT'S death in case of joint life annuity) will be paid to your
BENEFICIARY as payouts become due.
VARIABLE ANNUITY PAYOUTS
VARIABLE ANNUITY PAYOUTS will be determined using:
1. The CONTRACT VALUE on the ANNUITY COMMENCEMENT DATE;
2. The annuity tables contained in the CONTRACT;
3. The ANNUITY OPTION selected; and
4. The investment performance of the FUND(S) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the CONTRACT with a fixed number of ANNUITY UNITS equal to the first
periodic payout divided by the ANNUITY UNIT value; and
3. Calculate the value of the ANNUITY UNITS each period thereafter.
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 depend
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.
GUARANTEED INTEREST ACCOUNT (GIA)
The GIA is a separate account under Indiana law. NET PURCHASE PAYMENTS under the
CONTRACT may be allocated to the GIA. The GIA is for the exclusive benefit of
persons entitled to receive benefits under market value adjusted annuity
contracts issued by LINCOLN LIFE. The GIA will not be charged with the
liabilities arising from any other part of LINCOLN LIFE'S business.
The available GUARANTEED PERIODS are shown in the contract. LINCOLN LIFE
reserves the right to eliminate any of the GUARANTEED PERIODS shown at any time.
LINCOLN LIFE may also add one or more new GUARANTEED PERIODS at a later date.
CREDITING OF INTEREST ON GIA
Upon receipt by LINCOLN LIFE of each NET PURCHASE PAYMENT, all of the NET
PURCHASE PAYMENTS allocated to the GUARANTEED INTEREST ACCOUNT will be credited
to the GUARANTEED INTEREST ACCOUNT and allocated to the GUARANTEED PERIOD(S)
selected by the OWNER. Within each GUARANTEED PERIOD, we will establish a
GUARANTEED PERIOD SUBACCOUNT for each NET PURCHASE PAYMENT that will hold that
NET PURCHASE PAYMENT and any earnings attributable to the NET PURCHASE PAYMENT.
The value of the GUARANTEED INTEREST ACCOUNT, if any, at any time, is equal to
the sum of the then current values of all GUARANTEED PERIOD SUBACCOUNTS before
any applicable market value adjustment.
GUARANTEED PERIODS
The initial GUARANTEED PERIOD(S), if any, is selected by the OWNER for each NET
PURCHASE PAYMENT and each amount transferred. Each NET PURCHASE PAYMENT or the
portion thereof allocated to a particular GUARANTEED PERIOD SUBACCOUNT will earn
interest at the specified GUARANTEED INTEREST RATE in effect on the day the
payment or transfer is credited. The initial GUARANTEED PERIOD(S) begins on the
date a NET PURCHASE PAYMENT is accepted into that GUARANTEED PERIOD SUBACCOUNT
(or, in the case of a transfer, on the effective date of the transfer) and ends
on the expiration date for each duration selected.
Each GUARANTEED PERIOD SUBACCOUNT will have an associated GUARANTEED INTEREST
RATE and EXPIRATION DATE, and will be treated separately from other GUARANTEED
PERIOD SUBACCOUNTS for purposes of determining any market value adjustment. As a
result of additional NET PURCHASE PAYMENTS and transferred amounts, GUARANTEED
PERIOD SUBACCOUNTS for GUARANTEED PERIODS of the same duration may have
different GUARANTEED INTEREST RATES, expiration dates, and market value
adjustments.
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LINCOLN LIFE will send written notice to the owner, to the last address known to
LINCOLN LIFE, regarding each upcoming expiration of a GUARANTEED PERIOD. LINCOLN
LIFE will send this notice at least 60 days prior to the expiration date of such
GUARANTEED PERIOD. If available, a subsequent GUARANTEED PERIOD of the same
duration will begin automatically upon the expiration of the preceding
GUARANTEED PERIOD unless LINCOLN LIFE receives, in writing prior to the
expiration of such GUARANTEE PERIOD, an election by the owner of a different
currently available GUARANTEED PERIOD; or instructions to transfer all or a
portion of the value in the applicable GUARANTEED PERIOD SUBACCOUNT to one or
more of the VARIABLE SUBACCOUNTS or DCA FIXED ACCOUNT in accordance with the
transfer provisions. If only a portion is transferred, any remaining amounts
will automatically be invested in a subsequent GUARANTEE PERIOD SUBACCOUNT of
the same duration as the previous GUARANTEED PERIOD SUBACCOUNT unless otherwise
instructed by the OWNER. If the previous GUARANTEED PERIOD is no longer
available, and no election or instructions were received from the owner,
CONTRACT VALUE will be invested in a one year GUARANTEED PERIOD SUBACCOUNT.
GUARANTEED INTEREST RATE
LINCOLN LIFE will establish the applicable effective annual GUARANTEED INTEREST
RATE that will be credited for each GUARANTEED PERIOD SUBACCOUNT at the
beginning of that GUARANTEED PERIOD. This interest rate is guaranteed to be at
least 3.0%. Interest will be credited daily. The interest rate will be
guaranteed for the duration of the applicable GUARANTEED PERIOD. Subsequent
GUARANTEED INTEREST RATE(S) will be determined at the beginning of subsequent
GUARANTEED PERIOD(S) and may be higher or lower than the previous interest rate.
MARKET VALUE ADJUSTMENT
Any transfer, WITHDRAWAL, SURRENDER or annuitization from a GUARANTEED PERIOD
SUBACCOUNT, other than upon the Expiration Date of the GUARANTEED PERIOD, death
or the free look period will be subject to a market value adjustment ("MVA").
The amount being transferred, withdrawn, surrendered or annuitized is multiplied
by the MVA factor to determine the actual amount of the transfer, WITHDRAWAL,
SURRENDER or amount available for annuitization. LINCOLN LIFE guarantees that
the value available from any GUARANTEED PERIOD SUBACCOUNT after application of
the appropriate MVA(s) will be at least equal to the NET PURCHASE PAYMENTS
applied to that GUARANTEED PERIOD SUBACCOUNT, decreased by partial WITHDRAWALS
(without the MVA) and premium tax, if applicable, made from that GUARANTEED
PERIOD SUBACCOUNT.
The MVA factor generally reflects the relationship between the Index Rate (based
upon the Treasury Constant Maturity Series published by the Federal Reserve) in
effect at the time a NET PURCHASE PAYMENT is allocated to a GUARANTEED PERIOD
SUBACCOUNT under the Contract and the Index Rate in effect at the time of the
transfer, WITHDRAWAL, SURRENDER or annuitization. It also reflects the time
remaining in the GUARANTEED PERIOD SUBACCOUNT. Generally, if the Index Rate at
the time of transfer, WITHDRAWAL, SURRENDER or annuitization is lower than the
Index Rate at the time the NET PURCHASE PAYMENT was allocated, then the
application of the MVA will result in a higher payment upon transfer,
WITHDRAWAL, SURRENDER or annuitization. Similarly, if the Index Rate at the time
of transfer, WITHDRAWAL, SURRENDER or annuitization is higher than the Index
Rate at the time the NET PURCHASE PAYMENT was allocated, the application of the
MVA will generally result in a lower payment upon transfer, WITHDRAWAL,
SURRENDER or annuitization.
The MVA factor is computed by applying the following formula:
(1 + A)to the power of N
-------
(1 + B)to the power of N
where:
A = an Index Rate determined at the beginning of the GUARANTEED PERIOD based on
the Treasury Constant Maturity Series (published by the Federal Reserve) for a
security with time to maturity equal to the GUARANTEED PERIOD SUBACCOUNT.
B = an Index Rate determined at the time of transfer, WITHDRAWAL, SURRENDER or
annuitization based on the Treasury Constant Maturity Series for a security with
time to maturity equal to the GUARANTEED PERIOD SUBACCOUNT plus a 0.25%
adjustment (unless otherwise limited by applicable state law).
If Index Rates "A" and "B" are within .25% of each other when the index rate
factor is determined, no .25% adjustment to "B" will be made, unless otherwise
required by state law. This adjustment builds into the formula a factor
representing direct and indirect costs to the Company associated with
liquidating assets in order to satisfy transfer, WITHDRAWAL, SURRENDER or
annuitization requests. This adjustment of 0.25% has been added to the
denominator of the formula because it is anticipated that a substantial portion
of applicable portfolio assets will be in relatively illiquid securities. Thus,
in addition to direct transaction costs, if such securities must be sold (E.G.,
because of SURRENDERS), the market price may be lower. Accordingly, even if
interest rates decline, there will not be a positive adjustment until this
factor is overcome, and then any adjustment will be lower than otherwise, to
compensate for this factor. Similarly, if interest rates rise, any negative
adjustment will be greater than otherwise, to compensate for this factor. If
interest rates stay the same, this factor will result in a small but negative
market value adjustment.
N = The number of years remaining in the GUARANTEED PERIOD (E.G. 1 year and 73
days = 1 + (73 divided by 365) = 1.2 years)
See the Statement of Additional Information for examples of the application of
the market value adjustment.
19
<PAGE>
FEDERAL TAX STATUS
This section is a discussion of the Federal income tax rules applicable to the
CONTRACTS as of the date of this Prospectus. More information is provided in the
SAI. THESE DISCUSSIONS AND THOSE IN THE SAI ARE NOT INTENDED AS TAX ADVICE. This
section does not discuss the Federal tax consequences resulting from every
possible situation. No attempt has been made to consider any applicable state,
local, or foreign tax law, other than the imposition of any state premium taxes
(See 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 present 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 assignment
or pledge of, or the agreement to assign or pledge, any portion of the value of
a CONTRACT will be treated as a distribution. A transfer of ownership of a
CONTRACT, or designation of an ANNUITANT (or other BENEFICIARY) who is not also
the CONTRACTOWNER, may also result in tax consequences. The taxable portion of a
distribution (in the form of a lump sum payout or an annuity) is taxed as
ordinary income. In general, a CONTRACTOWNER who is not a natural person (for
example, a corporation), subject to limited exceptions, will be taxed on any
increase in the CONTRACT'S cash value over the investment in the CONTRACT during
the taxable year, even if no distribution occurs. [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 GROSS PURCHASE PAYMENT made 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 the ANNUITY PAYOUT that exceeds the
investment in the CONTRACT. For variable ANNUITY PAYOUTS, the taxable portion is
determined by a formula that establishes a specific dollar amount of each payout
that is not taxed. The dollar amount is determined by dividing the investment in
the CONTRACT by the total number of expected periodic payouts. For fixed ANNUITY
PAYOUTS, there generally is no tax on the portion of each payout that represents
the same ratio that the investment in the CONTRACT bears to the total expected
value of payouts for the term of the annuity; the remainder of each payout is
taxable. For individuals, 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.
All or a portion of a WITHDRAWAL may be taxable. Additionally, there may be
imposed a penalty tax on distributions equal to 10% of the amount treated as
taxable income. The penalty tax is not imposed in certain circumstances, which
generally are distributions:
1. Received on or after the CONTRACTOWNER attains 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 subsequently
modified);
4. Under a qualified funding asset in a structured settlement;
5. Under an immediate annuity CONTRACT as defined in the CODE; and/or
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;
5. SEPs, qualified under Section 408(k) of the CODE;
6. Simple retirement accounts, qualified under Section 401(k)(11) of the code,
commonly referred to as SIMPLE or SIMPLE 401(k) plans and SIMPLE IRA plans;
and/or
20
<PAGE>
7. Roth IRAs, qualified under Section 408A of the CODE.
The tax rules applicable to these plans, including restrictions on contributions
and benefits, taxation of distributions and any tax penalties, vary according to
the type of plan and its terms and conditions. Participants under such plans, as
well as CONTRACTOWNERS, ANNUITANTS and BENEFICIARIES, should be aware that the
rights of any person to any benefits under such plans may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the CONTRACTS. Purchasers of CONTRACTS for use with any qualified
plan, as well as plan participants, should consult counsel and other advisors as
to the suitability of the CONTRACTS to their specific needs, and as to
applicable CODE limitations and tax consequences.
MULTIPLE CONTRACTS
CONTRACTS issued by the same insurance company (or its affiliates) to the same
CONTRACTOWNER during any calendar year will be treated as a single CONTRACT for
tax purposes.
INVESTOR CONTROL
The Treasury Department has indicated that guidelines may be issued under which
a VARIABLE ANNUITY CONTRACT will not be treated as an annuity CONTRACT for tax
purposes if the CONTRACTOWNER has excessive control over the investments
underlying the CONTRACT. They may consider the number of investment options or
the number of transfer opportunities available between options as relevant when
determining excessive control. The issuance of those guidelines may require us
to impose limitations on your right to control the investment. We do not know
whether any such guidelines would have a retroactive effect.
Section 817(h) of the CODE and the related regulation that the Treasury
Department has adopted require that assets underlying a VARIABLE ANNUITY
CONTRACT be adequately diversified. The regulations provide that a VARIABLE
ANNUITY CONTRACT which does not satisfy the diversification standards will not
be treated as an annuity CONTRACT, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the CONTRACTOWNER or we pay an
amount to the Internal Revenue Service. The amount will be based on the tax that
would have been paid by the CONTRACTOWNER if the income, for the period the
CONTRACT was not diversified, had been received by the CONTRACTOWNER. If the
failure to diversify is not corrected in this manner, the CONTRACTOWNER of an
annuity CONTRACT will be deemed the owner of the underlying securities and will
be taxed on the earnings of his or her account. We believe, under our
interpretation of the code and regulations thereunder, that the investments
underlying this CONTRACT meet these diversification standards.
WITHHOLDING
Generally, pension and annuity distributions are subject to withholding for the
recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Income tax withholding of 20% may apply to eligible rollover
distributions. All taxable distributions from qualified plans (except IRAs) 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.
Mandatory 20% income tax withholding is imposed 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 VARIABLE SUBACCOUNTS
which invest in classes of 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
applying your percentage interest in a VARIABLE SUBACCOUNT to the total number
of votes attributable to the VARIABLE SUBACCOUNT. In determining the number of
votes, fractional shares will be recognized.
SERIES shares of a class held in a VARIABLE 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 VARIABLE
SUBACCOUNT. Voting instructions to abstain on any item to be voted on will be
applied on a pro-rata basis to reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, each person having a voting interest
in a VARIABLE SUBACCOUNT will receive proxy voting material, reports and other
materials relating to the SERIES. Since the SERIES engages in shared funding,
other persons or entities besides 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
21
<PAGE>
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 prepaid, to the HOME OFFICE
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 GIA and
DCA fixed account, we will return GROSS 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 premium taxes
which had been deducted. No 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 GROSS
PURCHASE PAYMENT(S).
STATE REGULATION
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the Indiana
Insurance Department at all times. A full examination of our operations is
conducted by that Department at least every five years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Title 8, Section 830.105 of the Texas Government Code, consistent with prior
interpretations of the Attorney General of the State of Texas, permits
participants in the Texas Optional Retirement Program (ORP) to redeem their
interest in a VARIABLE ANNUITY CONTRACT issued under the ORP only upon:
1. Termination of employment in all institutions of higher education as defined
in Texas law;
2. Retirement; or
3. Death.
Accordingly, a participant in the ORP will be required to obtain a certificate
of termination from their employer before accounts can be redeemed.
RECORDS AND REPORTS
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Market
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 OFFICE, 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 information
about the VAA, LINCOLN LIFE and the CONTRACTS offered. Statements in this
Prospectus about the content of CONTRACTS and other legal instruments are
summaries. For the complete text of those CONTRACTS and instruments, please
refer to those documents as filed with the SEC.
Lincoln National Variable Annuity Account E and Lincoln Life Flexible Premium
Variable Life Accounts F, G and J (all registered as investment companies under
the 1940 Act) and Lincoln National Flexible Premium Group Variable Annuity
Accounts 50, 51 and 52 are all segregated investment accounts of Lincoln
National Life Insurance Co. (LINCOLN LIFE) which also invest in the SERIES. The
SERIES also offers shares of the FUNDS to other segregated investment accounts.
PREPARING FOR YEAR 2000
LINCOLN LIFE, as part of its year 2000 updating process, is responsible for the
updating of the VAA related computer systems. Many existing computer programs
use only two digits to identify a year in the date field. These programs were
designed and developed without considering the impact of the upcoming change in
the century. If not corrected, many computer applications could
22
<PAGE>
fail or create erroneous results by or at the year 2000. The year 2000 issue
affects virtually all companies and organizations.
An affiliate of LINCOLN LIFE, Delaware Service Company (Delaware), provides
substantially all of the necessary accounting and valuation services for the
VAA. Delaware, for its part, is responsible for updating all of its internal
computer systems, including those which service the VAA, to accommodate the year
2000.
The year 2000 issue is pervasive and complex and affects virtually every aspect
of the businesses of both LINCOLN LIFE and Delaware (the Companies). The
computer systems of the Companies and their interfaces with the computer systems
of vendors, suppliers, customers and other business partners are particularly
vulnerable. The inability to properly recognize date-sensitive electronic
information and to transfer data between systems could cause errors or even
complete failure of systems, which would result in a temporary inability to
process transactions correctly and engage in normal business activities for the
VAA. The Companies respectively are redirecting significant portions of their
internal information technology efforts and are contracting, as needed, with
outside consultants to help update their systems to accommodate the year 2000.
The Companies have respectively initiated formal discussions with other critical
parties that interface with their systems to gain an understanding of the
progress by those parties in addressing year 2000 issues. While the Companies
are making substantial efforts to address their own systems and the systems with
which they interface, it is not possible to provide assurance that operational
problems will not occur. The Companies presently believe that, assuming the
modification of existing computer systems, updates by vendors and conversion to
new software and hardware, the year 2000 issue will not pose significant
operations problems for their respective computer systems. In addition, the
Companies are incorporating potential issues surrounding year 2000 into their
contingency planning process, in the event that, despite these substantial
efforts, there are unresolved year 2000 problems. If the remediation efforts
noted above are not completed timely or properly, the year 2000 issue could have
a material adverse impact on the operation of the businesses of LINCOLN LIFE or
Delaware, or both.
The cost of addressing year 2000 issues and the timeliness of completion will be
closely monitored by management of the respective Companies. Nevertheless, there
can be no guarantee either by LINCOLN LIFE or by Delaware that the estimated
costs will be achieved, and actual results could differ significantly from those
anticipated. Specific factors that might cause such differences include, but are
not limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer problems, and other
uncertainties.
LEGAL PROCEEDINGS
LINCOLN LIFE is involved in various pending or threatened legal proceedings
arising from the conduct of its business. Most of those proceedings are routine
and in the ordinary course of business. In some instances these proceedings
include claims for unspecified or substantial punitive damages and similar types
of relief in addition to amounts for alleged contractual liability or requests
for equitable relief. After consultation with legal counsel and a review of
available facts, it is management's opinion that the ultimate liability, if any,
under these suits will not have a material adverse effect on the financial
position of LINCOLN LIFE.
During the 1990's class action lawsuits alleging sales practices fraud have been
filed against many life insurance companies, and LINCOLN LIFE has not been
immune. Several suits involve alleged fraud in the sale of interest-sensitive
universal and whole life insurance policies. Certain of these suits have been
filed as class actions against LINCOLN LIFE, although as of the date of this
Prospectus the court had not certified a class in any of them. Plaintiffs seek
unspecified damages and penalties for themselves and on behalf of the putative
class. Although the relief sought in these cases is substantial, the cases are
in the early stages of litigation, and it is premature to make assessments about
potential loss, if any. Management denies these allegations and intends to
defend these suits vigorously. The amount of liability, if any, which may arise
as a result of these suits (exclusive of any indemnification from professional
liability insurers) cannot be reasonably estimated at this time.
23
<PAGE>
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF
CONTENTS FOR VARIABLE
ANNUITY ACCOUNT H
AMERICAN LEGACY
SHAREHOLDER'S ADVANTAGE
<TABLE>
<S> <C>
ITEM ITEM
- --------------------------------------------------- ---------------------------------------------------
General information and history of Calculation of investment results
Lincoln Life ---------------------------------------------------
- --------------------------------------------------- Annuity payouts
Special terms ---------------------------------------------------
- --------------------------------------------------- Market Value Adjustment examples
Services ---------------------------------------------------
- --------------------------------------------------- Federal tax status
Principal underwriter ---------------------------------------------------
- --------------------------------------------------- Advertising and sales literature
Purchase of securities being offered ---------------------------------------------------
Financial statements
</TABLE>
For a free copy of the SAI please see page one of
this booklet.
24
<PAGE>
To obtain a copy of the Statement of Additional Information, please complete and
mail this card.
STATEMENT OF ADDITIONAL INFORMATION REQUEST CARD
(LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT H)
Please send me a copy of the current Statement of Additional
Information for American Legacy Shareholder's Advantage and American
Variable Insurance Series (Please print)
Name: __________________________________________________________________
Address: _______________________________________________________________
City: ____________________________________ State: ________ Zip: ________
<PAGE>
PLACE
STAMP
HERE
POSTAL SERVICES
WILL NOT
DELIVER
UNLESS STAMPED
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
ATTN: AMERICAN LEGACY CUSTOMER
SERVICE
P.O. BOX 2348
FORT WAYNE, IN 46801-2348
<PAGE>
THE AMERICAN LEGACY SHAREHOLDER'S ADVANTAGE
LINCOLN NATIONAL
VARIABLE ANNUITY ACCOUNT H (REGISTRANT)
THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY (DEPOSITOR)
STATEMENT OF ADDITIONAL INFORMATION (SAI)
This Statement of Additional Information should be read in conjunction with the
American Legacy Shareholder's Advantage Prospectus of Lincoln National Variable
Annuity Account H dated , 1998.
You may obtain a copy of the American Legacy Shareholder's Advantage Prospectus
on request and without charge. Please write American Legacy Customer Service,
The Lincoln National Life Insurance Company, P.O. Box 2348, Fort Wayne, Indiana
46801 or call 1-800-942-5500.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
- -------------------------------------------------------
GENERAL INFORMATION AND HISTORY
OF LINCOLN LIFE B-2
- -------------------------------------------------------
SPECIAL TERMS B-2
- -------------------------------------------------------
SERVICES B-2
- -------------------------------------------------------
PRINCIPAL UNDERWRITER B-2
- -------------------------------------------------------
PURCHASE OF SECURITIES BEING OFFERED B-2
- -------------------------------------------------------
<CAPTION>
ITEM PAGE
- -------------------------------------------------------
<S> <C>
CALCULATION OF INVESTMENT RESULTS B-2
- -------------------------------------------------------
ANNUITY PAYOUTS B-8
- -------------------------------------------------------
MARKET VALUE ADJUSTMENT EXAMPLES B-8
- -------------------------------------------------------
FEDERAL TAX STATUS B-9
- -------------------------------------------------------
ADVERTISING AND SALES LITERATURE B-12
- -------------------------------------------------------
FINANCIAL STATEMENTS B-13
- -------------------------------------------------------
</TABLE>
THIS SAI IS NOT A PROSPECTUS.
The date of this SAI is .
B-1
<PAGE>
GENERAL INFORMATION
AND HISTORY OF THE
LINCOLN NATIONAL LIFE
INSURANCE COMPANY (LINCOLN LIFE)
The Lincoln National Life Insurance Company (Lincoln Life), organized in 1905,
is an Indiana stock insurance corporation, engaged primarily in the direct
insurance of life insurance contracts and annuities, and is also a professional
reinsurer. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a
publicly held insurance and financial services holding company domiciled 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, Martin
Luther King's Birthday, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. If any of these holidays
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
statutory-basis financial statements and schedules of Lincoln Life appearing in
this SAI and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports also appearing elsewhere in
this document and in the Registration Statement. The financial statements and
schedules audited by Ernst & Young LLP have been included in this document in
reliance on their reports given on their authority as experts in accounting and
auditing.
KEEPER OF RECORDS
All accounts, books, records and other documents which are required to be
maintained for the VAA are maintained by Lincoln Life or by third parties
responsible 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 Street, 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 offered to the public through certain securities
broker/dealers who have entered into selling agreements with AFD and whose
personnel are legally authorized to sell annuity products. Although there are no
special purchase plans for any class of prospective buyers, the sales charge
normally assessed on gross purchase payments will be waived for officers,
directors or bona fide full time employees of LNC, The Capital Group, Inc.,
their affiliated or managed companies, and certain other persons. See Charges
and other deductions in the Prospectus.
Both before and after the annuity commencement date, there are exchange
privileges between variable subaccounts, and from the VAA to the fixed side of
the contract subject to restrictions set out in the Prospectus. See The
contracts, in the Prospectus. No exchanges are permitted between the VAA and
other variable separate accounts.
The offering of the contracts is continuous.
CALCULATION OF INVESTMENT RESULTS
The paragraphs set forth below present performance information for the VAA and
the variable subaccounts calculated in several different ways. Paragraph A shows
the historical fund/series performance over the periods indicated in the table
set forth in the Paragraph adjusted to reflect the charges and expenses
associated with the contracts. This is commonly referred to as "standard
performance" because it is calculated in accordance with formulas prescribed by
the SEC. Under rules issued by the SEC, standard performance must be included in
certain advertising material that discusses
B-2
<PAGE>
the performance of the VAA and the variable subaccounts. Standard performance is
described in paragraph (B). Paragraph C shows additional "non-standardized"
performance information (i.e., performance information not calculated in
accordance with SEC guidelines) for each of the variable subaccounts that may be
used to advertise the performance of the VAA and the variable subaccounts. THIS
INFORMATION DOES NOT INDICATE OR REPRESENT FUTURE PERFORMANCE.
(a) VARIABLE SUBACCOUNT PERFORMANCE ADJUSTED FOR CONTRACT EXPENSE CHARGES
The examples below show, for the various subaccounts of the VAA, annual total
return as of the stated periods, based upon a hypothetical initial gross
purchase payment of $1,000, calculated according to the formula provided after
the examples. The annual total return has been calculated to show the annual
total return for a hypothetical contract with the enhanced guaranteed minimum
death benefit (EGMDB) and without EGMDB. Although the variable subaccounts did
not commence activity until 1998, these figures are calculated as if the
variable subaccounts had commenced activity at the same time as the underlying
funds.
Further, since the class of shares of the funds in which the variable
subaccounts invest was not created until 1997, the figures below are based on
the performance of the class of shares of the funds issued since the funds
commenced operations in 1989, as adjusted to reflect the fees and expenses
chargeable against assets attributable to shares of Class 2.
B-3
<PAGE>
VARIABLE SUBACCOUNT PERFORMANCE (ADJUSTED
FOR CONTRACT EXPENSE CHARGES)
PERIOD ENDING DECEMBER 31, 1997 (STANDARDIZED)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR 10-YEAR
PERIOD PERIOD PERIOD
WITH WITHOUT WITH WITHOUT WITH WITHOUT
EGMDB EGMDB EGMDB EGMDB EGMDB EGMDB
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Global Growth Variable Subaccount
(commenced activity 4/30/97) 1.32%* 1.51%* N/A N/A N/A N/A
- ---------------------------------------------------------------------------------
Growth Variable Subaccount
(as if commenced activity 2/8/84) 21.99 22.19 15.95% 16.14% 15.25% 15.44%
- ---------------------------------------------------------------------------------
International Variable Subaccount
(as if commenced activity 5/1/90) 1.30 1.47 12.49 12.68 8.31 * 8.49 *
- ---------------------------------------------------------------------------------
Growth-Income Variable Subaccount
(as if commenced activity 2/8/84) 17.79 17.98 15.74 15.94 13.72 13.90
- ---------------------------------------------------------------------------------
Asset Allocation Variable Subaccount
(as if commenced activity 8/1/89) 12.48 12.66 12.62 12.81 10.56* 10.74*
- ---------------------------------------------------------------------------------
High-Yield Bond Variable Subaccount
(as if commenced activity 2/8/84) 4.52 4.69 8.90 9.08 10.34 10.51
- ---------------------------------------------------------------------------------
Bond Variable Subaccount
(as if commenced activity 1/2/96) 2.35 2.52 3.36 * 3.53 * N/A N/A
- ---------------------------------------------------------------------------------
U.S. Gov't./AAA Variable Subaccount
(as if commenced activity 12/1/85) 0.70 0.86 4.46 4.62 6.54 6.71
- ---------------------------------------------------------------------------------
Cash Management Variable Subaccount
(as if commenced activity 2/8/84) (2.54) (2.39) 2.39 2.56 3.74 3.90
- ---------------------------------------------------------------------------------
</TABLE>
* The lifetime of each variable subaccount is less than the complete period
indicated.
See the date the variable subaccount commenced activity under its name.
There is a Global Small Capitalization variable subaccount but it is not in the
chart because it did not begin activity until 1998.
The length of the periods and the last day of each period used in the above
table are set out in the table heading and in the footnotes above.
B-4
<PAGE>
(b) FORMULAS
Average annual total return for each period was determined by finding the
average annual compounded rate of return over each period that would equate the
initial amount invested to the ending redeemable value for that period,
according to the following formula --
P(1 + T) to the power of (n) = ERV
Where: P = a hypothetical initial purchase payment of $1,000
T = average annual total return for the period in question
n = number of years
ERV = redeemable value (as of the end of the period in question) of a
hypothetical $1,000 purchase payment made at the beginning of the 1-year,
5-year, or 10-year period in question (or fractional portion thereof)
The formula assumes that: 1) all recurring fees have been charged to
contractowner accounts; 2) all applicable non-recurring charges are deducted at
the end of the period in question; and 3) there will be a complete redemption at
the end of the period in question.
(c) OTHER NON-STANDARDIZED INVESTMENT RESULTS:
The VAA may illustrate its results over various periods and compare its results
to indices and other variable annuities in sales materials including
advertisements, brochures and reports. Such results may be computed on a
cumulative and/or annualized basis.
Cumulative quotations are arrived at by calculating the change in the
Accumulation Unit Value between the first and last day of the base period being
measured, and expressing the difference as a percentage of the unit value at the
beginning of the base period.
Annualized quotations are arrived at by applying a formula which determines the
level rate of return which, if earned over the entire base period, would produce
the cumulative return.
B-5
<PAGE>
NON-STANDARDIZED INVESTMENT RESULTS
VARIABLE SUBACCOUNTS OF ACCOUNT H*
$10,000 INVESTED IN
THIS FUND THROUGH
AMERICAN LEGACY SHAREHOLDER'S ADVANTAGE
THIS MANY YEARS AGO . . .
. . . WOULD HAVE GROWN TO THIS AMOUNT ON DECEMBER 31, 1997**
<TABLE>
<CAPTION>
WITH EGMDB
GROWTH GROWTH-INCOME HIGH-YIELD BOND CASH MANAGEMENT
--------------------------------------------------------------------------------------
-------------------- -------------------- --------------------
COMPOUND COMPOUND COMPOUND COMPOUND
GROWTH GROWTH GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1 12/31/96-12/31/97 $12,798.82 27.99% $12,378.95 23.79% $11,052.41 10.52% $10,345.85 3.46%
- -------------------------------------------------------------------------------------------------------------------------------
2 12/31/95-12/31/97 14,268.88 19.45 14,453.66 20.22 12,305.43 10.93 10,692.41 3.40
- -------------------------------------------------------------------------------------------------------------------------------
3 12/31/94-12/31/97 18,705.50 23.21 18,907.63 23.66 14,738.96 13.80 11,101.62 3.54
- -------------------------------------------------------------------------------------------------------------------------------
4 12/31/93-12/31/97 18,492.06 16.61 18,986.06 17.38 13,550.44 7.89 11,343.75 3.20
- -------------------------------------------------------------------------------------------------------------------------------
5 12/31/92-12/31/97 21,328.63 16.36 20,986.91 15.98 15,557.22 9.24 11,457.60 2.76
- -------------------------------------------------------------------------------------------------------------------------------
Lifetime of fund 02/08/84-12/31/97 67,642.95 14.75 62,632.50 14.12 43,641.91 11.19 17,748.66 4.22
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WITHOUT EGMDB
GROWTH GROWTH-INCOME HIGH-YIELD BOND CASH MANAGEMENT
--------------------------------------------------------------------------------------
-------------------- -------------------- --------------------
COMPOUND COMPOUND COMPOUND COMPOUND
GROWTH GROWTH GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1 12/31/96-12/31/97 $12,818.21 28.18% $12,397.56 23.98% $11,068.91 10.69% $10,361.46 3.61%
- -------------------------------------------------------------------------------------------------------------------------------
2 12/31/95-12/31/97 14,312.62 19.64 14,497.80 20.41 12,342.87 11.10 10,725.10 3.56
- -------------------------------------------------------------------------------------------------------------------------------
3 12/31/94-12/31/97 18,791.54 23.40 18,994.39 23.84 14,806.44 13.98 11,152.59 3.70
- -------------------------------------------------------------------------------------------------------------------------------
4 12/31/93-12/31/97 18,605.44 16.79 19,102.32 17.56 13,633.24 8.06 11,413.20 3.36
5 12/31/92-12/31/97 21,332.56 16.36 21,144.84 16.16 15,641.85 9.36 11,544.30 2.91
- -------------------------------------------------------------------------------------------------------------------------------
Lifetime of fund 02/08/84-12/31/97 68,562.25 14.86 63,952.08 14.29 44,467.45 11.34 18,122.68 4.37
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Although the variable subaccounts for the contracts did not commence activity
until 1998, these figures are calculated as if the variable subaccounts had
commenced activity at the same time as the corresponding underlying funds.
** For purposes of determining these investment results, American Legacy
Shareholder's Advantage's 0.69% mortality and expense risk charge and
administrative fee for those contracts with EGMDB and 0.60% for those contracts
without EGMDB have been taken into account. No sales charges have been deducted.
B-6
<PAGE>
There is also a Global Small Capitalization variable subaccount but it is not in
the chart because it did not begin activity until 1998.
<TABLE>
<CAPTION>
WITH EGMDB WITHOUT EGMDB
U.S. GOVT/AAA U.S. GOVT/AAA
-------------------- ----------------------
COMPOUND COMPOUND
GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 12/31/96-12/31/97 $10,670.25 6.70% $ 10,686.38 6.86%
- ---------------------------------------------------------------------------------------------------------
2 12/31/95-12/31/97 10,820.11 4.02 10,853.23 4.18
- ---------------------------------------------------------------------------------------------------------
3 12/31/94-12/31/97 12,280.54 7.09 12,336.99 7.25
- ---------------------------------------------------------------------------------------------------------
4 12/31/93-12/31/97 11,556.21 3.68 11,627.02 3.84
- ---------------------------------------------------------------------------------------------------------
5 12/31/92-12/31/97 12,651.73 4.82 12,735.74 4.96
- ---------------------------------------------------------------------------------------------------------
Lifetime of fund 12/01/85-12/31/97 21,511.76 6.53 21,886.30 6.68
</TABLE>
<TABLE>
<CAPTION>
ASSET
ALLOCATION ASSET ALLOCATION
-------------------- ----------------------
COMPOUND COMPOUND
GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 12/31/96-12/31/97 $11,847.68 18.48% $ 11,865.45 18.65%
- ---------------------------------------------------------------------------------------------------------
2 12/31/95-12/31/97 13,490.87 16.15 13,531.99 16.33
- ---------------------------------------------------------------------------------------------------------
3 12/31/94-12/31/97 17,192.80 19.80 17,271.55 19.98
- ---------------------------------------------------------------------------------------------------------
4 12/31/93-12/31/97 16,864.61 13.96 16,967.69 14.13
- ---------------------------------------------------------------------------------------------------------
5 12/31/92-12/31/97 18,327.55 12.88 18,466.06 13.05
- ---------------------------------------------------------------------------------------------------------
Lifetime of fund 08/01/89-12/31/97 23,300.15 10.57 23,596.09 10.74
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
-------------------- ----------------------
COMPOUND COMPOUND
GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 12/31/96-12/31/97 $10,730.10 7.30% $ 10,746.43 7.46%
- ---------------------------------------------------------------------------------------------------------
2 12/31/95-12/31/97 12,402.89 11.37 12,440.99 11.54
- ---------------------------------------------------------------------------------------------------------
3 12/31/94-12/31/97 13,746.60 11.19 13,809.92 11.36
- ---------------------------------------------------------------------------------------------------------
4 12/31/93-12/31/97 13,782.68 8.35 13,867.27 8.52
- ---------------------------------------------------------------------------------------------------------
5 12/31/92-12/31/97 18,315.11 12.87 18,361.30 12.92
- ---------------------------------------------------------------------------------------------------------
Lifetime of fund 04/30/90-12/31/97 18,554.19 8.39 18,675.06 8.48
</TABLE>
<TABLE>
<CAPTION>
BOND BOND
-------------------- ----------------------
COMPOUND COMPOUND
GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 12/31/96-12/31/97 $10,835.40 8.35% $ 10,851.86 8.52%
- ---------------------------------------------------------------------------------------------------------
Lifetime of fund 01/02/96-12/31/97 11,304.03 6.33 11,316.06 6.39
</TABLE>
<TABLE>
<CAPTION>
GLOBAL GROWTH GLOBAL GROWTH
-------------------- ----------------------
COMPOUND COMPOUND
GROWTH GROWTH
NUMBER OF YEARS PERIODS AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Lifetime of fund 04/30/97-12/31/97 $10,732.30 11.11% $ 10,750.86 11.40%
</TABLE>
B-7
<PAGE>
ANNUITY PAYOUTS
VARIABLE ANNUITY PAYOUTS
Variable annuity payouts will be determined on the basis of: (1) the dollar
value of the contract on the annuity commencement date; (2) the annuity tables
contained in the contract; (3) the type of annuity option selected; and (4) the
investment results of the fund(s) selected. In order to determine the amount of
variable annuity payouts, Lincoln Life makes the following calculation: first,
it determines the dollar amount of the first payout; second, it credits the
contract with a fixed number of annuity units based on the amount of the first
payout; and third, it calculates the value of the annuity units each 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 contract
valued as of the annuity commencement date (less any premium taxes) to the
annuity tables contained in the contract. The first variable annuity payout will
be paid 14 days after the annuity commencement date. This day of the month will
become the day on which all future annuity payouts will be paid. Amounts shown
in the tables are based on the 1983 Table "a" Individual Annuity Mortality
Tables, modified, with an assumed investment return at the rate of 4% per annum.
The first annuity payout is determined by multiplying the benefit per $1,000 of
value shown in the contract tables by the number of thousands of dollars of
value accumulated under the contract. These annuity tables vary according to the
form of annuity selected and the age of the annuitant at the annuity
commencement date. The 4% interest rate stated above is the measuring point for
subsequent annuity payouts. If the actual net investment rate (annualized)
exceeds 4%, the payout will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 4%, annuity payouts will
decrease. If the assumed rate of interest were to be increased, annuity payouts
would start at a higher level but would decrease more rapidly or increase more
slowly.
Lincoln Life may use sex distinct annuity tables in contracts that are not
associated with employer sponsored plans and where not prohibited by law.
At an annuity commencement date, the contract is credited with annuity units for
each variable subaccount on which variable annuity payouts are based. The number
of annuity units to be credited is determined by dividing the amount of the
first periodic payout by the value of an annuity unit in each variable
subaccount selected. Although the number of annuity units is fixed by this
process, the value of such units will vary with the value of the underlying
fund. The amount of the second and subsequent periodic payouts is determined by
multiplying the contractowner's fixed number of annuity units in each variable
subaccount by the appropriate annuity unit value for the valuation date ending
14 days prior to the date that payout is due.
The value of each variable subaccount's annuity unit will be set initially at
$1.00. The annuity unit value for each variable subaccount at the end of any
valuation date is determined as follows:
1. The total value of fund shares held in a given variable subaccount is
calculated by multiplying the number of shares by the net asset value at the
end of the valuation period plus any dividend or other distribution.
2. The liabilities of the variable subaccount, including daily charges and
taxes, are subtracted.
3. The result is divided by the number of annuity units in the variable
subaccount at the beginning of the valuation period, and adjusted by 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.
MARKET VALUE ADJUSTMENT EXAMPLES
These two examples demonstrate the impact of a market value adjustment (MVA) on
a premature withdrawal of contract value from a guaranteed period subaccount.
The MVA formula is described in the prospectus.
EXAMPLE 1 demonstrates a negative market value adjustment. Assume a $10,000
single deposit was allocated to the 5-year guaranteed period with an initial
interest crediting rate of 4.50%. After 3 1/2 years, the contract is
surrendered. The Index Rate at the time of surrender is 5.50%. The contract
value before the surrender is $11,665.60.
B-8
<PAGE>
Applying the formula:
<TABLE>
<S> <C> <C>
(1 + .045)^ to the power of (5 - 3.5)
MVA = -------------------- = 0.982322002
(1 + .0575)^ to the power of (5 - 3.5)
$11,665.60 X 0.982322002 = $11,459.37
$11,459.37 is the amount payable upon surrender of the contract.
</TABLE>
EXAMPLE 2 demonstrates a positive market value adjustment. Assume a $10,000
single deposit was allocated to the 10-year guaranteed period with an initial
interest crediting rate of 5.0%. The contract is surrendered 7.25 years into the
contract when the Index Rate is 4.0%. The contract value before the surrender is
$14,418.49.
Applying the formula:
<TABLE>
<S> <C> <C>
(1 + .05)^ to the power of (10 - 7.25)
MVA = -------------------- = 1.019908937
(1 + .0425)^ to the power of (10 - 7.25)
$14,418.49 X 1.019908937 = $14,698.78
$14,698.78 is the amount payable upon surrender of the contract.
</TABLE>
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). VAA
investment income and realized net capital gains on the assets of the VAA are
reinvested and taken into account in determining the accumulation and annuity
unit values. As a result, such investment income and realized net capital gain
are automatically retained as part of the reserves under the contract. Under
existing federal income tax law, Lincoln Life believes that the VAA investment
income and realized net capital gain are not taxed to the extent they are
retained as part of the reserves under the contract. Accordingly, Lincoln Life
does not anticipate that it will incur any federal income tax liability
attributable to the VAA, and therefore it does not intend to make any provision
for such taxes. However, if changes in the federal tax laws or interpretations
thereof result in Lincoln Life's being taxed on income or gain attributable to
the VAA, then Lincoln Life may impose a charge against the VAA (with respect to
some or all (contracts) in order to make provision for payment of such taxes.
TAX STATUS OF NON-QUALIFIED 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 accounts
of insurance companies) underlying the contract be adequately diversified 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 guidance
concerning the extent to which contractowners may direct their investments to
particular variable subaccounts of a separate account. When guidance is
provided, 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
necessary to prevent the contractowner from being considered the owner of the
assets of the VAA.
In addition to the requirements of Section 817(h), code Section 72(s) provides
that contracts will not be treated 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 remaining portion of such interest must be distributed
at least as rapidly as under the method of distribution in effect at the time of
the contractowner's death; and (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 expectancy, and if that distribution begins within one year
of the contractowner's death. The designated beneficiary must be a natural
person. No regulations interpreting these requirements have yet been issued.
Thus, no assurance can be given that the provisions contained in contracts
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 regulations or
otherwise.
B-9
<PAGE>
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
regulations, are complex and subject to change. These rules also vary according
to the type of plan and the terms and conditions of the plan itself. Therefore,
no attempt is made herein to provide more than general information about the use
of contracts with the various types of plans, based on Lincoln Life's
understanding of the current federal tax laws as interpreted by the Internal
Revenue Service. Purchasers of contracts for use with such a plan and plan
participants and beneficiaries should consult counsel and other competent
advisers as to the suitability of the plan and the contract to their specific
needs, and as to applicable code limitations and tax consequences. Participants
under such plans, as well as contractowners, annuitants, and beneficiaries,
should also be aware that the rights of any person to any benefits under such
plans may be subject to the terms and conditions of the plans themselves
regardless of the terms and conditions of the contract.
Following are brief descriptions of the various types of plans and of the use of
contracts in connection therewith.
PUBLIC SCHOOL SYSTEMS AND 501(c)(3) ORGANIZATIONS [SECTION 403(b) PLANS]
Payments made to purchase annuity contracts by public school systems or code
Section 501(c)(3) organizations for their employees are excludable from the
gross income of the employee to the extent that aggregate payments for the
employee do not exceed the exclusion allowance provided by Section 403(b) of the
code, the over-all limits for excludable contributions of Section 415 of the
code or the limit on elective contributions. Furthermore, the investment results
of the fund credited to the account are not taxable until benefits are received
either in the form of annuity payouts, 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 [SECTION 401(a) PLANS]
Payments made by a corporate employer and the increments on all payments for
qualified corporate plans are not taxable as income to the employee until
distributed. However, the employee may be required to include these amounts in
gross income prior to distribution if the qualified plan or trust loses its
qualification. Corporate plans qualified under Sections 401(a) or 403(a) of the
code are subject to extensive rules, including limitations on maximum
contributions or benefits. Distributions of amounts in excess of non-deductible
employee contributions are generally taxable as ordinary income.
SELF-EMPLOYED INDIVIDUALS (H.R. 10 OR KEOGH)
Under code provisions, self-employed individuals may establish plans commonly
known as H.R. 10 or Keogh plans for themselves and their employees. The tax
consequences to participants under such plans depend upon the plan itself. Such
plans are subject to special rules in addition to those applicable to qualified
corporate plans; therefore, purchasers of the contracts for use with H.R. 10
plans should seek competent advice as to suitability of plan documents and the
funding contracts.
INDIVIDUAL RETIREMENT ANNUITIES (IRA)
Under Section 408 of the code, individuals may participate in a retirement
program known as 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
individual and his spouse) exceeds a specified amount. Distributions from
certain 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 certain
requirements are met. Distributions from IRA's are subject to certain
restrictions. Deductible IRA contributions and all IRA earnings will be taxed as
ordinary income when distributed. The failure to satisfy certain code
requirements with respect to an IRA may result in adverse tax consequences.
ROTH IRA
Beginning in 1998, Roth IRA's may be established. Non-deductible contributions
of $2,000 per year can be made to the Roth IRA. The contribution limits for
deductible and non-deductible IRA's are coordinated. In general, distributions
from a Roth IRA are not taxable and are not subject to the 10% early withdrawal
penalty that applies to Traditional IRA's. A five-year holding period as well as
other requirements must be satisfied if distributions are to be non-taxable
and/or not subject to the 10% early withdrawal penalty. Assuming certain income
restrictions are satisfied, a Traditional IRA can be converted to a Roth IRA.
This is a taxable event.
DEFERRED COMPENSATION PLANS (457 PLANS)
Under the code provisions, employees and independent contractors (participants)
performing services for state
B-10
<PAGE>
and local governments and certain tax-exempt organizations 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 sponsoring employer and are subject to the
claims of its creditors. Plans of state and local governments established on
August 20, 1996, or later, must hold all assets and income in trust (or
custodial accounts or an annuity contract) for the exclusive benefit of
participants and their beneficiaries. Section 457 plans that were in existence
before August 20, 1996 are allowed until January 1, 1999 to meet this
requirement. The amounts deferred under a plan which meet the requirements of
Section 457 of the code are not taxable as income to the participant until paid
or otherwise made available to the participant or beneficiary. Deferrals are
taxed as compensation from the employer when they are actually or constructively
received by the employee. As a general rule, the maximum amount which can be
deferred in any one year is the lesser of $7,500, as increased for cost of
living adjustments, or 33 1/3% of the participant's includable compensation.
However, in limited 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
employee pension plan ("SEP") established prior to January 1, 1997, 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 disability) or the failure to satisfy certain other
code requirements may result in adverse tax consequences. For tax years after
1996, salary reduction SEPs (SAR/ SEP) may no longer be established. However,
SAR/SEPs in existence prior to January 1, 1997 may continue to receive
contributions.
SAVINGS INCENTIVE MATCHED PLAN FOR EMPLOYEES (SIMPLE)
Employers with 100 or fewer employees, who earned $5,000 during the preceding
year, may establish SIMPLEs. SIMPLE plans may be in the form of an IRA or part
of a 401(k) plan. Under a SIMPLE IRA, employees are permitted to make elective
contributions to an IRA, stated as a percentage of the employee's compensation,
but not to exceed $6,000 annually as indexed. Such deferrals are not subject to
income tax until withdrawn. Withdrawals made by an employee in the first two
years of the employee's participation are subject to a 25 percent penalty. Later
withdrawals are subject to penalties applicable to IRAs. Under a SIMPLE 401(k),
employee deferrals are limited to no more than $6,000 annually. Employer
contributions are usually required for each type of SIMPLE.
TAX ON DISTRIBUTIONS FROM QUALIFIED CONTRACTS
The following rules generally apply to distributions from contracts purchased in
connection with the plans discussed above, other than 457 plans and Roth IRAs.
The portion, if any, of any contribution under a contract made by or on behalf
of an individual which is not excluded from the employee's gross income
(generally, the employee's own non-deductible contributions) constitutes his
investment in the contract. If a distribution is made in the form of annuity
payouts, the employee's investment in the contract (adjusted for certain refund
provisions) divided by his life expectancy (or other period for which annuity
payouts are expected to be made) constitutes a return of capital each year. The
dollar amount of annuity payouts received in any year in excess of such return
is taxable as ordinary income. However, 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 investment 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. Rules
generally provide 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 distribution
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
contract (adjusted for any prior withdrawals) allocated to that payment, if any,
will be taxed as ordinary income in the year of receipt.
Distributions from Section 401(a) plans, Section 403(b) plans, IRAs, SEPs and
Keoghs will be subject to a 10% penalty tax if made before age 59 1/2 unless
certain other exceptions apply. Failure to meet certain minimum distribution
requirements for the above plans, as well as for Section 457 plans, will result
in a 50% excise tax. Various other adverse tax consequences may also be
potentially applicable in certain circumstances to these types of plans.
Upon an annuitant's death, the taxation of benefits payable to his beneficiary
generally follow these same principles, subject to a variety of special rules.
B-11
<PAGE>
OTHER CONSIDERATIONS
It should be understood that the foregoing comments about the federal tax
consequences under these contracts are not exhaustive and that special rules are
provided with respect to other tax situations not discussed herein. Further, the
foregoing discussion does not address any applicable state, local, or foreign
tax laws. 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.
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, Lincoln Life may refer to the following
organizations (and others) in its marketing materials:
A.M. BEST'S RATING SYSTEM is designed to evaluate the various factors affecting
the overall performance of an insurance company in order to provide an opinion
as to an insurance company's relative financial strength and ability to meet its
contractual obligations. The procedure includes both a quantitative and
qualitative review of each company. A.M. Best also provides certain rankings, to
which Lincoln Life intends to refer.
DUFF & PHELPS insurance company claims paying ability (CPA) service provides
purchasers of insurance company policies and contracts with analytical and
statistical information on the solvency and liquidity of major U.S. licensed
insurance companies, both mutual and stock.
EAFE INDEX is prepared by Morgan Stanley Capital International (MSCI). It
measures performance of securities in Europe, Australia and the Far East. The
index reflects the movements of world stock markets by representing the
evolution of an unmanaged portfolio. The EAFE Index offers international
diversification with over 1,000 companies across 20 different countries.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports, including
reports on performance and portfolio analysis, fee and expense analysis.
MOODY'S insurance claims-paying rating is a system of rating insurance company's
financial strength, market leadership, and ability to meet financial
obligations. The purpose of Moody's ratings is to provide investors with a
simple system of gradation by which the relative quality of insurance companies
may be noted.
MORNINGSTAR is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuities.
STANDARD & POOR'S insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element in
the rating determination for such debt issues.
VARDS (VARIABLE ANNUITY RESEARCH DATA SERVICE) provides a comprehensive guide to
variable annuity contract features and historical fund performance. The service
also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable contracts.
STANDARD & POOR'S INDEX -- broad-based measurement of changes in stock-market
conditions based on the average performance of 500 widely held common stocks;
commonly known as the Standard & Poor's 500 (S&P 500). The selection of stocks,
their relative weightings to reflect differences in the number of outstanding
shares, and publication of the index itself are services of Standard & Poor's
Corporation, a financial advisory, securities rating, and publishing firm.
NASDAQ-OTC PRICE INDEX -- this index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value- weighted and
was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA) -- price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but including American Express
Company and American Telephone and Telegraph Company. Prepared and published by
Dow Jones & Company, it is the oldest and most widely quoted of all the market
indicators. The average is quoted in points, not dollars.
In its advertisements and other sales literature for the VAA and the series
funds, Lincoln Life intends to illustrate the advantages of the contracts in a
number of ways:
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several advantages of the
variable annuity contract. For example, but not by way of illustration, the
literature may emphasize the potential savings through tax deferral; the
potential advantage of the
B-12
<PAGE>
variable annuity account over the fixed account; and the compounding effect when
a client makes regular deposits to his or her contract.
INTERNET. An electronic communications network which may be used to provide
information regarding Lincoln Life, performance of the variable subaccounts and
advertisement literature.
DOLLAR-COST AVERAGING. (DCA) -- You may systematically transfer on a monthly
basis amounts from the DCA fixed account or certain variable subaccounts into
the variable subaccounts or guaranteed period subaccounts. The variable
subaccounts that are currently available for dollar cost averaging are the
variable subaccounts with the Cash Management Fund and the U.S. Government/AAA-
Rated Securities Fund. We reserve the right to change subaccounts under this
program. You may elect to participate in the DCA program at the time of
application or at anytime before the annuity commencement date by completing an
election form available from us. The minimum amount to be dollar cost averaged
is $10,000 over any period between six and 60 months. Once elected, the program
will remain in effect until the earlier of: (1) the annuity commencement date;
(2) the value of the amount being DCA'd is depleted; or (3) you cancel the
program by written request or by telephone if we have your telephone
authorization on file. Currently, there is no charge for this service. However,
we reserve the right to impose one. A transfer under this program is not
considered a transfer for purposes of limiting the number of transfers that may
be made, or assessing any charges which may apply to transfers. We reserve the
right to discontinue this program at any time. DCA does not assure a profit or
protect against loss.
AUTOMATIC WITHDRAWAL SERVICE. (AWS) -- AWS provides an automatic, periodic
withdrawal of contract value to you. You may elect to participate in AWS at the
time of application or at any time before the annuity commencement date by
sending a written request to our home office. The minimum contract value
required to establish AWS is $10,000. You may cancel or make changes to your AWS
program at any time by sending a written request to our home office. If
telephone authorization has been elected, certain changes may be made by
telephone. Notwithstanding the requirements of the program, any withdrawal must
be permitted by Section 401(a)(9) of the code for qualified plans or permitted
under Section 72 for non-qualified contracts. Currently, there is no charge for
this service. However, we reserve the right to impose one. If a charge is
imposed, it will not exceed $25 per transaction or 2% of the amount withdrawn,
whichever is less. We reserve the right to discontinue this service at any time.
CROSS-REINVESTMENT SERVICE -- Under this option, account value in a designated
variable subaccount or the fixed side of the contract that exceeds a certain
baseline amount is automatically transferred to another specific variable
subaccount(s) or the fixed side of the contract at specific intervals. You may
elect to participate in cross-reinvestment at the time of application or at any
time before the annuity commencement date by sending a written request to our
home office or by telephone if we have your telephone authorization on file. You
designate the holding account, the receiving account(s), and the baseline
amount. Cross-reinvestment will continue until we receive authorization to
terminate the program.
The minimum holding account value required to establish cross-reinvestment is
$10,000. Currently, there is no charge for this service. However, we reserve the
right to impose one. A transfer under this program is not considered a transfer
for purposes of limiting the number of transfers that may be made, or assessing
any charges which may apply to transfers. We reserve the right to discontinue
this service at any time.
LINCOLN LIFE'S CUSTOMERS. Sales literature for the VAA and the series' funds may
refer to the number of employers and the number of individual annuity clients
which Lincoln Life serves. As of the date of this SAI, Lincoln Life was serving
over 15,000 employers and had more than 1 million annuity clients.
LINCOLN LIFE'S ASSETS, SIZE. Lincoln Life may discuss its general financial
condition (see, for example, the reference to A.M. Best Company, above); it may
refer to its assets; it may also discuss its relative size and/or ranking among
companies in the industry or among any sub-classification of those companies,
based upon recognized evaluation criteria (see reference to A.M. Best Company
above). For example, at year-end 1997 Lincoln Life had statutory admitted assets
of over $58 billion.
FINANCIAL STATEMENTS
To be filed by amendment.
B-13
<PAGE>
Part C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements provided in the Statement of Additional Information.
(TO BE FILED BY AMENDMENT.)
(b) Exhibits
(1) Resolution of the Board of Directors and Memorandum from the
President of The Lincoln National Life Insurance Company authorizing
establishment of the Variable Account are incorporated by reference to
Registration Statement on Form N-4 (33-27783) filed on December 5, 1996.
(2) Not Applicable.
(3) (a) Underwriting Agreement incorporated herein by reference to
Registration Statement on Form N-4 (33-27783) filed on December 5, 1996.
(3) (b) Amendment to Underwriting Agreement incorporated herein by
reference to Registration Statement on Form N-4 (333-18419) filed on
March 27, 1998.
(3) (c) Selling Group Agreement incorporated herein by reference to
Registration Statement on Form N-4 (333-18419) filed on March 27, 1998.
(4) Form of Variable Annuity contract.
(5) Form of Application.
(6) (a) Articles of Incorporation of The Lincoln National Life Insurance
Company are incorporated herein by reference to Registration
Statement on Form N-4 (33-27783) filed on December 5, 1996.
(b) By-laws of The Lincoln National Life Insurance Company are
incorporated herein by reference to Registration Statement on Form
N-4 (33-27783) filed on December 5, 1996.
(7) Not applicable.
(8) (a) Participation Agreement incorporated herein by reference to
Registration Statement on Form N-4 (333-18419) filed on April 1,
1997.
(b) Amendment to Participation Agreement incorporated herein by
reference to Registration Statement on Form N-4 (333-18419) filed
on April 1, 1997.
(c) Amendment to Indemnification Agreement incorporated herein by
reference to Registration Statement on Form N-4 (333-18419) filed
on April 1, 1997.
(d) Service Agreement between Delaware Management Holdings, Inc.,
Delaware Services Company, Inc. and Lincoln National Life Insurance
Company is incorporated herein by reference to the Registration
Statement of Flexible Premium Variable Life Account F, Form S-6
(333-40745) filed November 21, 1997.
(9) Opinion and Consent of Mary Jo Ardington, Counsel, of The Lincoln
National Life Insurance Company (To be filed by amendment.)
<PAGE>
(10) Consent of Ernst & Young LLP, Independent Auditors. (To be filed by
amendment.)
(11) Not applicable.
(12) Not applicable.
(13) Schedule for Computation of Performance Results. (To be filed by
amendment)
(14) Not applicable.
(15) (a) Organizational Chart of The Lincoln National Insurance Holding
Company System is incorporated herein by reference to Registration Statement
on Form N-4 (File No. 333-62819) filed September 3, 1998.
(b) Books and Records Report is incorporated herein by reference to
Registration Statement on Form N-4 (File No. 333-18419) filed on March 27,
1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME POSITIONS AND OFFICES WITH DEPOSITOR
- ---- ------------------------------------
Gabriel L. Shaheen* President, Chief Executive Officer and Director
Jon A. Boscia** Director
Carolyn P. Brody* Vice President
Thomas L. Clagg* Vice President and Associate General Counsell
Kelly D. Clevenger* Vice President
Jeffrey K. Dellinger* Vice President
John H. Gotta**** Senior Vice President
Donald E. Keller* Vice President
Stephen H. Lewis* Senior Vice President
H. Thomas McMeekin** Director
Reed P. Miller* Vice President
Lawrence T. Rowland*** Executive Vice President and Director
Keith J. Ryan* Senior Vice President, Chief Financial Officer and
Assistant Treasurer
Richard C. Vaughan** Director
Roy V. Washington* Vice President and Chief Compliance Officer
Janet C. Whitney** Vice President and Treasurer
C. Suzanne Womack** Secretary and Assistant Vice President
* Principal business address is 1300 South Clinton Street,
Fort Wayne, IN 46802
** Principal business address is 200 East Berry Street, Fort Wayne,
IN 46802-2706.
<PAGE>
*** Principal business address is 1700 Magnovox Way, One Reinsurance
Place, Fort Wayne, IN 46804
**** Principal business address is 900 Cottage Grove Road, Bloomfield,
CT 06152-2321.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
See Exhibit 15(a): Organizational Chart of The Lincoln National Insurance
Holding Company System.
ITEM 27. NUMBER OF PURCHASERS
As of August 31, 1998, there were 268,490 contractowners.
ITEM 28. INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-laws of The Lincoln National Life
Insurance Company (Lincoln Life) provides that Lincoln Life will indemnify
certain persons against expenses, judgments and certain other specified
costs incurred by any such person if he/she is made a party or is
threatened to be made a party to a suit or proceeding because he/she was a
director, officer, or employee of Lincoln Life, as long as he/she acted in
good faith and in a manner he/she reasonably believed to be in the best
interests of, or not opposed to the best interests of, Lincoln Life.
Certain additional conditions apply to indemnification in criminal
proceedings.
In particular, separate conditions govern indemnification of directors,
officers, and employees of Lincoln Life in connection with suits by, or in
the right of, Lincoln Life. Please refer to Article VII of the By-laws of
Lincoln Life (Exhibit No. 6(b) hereto) for the full text of the
indemnification provisions. Indemnification is permitted by, and is
subject to the requirements of, Indiana law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities
Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in Item 28(a) above or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is again public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the
<PAGE>
Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
(a) 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., 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.,
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
27304 Park Vista Road
Van Nuys, CA 91301
John A. Agar Regional Vice President
1501 N. University Drive, Suite 227A
Little Rock, AR 72207
<PAGE>
Robert B. Aprison Vice President
2983 Bryn Wood Drive
Madison, WI 53711
S Richard Armstrong Assistant Vice President
L William W. Bagnard Vice President
Steven L. Barnes Senior Vice President
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
B Carl R. Bauer Assistant Vice President
Michelle A. Bergeron Vice President
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President
27 Drumlin Road
West Simsbury, CT 06092
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
John A. Blanchard Regional Vice President
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President
P.O. Box 1665
Brentwood, TN 37024-1655
Michael L. Brethower Vice President
2320 North Austin Avenue
Georgetown, TX 78628
C. Alan Brown Regional Vice President
4129 Laclede Avenue
St. Louis, MO 63108
L Daniel C. Brown Sr. Vice President
H J. Peter Burns Vice President
Brian C. Casey Regional Vice President
9508 Cable Drive
Kensington, MD 20895
<PAGE>
Victor C. Cassato Senior Vice President
609 W. Littleton Blvd., Suite 310
Littleton, CO 80120
Christopher J. Cassin Senior Vice President
111 W. Chicago Avenue, Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director
L Kevin G. Clifford Director, President
Ruth M. Collier Vice President
145 West 67th Street, Suite #12K
New York, NY 10023
S David Coolbaugh Assistant Vice President
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
--------------------- ---------------------
Thomas E. Cournoyer Vice President
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President
4116 Woodbine St.
Chevy Chase, MD 20815
L 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
G. Michael Dill Senior Vice President
505 E. Main Street
Jenks, OK 74037
<PAGE>
Kirk D. Dodge Senior Vice President
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter Doran Senior Vice President
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary
Robart W. Durbin Vice President
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President
L Paul H. Fieberg Sr. Vice President
John R. Fodor Vice President
15 Latisquama Road
Southborough, MA 01772
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ----------------------
L Mark P. Freeman, Jr. Director
Clyde E. Gardner Vice President
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President
Jeffrey J. Greiner Vice President
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director
B Mariellen Hamann Assistant Vice President
David E. Harper Vice President
R.D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Regional Vice President
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President
1225 Vista Del Mar Drive
Delray Beach, FL 33483
L Robert L. Johansen Vice President, Controller
Michael J. Johnston Director
630 Fifth Ave., 36th Floor
New York, NY 10111-0121
B Damien M. Jordan Vice President
V. John Kriss Vice President
P.O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President
12558 Highlands Place
Fishers, IN 46038
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
B Karl A. Lewis Assistant Vice President
T. Blake Liberty Regional Vice President
5506 East Mineral Lane
Littleton, CO 80122
L Lorin E. Liesy Assistant Vice President
L Susan G. Lindgren Vice President - Institutional
Investment Services Division
S Stella Lopez Vice President
LW Robert W. Lovelace Director
Stephen A. Malbasa Vice President
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President
5241 South Race Street
Littleton, CO 80121
L John C. Massar Director, Senior Vice President
L E. Lee McClennahan Senior Vice President
L Jamie R. McCrary Assistant Vice President
S John V. McLaughlin Senior Vice President
Terry W. McNabb Vice President
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Mellnat Vice President-Institutional
Investment Services Division
David R. Murray Vice President
60 Briant Avenue
Sudbury, MA 01776
Stephen S. Nelson Vice President
P.O. Box 470528
Charlotte, NC 28247-0528
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
William E. Noe Regional Vice President
304 River Oaks Road
Brentwood, TN 37207
Peter A. Nyhus Regional Vice President
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President
32 Ridge Avenue
Newton Centre, MA 02159
B Candance D. Pilgrim Assistant Vice President
Carl S. Platou Regional Vice President
4021 96th Avenue, SE
Mercer Island, WA 98040
L John O. Post, Jr. Vice President
S Richard P. Prior Assistant Vice President
Steven J. Reitman Vice President
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President
12025 Delmahoy Drive
Charlotte, NC 28277
George S. Ross Senior Vice President
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President
L James F. Rothenberg Director
Douglas F. Rowe Regional Vice President
30008 Oakland Hills Drive
Georgetown, TX 78628
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
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 Avenue, No. 4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President
31465 St. Andrews
Westlake, OH 44145
L Daniel B. Seivert Assistant Vice President
L R. Michael Shanahan Director
David W. Short Chairman of the Board
Suite 212, 1000 RIDC Plaza
Pittsburgh, PA 15238-2941
William P. Simon, Jr. Senior Vice President
554 Canterbury Lane
Berwyn, PA 19312
L John C. Smith Vice President-
Institutional Investment
Services Division
L Mary E. Smith Vice President-
Institutional Investment
Services Division
Rodney G. Smith Vice President
100 N. Central Expressway, Suite 1214
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President
<PAGE>
(b) (1) (2)
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
Daniel S. Spradling Senior Vice President
#4 West Fourth Avenue, Suite 406
San Mateo, CA 94402
B Max D. Stites Vice President
Thomas A. Stout Regional Vice President
12913 Kendale Lane
Bowie, MD 20715
Craig R. Strauser Regional Vice President
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Vice President
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew Taylor Assistant Vice President
S James P. Toomey Vice President
I Christopher E. Trede Vice President
George F. Truesdail Vice President
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President
60 Reedland Woods Way
Tiburon, CA 94920
H Andrew J. Ward Vice President
L David M. Ward Vice President-
Institutional Investment
Services Division
Thomas E. Warren Regional Vice President
1701 Starling Drive
Sarasota, FL 34231
L J. Kelly Webb Sr. Senior Vice President, Treasurer
<PAGE>
<TABLE>
<CAPTION>
(b) (1) (2)
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ---------------------
Gregory J. Weimer Vice President
125 Surrey Drive
Canonsburg, PA 15317
B Timothy W. Weiss Director
N. Dexter Williams Senior Vice President
25 Whitside Court
Danville, CA 94526
Timothy J. Wilson Regional Vice President
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President
H Marshall D. Wingo Sr. Director, Senior Vice President
L Robert L. Winston Director, Sr. Vice President
Laurie B. Wood Regional Vice President
3500 West Camino de Urania
Tucson, AZ 85741
William R. 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
320 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
- - -------------
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles,
CA 90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
Item 32
- - -------
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual Contract offered by
the Prospectus, a space that an applicant can check to request a Statement
of Additional Information, or (2) a post card or a similar written
communication affixed to or included in the Prospectus that the applicant
can remove to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to Lincoln Life at the address or
phone number listed in the Prospectus.
(d) The Lincoln National Life Insurance Company hereby represents that the fees
and charges deducted under the contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by The Lincoln National Life Insurance Company.
(e) Registrant hereby represents that it is relying on the American Council of
Life Insurance (avail. Nov. 28, 1988) no-action letter with respect to
Contracts used in connection with retirement plans meeting the requirements
of Section 403(b) of the Internal Revenue Code, and represents further that
it will comply with the provisions of paragraphs (1) through (4) set forth
in that no-action letter.
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
See Exhibit 15(b): Books and Records Report.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post effective amendment to this
registration statement under the Securities Act of 1933 as frequently as
necessary to ensure that the audited financial statements in the registration
statement are never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (i) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information or (ii) a
space in the Contract application or order to purchase that an applicant can
check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver promptly, upon written or oral request made
to The Lincoln National Life Insurance Company at the address or phone number
listed in the Prospectus, any Statement of Additional Information and any
financial statements required by Form N-4 to be made available to applicants or
owners.
(d) The Lincoln National Life Insurance Company hereby represents that the fees
and charges deducted under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by The Lincoln National Life Insurance Company.
<PAGE>
(e) Registrant represents that it is relying on the American Council of Life
Insurance (avail. Nov. 28, 1988) no-action letter with respect to Contracts
used in connection with retirement plan meeting the requirements of Section
403(b) of the Internal Revenue Code, and represents further that it will comply
with the provisions of paragraphs (1) through (4) set forth in that no-action
letter.
(f) For Contracts sold in connection with the Texas Option Retirement Program,
Registrant is relying on Rule 6c-7 and represents that paragraphs (a) through
(d) of that rule have been complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement on Form N-4 to
be signed on its behalf, in the City of Fort Wayne and State of Indiana on the
_____th day of September, 1998.
LINCOLN NATIONAL VARIABLE ANNUITY
ACCOUNT H (Shareholder's Advantage)
(Registrant)
By: /s/ Stephen H. Lewis
---------------------------------------------
Stephen H. Lewis
(Signature-Officer of Depositor)
Senior Vice President, LNL
(Title)
By: THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
(Depositor)
By: /s/ Gabriel L. Shaheen
---------------------------------------------
Gabriel L. Shaheen
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Gabriel L. Shaheen President, Chief Executive Officer September__, 1998
- --------------------------------- & Director (Principal Executive
Gabriel L. Shaheen Officer)
Executive Vice President and September__, 1998
- --------------------------------- Director
Lawrence T. Rowland
/s/ Keith J. Ryan Senior Vice President, Chief September__, 1998
- --------------------------------- Financial Officer and Assistant
Keith J. Ryan Treasurer (Principal Accounting
Officer and Principal Financial
Officer)
<PAGE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ H. Thomas McMeekin Director September__, 1998
- ---------------------------------
H. Thomas McMeekin
/s/ Richard C. Vaughan Director September__, 1998
- ---------------------------------
Richard C. Vaughan
/s/ Jon A. Boscia Director September__, 1998
- ---------------------------------
Jon A. Boscia
</TABLE>
<PAGE>
Exhibit 4
ABRAHAM LINCOLN
XX-0123456
- -Registered Trademark-[LOGO] LINCOLN NATIONAL
LIFE INSURANCE CO.
----------------------------
A part of LINCOLN NATIONAL CORPORATION
(a Stock Company)
ANNUITY CONTRACT
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY OR
VARIABLE AND MARKET VALUE ADJUSTED FIXED ANNUITY
BENEFIT PAYMENT OPTIONS
NONPARTICIPATING
The Lincoln National Life Insurance Company (LNL) agrees to provide the benefits
and other rights described in this Contract in accordance with the terms of this
Contract.
READ THIS CONTRACT CAREFULLY. This is a legal contract between the Owner and
LNL. We want to be sure you understand the features and benefits contained in
this Contract. IT IS THEREFORE IMPORTANT THAT YOU READ YOUR CONTRACT CAREFULLY.
If you have any questions after reading the Contract, we hope you will contact
your representative or the Home Office of LNL.
NOTICE OF 10-DAY RIGHT TO EXAMINE CONTRACT. WITHIN 10 DAYS AFTER THIS CONTRACT
IS FIRST RECEIVED, IT MAY BE CANCELLED FOR ANY REASON WITHOUT PENALTY (E.G., THE
SALES CHARGE WILL BE RETURNED AND NO MARKET VALUE ADJUSTMENT WILL APPLY) BY
DELIVERING OR MAILING IT TO THE REPRESENTATIVE THROUGH WHOM IT WAS PURCHASED OR
TO THE HOME OFFICE OF LNL. UPON CANCELLATION, LNL WILL RETURN THE VALUE OF ANY
GROSS PURCHASE PAYMENTS MADE TO THE VARIABLE ACCOUNT, THE GUARANTEED INTEREST
ACCOUNT AND/OR THE DCA FIXED ACCOUNT OF THE CONTRACT.
PAYMENTS AND VALUES BASED ON THE GUARANTEED INTEREST ACCOUNT (INCLUDING
TRANSFERS, WITHDRAWALS, SURRENDER, AND/OR ANNUITIZATION) MAY BE SUBJECT TO A
MARKET VALUE ADJUSTMENT, WHICH MAY RESULT IN UPWARD OR DOWNWARD ADJUSTMENTS IN
AMOUNTS PAYABLE TO THE OWNER.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT, ARE VARIABLE (THE AMOUNT MAY INCREASE OR
DECREASE), AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT (SEE PAGES 6
AND 12).
Signed for The Lincoln National Life Insurance Company at its Home Office
located at 1300 South Clinton Street, Fort Wayne, Indiana 46802.
/s/ Jon A. Boscia /s/ Kathleen Peterson
JON A. BOSCIA, PRESIDENT KATHLEEN PETERSON, SECOND VICE PRESIDENT
Form 29266
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 PURCHASE PAYMENTS, OPTIONS AND BENEFITS. . . . . . . . . . . . . . . 5
3 ANNUITY PAYMENT OPTIONS. . . . . . . . . . . . . . . . . . . . . . .12
4 BENEFICIARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . .14
6 ANNUITY PURCHASE RATES UNDER A VARIABLE PAYMENT OPTION . . . . . . .16
7 ANNUITY PURCHASE RATES UNDER A FIXED PAYMENT OPTION. . . . . . . . .17
Form 29266
<PAGE>
CONTRACT DATA
Contract Number XX-0123456
Annuitant Abraham Lincoln
Age at Issue 35
Contract Date April 1, 1989
Gross Purchase Payment $100,000
Purchase Payment Frequency Flexible
Maturity Date April 1, 2044
Owner
Abraham Lincoln
Beneficiary Designation
PLEASE REFER TO THE CLIENT INFORMATION PROFILE FOR BENEFICIARY DESIGNATION
VARIABLE ACCOUNT
There are currently [ten] Variable Sub-accounts in the Variable Account
available to the Owner. The Owner may direct Net Purchase Payments under
the Contract to any of the available Variable Sub-accounts, subject to
limitations. The amounts allocated to each Variable Sub-account will be
invested at net asset value in the shares of one of the Funds of the
American Variable Insurance Series (Series). The Funds are:
1. [Growth Fund]
2. [International Fund]
3. [Global Growth Fund]
4. [Growth-Income Fund]
5. [Asset Allocation Fund]
6. [High-Yield Bond Fund]
7. [Bond Fund]
8. [U.S. Government/AAA-Rated Securities Fund]
9. [Cash Management Fund]
10. [Global Small Cap Fund]
11. Other funds made available by LNL
See Section 2.03 for provisions governing any limitations, substi-
tutions or elimination of Funds.
Form 29266 Page 3
<PAGE>
GUARANTEED INTEREST ACCOUNT
There are currently [five] fixed Guaranteed Periods available to the Owner.
The Owner may direct Net Purchase Payments under the Contract to any of the
available Guaranteed Periods, subject to limitations. The Guaranteed Periods
available under this Contract are:
1. [1 year]
2. [3 year]
3. [5 year]
4. [7 year]
5. [10 year]
6. Other Guaranteed Periods made available by LNL
See Section 2.05 and Section 2.06 regarding Guaranteed Interest Account
and Crediting of Interest on Guaranteed Interest Account
SALES CHARGE
For purposes of determining the Sales Charge associated with this Con-
tract, the following table will be used.
<TABLE>
<CAPTION>
Sales Charge as a percentage
Owner's Investment (as defined in Section 2.13) of Gross Purchase Payment
- ------------------ -------------------------
<S> <C>
Less than $50,000 5.75%
$50,000 or greater but less than $100,000 4.50%
$100,000 or greater but less than $250,000 3.50%
$250,000 or greater but less than $500,000 2.50%
$500,000 or greater but less than $1,000,000 2.00%
$1,000,000 or greater 1.00%
</TABLE>
Form 29266 Page 3a
<PAGE>
ARTICLE 1
DEFINITIONS
1.01
ACCUMULATION UNIT - A unit of measure used to calculate the variable Contract
Value during the accumulation period.
1.02
ANNUITANT OR JOINT ANNUITANT -- The person(s) upon whose life the annuity
benefit payments made after the Annuity Commencement Date will be based.
1.03
ANNUITY COMMENCEMENT DATE -- The Valuation Date when the Contract Value,
adjusted by applicable Market Value Adjustments, is initially withdrawn for
payment of annuity benefits under the Annuity Payment Option selected.
1.04
ANNUITY PAYMENT OPTION -- An optional form of payment of annuity benefits
provided for under this Contract.
1.05
ANNUITY UNIT -- A unit of measure used after the Annuity Commencement Date
to calculate the amount of each variable annuity benefit payment.
1.06
BENEFICIARY -- The person or entity designated by the Owner to receive the
Death Benefit, if any, payable upon the death of the Owner.
1.07
CODE -- The Internal Revenue Code (IRC) of 1986, as amended.
1.08
CONTRACT -- The agreement, between LNL and the Owner, in which LNL provides a
variable and/or a market value adjusted fixed annuity.
1.09
CONTRACT VALUE -- The sum of the values of all the Accumulation Units at a
given time and the value of the Guaranteed Interest Account and DCA Fixed
Account attributable to this Contract.
1.10
CONTRACT YEAR -- Each twelve month period starting with the Contract Date on
your Contract Data Pages.
1.11
DCA FIXED ACCOUNT -- An identifiable account, established to accept Net
Purchase Payments or transfers of Contract Value, that may only be used for
Dollar Cost Averaging purposes. The DCA Fixed Account is a part of the
General Account of LNL.
1.12
DEATH BENEFIT -- The amount payable to the Owner's designated Beneficiary
upon death of the Owner.
1.13
DOLLAR COST AVERAGING (DCA) -- An option that allows automatic transfers of
Net Purchase Payments or Contract Value in equal periodic installments over a
defined period in accordance with LNL procedures. The transfers are from the
DCA Fixed Account or Variable Sub-account(s) made available by LNL for this
purpose to one or more Variable Sub-account(s) or Guaranteed Period
Sub-accounts available under this Contract and selected by the Owner. Any
interest credited or other gains, if any, attributable to the DCA Fixed
Account or Variable Sub-account will be transferred with the final DCA
transfer.
1.14
EXPIRATION DATE(S) -- The date(s) on which the Guaranteed Period(s) of the
Guaranteed Interest Account, if any, will end.
1.15
FUND -- Any of the underlying investment options available in the Series in
which Net Purchase Payments are invested through the Variable Account.
1.16
GENERAL ACCOUNT -- An account consisting of all assets owned by LNL other
than those assets in segregated investment accounts.
1.17
GROSS PURCHASE PAYMENT -- Amounts paid into this Contract before deduction
of Sales Charge.
1.18
GUARANTEED INTEREST ACCOUNT -- The segregated investment account into which
LNL sets aside and invests assets allocated to Guaranteed Period
Sub-accounts.
1.19
GUARANTEED INTEREST RATE -- The effective annual rate of interest LNL
guarantees to credit on Net Purchase Payments or Contract Value allocated to
each Guaranteed Period Sub-account.
Form 29266 Page 4
<PAGE>
1.20
GUARANTEED PERIOD -- The length, in years, of the period during which an
initial or subsequent Guaranteed Interest Rate will be credited. The
Guaranteed Period is selected by the Owner from those made available by LNL
at the time of selection.
1.21
GUARANTEED PERIOD SUB-ACCOUNT -- That portion of the Guaranteed Interest
Account which accepts Net Purchase Payments or transfers for each Guaranteed
Period at each Guaranteed Interest Rate.
1.22
HOME OFFICE -- The principal office of LNL located at 1300 South Clinton
Street, Fort Wayne, Indiana 46802, or an institution designated by LNL.
1.23
LNL -- The Lincoln National Life Insurance Company.
1.24
MATURITY DATE -- The date specified on the Contract Data Pages of this
Contract.
1.25
NET ASSET VALUE PER SHARE -- The market value of a Fund or Series share
calculated each day by taking the closing market value of all securities
owned, adding the value of all other assets (such as cash), subtracting all
liabilities, and then dividing the result (total net assets) by the number
of shares outstanding.
1.26
NET PURCHASE PAYMENT -- An amount equal to the Gross Purchase Payment less
the Sales Charge. The Net Purchase Payment is the amount allocated into the
Guaranteed Interest Account, the DCA Fixed Account and/or the Variable
Account.
1.27
OWNER OR JOINT OWNER -- The individual(s) or entity who exercise rights of
ownership under this Contract.
1.28
QUALIFIED PLAN -- A retirement plan qualified for special tax treatment under
the Internal Revenue Code of 1986, as amended, including Sections 401, 403,
408, 408A and 457. All other plans are considered Non-Qualified.
1.29
SALES CHARGE -- A charge deducted from each Gross Purchase Payment prior to
allocation into the Guaranteed Interest Account, the DCA Fixed Account
and/or the Variable Account, expressed as a percentage of the Gross Purchase
Payment.
1.30
SERIES -- American Variable Insurance Series, the mutual fund(s) into which
Net Purchase Payments allocated to the Variable Account are invested.
1.31
VALUATION DATE -- Close of the market on each day that the New York Stock
Exchange is open for business.
1.32
VALUATION PERIOD -- The period commencing at the close of business on a
particular Valuation Date and ending at the close of business on the next
succeeding Valuation Date.
1.33
VARIABLE ACCOUNT -- The segregated investment account into which The Lincoln
National Life Insurance Company sets aside and invests the assets allocated
to the Variable Sub-account(s) selected by the Owner.
1.34
VARIABLE SUB-ACCOUNT -- That portion of the Variable Account which invests in
shares of a particular Fund in the Series. There is a separate Variable
Sub-account for each particular Fund.
ARTICLE 2
PURCHASE PAYMENTS, OPTIONS, AND BENEFITS
2.01 WHERE PAYABLE
All Gross Purchase Payments must be made to LNL at its Home Office.
2.02 AMOUNT AND FREQUENCY
Gross Purchase Payments are made in an amount and at the frequency shown on
the Contract Data Pages. The Owner may change the frequency or amount of
Gross Purchase Payments subject to LNL's rules in effect at the time of the
change.
The minimum initial Gross Purchase Payment is $1,500 for NonQualified Plans
and $300 for Qualified Plans. The minimum annual amount of subsequent Gross
Purchase Payments is $300 for either Non-Qualified Plans or Qualified Plans.
The minimum payment to the Contract at any one time must be at least $25.00
if transmitted electronically; otherwise the minimum amount is $100.00.
Gross Purchase Payments may be made until the earliest of the Annuity
Commencement Date, the surrender of the Contract, Maturity Date or death of
Form 29266 Page 5
<PAGE>
the Owner, or Joint Owner, that results in payment of any Death Benefit.
2.03 VARIABLE ACCOUNT
Net Purchase Payments under the Contract may be allocated to the Lincoln
National Variable Annuity Account H (Variable Account) of the Contract. The
Variable Account is for the exclusive benefit of persons entitled to receive
benefits under variable annuity contracts. The Variable Account will not be
charged with the liabilities arising from any other part of LNL's business.
The Owner may direct Net Purchase Payments under the Contract to any of the
then available Variable Sub-accounts subject to the following limitations:
1) the allocation to any one Variable Sub-account must be at least $20.
2) If the Owner elects to direct Net Purchase Payments to a new Variable
Sub-account not previously selected, that election must be made in writing
to LNL or may be made by telephone transfer provided LNL has received the
appropriate authorization from the Owner for telephone transfers in
accordance with LNL procedures.
The amounts allocated to each Variable Sub-account will be invested at net
asset value in the shares of one of the Funds of the American Variable
Insurance Series (Series). The Funds are shown on the Contract Data page.
Subject to any required regulatory approvals, LNL reserves the right to
eliminate the shares of any Fund and substitute the shares of a different
Fund or investment company or mutual fund if the shares of a Fund are no
longer available for investment, or, if in the judgment of LNL, further
investment in any Fund should become inappropriate in view of the purposes
of the Contract. LNL may add a new Variable Sub-account in order to invest
the assets of the Variable Account into a Fund. LNL will give the Owner
written notice of the elimination and substitution of any Fund within fifteen
days after such substitution occurs.
LNL will use each Net Purchase Payment allocated to the Variable Account by
the Owner to buy Accumulation Units in the Variable Sub-account(s) selected
by the Owner. The number of Accumulation Units bought will be determined by
dividing the amount directed to the Variable Sub-account by the dollar value
of an Accumulation Unit in such Variable Sub-account next determined,
immediately following receipt of the Net Purchase Payment at the Home Office
of LNL. The number of Accumulation Units held for the Variable Account of an
Owner will not be changed by any change in the dollar value of Accumulation
Units in any Variable Sub-account.
2.04 VALUATION OF ACCUMULATION UNITS
The value of the Variable Account at any time prior to the Annuity
Commencement Date equals the sum of the values of the Accumulation Units
credited in the Variable Sub-accounts under the Contract.
The value of a Variable Sub-account on any Valuation Date is the number of
Accumulation Units in the Variable Sub-account multiplied by the value of an
Accumulation Unit in the Variable Sub-account.
Accumulation Units for each Variable Sub-account are valued separately.
Initially, the value of an Accumulation Unit was arbitrarily established at
the inception of the Variable Sub-account. It may increase or decrease from
Valuation Period to Valuation Period. The Accumulation Unit value for a
Variable Sub-account for any later Valuation Period is determined as follows:
a. The total value of Fund or Series shares held in the Variable
Sub-account is calculated by multiplying the number of Fund or Series
shares owned by the Variable Sub-account at the beginning of the Valuation
Period by the Net Asset Value Per Share of the Fund or Series at the end of
the Valuation Period, and adding any dividend or other distribution of the
Fund or Series if an ex-dividend date occurs during the Valuation Period;
minus
b. The liabilities of the Variable Sub-account at the end of the Valuation
Period (such liabilities include daily charges imposed on the Variable
Sub-account, and may include a charge or credit with respect to any taxes
paid or reserved for by LNL that LNL determines as a result of the
operation from the Variable Account); the result divided by
c. The outstanding number of Accumulation Units in the Variable Sub-account
at the beginning of the Valuation Period.
The daily charges imposed on a Variable Sub-account for any Valuation Period
represent the daily mortality and expense risk charge and the daily
administrative charge adjusted for the number of calendar days in the
Valuation Period. On an annual basis, these charges will not exceed 0.69%.
For any period in which the Enhanced Guaranteed Minimum Death Benefit (see
Section 2.14) is not in effect, these charges will not exceed 0.60% on an
annual basis. The Accumulation Unit value may increase or decrease the
dollar value of benefits under the Contract. The dollar value of benefits
will not be adversely affected by expenses incurred by LNL.
2.05 GUARANTEED INTEREST ACCOUNT
Net Purchase Payments under the Contract may be allocated to the Guaranteed
Interest Account. The Guaranteed Interest Account is for the exclusive
Form 29266 Page 6
<PAGE>
benefit of persons entitled to receive benefits under market value adjusted
annuity contracts issued by LNL. The Guaranteed Interest Account will not be
charged with the liabilities arising from any other part of LNL's business.
The Owner may direct Net Purchase Payments under the Contract to any of the
available Guaranteed Period Sub-accounts, subject to the following
limitations:
1) The allocation to a Guaranteed Period Sub-account must be at least $20.
2) If the Owner elects to direct Net Purchase Payments to a new Guaranteed
Period Sub-account not previously selected, that election must be made in
writing to LNL or may be made by telephone transfer provided LNL has
received the appropriate authorization from the Owner for telephone
transfers in accordance with LNL procedures.
3) The amounts allocated to each Guaranteed Period Sub-account will be
invested at the Guaranteed Interest Rate in effect on the day the payment
or transfer is credited to the Guaranteed Period Sub-account.
The available Guaranteed Periods are shown on the Contract Data page. LNL
reserves the right to eliminate any of the Guaranteed Periods shown at any
time. LNL may also add one or more new Guaranteed Periods at a later date.
2.06 CREDITING OF INTEREST ON GUARANTEED INTEREST ACCOUNT
Upon receipt by LNL of each Net Purchase Payment, all of the Net Purchase
Payment allocated to the Guaranteed Interest Account will be credited to the
Guaranteed Interest Account and allocated to the Guaranteed Period
Sub-account(s) selected by the Owner. The value of the Guaranteed Interest
Account, if any, at any time, is equal to the sum of the then current values
of all Guaranteed Period Sub-accounts with respect to this Contract before
any applicable Market Value Adjustment.
Prior to the earlier of:
a. the Annuity Commencement Date;
b. payment of any Death Benefit; or
c. surrender of this Contract;
LNL guarantees that it will credit interest on amounts allocated to the
Guaranteed Interest Account at an effective annual rate not less than 3.0%
during all years. LNL may credit interest at effective annual rates in
excess of 3.0% at any time.
Guaranteed Periods.
The initial Guaranteed Period(s), if any, is selected by the Owner for each
Net Purchase Payment and each amount transferred in accordance with Section
2.09. Each Net Purchase Payment or the portion thereof (or amount
transferred in accordance with Section 2.09) allocated to a particular
Guaranteed Period Sub-account will earn interest at the specified Guaranteed
Interest Rate in effect on the day the payment or transfer is credited. The
initial Guaranteed Period(s) begins on the date a Net Purchase Payment is
accepted into that Guaranteed Period Sub-account (or, in the case of a
transfer, on the effective date of the transfer) and ends on the Expiration
Date for each duration selected.
Each Guaranteed Period Sub-account will have an associated Guaranteed
Interest Rate and Expiration Date, and will be treated separately from other
Guaranteed Period Subaccounts for purposes of determining any Market Value
Adjustment. As a result of additional Net Purchase Payments and transferred
amounts, Guaranteed Period Sub-accounts for Guaranteed Periods of the same
duration may have different Guaranteed Interest Rates, Ex-piration Dates, and
Market Value Adjustments.
LNL will send written notice to the Owner, to the last address known to LNL,
regarding each up-coming expiration of a Guaranteed Period. LNL will send
this notice at least 60 days prior to the Expiration Date of such Guaranteed
Period. If available, a subsequent Guaranteed Period of the same duration
will begin automatically upon the expiration of the preceding Guaranteed
Period unless LNL receives, in writing prior to the expiration of such
Guaranteed Period, an election by the Owner of a different currently
available Guaranteed Period; or instructions to transfer all or a portion of
the value in the applicable Guaranteed Period Sub-account to one or more of
the Variable Sub-accounts or DCA Fixed Account in accordance with the
transfer provision as described in Section 2.09. If only a portion is
transferred, any remaining amounts will automatically be invested in a
subsequent Guaranteed Period Sub-account of the same duration as the previous
Guaranteed Period Sub-account unless otherwise instructed by the Owner. In
the event the preceding Guaranteed Period is no longer available and no
election or instructions have been received from the Owner, all or the
remaining portion of value in the Guaranteed Period Subaccount will be
transferred to a one year Guaranteed Period.
Form 29266 Page 7
<PAGE>
GUARANTEED INTEREST RATE.
LNL will establish the applicable effective annual Guaranteed Interest Rate
that will be credited for each Guaranteed Period Sub-account at the beginning
of that Guaranteed Period. Interest will be credited daily. The interest
rate will be guaranteed for the duration of the applicable Guaranteed Period,
and will never be less than 3.0%. Subsequent Guaranteed Interest Rate(s)
will be determined at the beginning of subse-quent Guaranteed Period(s) and
may be higher or lower than the previous interest rate, but will never be
less than 3.0%.
2.07 DCA FIXED ACCOUNT
Net Purchase Payments under the Contract may be allocated to the DCA Fixed
Account of this Contract. Interest will be credited daily on all Net
Purchase Payments and transferred amounts that are allocated to the DCA Fixed
Account.
Prior to: the Annuity Commencement Date; payment of any Death
Benefit, or surrender of this Contract; whichever occurs first, LNL
guarantees that it will credit interest on amounts allocated to the DCA Fixed
Account at an effective annual rate not less than 3.0% during all years. LNL
may credit interest at effective annual rates in excess of 3.0% at any time.
2.08 AUTOMATIC NONFORFEITURE OPTION
In the event that Gross Purchase Payments are discontinued, this Contract
will continue until the earlier of:
a. the Maturity date;
b. surrender of this Contract;
c. payment of any Death Benefit; or
d. the Annuity Commencement Date.
Gross Purchase Payments may be re-sumed at any time prior to the earlier of:
a. the Maturity Date;
b. surrender of this Contract;
c. payment of any Death Benefit; or
d. the Annuity Commencement Date.
LNL reserves the right to surren-der this Contract in accordance with the
terms set forth in the nonforfeiture law, applicable in your state, for
individual deferred annuities.
2.09 TRANSFERS
Prior to the earlier of:
a. the Maturity Date;
b. surrender of the Contract;
c. payment of any Death Benefit; or
d. the Annuity Commencement Date;
the Owner may direct a transfer of Contract Value;
a. from one Variable Sub-account to another Variable Sub-account, or to a
Guaranteed Period Sub-account, or to the DCA Fixed Account; or
b. from one Guaranteed Period Sub-account to another Guaranteed Period
Sub-account, or to a Variable Sub-account, or to the DCA Fixed Account; or
c. from the DCA Fixed Account to a Variable Sub-account or to a Guaranteed
Period Sub-account;
subject to the limitations described below. Such a transfer request must be
made in writing to LNL or may be made by telephone provided LNL has received
the ap-propriate authorization from the Owner for telephone transfers in
accordance with LNL procedures.
A transfer between Variable Sub-accounts will result in the redemption of
Accumulation Units in one Variable Sub-account and the purchase of
Accumulation Units in the other Variable Sub-account. Such a transfer will
be accomplished at Accumulation Unit values as of the Valuation Date the
transfer request is received in the Home Office. The valuation of
Accumulation Units is described in Section 2.04.
LNL reserves the right to impose a charge in the future for transfers between
Variable Sub-accounts.
The minimum transfer amount is the lesser of $300 or the entire amount in the
Variable Sub-account, or any Guaranteed Period Sub-account, or the DCA Fixed
Ac-count.
If, after the transfer, the amount remaining in:
a. The Variable Sub-account;
b. any Guaranteed Period Sub-account; or
c. the DCA Fixed Account;
from which the transfer is taken is less than $300, the entire amount held in
that Variable Sub-account, any Guaranteed Period Sub-account, or the DCA
Fixed Ac-count will be transferred with the transfer amount.
Form 29266 Page 8
<PAGE>
There are no restrictions on the maximum amount which may be transferred from
a Variable Sub-account(s). Only one transfer will be allowed from a
Guaranteed Period Sub-account(s) and the DCA Fixed Account in any 12 month
period. The amount available for transfer is limited to 25% of the value of
the Guaranteed Period Sub-account(s) or DCA Fixed Account. These
restrictions do not apply to a transfer at the Expiration Date of the
Guaranteed Period Sub-account(s) or to the automatic DCA transfers. For
transfers from a Guaranteed Period Sub-account(s), a Market Value Adjustment
will apply at any time other than as specified in Section 2.12.
Transfers cannot be made during the first 30 days after the Contract Date
and no more than six transfers will be allowed in any Contract Year
(excluding automatic DCA transfers). LNL reserves the right to waive or
modify any of these restrictions.
2.10 WITHDRAWAL OPTION
A withdrawal will be effective as of the Valuation Date on which LNL receives a
written request at its Home Office.
The minimum withdrawal is $300. LNL reserves the right to surrender this
Contract if any withdrawal reduces the total Contract Value to a level at
which this Contract may be surrendered in accordance with applicable law for
individual deferred annuities.
The request should specify from which Variable Sub-account or Guaranteed
Period Sub-account the withdrawal will be made. If none is specified, LNL
will withdraw the amount requested on a pro-rata basis from each Variable
Sub-account, each Guaranteed Period, and the DCA Fixed Account. Within each
Guaranteed Period, a withdrawal will be made from Guaranteed Period
Subaccounts on a first-in, first-out basis. If a withdrawal is taken from a
Guaranteed Period Sub-account, a Market Value Adjustment will apply at any
time other than as specified in Section 2.11.
Any cash payment will be mailed from LNL's Home Office within seven days
after the date of with-drawal; however, LNL may be permitted to defer such
payment under the Investment Company Act of 1940, as in effect at the time
such request for withdrawal is received by LNL.
The Withdrawal Option is not available after the Annuity Commencement Date.
2.11 SURRENDER OPTION
The Owner may surrender this Contract for its surrender value. On surrender,
this Contract terminates. Surrender will be effective on the Valuation Date
on which LNL receives a written request at its Home Office. The surrender
value will be the value of all the variable Accumulation Units attributable
to this Contract plus the value of the Guaranteed Interest Account adjusted
by any applicable Market Value Adjustments (see Section 2.12) and the value
of the DCA Fixed Account.
Any cash payment will be mailed from LNL's Home Office within seven days
after the date of surrender; however, LNL may be permitted to defer such
payment under the Investment Company Act of 1940, as in effect at the time a
request for surrender is received by LNL.
The Surrender Option is not avail-able after the Annuity Commence-ment Date.
2.12 MARKET VALUE ADJUSTMENT
Any transfer, withdrawal, surrender, or annuitization from a Guaranteed
Period Sub-account occurring at any time other than an Expiration Date or
during the time period for examining the contract (as set forth on the face
page of this Contract) will be subject to a Market Value Adjustment.
Amounts payable as a Death Benefit will not be subject to a Market Value
Adjustment.
The amount payable on such transfer, withdrawal, surrender, or annuitization
will be adjusted up or down by the application of the Market Value
Adjustment. The amount of transfer, withdrawal, surrender, or annuitization
is multiplied by a Market Value Adjustment factor to determine the actual
amount of the transfer, withdrawal, surrender, or annuitization. LNL
guarantees that the value available from any Guaranteed Period Sub-account,
after the application of any appro-priate Market Value Adjustment(s), will
be at least equal to the Net Purchase Payments made to that Guaranteed Period
Sub-account, decreased by partial withdrawals and premium tax, if
applicable, made from that Guaranteed Period Sub-account. The Market Value
Adjustment factor is defined as:
N
(1 + A)
---------
N
(1 + B)
where:
A is an index rate determined at the beginning of the applicable Guaranteed
Period based on the Treasury Constant Maturity Series (published by the
Federal Reserve) for a security with time to maturity equal to the applicable
Guaranteed Period.
B is an index rate determined at the time of transfer,
withdrawal, surrender, or annuitization based on the Treasury Constant
Maturity Series (published by the Federal Reserve) for a security with time
to maturity equal to the applicable Guaranteed Period, plus a factor of
0.0025.
Form 29266 Page 9
<PAGE>
N is the number of years remaining in the applicable Guaranteed Period
(E.G. 1 year and 73 days = 1 + (73 divided by 365) = 1.2 years).
Straight-line interpolation is used for periods to maturity not quoted.
2.13 SALES CHARGES
A Sales Charge, as described on the Contract Data Pages, will apply to all
initial and subsequent Gross Purchase Payments paid into this Contract. This
charge is taken as a percentage of the Gross Purchase Payment and is based on
the amount of the Owner's Investment at the time of each Gross Purchase
Payment.
The Owner's Investment is determined at a given time, in accordance with LNL
procedures, as the sum of:
a. The account values for any of the following individual LNL contracts
owned by an Eligible Owner (defined below) marketed under the names of:
The American Legacy Variable Annuity, American Legacy II Variable Annuity,
American Legacy III Var- iable Annuity, or American Legacy Shareholder's
Advantage Variable Annuity; plus
b. The amount (in dollars) of an Eligible Owner's investment in existing
mutual funds in The American Funds Group in accordance with the procedures
established by the American Funds Group; plus
c. The amount of the current Gross Purchase Payment made into this
Contract.
An Eligible Owner includes the Owner of this Contract, the spouse of the
Owner of this Contract, and a child under the age of 21 of the Owner of this
Contract.
2.14 DEATH BENEFITS
BEFORE THE ANNUITY COMMENCEMENT DATE.
ENTITLEMENT.
If there is a single Owner, upon the death of the Owner LNL will pay a Death
Benefit to the designated Beneficiary(s) in accordance with the terms of
Article 4. If the designated Beneficiary of the Death Benefit is the
surviving spouse of the deceased Owner, the designated Beneficiary may elect
to continue the Contract as the new Owner in lieu of receiving the Death
Benefit. Upon the death of the designated Beneficiary who continues the
Contract as the new Owner, LNL will pay a Death Benefit to the designated
Beneficiary(s) in accordance with the terms of Article 4.
If there are Joint Owners, upon the death of the first Joint Owner, LNL will
pay a Death Benefit to the surviving Joint Owner. The surviving Joint Owner,
as the spouse of the deceased Joint Owner, may elect to continue the Contract
as sole Owner in lieu of receiving the Death Benefit. Upon the death of the
Joint Owner who continues the Contract, LNL will pay a Death Benefit to the
designated Beneficiary(s) in accordance with the terms of Article 4.
The Death Benefit will be paid if LNL is in receipt of:
a. Proof of death acceptable to LNL;
b. written authorization for payment; and
c. all claim forms, fully completed.
Due proof of death may be a certified copy of a death certificate, a
certified copy of the statement of death from the attending physician, a
certified copy of a decree of a court of competent jurisdiction as to the
findings of death, or any other proof of death acceptable to LNL.
All Death Benefit payments will be subject to the laws and regulations
governing death benefits.
Notwithstanding any provision of this Contract to the contrary, no payment of
Death Benefits provided under the Contract will be allowed that does not
satisfy the requirements of Code Section 72(s) or 401(a)(9) as applicable, as
amended from time to time.
DETERMINATION OF AMOUNTS.
This Contract provides a Death Benefit called the Enhanced Guaranteed Minimum
Death Benefit (EGMDB), if in effect. If the EGMDB was not available at issue
or was terminated, then the Death Benefit is equal to the Guarantee of
Principal.
The EGMDB is equal to the greater of:
a. the current Contract Value as of the Valuation Date on which the death
claim is approved by LNL for payment; or
b. the highest Contract Value on any policy anniversary date (including
the inception date) on ages up to, and including, the Owner's age 75 (if
there are Joint Owners this is youngest Joint Owner's age); increased
by Net Purchase Payments subsequent to such anniversary date on which the
highest Contract Value is obtained, and decreased by partial withdrawals
(without regard to Market Value Adjustments), and premium tax (if
applicable) made, effected, or incurred subsequent to such anniversary
date on which the highest Contract Value is obtained.
The Guarantee of Principal is equal to the greater of:
Form 29266 Page 10
<PAGE>
a. the current Contract Value as of the Valuation Date on which the death
claim is approved by LNL for payment; or
b. the sum of all Net Purchase Payments minus withdrawals (without regard
to Market Value Adjustments) and premium tax (if applicable) incurred.
The EGMDB will not be in effect if this Contract is issued to an Owner with
an attained age of 75 or greater at issue (or if issued to Joint Owners where
youngest age is 75 or greater at issue ). Under these circumstances, there
will be no EGMDB provided and the Death Benefit is equal to the Guarantee of
Principal.
The EGMDB will only be in effect, unless terminated by the Owner, for
Non-Qualified Contracts and Contracts sold as Individual Retirement Annuities
(IRA) under Code Section 408(b) and Roth Indi-vidual Retirement Annuities
under Code Section 408A. For all other Contracts the EGMDB will not be in
effect and the Death Benefit is equal to the Guarantee of Principal.
If the Contract is continued by the surviving spouse, the EGMDB will
continue, if it was in effect at the time of death of the original Owner,
unless subsequently terminated by the surviving spouse. A surviving spouse
who continues the Contract cannot add the EGMDB to the Contract.
At any time prior to the Annuity Commencement Date, an Owner may choose to
terminate the EGMDB by giving written notice to LNL, and the Contract will
then have no EGMDB. The EGMDB will terminate on the next Valuation Date
following receipt of the written notice in the LNL Home Office and the Death
Benefit will then be the Guarantee of Principal. Termination of the EGMDB by
the Owner or surviving spouse who assumed the Contract will be permanent and
final.
If the Owner is a corporation or other non-individual (non-natural person),
the death of the Annuitant will be treated as the death of the Owner. The
EGMDB, if applicable, will apply on the death of the Annuitant only in this
situation.
PAYMENT OF AMOUNTS.
The Death Benefit payable on the death of the Owner, or after the death of
the first Joint Owner, or upon the death of the spouse who continues the
Contract as the new Owner, will be distributed to the designated
Beneficiary(s) as follows:
a. the Death Benefit must be completely distributed within five years of the
Owner's date of death; or
b. the designated Beneficiary may elect, within the one year period after
the Owner's date of death, to receive the Death Benefit in substantially
equal installments over the life of such designated Beneficiary or over
a period not extending beyond the life expectancy of such designated
Beneficiary; provided that such distributions begin not later than one
year after the Owner's date of death.
If a lump sum settlement is elected, the proceeds will be mailed within seven
days of approval by LNL of the claim. This payment may be postponed as
permitted by the Investment Company Act of 1940.
ON OR AFTER THE ANNUITY COMMENCE-MENT DATE.
If the Owner dies on or after the Annuity Commencement Date, any remaining
annuity benefit payments will continue to be distributed under the Annuity
Payment Option then in effect. All of the Owner's rights granted by the
Contract will pass to the Joint Owner, if any; otherwise to the Beneficiary.
If there is no named Beneficiary at the time of the Owner's death, then the
Owner's rights will pass to the Annuitant, if still living; otherwise to the
Joint Annuitant, if applicable. If no named Beneficiary, Annuitant, or Joint
Annuitant survives the Owner, any remaining an-nuity benefit payments will
continue to the Owner's estate.
2.15 DEATH OF ANNUITANT
BEFORE THE ANNUITY COMMENCEMENT DATE.
If the Annuitant is also the Owner or a Joint Owner, then the Death Benefit
paid will be subject to the Contract provisions regarding death of the Owner.
If the surviving spouse of the Owner/Annuitant assumes the Contract, the
Contingent Annuitant becomes the Annuitant. If no Contingent Annuitant is
named, the surviving spouse becomes the Annuitant.
If an Annuitant who is not the Owner or Joint Owner dies, then the Contingent
Annuitant, if any, becomes the Annuitant. If no Contingent Annuitant is
named, the Owner (or the younger of the Joint Owners) becomes the Annuitant.
ON OR AFTER THE ANNUITY COMMENCE-MENT DATE.
On receipt of due proof of death, as described in Section 2.14, of the
Annuitant or both Joint Annuitants, any remaining annuity benefit payments
under the Annuity Payment Option will be paid to the Owner if living;
otherwise, to the Beneficiary. If there is no Beneficiary, any remaining
annuity benefit payments will continue to the estate of the Annuitant.
Form 29266 Page 11
<PAGE>
ARTICLE 3
ANNUITY PAYMENT OPTIONS
3.01 ANNUITY BENEFIT PAYMENTS
An election to receive annuity benefit payments under an Annuity Payment
Option must be made by the Maturity Date.
If an Annuity Payment Option is not chosen prior to the Maturity Date,
annuity benefit payments will commence to the Owner on the Maturity Date
under the Annuity Payment Option providing a Life Annuity with annuity
benefit payments guaranteed for 10 years.
The Maturity Date is set forth on the Contract Data Pages. Upon written
request by the Owner and any Beneficiary who cannot be changed, the Maturity
Date may be deferred. Gross Purchase Payments may be made until the new
Maturity Date.
3.02 CHOICE OF ANNUITY PAYMENT OPTION
Prior to the Annuity Commencement Date, the Owner or a Beneficiary entitled
to a Death Benefit in a lump sum may choose or change any Annuity Payment
Option. A choice of or change to an Annuity Payment Option must be made in
writing to LNL. For a 100% fixed annuity benefit payment, the Annuity
Commencement Date must be at least thirty days prior to the time that
annuity benefit payments are to begin. If any portion of the annuity
benefit payment will be on a variable basis, the first payment will be made
fourteen days after the Annuity Commencement Date. The Annuity Payment Option
chosen by the Beneficiary must meet the requirements of Section 72(s) or
401(a)(9) of the Code. The Beneficiary who becomes entitled to the Death
Benefit and chooses an Annuity Payment Option will become the Owner and
Annuitant.
3.03 ANNUITY PAYMENT OPTIONS
1) Life Annuity/Life Annuity with Guaranteed Period--Annuity benefit payments
will be made for the lifetime of the Annuitant with no certain period, or
life and a 10 year certain period, or life and a 20 year certain period.
2) Unit Refund Life Annuity -- Variable annuity benefit payments will be made
for the lifetime of the Annuitant with the guarantee that upon death, if:
a) the number of Annuity Units initially purchased (determined by dividing
the total dollar amount applied to purchase this option by the Annuity
Unit Value on the Annuity Commencement Date) is greater than;
b) the number of Annuity Units paid as part of each variable annuity benefit
payment multiplied by the number of annuity benefit payments paid prior to
death;
then a refund payment equal to the number of Annuity Units determined by (a)
minus (b) will be made. The refund payment value will be determined using the
Annuity Unit Value on the Valuation Date on which the death claim is approved by
LNL for payment after LNL is in receipt of:
a. proof of death acceptable to LNL;
b. written authorization for payment; and
c. all claim forms, fully completed.
3) Cash Refund Life Annuity--Fixed annuity benefit payments will be made for the
lifetime of the Annuitant with the guarantee that upon death, if:
a) the total dollar amount applied to purchase this option is greater than;
b) the fixed annuity benefit payment multiplied by the number of annuity
benefit payments paid prior to death;
then a refund payment equal to the dollar amount of (a) minus (b) will be
made after the death claim is approved by LNL for payment and LNL is in re-
ceipt of:
a. proof of death acceptable to LNL;
b. written authorization for payment; and
c. all claim forms, fully completed.
4) Joint Life Annuity/Joint Life Annuity with Guaranteed Period--Annuity
benefit payments will be made during the joint life of the Annuitant and a
Joint Annuitant of the Owner's choice. Annuity benefit payments continue
for the life of the survivor at the death of the Annuitant or Joint
Annuitant. Annuity benefit payments will be made for life with no certain
period, or life and a 10 year certain period, or life and a 20 year certain
period.
5) Other Annuity Payment Options may be available as agreed upon in writing
by LNL.
At the time an Annuity Payment Option is selected under the provisions of
this Contract, the Owner may elect to have the total Contract Value, adjusted
by any applicable Market Value Adjustments, applied to provide a variable
annuity benefit payment, a fixed annuity benefit payment, or a combination
fixed and variable annuity benefit payment. If any value in the Guaranteed
Interest Account is used to provide a fixed annuity benefit, this amount will
be withdrawn from the Guaranteed Interest Account and the fixed annuity
benefit payments will be provided by the
Form 29266 Page 12
<PAGE>
General Account. If no election is made, the value of the Owner's Variable
Account will be used to provide a variable annuity benefit payment, and the
value of the Owner's Guaranteed Interest Account and DCA Fixed Account will be
used to provide a fixed annuity benefit payment. Amounts withdrawn from the
Guaranteed Interest Account will be subject to a Market Value Adjustment
unless otherwise specified in Section 2.12.
The amount of annuity benefit payments will depend on the age and sex (except
in cases where unisex rates are required) of the Annuitant as of the Annuity
Commencement Date. A choice may be made to receive annuity benefit payments
once each month, four times each year, twice each year, or once each year.
3.04 THE AMOUNT OF THE ANNUITY BENEFIT PAYMENT
The Contract Value, adjusted by any applicable Market Value Adjustment, and
the Annuity Unit value used to effect annuity benefit payments will be
calculated as of the Annuity Commencement Date.
Article 6 of this Contract illustrates the minimum annuity benefit payment
amounts and the age adjustments which will be used to determine the first
monthly annuity benefit payment under a variable Annuity Payment Option. The
tables show the dollar amount of the first monthly annuity benefit payment
which can be purchased with each $1,000 of Contract Value, adjusted by any
applicable Market Value Adjustments, after deduction of any applicable
premium taxes. Amounts shown use the 1983 'a' Individual Annuity Mortality
Table, modified, with an assumed rate of return of 4% per year.
Article 7 of this Contract illustrates the minimum annuity benefit payment
amounts and the age adjustments which will be used to determine the monthly
annuity benefit payments under a fixed Annuity Payment Option. The tables
show the dollar amount of the guaranteed monthly annuity benefit payments
which can be purchased with each $1,000 of Contract Value, adjusted by any
applicable Market Value Adjustments, after deduction of any applicable
premium taxes. Amounts shown use the 1983 'a' Individual Annuity Mortality
Table, modified, with an interest rate of 3.0% per year and a 2.0% expense
load.
3.05 DETERMINATION OF THE AMOUNT OF VARIABLE ANNUITY BENEFIT PAYMENTS AFTER
THE FIRST PAYMENT
The first variable annuity benefit payment is subdivided into components
where each of them represents the product of:
a. the percentage elected by the Contract Owner of a specific Variable
Sub-account; and
b. the entire first variable annuity benefit payment.
On the Annuity Commencement Date, the Contract is credited with Annuity Units
for each Variable Sub-account. The number of Annuity Units credited is
computed by dividing the component of the first annuity benefit payment
attributable to a specific Variable Sub-account by the Annuity Unit value
for that Variable Sub-account. Each component of each variable annuity benefit
payment after the first payment attributable to a specific Variable
Sub-account will be determined by multiplying the Annuity Unit value for that
Variable Sub-account on the monthly, quarterly, semi-annual, or annual
anniversary of the Annuity Commencement Date by the number of Annuity Units
attributable to that Variable Sub-account. The total variable annuity
benefit payment will be the sum of the payments attributable to each Variable
Sub-account. In the absence of transfers between Variable Sub-accounts, the
number of Annuity Units attributable to each Variable Sub-account remains
constant, although the Annuity Unit values will vary with the investment
performance of the Funds. The Annuity Unit Value may increase or decrease
the dollar value of benefits under the Contract.
The Annuity Unit value for any Valuation Period for any Variable Sub-account
is determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the product of (a) 0.9998926 raised to a power
equal to the number of days in the current Valuation Period and (b) the
Accumulation Unit value of the same Variable Sub-account for this Valuation
Period divided by the Accumulation unit value of the same Variable
Sub-account for the immediately preceding Valuation Period.
LNL will value all assets in the Variable Sub-account in accordance with the
provisions of applicable laws, rules, and regulations. The determination by
LNL of the value of an Accumulation Unit or of an Annuity Unit, consistent
with the above-described methodology, will be binding on all parties to this
Contract.
LNL guarantees that the dollar amount of each annuity benefit
payment after the first will not be affected by variations in mortality
experience from mortality assumptions on which the first payment is based.
After the Annuity Commencement Date, if any portion of the annuity benefit
payment is a variable annuity benefit payment, the Owner may direct a
transfer of assets from one Variable Sub-account to another Variable
Sub-account or to a fixed annuity benefit payment. Such transfers will be
limited to three (3) times per Contract Year. Assets may not be transferred
from a fixed annuity benefit payment to a variable annuity benefit payment.
A transfer from one Variable Sub-account to another Variable Sub-account will
result in the purchase of Annuity Units in one Variable Sub-account and the
redemption of Annuity Units in the other Variable Sub-account. Such a
transfer will be accomplished
Form 29266 Page 13
<PAGE>
at Annuity Unit values as of the Valuation Date the transfer request is
received. The valuation of Annuity Units is described above. A transfer
from one Variable Sub-account to a fixed annuity benefit payment will result
in the redemption of Annuity Units in one Variable Sub-account and the
purchase of a minimum fixed annuity benefit payment based on the tables in
Article 7.
3.06 PROOF OF AGE
Payment will be subject to proof of age that LNL will accept such as a
certified copy of a birth certificate.
3.07 MINIMUM ANNUITY BENEFIT PAYMENT REQUIREMENTS
If the Annuity Payment Option chosen results in annuity benefit payments of
less than $50 per Variable Sub-account, the frequency will be changed so
that annuity benefit payments will be at least $50.
For the purposes of this Section 3.07, the fixed annuity benefit payment of
the Contract is considered a Variable Sub-account.
3.08 EVIDENCE OF SURVIVAL
LNL has the right to ask for proof that the person on whose life the annuity
benefit payment is based is alive when each annuity benefit payment is due.
3.09 CHANGE IN ANNUITY PAYMENT OPTION
The Annuity Payment Option may not be changed after the Annuity Commencement
Date.
ARTICLE 4
BENEFICIARY
4.01 DESIGNATION
The Owner may designate a Beneficiary(s). Unless otherwise stated in the
Beneficiary designation, if there is more than one Beneficiary, they are
presumed to share equally.
Upon the Owner's death, the surviving Joint Owner, if any, will be treated as
the primary, designated Beneficiary. Any other Beneficiary designation on
record at the time of death will be treated as a contingent beneficiary.
If a surviving spouse continues the Contract after the death of the Owner,
the remaining Beneficiaries move up, in the order of their original
designation, to replace the spouse as original Beneficiary, unless the
Beneficiary designation is subsequently changed by the surviving spouse as
the new Owner.
4.02 CHANGE
The Owner may change any Beneficiary unless otherwise provided in the previous
designation. A change of Beneficiary will revoke any previous designation.
A change may be made by filing a written request, in a form acceptable to LNL,
at its Home Office. The change will become effective upon receipt of the written
request by LNL at its Home Office. LNL reserves the right to request the
Contract for endorsement of the change.
4.03 DEATH
Unless otherwise provided in the Beneficiary designation, if any Beneficiary
dies before the Owner, that Beneficiary's interest will go to any other
Beneficiaries named, according to their respective interests. If there are
no Beneficiaries, the Beneficiary's interest will pass to a Contingent
Beneficiary(s), if any. Prior to the Annuity Commencement Date, if no
Beneficiary or Contingent Beneficiary survives the Owner, the Death Benefits
will be paid to the Owner's estate.
Once a Beneficiary is receiving Death Benefits or annuity benefit payments,
the Beneficiary may name his or her own Beneficiary(s) to receive any
remaining benefits due under the Contract, should the original Beneficiary
die prior to receipt of all benefits. If no such Beneficiary is named or the
named Beneficiary predeceases the original Beneficiary, any remaining
benefits will continue to the original Beneficiary's estate. A Beneficiary
designation must be made in writing to the LNL Home Office in a form
acceptable to LNL.
ARTICLE 5
GENERAL PROVISIONS
5.01 THE CONTRACT
The Contract and any riders attached constitute the entire Contract. Only
the President, a Vice President, the Secretary or an Assistant Secretary of
LNL has the power, on behalf of LNL, to change, modify, or waive any
provisions of this Contract.
LNL reserves the right to unilaterally change the Contract for the purpose of
keeping the Contract in compliance with federal or state law.
Any changes, modifications, or waivers must be in writing. No representative
or person other than the above named officers has authority to change or modify
this Contract or waive any of its provisions. All terms used in this Contract
will have their usual and customary meaning except when specifically defined.
Form 29266 Page 14
<PAGE>
5.02 OWNERSHIP
The Owner is the person who has the ability to exercise the
rights within this Contract.
The Owner may only name his or her spouse as a Joint Owner. Joint Owner(s)
will be treated as having equal, undivided interests in the Contract,
including rights of survivorship. Either Joint Owner, independently of the
other, may exercise any ownership rights in the Contract.
Prior to the Annuity Commencement Date, the Owner has the right to change the
Annuitant at any time by notifying LNL in writing of the change. The
Annuitant may not be changed in a Contract owned by a non-natural person.
The Owner may also name a Contingent Annuitant by notifying LNL in writing.
The Contingent Annuitant designation is no longer applicable after the
Annuity Commencement Date.
5.03 ASSIGNMENTS
If this Contract is used with a Qualified Plan, the Contract will not be
transferable. In addition, it may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose.
5.04 INCONTESTABILITY
This Contract will not be contested by LNL.
5.05 MISSTATEMENT OF AGE AND/OR SEX
If the age and/or sex of the Annuitant has been misstated, the benefits
available under this Contract will be those which the Contract Value would
have purchased using the correct age and/or sex. Any underpayment already
made by LNL will be made up immediately and any overpayments already made by
LNL will be charged against the annuity payments falling due after the
correction is made.
5.06 NONPARTICIPATING
The Contract is nonparticipating and will not share in the surplus earnings
of LNL.
5.07 VOTING RIGHTS
The Owner will have a right to vote at the meetings of the Series. Ownership
of this Contract will not entitle any person to vote at any meeting of
shareholders of LNL. Votes attributable to the Contract will be cast in
conformity with applicable law.
5.08 OWNERSHIP OF THE ASSETS
LNL will have exclusive and absolute ownership and control of its assets,
including all assets in the Variable Account and Guaranteed Interest Account.
5.09 REPORTS
Prior to the Annuity Commencement Date, at least once each Contract Year LNL
will mail a report to the Owner. The report will be mailed to the last
address known to LNL. The report will include a statement of the number of
Accumulation Units credited to the Variable Account under this Contract and
the dollar value of such units as well as a statement of the value of the
Guaranteed Interest Account and DCA Fixed Account of this Contract. The
information in the report will be as of a date not more than two months
prior to the date of mailing the report. LNL will also mail to the Owner at
least once in each Contract Year a report of the investments held in the
Variable Sub-accounts under this Contract.
5.10 PREMIUM TAX
State and local government premium tax, if applicable, will be deducted from
Gross Purchase Payments or Contract Value. This will be deducted when
incurred by LNL or at another time of LNL's choosing.
5.11 MAXIMUM ISSUE AGE
This Contract will not be issued to Owners over the age of 90. This also
applies to each Joint Owner, if any.
Form 29266 Page 15
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 6
ANNUITY PURCHASE RATES UNDER A VARIABLE PAYMENT OPTION
<S><C>
+---------------------------------------------------------------------+
| DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS |
| PURCHASED WITH EACH $1,000 APPLIED |
+---------------------------------------------------------------------+
| SINGLE LIFE ANNUITIES |
+---------+--------------+--------------+--------------+--------------+
| | No | 120 | 240 | |
| | Period | Months | Months | Unit |
| Age | Certain | Certain | Certain | Refund |
+---------+--------------+--------------+--------------+--------------+
| 60 | $4.83 | $4.78 | $4.61 | $4.62 |
| 61 | 4.92 | 4.87 | 4.67 | 4.69 |
| 62 | 5.02 | 4.96 | 4.74 | 4.76 |
| 63 | 5.13 | 5.05 | 4.80 | 4.84 |
| 64 | 5.24 | 5.15 | 4.87 | 4.93 |
| | | | | |
| 65 | 5.36 | 5.26 | 4.93 | 5.02 |
| 66 | 5.49 | 5.38 | 5.00 | 5.11 |
| 67 | 5.63 | 5.50 | 5.07 | 5.21 |
| 68 | 5.78 | 5.62 | 5.13 | 5.31 |
| 69 | 5.94 | 5.76 | 5.19 | 5.42 |
| | | | | |
| 70 | 6.11 | 5.90 | 5.25 | 5.53 |
| 71 | 6.30 | 6.05 | 5.31 | 5.65 |
| 72 | 6.50 | 6.21 | 5.37 | 5.78 |
| 73 | 6.73 | 6.37 | 5.42 | 5.91 |
| 74 | 6.97 | 6.54 | 5.46 | 6.05 |
| 75 | 7.23 | 6.72 | 5.50 | 6.20 |
+---------+--------------+--------------+--------------+--------------+
| |
| |
+---------------------------------------------------------------------+
| JOINT AND SURVIVOR ANNUITIES |
+----------------------------+---------+------------------------------+
| Joint and Full to Survivor | | Joint and Two-Thirds Survivor|
+----------------------------+---------+------------------------------+
| Certain Period | | Certain Period |
+--------+---------+---------+---------+---------+---------+----------+
| | | | Joint | | | |
| None | 120 | 240 | Age | None | 120 | 240 |
+--------+---------+---------+---------+---------+---------+----------+
| $4.42 | $4.42 | $4.38 | 60 | $4.84 | $4.79 | $4.62 |
| 4.49 | 4.49 | 4.45 | 61 | 4.93 | 4.87 | 4.68 |
| 4.57 | 4.56 | 4.51 | 62 | 5.03 | 4.96 | 4.74 |
| 4.65 | 4.64 | 4.58 | 63 | 5.13 | 5.06 | 4.81 |
| 4.73 | 4.73 | 4.65 | 64 | 5.24 | 5.16 | 4.87 |
| | | | | | | |
| 4.82 | 4.82 | 4.72 | 65 | 5.36 | 5.27 | 4.94 |
| 4.92 | 4.91 | 4.79 | 66 | 5.49 | 5.38 | 5.00 |
| 5.03 | 5.02 | 4.87 | 67 | 5.63 | 5.50 | 5.07 |
| 5.14 | 5.13 | 4.94 | 68 | 5.78 | 5.62 | 5.13 |
| 5.26 | 5.24 | 5.02 | 69 | 5.94 | 5.75 | 5.19 |
| | | | | | | |
| 5.39 | 5.37 | 5.09 | 70 | 6.11 | 5.89 | 5.25 |
| 5.53 | 5.50 | 5.16 | 71 | 6.29 | 6.04 | 5.31 |
| 5.68 | 5.64 | 5.23 | 72 | 6.48 | 6.19 | 5.36 |
| 5.85 | 5.79 | 5.30 | 73 | 6.69 | 6.35 | 5.41 |
| 6.02 | 5.94 | 5.36 | 74 | 6.92 | 6.51 | 5.46 |
| 6.21 | 6.11 | 5.41 | 75 | 7.16 | 6.68 | 5.50 |
+--------+---------+---------+---------+---------+---------+----------+
</TABLE>
<TABLE>
<CAPTION>
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
------------- ----------------- ------------- -----------------
<S><C>
Before 1920 + 2 1960-1969 - 3
1920-1929 + 1 1970-1979 - 4
1930-1939 0 1980-1989 - 5
1940-1949 - 1 1990-1999 - 6
1950-1959 - 2 ETC. ETC.
</TABLE>
Form 29266 Page 16
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 7
ANNUITY PURCHASE RATES UNDER A FIXED PAYMENT OPTION
<S><C>
+---------------------------------------------------------------------+
| DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS |
| PURCHASED WITH EACH $1,000 APPLIED |
+---------------------------------------------------------------------+
| SINGLE LIFE ANNUITIES |
+---------+--------------+--------------+--------------+--------------+
| | No | 120 | 240 | |
| | Period | Months | Months | Cash |
| Age | Certain | Certain | Certain | Refund |
+---------+--------------+--------------+--------------+--------------+
| 60 | $4.42 | $4.38 | $4.22 | $4.18 |
| 61 | 4.52 | 4.47 | 4.29 | 4.26 |
| 62 | 4.62 | 4.56 | 4.36 | 4.34 |
| 63 | 4.73 | 4.66 | 4.43 | 4.42 |
| 64 | 4.85 | 4.77 | 4.50 | 4.51 |
| | | | | |
| 65 | 4.97 | 4.89 | 4.57 | 4.60 |
| 66 | 5.11 | 5.01 | 4.64 | 4.69 |
| 67 | 5.25 | 5.13 | 4.71 | 4.79 |
| 68 | 5.41 | 5.27 | 4.78 | 4.90 |
| 69 | 5.57 | 5.41 | 4.85 | 5.01 |
| | | | | |
| 70 | 5.75 | 5.56 | 4.91 | 5.13 |
| 71 | 5.95 | 5.71 | 4.98 | 5.25 |
| 72 | 6.16 | 5.88 | 5.04 | 5.38 |
| 73 | 6.38 | 6.05 | 5.09 | 5.52 |
| 74 | 6.63 | 6.23 | 5.14 | 5.66 |
| 75 | 6.90 | 6.42 | 5.19 | 5.81 |
+---------+--------------+--------------+--------------+--------------+
| |
| |
+---------------------------------------------------------------------+
| JOINT AND SURVIVOR ANNUITIES |
+----------------------------+---------+------------------------------+
| Joint and Full to Survivor | | Joint and Two-Thirds Survivor|
+----------------------------+---------+------------------------------+
| Certain Period | | Certain Period |
+--------+---------+---------+---------+---------+---------+----------+
| | | | Joint | | | |
| None | 120 | 240 | Age | None | 120 | 240 |
+--------+---------+---------+---------+---------+---------+----------+
| $4.01 | $4.01 | $3.98 | 60 | $4.43 | $4.38 | $4.22 |
| 4.09 | 4.08 | 4.05 | 61 | 4.52 | 4.47 | 4.29 |
| 4.17 | 4.16 | 4.12 | 62 | 4.63 | 4.57 | 4.36 |
| 4.25 | 4.25 | 4.19 | 63 | 4.74 | 4.67 | 4.43 |
| 4.34 | 4.34 | 4.26 | 64 | 4.85 | 4.78 | 4.50 |
| | | | | | | |
| 4.44 | 4.43 | 4.34 | 65 | 4.98 | 4.89 | 4.57 |
| 4.54 | 4.54 | 4.42 | 66 | 5.11 | 5.01 | 4.64 |
| 4.66 | 4.64 | 4.50 | 67 | 5.26 | 5.13 | 4.71 |
| 4.77 | 4.76 | 4.58 | 68 | 5.41 | 5.27 | 4.78 |
| 4.90 | 4.88 | 4.66 | 69 | 5.57 | 5.41 | 4.85 |
| | | | | | | |
| 5.04 | 5.01 | 4.74 | 70 | 5.75 | 5.55 | 4.91 |
| 5.18 | 5.15 | 4.82 | 71 | 5.94 | 5.70 | 4.98 |
| 5.34 | 5.30 | 4.89 | 72 | 6.14 | 5.86 | 5.03 |
| 5.51 | 5.45 | 4.96 | 73 | 6.35 | 6.03 | 5.09 |
| 5.69 | 5.62 | 5.03 | 74 | 6.59 | 6.20 | 5.14 |
| 5.89 | 5.79 | 5.09 | 75 | 6.84 | 6.38 | 5.18 |
+--------+---------+---------+---------+---------+---------+----------+
</TABLE>
<TABLE>
<CAPTION>
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
------------- ----------------- ------------- -----------------
<S><C>
Before 1920 + 2 1960-1969 - 3
1920-1929 + 1 1970-1979 - 4
1930-1939 0 1980-1989 - 5
1940-1949 - 1 1990-1999 - 6
1950-1959 - 2 ETC. ETC.
</TABLE>
Form 29266 Page 17
<PAGE>
ANNUITY
CONTRACT
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY OR
VARIABLE AND MARKET VALUE ADJUSTED FIXED ANNUITY
BENEFIT PAYMENT OPTIONS
NONPARTICIPATING
If you have any questions concerning
this Contract, please
contact your Lincoln National Life
representative or the Home Office of LNL.
THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY
1300 SOUTH CLINTON STREET
P.O. BOX 2348
FORT WAYNE, INDIANA 46801
800-942-5500
Form 29266
<PAGE>
<TABLE>
<CAPTION>
<S><C>
-------------------------
AMERICAN SHAREHOLDER'S ADVANTAGE THE LINCOLN NATIONAL LIFE
LEGACY The American Legacy Shareholder's Advantage is a variable annuity contract INSURANCE COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
Instructions: Please type or print. ANY ALTERATIONS TO THIS APPLICATION MUST BE INITIALED BY THE CONTRACT OWNER.
- ------------------------------------------------------------------------------------------------------------------------------------
1a RIGHT OF ACCUMULATION (if additional space is needed, use section 12)
/ / I own an American Funds Mutual Fund or American Legacy Variable Annuity, which may entitle me to a reduced sales charge
under the terms of the prospectus. My account numbers are:
---------------------------- -----------------------------
/ / The registration of some of my shares differs. Their account numbers are:
Account no. Name SSN
----------------------------------------- ---------------------------------------------- ---------------------------
Account no. Name SSN
----------------------------------------- ---------------------------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1b CONTRACT OWNER NONE: MAXIMUM AGE OF CONTRACT OWNER AND JOINT CONTRACT OWNER IS 90.
Social Security number/TIN / / / /-/ / /-/ / / / /
--------------------------------------------------
Full legal name or trust name*
Home telephone number / / / / / / / /-/ / / / /
--------------------------------------------------
Street address
Date of birth / / / / / / / / / / / Male / / Female
Month Day Year
--------------------------------------------------
City State Zip Date of trust* / / / / / / / / / Is trust revocable?*
Month Day Year / / Yes / / No
--------------------------------------------------
Trustee name*
*This information is required for trusts.
- ------------------------------------------------------------------------------------------------------------------------------------
1c JOINT CONTRACT OWNER (Joint Contract Owner may only be a spouse)
Social Security number / / / /-/ / /-/ / / / /
--------------------------------------------------
Full legal name
Date of birth / / / / / / / / / / / Male / / Female
Month Day Year
- ------------------------------------------------------------------------------------------------------------------------------------
2a ANNUITANT (if no Annuitant is specified, the Contract Owner, or Joint Owner if younger, will be the Annuitant)
Social Security number / / / /-/ / /-/ / / / /
--------------------------------------------------
Full legal name
Home telephone number / / / / / / / /-/ / / / /
--------------------------------------------------
Street address
Date of birth / / / / / / / / / / / Male / / Female
Month Day Year
--------------------------------------------------
City State Zip
NOTE: MAXIMUM AGE OF ANNUITANT AND CONTINGENT ANNUITANT IS 90.
- ------------------------------------------------------------------------------------------------------------------------------------
2b CONTINGENT ANNUITANT
Social Security number / / / /-/ / /-/ / / / /
--------------------------------------------------
Full legal name
- ------------------------------------------------------------------------------------------------------------------------------------
3 BENEFICIARY(IES) OF CONTRACT OWNER (List additional beneficiaries on separate sheet. If listing children, use full legal
names.)
-------------------------------------------------- ------------------------------ ------------------------- -------
Primary: Full legal name or trust name* Relationship to Contract Owner SSN/TIN %
-------------------------------------------------- ------------------------------ ------------------------- -------
Primary: Full legal name Relationship to Contract Owner SSN/TIN %
-------------------------------------------------- ------------------------------ ------------------------- -------
Contingent: Full legal name or trust name Relationship to Contract Owner SSN/TIN %
-------------------------------------------------- Date of trust* / / / / / / / / / Is trust revocable?*
Executor/Trustee name* Month Day Year / / Yes / / No
This information is required for trusts.
- ------------------------------------------------------------------------------------------------------------------------------------
4 TYPE OF AMERICAN LEGACY CONTRACT
Nonqualified: / / Initial Contribution OR / / 1035 Exchange
Tax-Qualified (must complete plan type): / / Initial Contribution, Tax Year 19__ OR / / Transfer OR / / Rollover
Plan Type (check one): / / Roth IRA / / Traditional IRA / / SEP / / Other*
------------------------------------
(specify)
/ / 457(f) Executive Benefit* / / 457(b) Governmental/Non-Profit* / / 403(b)* (transfers only)
*Indicate plan year-end: / / / / / /
Month Day
Page 1
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
5a ALLOCATION (this section must be completed) 5b DOLLAR COST AVERAGING (complete only if electing DCA)
Initial minimums: $10,000 minimum required in the Holding Account
Nonqualified/403(b) $1,500 --------------------------------------------------------------
Qualified $ 300 Total amount to DCA: $
OR ----------------
THE CURRENT ALLOCATION WILL APPLY TO FUTURE MONTHLY amount to DCA: $
CONTRIBUTIONS UNLESS OTHERWISE SPECIFIED. ----------------
If no allocations are specified, the entire amount --------------------------------------------------------------
will be allocated to the Cash Management Fund pending OVER THE FOLLOWING PERIOD:
instructions from the Contract Owner. ----------------
MONTHS (6-60)
------------------------------------------------------- --------------------------------------------------------------
PLEASE ALLOCATE MY CONTRIBUTION OF: FROM THE FOLLOWING HOLDING ACCOUNT (check one)
$ OR $ / / DCA Fixed Account*
-------------------- --------------------- / / Cash Management Fund*
Initial contribution Approximate amount / / U.S. Govt/AAA-Rated Securities Fund*
from previous carrier
------------------------------------------------------- --------------------------------------------------------------
INTO THE FUND(S) BELOW [DOWN ARROW SYMBOL] INTO THE FUND(S) BELOW [DOWN ARROW SYMBOL]
------------------------------------------------------- --------------------------------------------------------------
USE WHOLE PERCENTAGES USE WHOLE PERCENTAGES
% Global Growth Fund % Global Growth Fund
------- -------
% Global Small Capitalization Fund % Global Small Capitalization Fund
------- -------
% Growth Fund % Growth Fund
------- ------- The holding account and
% International Fund % International Fund the DCA fund elected
------- ------- cannot be the same.
% Growth-Income Fund % Growth-Income Fund
------- -------
% Asset Allocation Fund % Asset Allocation Fund
------- -------
% High-Yield Bond Fund % High-Yield Bond Fund
------- -------
% Bond Fund % Bond Fund
------- -------
% U.S. Govt/AAA-Rated Securities Fund % U.S. Govt/AAA-Rated Securities Fund*
------- -------
% Cash Management Fund % Cash Management Fund
------- -------
[RIGHT ARROW SYMBOL] [RIGHT ARROW SYMBOL]
Guaranteed Interest Account Periods: Guaranteed Interest Account Periods:
% 1 year % 3 years % 5 years % 1 year % 3 years % 5 years
------- -------- -------- ------- -------- --------
% 7 years % 10 years % 7 years % 10 years
------- -------- ------- --------
% Other (if currently available) % Other (if currently available)
------- -------
% DCA Fixed Account (For DCA only)
-------
% TOTAL (must = 100%) % TOTAL (must = 100%)
------- -------
------- -------
------------------------------------------------------- --------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
5c CROSS-REINVESTMENT OR PORTFOLIO REBALANCING
To elect either of these options, please complete the appropriate form (available from your broker or financial planner).
- ------------------------------------------------------------------------------------------------------------------------------------
6. AUTOMATIC BANK DRAFT
To: ATTACH VOIDED CHECK
-------------------------------------------------------------------------------------------------------
Bank name ABA number
-------------------------------------------------------------------------------------------------------------------------------
Bank street address City State Zip
$
Automatic bank draft start date: / / / / / / / / / (1/29) $
------------------------------ --------------------------
Month Day Year Checking account number Monthly amount
I/We hereby request and authorize you to pay and charge to my/our account checks or electronic fund transfer debits processed
by and payable to the order of Lincoln Life, P.O. Box 2348, Fort Wayne, IN 46801-2348, provided there are sufficient collected
funds in said account to pay the same upon presentation. It will not be necessary for any officer or employee of Lincoln Life
to sign such checks. I/We agree that your rights in respect to each such check shall be the same as if it were a check drawn
on you and signed personally by me/us. This authority is to remain in effect until revoked by me/us, and until you actually
receive such notice I/we agree that you shall be fully protected in honoring any such check or electronic fund transfer
debit. I/We further agree that if any such check or electronic fund transfer debit be dishonored, whether with or without
cause and whether intentionally or inadvertently, you shall be under no liability whatsoever even though such dishonor results
in the forfeiture of insurance or investment loss to me/us.
Date / / / / / / / / /
---------------------------------------------- ------------------------------------- Month Day Year
Signature(s) EXACTLY as shown on bank records
---------------------------------------------- -------------------------------------
Print full legal name(s)
Page 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------------
7. AUTOMATIC WITHDRAWAL $10,000 minimum account balance required.
NOTE: WITHDRAWALS MAY NOT EXCEED 10% OF TOTAL CONTRACT VALUE PER YEAR.
----------------------------------------------------------- -----------------------------------------------------------
/ / Please provide me with automatic withdrawals / / Please provide me with automatic withdrawals
based on 10% of total contract value of $
---------------------------
/ / Monthly / / Quarterly / / Semiannually / / Annually OR / / Monthly / / Quarterly / / Semiannually / / Annually
Begin withdrawals in / / / / / / Begin withdrawals in / / / / / /
Month Year Month Year
----------------------------------------------------------- -----------------------------------------------------------
ELECT ONE: / / Do withhold taxes / / Do not withhold taxes
ELECT ONE: / / Send check to address of record OR / / Send check to the following alternate address:
NOTE: IF NO TAX WITHHOLDING SELECTION IS MADE, TAXES WILL BE WITHHELD.
--------------------------------------------------------
For direct deposit into your bank account,
an electronic fund transfer form must be --------------------------------------------------------
completed and submitted with a voided check.
--------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
8. TELEPHONE TRANSFER (check box if this option is desired)
/ / I/We hereby authorize and direct Lincoln Life to accept telephone instructions from any person who can furnish proper
identification to exchange units from subaccount to subaccount and/or change the allocation of future investments. I/We
agree to hold harmless and indemnify Lincoln Life, American Funds Distributors, Inc. and their affiliates and any mutual fund
managed by such affiliates and their directors, trustees, officers, employees and agents for any losses arising from such
instructions.
- -----------------------------------------------------------------------------------------------------------------------------------
9. REPLACEMENT Will the proposed contract replace any existing annuity or life insurance contract?
ELECT ONE: / / NO / / YES IF YES, COMPLETE THE 1035 EXCHANGE OR QUALIFIED RETIREMENT ACCOUNT TRANSFER FORM.
(Attach a replacement form if required by the state in which the application is signed.)
------------------------------------------------------------------------------------------------------------------------------
Company name
------------------------------------------------------------------------------------------------------------------------------
Plan name Year issued
- -----------------------------------------------------------------------------------------------------------------------------------
MUST COMPLETE REVERSE SIDE (PAGE 4)
- -----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING STATEMENT APPLIES TO RESIDENTS OF AL, AK, AR, DE, ID, KY, LA, ME, MI, MT, NV, SD, WA AND WY:
"I/We understand and agree that acceptance of the annuity contract will mean acceptance of all of its terms and ratification
of any changes noted on the 'Home Office Corrections and Additions' endorsement to the application. Changes to the items which
may affect the benefits applied for must be agreed to by me/us in writing."
THE FOLLOWING STATEMENT APPLIES TO RESIDENTS OF ALL OTHER STATES (EXCEPT MD, NY AND WV):
"I/We understand and agree that acceptance of the annuity contract will mean acceptance of all of its terms and ratification
of any changes noted on the 'Home Office Corrections and Additions' endorsement to the application. Funding allocations
must be designated by me/us in writing."
- -----------------------------------------------------------------------------------------------------------------------------------
FRAUD WARNING:
RESIDENTS OF MARYLAND, PLEASE NOTE:
Any person who knowingly, and with intent to defraud any insurance company or other person, files or submits an application or
statement of claim containing any materially false or deceptive information, or conceals, for the purpose of misleading,
information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime and may subject such
person to criminal and civil penalties.
RESIDENTS OF ALL OTHER STATES EXCEPT VIRGINIA AND WASHINGTON, PLEASE NOTE:
Any person who knowingly, and with intent to defraud any insurance company or other person, files or submits an application or
statement of claim containing any materially false or deceptive information, or conceals, for the purpose of misleading,
information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime and subjects such
person to criminal and civil penalties.
Page 3
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
10 SIGNATURES
All statements made in this application are true to the best of my/our knowledge and belief, and I/we agree to all terms and
conditions as shown. I/We further agree that this application is part of the annuity contract. I/We acknowledge receipt of
current prospectuses for American Legacy Shareholder's Advantage and American Variable Insurance Series and verify my/our
understanding that ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF THE FUNDS IN THE
SERIES, ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. All payments and values based on the fixed account are subject
to a market value adjustment formula that may increase or decrease the value of any partial or full surrender made prior to
the end of a guaranteed period. Under penalty of perjury, the Contract Owner(s) certifies that the Social Security (or
taxpayer identification) number(s) is correct as it appears in this application.
--------------------------------------------------------------------------------------
Signed at (city) State Date / / / / / / / / /
Month Day Year
--------------------------------------------------------------------------------------
SIGNATURE OF CONTRACT OWNER JOINT CONTRACT OWNER (IF APPLICABLE)
--------------------------------------------------------------------------------------
Signed at (city) State Date / / / / / / / / /
Month Day Year
--------------------------------------------------------------------------------------
SIGNATURE OF ANNUITANT (ANNUITANT MUST SIGN IF CONTRACT OWNER IS A TRUST OR CUSTODIAN)
- -----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING SECTIONS MUST BE COMPLETED BY THE SECURITIES DEALER OR FINANCIAL ADVISER. Please type or print.
- -----------------------------------------------------------------------------------------------------------------------------------
11 INSURANCE IN FORCE Will the proposed contract replace any existing annuity or life insurance contract?
ELECT ONE: / / NO / / YES IF YES, PLEASE LIST THE INSURANCE IN FORCE ON THE LIFE OF THE PROPOSED CONTRACT OWNER(S) AND
ANNUITANT(S):
(Attach a replacement form if required by the state in which the application was signed.)
$
------------------------------------------------------------------------------------------------------------------------------
Company name Year Issued Amount
- -----------------------------------------------------------------------------------------------------------------------------------
12 ADDITIONAL REMARKS
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
13 DEALER INFORMATION NOTE: LICENSING APPOINTMENT WITH LINCOLN LIFE IS REQUIRED FOR THIS APPLICATION TO BE PROCESSED.
IF MORE THAN ONE REPRESENTATIVE, PLEASE INDICATE NAMES AND PERCENTAGES IN SECTION 12.
/ / / / / / / / - / / / / /
------------------------------------------------------------------------------
Registered representative's name (print as it appears on NASD licensing) Registered representative's telephone number
/ / / / - / / / - / / / / /
------------------------------------------------------------------------------
Client account number at dealer (if applicable) Registered representative's SSN
------------------------------------------------------------------------------------------------------------------------------
Dealer's name
------------------------------------------------------------------------------------------------------------------------------
Branch address City State Zip
/ / CHECK IF BROKER CHANGE OF ADDRESS
- -----------------------------------------------------------------------------------------------------------------------------------
14 REPRESENTATIVE'S SIGNATURE
The representative hereby certifies that he/she witnessed the signature(s) in section 10 and that all information contained
in this application is true to the best of his/her knowledge and belief.
------------------------------------------------------------------------------------------------------------------------------
Signature
- -----------------------------------------------------------------------------------------------------------------------------------
Send completed application -- with a check made payable to Lincoln Life -- to your investment dealer's home office or to:
BY EXPRESS MAIL:
[LOGO] LINCOLN LIFE LINCOLN LIFE
P.O. Box 2348 Attention: American Legacy Operations
Fort Wayne, IN 45801-2348 1300 South Clinton Street
800-942-5500 Fort Wayne, IN 45802
Page 4
</TABLE>
