<PAGE>
Legacy III
As filed with the Securities and Exchange Commission on January 22, 1999
Registration No.: 333-18419
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 2 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 17 [X]
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT H
(Exact Name of Registrant)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
1300 South Clinton Street
Post Office Box 1110
Fort Wayne, Indiana 46801
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(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (219)455-2000
JACK D. HUNTER, ESQ.
200 East Berry Street
Post Office Box 1110
Fort Wayne, Indiana 46802
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(Name and Address of Agent for Service)
Copy to:
Kimberly J. Smith
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Title of securities being registered:
Interests in a separate account under individual flexible premium deferred
variable annuity contracts.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on April 1, 1998, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on April 1, 1999 pursuant to paragraph (a)(1) of Rule 485
<PAGE>
American Legacy III
Lincoln National Variable Annuity Account H
individual variable annuity contracts
Home Office:
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46801
This Prospectus describes the individual flexible premium deferred variable
annuity contract that is issued by Lincoln National Life Insurance Company
(Lincoln Life). It is for use with nonqualified and qualified retirement
plans. Generally, you do not pay federal income tax on the contract's growth
until it is paid out. Qualified 403(b) business will only be accepted for pur-
chase payments that are either lump sum transfers or rollovers. The contract
is designed to accumulate contract value and to provide retirement income that
you cannot outlive or for an agreed upon time. These benefits may be a vari-
able or fixed amount or a combination of both. If you die before the annuity
commencement date, we will pay your beneficiary a death benefit.
The minimum initial purchase payment for the contract is:
1. $1,500 for a nonqualified plan and a 403(b) transfer/rollover or
2. $300 for a qualified plan.
Additional purchase payments may be made to the contract and must be at least
$100 per payment ($25 if transmitted electronically), and at least $300 annu-
ally.
You choose whether your contract value accumulates on a variable or a fixed
(guaranteed) basis or both. If you put all your purchase payments into the
fixed account, we guarantee your principal and a minimum interest rate. We
limit withdrawals and transfers from the fixed side of the contract.
All purchase payments for benefits on a variable basis will be placed in Lin-
coln National Variable Annuity Account H (variable annuity account [VAA]). The
VAA is a segregated investment account of Lincoln Life. If you put all or some
of your purchase payments into one or more of the contract's variable options
you take all the investment risk on the contract value and the retirement in-
come. If the subaccounts you select make money, your contract value goes up;
if they lose money, it goes down. How much it goes up or down depends on the
performance of the subaccounts you select. We do not guarantee how any of the
variable options or their funds will perform. Also, neither the U.S. Govern-
ment nor any federal agency insures or guarantees your investment in the con-
tract.
The available funds, listed below, are each part of American Variable Insur-
ance Series (series) Class 2 Shares:
Global Growth
Global Small Capitalization
Growth
International
Growth-Income
Asset Allocation
Bond
High-Yield Bond
U.S. Government/AAA-Rated Securities
Cash Management
This Prospectus gives you information about the contracts that you should know
before you decide to buy a contract and make purchase payments. You should
also review the prospectus for the funds that is attached, and keep both pro-
spectuses for reference.
Neither the SEC nor any state securities commission has approved this contract
or determined that this prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
You can obtain a current Statement of Additional Information (SAI) about the
contracts which has more information. Its terms are made part of this Prospec-
tus. For a free copy, write: Lincoln National Life Insurance Company, P.O. Box
2348, Fort Wayne, Indiana 46801, or call 1-800-942-5500. The SAI and other in-
formation about Lincoln Life and Account H are also available on the SEC's web
site (http://www.sec.gov). There is a table of contents for the SAI on the
last page of this Prospectus.
April 1, 1999
1
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Table of contents
<TABLE>
<CAPTION>
Page
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<S> <C>
Special terms 3
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Expense tables 4
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Summary 5
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Condensed financial information 7
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Investment results 7
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Financial statements 7
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Lincoln National Life Insurance Co. 7
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Fixed side of the contract 7
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Variable annuity account (VAA) 8
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Investments of the variable annuity account 8
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Charges and other deductions 10
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The contracts 12
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</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Annuity payouts 16
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Federal tax status 17
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Voting rights 19
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Distribution of the contracts 19
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Return privilege 19
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State regulation 19
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Restrictions under the Texas Optional Retirement Program 19
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Records and reports 20
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Other information 20
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Statement of additional information table of contents for Variable
Annuity Account H American Legacy III
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</TABLE>
Special terms
(We have italicized the terms that have special meaning throughout the Pro-
spectus)
Account or variable annuity account (VAA) -- The segregated investment ac-
count, Account H, into which Lincoln Life sets aside and invests the assets
for the variable side of the contract offered in this Prospectus.
Accumulation unit -- A measure used to calculate contract value for the vari-
able side of the contract before the annuity commencement date.
Annuitant -- The person on whose life the annuity benefit payments made after
the annuity commencement date are based.
Annuity commencement date -- The valuation date when funds are withdrawn or
converted into annuity units or fixed dollar payout for payment of retirement
income benefits under the annuity payout option you select.
Annuity payout -- An amount paid at regular intervals after the annuity com-
mencement 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 for
the variable side of the contract after the annuity commencement date.
Beneficiary -- The person you choose to receive the death benefit that is paid
if you die before the annuity commencement date.
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 the annuitant.
Contract value -- At a given time, before the annuity commencement date, the
total value of all accumulation units for a contract plus the value of the
fixed side of the contract.
Contract year -- Each one-year period starting with the effective date of the
contract and starting with each contract anniversary after that.
Death benefit (GMDB, EGMDB) -- The amount payable to your designated benefi-
ciary if the owner dies before the annuity commencement date. An enhanced
guaranteed minimum death benefit is also available.
Lincoln Life (we, us, our) -- Lincoln National Life Insurance Company.
Purchase payments -- Amounts paid into the contract.
Series -- American Variable Insurance Series (series), the funds to which you
direct purchase payments.
American Legacy III subaccount -- The portion of the VAA that reflects invest-
ments in accumulation and annuity units of a class of a particular fund avail-
able under the contracts. There is a separate subaccount which corresponds to
each class of a fund.
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 (valua-
tion date) and ending at the close of such trading on the next valuation date.
2
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Expense tables
Summary of Contractowner expenses:
The maximum surrender charge (contingent deferred sales charge)
(as a percentage of purchase payments surrendered/withdrawn): 6%
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or with-
drawal. We may waive this charge in certain situations. See Surrender charges.
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Account H annual expenses for American Legacy III subaccounts:
(as a percentage of average account value):
<TABLE>
<CAPTION>
With Enhanced Without Enhanced
Death Benefit Death Benefit
<S> <C> <C>
Mortality and expense risk charge 1.30% 1.15%
Administrative charge .10% .10%
----- -----
Total annual charge for each American Legacy
III subaccount 1.40% 1.25%
</TABLE>
Annual expenses of the funds for the year ended November 30, 1998:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
Management 12b-1 Other Total
fees + fees + expenses = expenses
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<S> <C> <C> <C> <C> <C> <C> <C>
1. Global Growth .25%
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2. Global Small Capitalization .25
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3. Growth .25
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4. International .25
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5. Growth-Income .25
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6. Asset Allocation .25
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7. Bond .25
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8. High-Yield Bond .25
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9. U.S. Govt./AAA-Rated
Securities .25
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10. Cash Management .25
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</TABLE>
3
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Examples
(expenses of the subaccounts and of the funds):
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual re-
turn:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
1. Global Growth
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2. Global Small Capitalization
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3. Growth
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4. International
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5. Growth-Income
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6. Asset Allocation
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7. High-Yield Bond
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8. Bond
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9. U.S. Govt./AAA-Rated Securities
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10. Cash Management
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If you do not surrender your contract, you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return:
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
1. Global Growth
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2. Global Small Capitalization
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3. Growth
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4. International
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5. Growth-Income
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6. Asset Allocation
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7. Bond
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8. High-Yield Bond
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9. U.S. Govt./AAA-Rated Securities
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10. Cash Management
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</TABLE>
We provide these examples, which are unaudited, to help you understand the di-
rect and indirect costs and expenses of the contract. The examples assume that
an enhanced death benefit is in effect. Without this benefit, expenses would
be lower.
For more information, see Charges and other deductions in this Prospectus, and
Fund Organization and Management in the Prospectus for the funds. Premium
taxes may also apply, although they do not appear in the examples. We also re-
serve the right to impose a charge on transfers between subaccounts and to and
from the fixed account--currently, there is no charge. These examples should
not be considered a representation of past or future expenses. Actual expenses
may be more or less than those shown.
4
<PAGE>
Summary
What kind of contract am I buying? It is an individual annuity contract be-
tween you and Lincoln Life. It may provide for a fixed annuity and/or a vari-
able annuity. This Prospectus describes the variable side of the contract. See
The contracts.
What is the variable annuity account (VAA)? It is a separate account we estab-
lished under Indiana insurance law, and registered with the SEC as a unit in-
vestment trust. VAA assets are allocated to one or more subaccounts, according
to your investment choices. VAA 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? Based upon your instruction, the VAA applies
your purchase payments to buy series shares in one or more of the investment
funds of the series: Global Growth, Global Small Capitalization, Growth, In-
ternational, Growth-Income, Asset Allocation, Bond, High-Yield Bond, U.S.
Government/AAA-Rated Securities and Cash Management. In turn, each fund holds
a portfolio of securities consistent with its investment policy. See Invest-
ments of the variable annuity account and Description of the series.
Who invests my money? The investment advisor for the series is Capital Re-
search and Management Company (CRMC), Los Angeles, California. CRMC is regis-
tered as an investment advisor with the SEC. See Investments of the variable
annuity account and Investment advisor.
How does the contract work? If we approve your application, we will send you a
contract. When you make purchase payments during the accumulation phase, you
buy accumulation units. If you decide to receive retirement income payments,
your accumulation units are converted to annuity units. Your retirement income
payments will be based on the number of annuity units you received and the
value of each annuity unit on payout days. See The contracts.
What charges do I pay under the contract? If you withdraw contract value, you
pay a surrender charge from 0% to 6%, depending upon how many contract years
those payments have been in the contract. We may waive surrender charges in
certain situations. See Surrender charges.
We will deduct any applicable premium tax from purchase payments or contract
value at the time the tax is incurred or at another time we choose.
We apply an annual charge totaling 1.40% to the daily net asset value of the
VAA. This charge includes 0.10% as an administrative charge and 1.30% as a
mortality and expense risk charge. If the enhanced death benefit is not in ef-
fect, the mortality and expense risk charge is 1.15%, for an annual charge to-
taling 1.25%. See Charges and other deductions.
The series pays a management fee to CRMC based on the average daily net asset
value of each fund. See Investments of the variable annuity account--Invest-
ment advisor. Each fund also has a 12b-1 fee and additional operating ex-
penses. These are described in the Prospectus for the series.
What purchase payments do I make, and how often? Subject to the minimum and
maximum payment amounts, your payments are completely flexible. See The con-
tracts--Purchase payments.
How will my annuity payouts be calculated? If you decide to annuitize, you may
select an annuity option and start receiving retirement income payments from
your contract as a fixed option or variable option or a combination of both.
See Annuity Options. Remember that participants in the VAA benefit from any
gain, and take a risk of any loss, in the value of the securities in the
funds' portfolios.
What happens if I die before I annuitize? If the enhanced death benefit is in
effect, your beneficiary will receive the greater of the enhanced death bene-
fit or the contract value. If the enhanced death benefit is not in effect,
your beneficiary will receive the greater of the guaranteed minimum death ben-
efit or the contract value. Your beneficiary has options as to how the death
benefit is paid. See Death benefit before the annuity commencement date.
May I transfer contract value between variable options and between the fixed
side of the contract? Yes, with certain limits. See The contracts--Transfers
between subaccounts on or before the annuity commencement date and Transfers
following the annuity commencement date. Transfers to and from the General Ac-
count on or before the annuity commencement date.
May I surrender the contract or make a withdrawal? Yes, subject to contract
requirements and to the restrictions of any qualified retirement plan for
which the contract was purchased. See Surrenders and withdrawals. If you sur-
render the contract or make a withdrawal, certain charges may apply. See
Charges and other deductions. A portion of surrender/withdrawal proceeds may
be taxable. In addition, if you decide to take a distribution before age 59
1/2, a 10% Internal Revenue Service (IRS) tax penalty may apply. A surrender
or a withdrawal also may be subject to 20% withholding. See Federal tax status
and withholding.
Do I get a free look at this contract? Yes. You can cancel the contract within
ten days (in some states longer) of the date you first receive the contract.
You need to return the contract, postage prepaid, to our home office. In most
states you assume the risk of any market drop on purchase payments you allo-
cate to the variable side of the contract. See Return privilege.
5
<PAGE>
Condensed financial information for the variable annuity account
Accumulation unit values
The following information relating to accumulation unit values and number of
accumulation units for the American Legacy III subaccounts for both of the
years in the period ended December 31, 1998 comes from the VAA's financial
statements. It should be read along with the VAA's financial statements and
notes which are all included in the SAI. (to be updated)
<TABLE>
<CAPTION>
1997* 1998
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<S> <C> <C>
Global Growth subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.073
. End of period............................................... $ 1.073
Number of accumulation units
. End of period (000's omitted)............................... 49,504
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Global Small Capitalization subaccount***
Accumulation unit value
. Beginning of period................................................. $1.000
. End of period.......................................................
Number of accumulation units
. End of period (000's omitted).......................................
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Growth subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.225
. End of period............................................... $ 1.225
Number of accumulation units
. End of period (000's omitted)............................... 73,898
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International subaccount
Accumulation unit value
. Beginning of period ........................................ $ 1.000 $1.024
. End of period .............................................. $ 1.024
Number of accumulation units
. End of period (000's omitted)............................... 53,322
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Growth-Income subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.186
. End of period .............................................. $ 1.186
Number of accumulation units
. End of period (000's omitted)............................... 163,672
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Asset Allocation subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.139
. End of period .............................................. $ 1.139
Number of accumulation units
. End of period (000's omitted)............................... 44,481
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Bond subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.080
. End of period............................................... $ 1.080
Number of accumulation units
. End of period (000's omitted)............................... 12,960
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High-Yield Bond subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.095
. End of period .............................................. $ 1.095
Number of accumulation units
. End of period (000's omitted)............................... 22,666
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U.S. Government/AAA-Rated subaccount
Accumulation unit value
. Beginning of period......................................... $ 1.000 $1.066
. End of period............................................... $ 1.066
Number of accumulation units
. End of period (000's omitted)............................... 7,885
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</TABLE>
<TABLE>
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<S> <C> <C>
Cash Management subaccount
Accumulation unit value
. Beginning of period............................................ $ 1.000 $1.023
. End of period ................................................. $ 1.023
Number of accumulation units
. End of period (000's omitted).................................. 14,282
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</TABLE>
*The VAA began operations on August 1, 1989. However, the subaccounts did not
begin operations until April 30, 1997, so the figures for 1997 represent
experience of less than one year.
**The Global Small Capitalization subaccount began operations on April 30, 1998
so the figures for 1998 represent experience of less than one year.
There is a subaccount but it is not in the chart because it did not begin
activity until 1999.
Unit values are for contracts with the EGMDB. For those contracts without the
EGMDB, the unit values are higher.
Investment results
At times, the VAA may compare its investment results to various unmanaged indi-
ces 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, with or without contingent deferred sales charges. Results
calculated without contingent deferred sales charges will be higher. Total re-
turns include the reinvestment of all distributions, which are reflected in
changes in unit value. 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
Purchase payments allocated to the fixed side of the contract become part of
Lincoln Life's general account, and do not participate in the investment expe-
rience of the VAA. The general account is subject to regulation and supervision
by the Indiana Insurance Department as well as the insurance laws and regula-
tions 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 ac-
6
<PAGE>
count as a security under the Securities Act of 1933 and has not registered
the general account as an investment company under the 1940 Act. Accordingly,
neither the general account nor any interests in it are regulated 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 Pro-
spectus which relate to our general account and to the fixed account under the
contract. These disclosures, however, may be subject to certain 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.
Purchase payments allocated to the fixed side of the contract are guaranteed
to be credited with a minimum interest rate, specified in the contract, of at
least 3.0%. A purchase payment allocated to the fixed side of the contract 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.
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 liabili-
ties 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 ac-
cordance 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 other annuity contracts offered by Lincoln Life in
addition to the contracts described in this prospectus. The other annuity con-
tracts supported by the VAA invest in the same portfolios of the series as the
contracts described in this Prospectus. These other annuity contracts may have
different charges that could affect performance of the subaccount.
Investments of the variable annuity account
You decide the subaccount(s) to which you allocate purchase payments. There is
a separate subaccount which corresponds to each class of each fund of the se-
ries. You may change your allocation without penalty or charges. Shares of the
funds will be sold at net asset value with no initial sales charge to the VAA
in order to fund the contracts. The series is required to redeem fund shares
at net asset value upon our request. We reserve the right to add, delete or
substitute funds.
Investment advisor
The investment advisor for the series is Capital Research and Management Com-
pany (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 reg-
istered as a diversified, open-end management investment company under the
1940 Act. Diversified means not owning too great a percentage of the securi-
ties of any one company. An open-end company is one which, in this case, per-
mits Lincoln Life to sell its shares back to the series when you make a with-
drawal, surrender the contract or transfer from one fund to another. Manage-
ment 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 assets are segregated
and a shareholder's interest is limited to those funds in which the share-
holder 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, pow-
ers, restrictions, limitations, qualifications
7
<PAGE>
and terms and conditions, except that: (1) each class has a different designa-
tion; (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 desig-
nated as class expenses by the series' Board of Trustees under the plan pursu-
ant 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 re-
lated 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.
Certain funds offered as part of this contract have similar investment objec-
tives and policies to other portfolios managed by the advisor. The investment
results of the funds, however, may be higher or lower than the other portfo-
lios that are managed by the advisor. There can be no assurance, and no repre-
sentation is made, that the investment results of any of the funds will be
comparable to the investment results of any other portfolio managed by the ad-
visor.
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 in-
vesting 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 secu-
rities 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 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 in-
come. In the selection of securities for investment, the possibilities of
appreciation and potential dividends are given more weight than current
yield. Ordinarily, the assets of the Growth-Income Fund consist principally
of a diversified group of common stocks, but other types of securities may
be held when deemed advisable including preferred stocks and corporate
bonds, including convertible bonds.
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 com-
mon stocks and other equity-type securities (such as convertible bonds and
preferred stocks), bonds and other intermediate and long-term fixed-income
securities and money market instruments (debt securities maturing in one
year or less).
7. 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.
8. High-Yield Bond Fund--The investment objective is a fully managed, diversi-
fied 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.
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 pre-
serving 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, surrend-
8
<PAGE>
er/withdrawal proceeds or for other purposes described in the contract. If you
want to transfer all or part of your investment from one subaccount to anoth-
er, we may redeem shares held in the first and purchase shares of the other.
The shares are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to Lincoln Life, and may be sold to other insurance companies, for investment
of the assets of the subaccounts established by those insurance companies to
fund variable annuity and variable life insurance contracts.
When the series sells shares in any of its funds both to variable annuity and
to variable life insurance separate accounts, it is said to engage in mixed
funding. When the series sells shares in any of its funds to separate accounts
of unaffiliated life insurance companies, it is said to engage in shared fund-
ing.
The series currently engages in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interests of various contractowners participating in a fund could conflict.
The series' Board of Trustees will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. See the Pro-
spectus for the series.
Reinvestment of dividends and capital gain distributions
All dividend and capital gain distributions of the funds are automatically re-
invested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as
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 substi-
tutions 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 pur-
chased, or to be purchased in the future, under the contract. This substitu-
tion might occur if shares of a fund should no longer be available, or if in-
vestment in any fund's shares should become inappropriate, in the judgment of
our management, for the purposes of the contract.) We cannot substitute shares
of one fund for another without approval by the SEC. We will also notify you.
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 ad-
ministrative 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 ac-
counting and valuation services (including the calculation and monitoring of
daily 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
annuitants receiving annuity payouts under contract live longer than we as-
sumed when we calculated 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; the risk that more owners
than expected will qualify for waivers of the contingent deferred sales
charge; and the risk that our costs in providing the services will exceed our
revenues from contract charges (which we cannot change). The amount of a
charge may not necessarily correspond to the costs associated with providing
the services or benefits indicated by the description of the charge. For exam-
ple, the contingent deferred sales load collected may not fully cover all of
the sales and distribution expenses actually incurred by us.
Deductions from the VAA for American Legacy III
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.40% (1.25% for contracts without the EGMDB) of the daily net asset
value. The charge consists of a 0.10% administrative charge and a 1.30% (1.15%
for contracts without the EGMDB) mortality and expense risk charge.
Surrender charge
A surrender charge applies (except as described below) to surrenders and with-
drawals of other purchase payments that have been invested for the periods in-
dicated as follows:
<TABLE>
<CAPTION>
Number of complete contract years
that a purchase payment has been
invested
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than At least
2 years 2 3 4 5 6 7+
Surrender charge as a percentage of the
surrendered or withdrawn purchase payments 6% 5 4 3 2 1 0
</TABLE>
9
<PAGE>
A surrender charge does not apply to:
1. A surrender or withdrawal of purchase payments that have been invested at
least seven full contract years.
2. The first four withdrawals of contract value during a contract year to the
extent that the total contract value withdrawn during the current contract
year does not exceed 10% of the current contract value;
3. Automatic withdrawals in total not in excess of 10% of the contract value
during a contract year, made by non-trustee contractowners who are at least
59 1/2;
4. Electing an annuity option available within the contract;
5. A surrender of a contract or withdrawal of contract value as a result of
the permanent and total disability of the owner as defined in Section
22(e)(3) of the tax code, after the effective date of the contract and be-
fore the 65th birthday of the owner. For contracts issued in the State of
New Jersey permanent and total disability is defined as: (1) during the
first 24 months of disability, the owner must be unable to engage in his or
her regular occupation and (2) after 24 months of disability, or if the
owner was not engaged in an occupation when the disability began, the owner
must be unable to engage in any occupation for which he or she is or could
be suited by reason of education, training or experience. Being a homemaker
or student is considered engaging in an occupation.
6. When the surviving spouse assumes ownership of the contract as a result of
the death of the original owner;
7. A surrender of a contract as a result of 90 days of continuous confinement
of the contractowner in an accredited nursing home or equivalent health
care facility subsequent to the effective date of the contract;
8. A surrender of a contract as a result of terminal illness of the
contractowner that results in a life expectancy of less than one year as
determined by a qualified professional medical practitioner subsequent to
the effective date of the contract;
9. A surrender of the contract as a result of the death of the contractowner.
However, the surrender charge is not waived as a result of the death of an
annuitant who is not the contractowner; and
10. A surrender of a contract or withdrawal of contract value of a contract
issued to employees and registered representatives of any member of the
selling group and their spouses and minor children, or to officers, direc-
tors, trustees or bona-fide full-time employees of Lincoln National Corp.
or The Capital Group, Inc. or their affiliated or managed companies (based
upon the contractowner's status at the time the contract was purchased).
The surrender charge is calculated separately for each contract year's pur-
chase payments to which a charge applies. (For purposes of calculating this
charge, we assume that purchase payments are withdrawn on a first in-first out
basis, and that all purchase payments are withdrawn before any earnings are
withdrawn.) The surrender charges associated with surrender or withdrawal are
paid to us to compensate us for the loss we experience on contract distribu-
tion costs when contractowners surrender or withdraw before distribution costs
have been recovered.
Deductions for premium taxes
Any premium tax or other tax levied by any governmental entity as a result of
the existence of the contracts or the VAA will be deducted from the contract
value when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. These premium taxes gen-
erally depend upon the law of your state of residence. The tax ranges from
0.5% to 4.0%.
Other charges and deductions
There are deductions from and expenses paid out of the assets of the under-
lying series that are more fully described in the Prospectus for the series.
Among these 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 and surrender charges described previously may be reduced
or eliminated for any particular contract. However, these charges will be re-
duced only to the extent that we anticipate lower distribution and/or adminis-
trative expenses, or that we perform fewer sales or administrative services
than those originally contemplated in establishing the level of those charges.
Lower distribution and administrative expenses may be the result of economies
associated with (1) the use of mass enrollment procedures, (2) the performance
of administrative or sales functions by the employer, (3) the use by an em-
ployer 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 adminis-
trative and surrender charges applicable to a particular contract will be
stated in that contract.
10
<PAGE>
The contracts
Purchase of contracts
If you wish to purchase a contract, you must apply for it through a sales rep-
resentative authorized by us. The completed application is sent to us and we
decide whether to accept or reject it. If the application is accepted, a con-
tract is prepared and executed by our legally authorized officers. The con-
tract is then sent to you through your sales representative. See Distribution
of the contracts.
When a completed application and all other information necessary for process-
ing a purchase order is received, an initial purchase payment will be priced
no later than two business days after we receive the order. While attempting
to finish an incomplete application, we may hold the initial purchase payment
for no more than five business days. If the incomplete application cannot be
completed within those five days, you will be informed of the reasons, and the
purchase payment will be returned immediately (unless you specifically autho-
rize us to keep it until the application is complete). Once the application is
complete, the initial purchase payment must be priced within two business
days.
Who can invest
To apply for a contract, you must be of legal age in a state where the con-
tracts may be lawfully sold and also be eligible to participate in any of the
qualified or nonqualified plans for which the contracts are designed. The
contractowner cannot be older than age 85 (or older than age 80 in Pennsylva-
nia).
Purchase payments
Purchase payments are payable to us at a frequency and in an amount selected
by you in the application. The minimum initial purchase payment is $1,500 for
nonqualified contracts and Section 403(b) transfers/rollovers; and $300 for
qualified contracts. The minimum annual amount for additional purchase pay-
ments 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 elec-
tronically). Purchase payments in total may not exceed $1 million for an owner
or $500,000 for each joint owner. If you stop making purchase payments, the
contract will remain in force as a paid-up contract. However, we may terminate
the contract as allowed by your state's non-forfeiture law for individual de-
ferred annuities. Payments may be made or, if stopped, resumed at any time un-
til the annuity commencement date, the surrender of the contract, maturity
date or the death of the contractowner (or joint owner, if applicable), which-
ever comes first.
Valuation date
Accumulation and annuity units will be valued once daily at the close of trad-
ing (currently 4:00 p.m., New York time) on each day the New York Stock Ex-
change is 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
Purchase payments are placed into the VAA's subaccounts, each of which invests
in shares of the class of its corre-
sponding fund of the series, accord-
ing to your instructions.
The minimum amount of any purchase payment which can be put into any one
subaccount is $20. Upon allocation to a subaccount, purchase payments are con-
verted into accumulation units. The number of accumulation units credited is
determined by dividing the amount allocated to each subaccount by the value of
an accumulation unit for that subaccount on the valuation date on which the
purchase payment is received at our home office if received before 4:00 p.m.,
New York time. If the purchase payment is received at or after 4:00 p.m., New
York time, we will use the accumulation unit value computed on the next valua-
tion date. The number of accumulation units determined in this way is not
changed by any subsequent change in the value of an accumulation unit. Howev-
er, 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.
Valuation of accumulation units
Purchase payments allocated to the VAA are converted into accumulation units.
This is done by dividing each purchase payment by the value of an accumulation
unit for the valuation period during which the purchase payment is allocated
to the VAA. The accumulation unit value for each subaccount was or will be es-
tablished at the inception of the subaccount. It may increase or decrease from
valuation period to valuation period. The accumulation unit value for a
subaccount for a later valuation period is determined as follows:
(1) The total value of the fund shares held in the subaccount is calculated by
multiplying the number of fund shares owned by the subaccount at the be-
ginning 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 valua-
tion period; minus
(2) The liabilities of the subaccount at the end of the valuation period;
these liabilities include daily charges imposed on the 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 subaccount units outstanding
at the beginning of the valuation period.
11
<PAGE>
The daily charges imposed on a 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 between subaccounts on or before the annuity commencement date
You may transfer all or a portion of your investment from one subaccount to an-
other. A transfer involves the surrender of accumulation units in one
subaccount and the purchase of accumulation units in the other subaccount. A
transfer will be done using the respective accumulation unit values 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 are restricted to six times every contract year.
We reserve the right to waive this six-time limit. This limit 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.
A transfer may be made by writing to our home office or, if a Telephone Ex-
change Authorization form (available from us) is on file with us, by a toll-
free telephone call. In order to prevent unauthorized or fraudulent telephone
transfers, we may require the caller to provide certain identifying information
before we will act upon their instructions. We may also assign the
contractowner a Personal Identification Number (PIN) to serve as identifica-
tion. We will not be liable for following telephone instructions we reasonably
believe are genuine. Telephone requests may be recorded and written confirma-
tion 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 in-
herent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time.
Transfers to and from the
General Account on or before the
annuity commencement date
You may transfer all or any part of the contract value from the subaccount(s)
to the fixed side of the contract. The minimum amount which can be transferred
to the fixed side is $300 or the total amount in the subaccount, if less than
$300. However, if a transfer from a subaccount would leave you with less than
$300 in the subaccount, we may transfer the total amount to the fixed side.
You may also transfer all or any part of the contract value from the fixed side
of your contract to the various subaccount(s) subject to the following restric-
tions: (1) the sum of the percentages of fixed value transferred is limited to
25% of the value of the fixed side in any 12 month period; (2) the minimum
amount which can be transferred is $300 or the amount in the fixed account; and
(3) a transfer cannot be made during the first 30 days after the issue date of
the contract.
These transfers cannot be elected more than six times every contract year. We
reserve the right to waive these restrictions. These restrictions do not apply
to transfers made under a dollar cost averaging or cross-reinvestment program
elected on forms available from us. Currently, there is no charge to you for a
transfer. However, we reserve the right to impose a charge in the future for
any transfers to and from the General Account.
Transfers after the annuity commencement date
You may transfer all or a portion of your investment in one subaccount to an-
other subaccount or to the fixed side of the contract. Those transfers will be
limited to three times per contract year. 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 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 enhanced
guaranteed death benefit (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
12
<PAGE>
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 purchase payments and is decreased by
partial withdrawals, partial annuitizations, and any premium taxes made, ef-
fected 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 greater of contract value or the guaranteed minimum death
benefit (GMDB). The GMDB is equal to the sum of all purchase payments minus
any withdrawals, partial annuitizations or premium taxes incurred.
If there are joint owners, upon the death of the first owner, Lincoln Life
will pay a death benefit to the surviving joint owner. If the surviving joint
owner is the spouse of the deceased joint owner he/she may continue the con-
tract as sole owner. Upon the death of the spouse who continues the contract,
Lincoln Life will pay a death benefit to the designated beneficiary(s). Joint
owners are not allowed in the states of New Jersey, Oregon, or Pennsylvania.
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 authori-
zation 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 Discontinu-
ance form and sending it to Lincoln Life. The benefit will be discontinued as
of the valuation date we receive the request, and we will stop 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 either in the form of a lump sum settlement or an
annuity payout.
If a lump sum settlement is requested, the proceeds will be mailed within
seven days of receipt of satisfactory claim documentation as discussed previ-
ously, subject to the laws and regulations governing payment of death bene-
fits. If an election has not been made by the end of the 60-day period, a lump
sum settlement will be made to the beneficiary at that time. This payment may
be postponed as permitted by the 1940 Act.
Payment will be made in accordance with applicable laws and regulations gov-
erning payment of death benefits.
Unless otherwise provided in the beneficiary designation, one of the following
procedures will take place on the death of a beneficiary:
1. If any beneficiary dies before the contractowner, that beneficiary's inter-
est will go to any other beneficiaries named, according to their respective
interests (There are no restrictions on the beneficiary's use of the pro-
ceeds.); and/or
2. If no beneficiary survives the contractowner, the proceeds will be paid to
the contractowner's estate.
The death benefit payable to the beneficiary must be distributed within five
years of the contractowner's date of death unless the beneficiary begins re-
ceiving within one year of the contractowner's death the distribution in the
form of a life annuity over 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,
subject to the laws and regulations governing payment of death benefits. This
payment may be postponed as permitted by the Investment Company Act of 1940.
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 ap-
ply.
If there are joint owners, upon the death of the first joint owner, the sur-
viving 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.
If the surviving joint owner, is a spouse and continues the contract as the
owner instead 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, in-
dependently 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.
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<PAGE>
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 con-
tingent 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 con-
tract or a withdrawal of the contract value upon your written request, subject
to the rules discussed below. Surrender or withdrawal rights after the annuity
commencement date depend upon the annuity option you select.
Special restrictions on surrenders/withdrawals apply if your contract is pur-
chased as part of a retirement plan of a public school system or 501(c)(3) or-
ganization under Section 403(b) of the tax code. Beginning January 1, 1989, in
order for a contract to retain its tax-qualified status, Section 403(b) prohib-
its a withdrawal from a 403(b) contract of post-1988 contributions (and earn-
ings on those contributions) pursuant to a salary reduction agreement. 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 attribut-
able to those contributions may not be withdrawn).
Pre-1989 contributions and earnings through December 31, 1988, are not subject
to the previously stated restriction. Funds transferred to the contract from a
403(b)(7) custodial account will be subject to the restrictions.
The contract value available upon surrender/withdrawal is the cash surrender
value (contract value less any applicable charges, fees, and taxes) at the end
of the valuation period during which the written request for
surrender/withdrawal is received at the home office. Unless a request for with-
drawal specifies otherwise, withdrawals will be made from all subaccounts
within the VAA and from the General Account in the same proportion that the
amount of withdrawal bears to the total contract value. The minimum amount
which can be withdrawn is $300, and the remaining contract value must be at
least $300. Unless prohibited, surrender/ withdrawal payments will be mailed
within seven days after we receive a valid written request at the home office.
The payment may be postponed as permitted by the 1940 Act.
There are charges associated with surrender of a contract or withdrawal of con-
tract value. You may specify whether these charges are deducted from the amount
you request to be withdrawn or from the remaining contract value. See Charges
and other deductions.
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal tax status.
Participants in the Texas Optional Retirement Program should refer to the Re-
strictions under the Texas Optional Retirement Program, later in this Prospec-
tus booklet.
We may terminate the contract, if your purchase payment's frequency or your
contract's value falls below your state's minimum standards.
Reinvestment privilege
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal, and we will recredit the surrender/withdrawal charges
previously deducted. This election must be made within 30 days of the date of
the surrender/withdrawal, and the repurchase must be of a contract covered by
this Prospectus. A representation must be made that the proceeds being used to
make the purchase have retained their tax-favored status under an arrangement
for which the contracts offered by this Prospectus are designed. The number of
accumulation units which will be credited when the proceeds are reinvested will
be based on the value of the accumulation unit(s) on the next valuation date.
This computation will occur following receipt of the proceeds and 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 reinvest-
ment purchase.
Amendment of contract
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. You will be noti-
fied in writing of any changes, modifications or waivers.
Commissions
The commissions paid to dealers are a maximum of 4.75% of each purchase pay-
ment; plus an annual continuing commission of up to 0.40% of contract value. At
times, additional sales incentives (up to 0.25% of purchase payments and an an-
nual continuing 0.10% of contract value) may be provided to dealers maintaining
certain sales volume levels. Upon annuitization, an annual continuing commis-
sion of up to 0.80% (or up to 0.90% for dealers maintaining certain sales vol-
ume 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.
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<PAGE>
Ownership
As contractowner, you have all rights under the contract. According to Indiana
law, the assets of the VAA are held for the exclusive benefit of all
contractowners and their designated beneficiaries; and the assets of the VAA
are not chargeable with liabilities arising from any other business that we may
conduct. Qualified contracts may not be assigned or transferred except as per-
mitted by the Employee Retirement Income Security Act (ERISA) of 1974 and upon
written notification to us. Non-qualified contracts may not be collaterally as-
signed. We assume no responsibility for the validity or effect of any assign-
ment. 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 tax code] and qualified annu-
ity plans [described in Section 403(a) of the tax code], including H.R.10
trusts and plans covering self-employed individuals and their employees, pro-
vide 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. The contract provides that all or part of the contract
value may be used to purchase an annuity.
You may elect annuity payouts in monthly, quarterly, semiannual or annual in-
stallments. If the payouts from any subaccount would be or become less than
$50, we have the right to reduce their frequency until the payouts are at least
$50 each. Following are explanations of the annuity options available.
Annuity options
Life Annuity. This option offers a periodic payout during the lifetime of the
annuitant and ends with the last payout before the death of the annuitant. This
option offers the highest periodic payout since there is no guarantee of a min-
imum number of payouts or provision for a death benefit for beneficiaries. How-
ever, 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 guaran-
tees periodic payouts during a designated period, usually 10 or 20 years, and
then continues throughout the lifetime of the annuitant. The designated period
is selected by the contractowner.
Joint Life Annuity. This option offers a periodic payout during the joint life-
time 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 dur-
ing 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 life-
time 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 of-
fice.
General Information
Under the options listed above, you may not make withdrawals. 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 tax code, if applica-
ble. 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 mor-
tality risk.
The annuity commencement date is usually on or before the contractowner's 85th
birthday. You may change the annuity commencement date, change the annuity op-
tion 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.
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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 alloca-
tions 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 benefi-
ciary 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.
Federal tax matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules that
may affect you and your contract. This discussion also does not address other
Federal tax consequences, or state or local tax consequences, associated with
the contract. As a result, you should always consult a tax adviser about the
application of tax rules to your individual situation.
Taxation of nonqualified annuities
This part of the discussion describes some of the Federal income tax rules ap-
plicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan receiving special tax
treatment under the tax code, such as an IRA or a section 403(b) plan.
Tax Deferral on Earnings
The Federal income tax law generally does not tax any increase in your contract
value until you receive a contract distribution. However, for this general rule
to apply, certain requirements must be satisfied:
. An individual must own the contract (or the tax law must treat the contact as
owned by an individual).
. The investments of the VAA must be "adequately diversified" in accordance
with IRS regulations.
. Your right to choose particular investments for a contract must be limited.
. The annuity commencement date must not occur near the end of the annuitant's
life expectancy.
Contracts not owned by an individual
If a contract is owned by an entity (rather than an individual) the tax code
generally does not treat it as an annuity contract for Federal income tax pur-
poses. This means that the entity owning the contract pays tax currently on the
excess of the contract value over the purchase payments for the contract. Exam-
ples of contracts where the owner pays current tax on the contract's earnings
are contracts issued to a corporation or a trust. Exceptions to this rule ex-
ist. For example, the tax code treats a contract as owned by an individual if
the named owner is a trust or other entity that holds the contract as an agent
for an individual. However, this exception does not apply in the case of any
employer that owns a contract to provide deferred compensation for its employ-
ees.
Investments in the VAA must be diversified
For a contract to be treated as an annuity for Federal income tax purposes, the
investments of the VAA must be "adequately diversified." IRS regulations define
standards for determining whether the investments of the VAA are adequately di-
versified. If the VAA fails to comply with these diversification standards, you
could be required to pay tax currently on the excess of the contract value over
the contract purchase payments. Although we do not control the investments of
the underlying investment options, we expect that the underlying investment op-
tions will comply with the IRS regulations so that the VAA will be considered
"adequately diversified."
Restrictions
Federal income tax law limits your right to choose particular investments for
the contract. Because the I.R.S. has not issued guidance specifying those lim-
its, the limits are uncertain and your right to allocate contract values among
the subaccounts may exceed those limits. If so, you would be treated as the
owner of the assets of the VAA and thus subject to current taxation on the in-
come and gains from those assets. We do not know what limits may be set by the
I.R.S. in any guidance
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that it may issue and whether any such limits will apply to existing contracts.
We reserve the right to modify the contract without your consent to try to pre-
vent the tax law from considering you as the owner of the assets of the VAA.
Age at which annuity payouts begin
Federal income tax rules do not expressly identify a particular age by which
annuity payouts must begin. However, those rules do require that an annuity
contract provide for amortization, through annuity payouts, of the contract's
purchase payments and earnings. If annuity payouts under the contract begin or
are scheduled to begin on a date past the annuitant's 85th birthday, it is pos-
sible that the tax law will not treat the contract as an annuity for Federal
income tax purposes. In that event, you would be currently taxable on the ex-
cess of the contract value over the purchase payments of the contract.
Tax Treatment of Payments
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
that your contract will be treated as an annuity for Federal income tax pur-
poses and that the tax law will not tax any increase in your contract value un-
til there is a distribution from your contract.
Taxation of withdrawals and surrenders
You will pay tax on withdrawals to the extent your contract value exceeds your
purchase payments in the contract. This income (and all other income from your
contract) is considered ordinary income. A higher rate of tax is paid on ordi-
nary income than on capital gains. You will pay tax on a surrender to the ex-
tent the amount you receive exceeds your purchase payments. In certain circum-
stances your purchase payments are reduced by amounts received from your con-
tract that were not included in income.
Taxation of annuity payouts
The tax code imposes tax on a portion of each annuity payout (at ordinary in-
come tax rates) and treats a portion as a nontaxable return of your purchase
payments in the contract. We will notify you annually of the taxable amount of
your annuity payout. Once you have recovered the total amount of the purchase
payment in the contract, you will pay tax on the full amount of your annuity
payouts. If annuity payouts end because of the annuitant's death and before the
total amount of the purchase payments in the contract has been received, the
amount not received generally will be deductible.
Taxation of death benefits
We may distribute amounts from your contract because of the death of a
contractowner or an annuitant. The tax treatment of these amounts depends on
whether you or the annuitant dies before or after the annuity commencement
date.
. Death prior to the annuity commencement date--
. If the beneficiary receives death benefits under an annuity payout op-
tion, they are taxed in the same manner as annuity payouts.
. If the beneficiary does not receive death benefits under an annuity pay-
out option, they are taxed in the same manner as a withdrawal.
. Death after the annuity commencement date--
. If death benefits are received in accordance with the existing annuity
payout option, they are excludible from income if they do not exceed the
purchase payments not yet distributed from the contract. All annuity
payouts in excess of the purchase payments not previously received are
includible in income.
. If death benefits are received in a lump sum, the tax law imposes tax on
the amount of death benefits which exceeds the amount of purchase pay-
ments not previously received.
Penalty taxes payable on withdrawals, surrenders, or annuity payouts
The tax code may impose a 10% penalty tax on any distribution from your con-
tract which you must include in your gross income. The 10% penalty tax does not
apply if one of several exceptions exists. These exceptions include withdraw-
als, surrenders, or annuity payouts that:
. you receive on or after you reach age 59 1/2,
. you receive because you became disabled (as defined in the tax law),
. a beneficiary receives on or after your death, or
. you receive as a series of substantially equal periodic payments for your
life (or life expectancy).
Special rules if you own more than one annuity contract
In certain circumstances, you must combine some or all of the nonqualified an-
nuity contracts you own in order to determine the amount of an annuity payout,
a surrender, or a withdrawal that you must include in income. For example, if
you purchase two or more deferred annuity contracts from the same life insur-
ance company (or its affiliates) during any calendar year, the tax code treats
all such contracts as one contract. Treating two or more contracts as one con-
tract could affect the amount of a surrender, a withdrawal or an annuity payout
that you must include in income and the amount that might be subject to the
penalty tax described above.
Loans and assignments
Except for certain qualified contracts, the tax code treats any amount received
as a loan under a contract, and any assignment or pledge (or agreement to as-
sign or pledge) any portion of your contract value, as a withdrawal of such
amount or portion.
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Gifting a contract
If you transfer ownership of your contract to a person other than your spouse
(or to your former spouse incident to divorce), and receive a payment less
than your contract's value, you will pay tax on your contract value to the ex-
tent it exceeds your purchase payments not previously received. The new own-
er's purchase payments in the contract would then be increased to reflect the
amount included in your income.
Charges for a contract's death benefit
Your contract may have an EGMDB, for which you pay an annual charge, computed
daily. It is possible that the tax law may treat all or a portion of the EGMDB
charge as a contract withdrawal.
Loss of interest deduction
After June 8, 1997 if a contract is issued to a taxpayer that is not an indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should
consult a tax advisor.
Qualified retirement plans
We also designed the contracts for use in connection with certain types of re-
tirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called "quali-
fied contracts." We issue contracts for use with different types of qualified
plans. The Federal income tax rules applicable to those plans are complex and
varied. As a result, this Prospectus does not attempt to provide more than
general information about use of the contract with the various types of quali-
fied plans. Persons planning to use the contract in connection with a quali-
fied plan should obtain advice from a competent tax advisor.
Types of Qualified Contracts and Terms of Contracts
Currently, we issue contracts in connection with the following types of quali-
fied plans:
. Individual Retirement Accounts and Annuities ("Traditional IRAs")
. Roth IRAs
. Simplified Employee Pensions ("SEPs")
. Savings Incentive Matched Plan for Employees ("SIMPLE 401(k) plans")
. Public school system and tax-exempt organization annuity plans ("403(b)
plans")
. Qualified corporate employee pension and profit-sharing plans ("401(a)
plans") and qualified annuity plans ("403(a) plans")
. Self-employed individual plans ("H.R. 10 plans" or "Keogh Plans")
. Deferred compensation plans of state and local governments and tax-exempt
organizations ("457 plans").
We may issue a contract for use with other types of qualified plans in the fu-
ture.
We will amend contracts to be used with a qualified plan as generally neces-
sary to conform to tax law requirements for the type of plan. However, the
rights of a person to any qualified plan benefits may be subject to the plan's
terms and conditions, regardless of the contract's terms and conditions. In
addition, we are not bound by the terms and conditions of qualified plans to
the extent such terms and conditions contradict the contract, unless we con-
sent.
Tax Treatment of Qualified Contracts
The Federal income tax rules applicable to qualified plans and qualified con-
tracts vary with the type of plan and contract. For example,
. Federal tax rules limit the amount of purchase payments that can be made,
and the tax deduction or exclusion that may be allowed for the purchase pay-
ments. These limits vary depending on the type of qualified plan and the
plan participant's specific circumstances, e.g., the participant's compensa-
tion.
. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the an-
nuitant must begin receiving payments from the contract in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum dis-
tribution rules" do not apply to a Roth IRA.
. Loans are allowed under certain types of qualified plans, but Federal income
tax rules prohibit loans under other types of qualified plans. For example,
Federal income tax rules permit loans under some section 403(b) plans, but
prohibit loans under Traditional and Roth IRAs. If allowed, loans are sub-
ject to a variety of limitations, including restrictions as to the loan
amount, the loan's duration, and the manner of repayment. Your contract or
plan may not permit loans.
Tax treatment of payments
Federal income tax rules generally include distributions from a qualified con-
tract in the recipient's income as ordinary income. These taxable distribu-
tions will include purchase payments that were deductible or excludible from
income. Thus, under many qualified contracts the total amount received is in-
cluded in income since a deduction or exclusion from income was taken for pur-
chase payments. There are exceptions. For example, you do not include amounts
received from a Roth IRA in income if certain conditions are satisfied.
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Failure to comply with the minimum distribution rules applicable to certain
qualified plans, such as Traditional IRAs, will result in the imposition of an
excise tax. This excise tax generally equals 50% of the amount by which a min-
imum required distribution exceeds the actual distribution from the qualified
plan.
Federal penalty taxes payable on distributions
The tax code may impose a 10% penalty tax on the amount received from the
qualified contract that must be included in income. The tax code does not im-
pose the penalty tax if one of several exceptions applies. The exceptions vary
depending on the type of qualified contract you purchase. For example, in the
case of an IRA, exceptions provide that the penalty tax does not apply to a
withdrawal, surrender, or annuity payout:
. received on or after the annuitant reaches age 59 1/2,
. received on or after the annuitant's death or because of the annuitant's
disability (as defined in the tax law),
. received as a series of substantially equal periodic payments for the
annuitant's life (or life expectancy), or
. received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally ap-
ply to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
Transfers and direct rollovers
In many circumstances, money may be moved between qualified contracts and
qualified plans by means of a rollover or a transfer. Special rules apply to
such rollovers and transfers. If the applicable rules are not followed, you
may suffer adverse Federal income tax consequences, including paying taxes
which might not otherwise have had to be pay. A qualified advisor should al-
ways be consulted before you move or attempt to move funds between any quali-
fied plan or contract and another qualified plan or contract.
The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs or section 457 plans.)
The direct rollover rules require that we withhold Federal income tax equal to
20% of the eligible rollover distribution from the distribution amount, unless
you elect to have the amount directly transferred to certain qualified plans
or contracts. Before we send a rollover distribution, we will provide the re-
cipient with a notice explaining these requirements and how the 20% withhold-
ing can be avoided by electing a direct rollover.
The EGMDB and IRAs
Pursuant to IRS regulations, IRAs may not invest in life insurance contracts.
We do not believe that these regulations prohibit the EGMDB from being pro-
vided under the contracts when we issue the contracts as Traditional IRAs or
Roth IRAs. However, the law is unclear and it is possible that the presence of
the EGMDB under a contract issued as a Traditional or Roth IRA could result in
increased taxes to you.
Federal income tax withholding
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a contract unless the distributee notifies us at or
before the time of the distribution that tax is not to be withheld. In certain
circumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender, or annuity payout is requested, we will give the
recipient an explanation of the withholding requirements.
Tax status of Lincoln Life
Under existing Federal income tax laws, Lincoln Life does not pay tax on in-
vestment income and realized capital gains of the VAA. Lincoln Life does not
expect that it will incur any Federal income tax liability on the income and
gains earned by the VAA. We, therefore, do not impose a charge for Federal in-
come taxes. If Federal income tax law changes and we must pay tax on some or
all of the income and gains earned by the VAA, we may impose a charge against
the VAA to pay the taxes.
Changes in the law
The above discussion is based on the tax code, IRS regulations, and interpre-
tations existing on the date of this Prospectus. However, Congress, the IRS,
and the courts may modify these authorities, sometimes retroactively.
Voting rights
As required by law, we will vote the series shares held in the VAA at meetings
of the shareholders of the series. The voting will be done according to the
instructions of contractowners who have interests in any subaccounts which in-
vest in classes of funds of the series. If the 1940 Act or any regulation un-
der it should be amended or if present interpretations should change, and if
as a result we determine that we are permitted to vote the series shares in
our own right, we may elect to do so.
The number of votes which you have the right to cast will be determined by ap-
plying your percentage interest in a subaccount to the total number of votes
attributable to the subaccount. In determining the number of votes, fractional
shares will be recognized.
Series shares of a class held in a subaccount for which no timely instructions
are received will be voted by us in proportion to the voting instructions
which are re-
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ceived for all contracts participating in that subaccount. Voting instructions
to abstain on any item to be voted on will be applied on a pro-rata basis to
reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, each person having a voting interest
in a subaccount will receive proxy voting material, reports and other materials
relating to the series. Since the series engages in shared funding, other per-
sons 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 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 con-
tract canceled under this provision will be void. With respect to the fixed
portion of a contract, we will return purchase payments. With respect to the
VAA, except as explained in the following paragraph, we will return the con-
tract value as of the date of receipt of the cancellation, plus any premium
taxes which had been deducted. No contingent deferred sales charge will be as-
sessed. A purchaser who participates in the VAA is subject to the risk of a
market loss during the free-look period.
For contracts written in those states whose laws require that we assume this
market risk during the free-look period, a contract may be canceled, subject to
the conditions explained before, except that we will return only the purchase
payment(s).
State regulation
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the Indiana In-
surance Department at all times. A full examination of our operations is con-
ducted 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 partici-
pants 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 re-
sponsible 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 informa-
tion required by that Act or any other applicable law or regulation.
Other information
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered here. This Prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further informa-
tion about the VAA, Lincoln Life and the contracts offered. Statements in this
Prospectus about the content of contracts and other legal instruments are sum-
maries. 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 Ac-
counts 50, 51 and 52 are all
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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. 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 computer systems, including those
which service the VAA, to accommodate year 2000. Lincoln Life and Delaware
have begun formal discussions with each other to assess the requirements for
their respective systems to interface properly in order to facilitate the ac-
curate and orderly operation of the VAA beginning in the year 2000.
The year 2000 issue is pervasive and complex and affects virtually every as-
pect of the businesses of both Lincoln Life and Delaware (the Companies). The
computer systems of the Companies and their interfaces with the computer sys-
tems of vendors, suppliers, customers and other business partners are particu-
larly vulnerable. The inability to properly recognize date-sensitive elec-
tronic 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. Also, in addition to the discussions with each other noted above, the
Companies have respectively initiated formal discussions with other critical
parties that interface with their systems to gain an understanding of the pro-
gress 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, with the modi-
fication of existing computer systems, updates by vendors and conversion to
new software and hardware, the year 2000 issue will not pose significant oper-
ations problems for their respective computer systems. In addition, the Compa-
nies are incorporating potential issues surrounding year 2000 into their con-
tingency planning process, in the event that, despite these substantial ef-
forts, 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 and, for each
company, will be based on its management's best estimates which are derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. Nevertheless, there can be no guarantee either by Lincoln Life or by
Delaware that estimated costs will be achieved, and actual results could dif-
fer 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 rou-
tine and in the ordinary course of business. In some instances these proceed-
ings include claims for unspecified or substantial punitive damages and simi-
lar 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 lia-
bility, if any, under these suits will not have a material adverse effect on
the financial position of Lincoln Life.
Two lawsuits involve alleged fraud in the sale of interest-sensitive universal
and whole life insurance policies. These two 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 either case. Plaintiffs seek unspecified
damages and penalties for themselves and on behalf of the putative class. Al-
though 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 po-
tential loss, if any. Management intends to defend these suits vigorously. The
amount of liability, if any, which may arise as a result of these suits cannot
be reasonably estimated at this time.
21
<PAGE>
The American Legacy III
Lincoln NationalVariable Annuity Account H (Registrant)
The Lincoln NationalLife Insurance Company (Depositor)
Statement of Additional Information (SAI)
This Statement of Additional Information should be read in conjunction with the
American Legacy III Prospectus of Lincoln National Variable Annuity Account H
dated April 1, 1999.
You may obtain a copy of the American Legacy III Prospectus on request and
without charge.
Please write American Legacy Customer Service, The Lincoln National Life Insur-
ance 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
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Item Page
<S> <C>
Calculation of investment results B- 2
Annuity payouts B- 7
Federal tax status B- 7
Advertising and sales literature B-10
Financial statements B-12
</TABLE>
This SAI is not a Prospectus.
The date of this SAI is April 1, 1999.
<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 in-
surance of life and health insurance contracts and annuities, and is also a
professional reinsurer. Lincoln Life is wholly owned by Lincoln National Cor-
poration (LNC), a publicly held insurance and financial services holding com-
pany 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 cur-
rently 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 oc-
curs on a weekend day, the Exchange may also be closed on the business day oc-
curring just before or just after the holiday.
Services
Independent auditors
The financial statements of the variable annuity account (VAA) and the statu-
tory-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 re-
sponsible to Lincoln Life. We have entered into an agreement with the Delaware
Management Company, 2005 Market Street, Philadelphia, PA 19203, to provide ac-
counting 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 contingent
deferred sales charge normally assessed upon surrender or withdrawal of con-
tract value will be waived for officers, directors or bona fide full time em-
ployees of LNC, The Capital Group, Inc., their affiliated or managed compa-
nies, and certain other persons. See Contingent deferred sales charges in the
Prospectus.
Both before and after the annuity commencement date, there are exchange privi-
leges between subaccounts, and from the VAA to the General Account subject to
restrictions set out in the Prospectus. See The contracts, in the Prospectus.
No exchanges are permitted between the VAA and other separate accounts.
The offering of the contracts is continuous.
Calculation of investment results
The paragraphs set forth below present performance information for the VAA and
the subaccounts calculated in several different ways. Paragraph A shows the
performance of the series over the periods indicated in the table set forth in
the Paragraph adjusted to reflect the charges and expenses associated with the
contracts. Paragraph B shows the average annual total return of each
subaccount since its inception. The information presented in Paragraph B is
commonly referred to as "standard performance" because it is calculated in ac-
cordance with formulas prescribed by the SEC. Under rules issued by the SEC,
standard performance must be included in certain advertising material that
discusses the performance of the VAA and the subaccounts. Standard performance
is described in paragraph (C). Paragraph D shows additional "non-standardized"
performance information (i.e., performance information not calculated in ac-
cordance with SEC guidelines)
B-2
<PAGE>
for each of the subaccounts that may be used to advertise the performance of
the VAA and the subaccounts.
(A) 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 purchase
payment of $1,000, calculated according to the formula provided after the exam-
ples. The annual total return has been calculated to show the annual total re-
turn for a hypothetical contract with the enhanced guaranteed minimum death
benefit (EGMDB) and without EGMDB. Although the subaccounts did not commence
activity until 1997, these figures are calculated as if the subaccounts had
commenced activity at the same time as the underlying funds.
Further, since the class of shares of the funds in which the 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.
Subaccount performance (adjusted for contract expense charges) (to be updated)
Period Ending December 31, 1998
<TABLE>
<CAPTION>
10-year
1-year period 5-year period period
With Without With Without With Without
EGMDB EGMDB EGMDB EGMDB EGMDB EGMDB
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Growth Subaccount 1.32%* 1.51%* N/A N/A N/A N/A
(commenced activity 4/30/97)
Global Small Capitalization
Subaccount
(commenced activity 4/30/98)
Growth Subaccount 21.99 22.19 15.95% 16.14% 15.25% 15.44%
(as if commenced activity 2/8/84)
International Subaccount 1.30 1.47 12.49 12.68 8.31* 8.49*
(as if commenced activity 5/1/90)
Growth-Income Subaccount 17.79 17.98 15.74 15.94 13.72 13.90
(as if commenced activity 2/8/84)
Asset Allocation Subaccount 12.48 12.66 12.62 12.81 10.56* 10.74*
(as if commenced activity 8/1/89)
High-Yield Bond Subaccount 4.52 4.69 8.90 9.08 10.34 10.51
(as if commenced activity 2/8/84)
Bond Subaccount 2.35 2.52 3.36* 3.53* N/A N/A
(as if commenced activity 1/2/96)
U.S. Gov't./AAA Subaccount 0.70 0.86 4.46 4.62 6.54 6.71
(as if commenced activity 12/1/85)
Cash Management Subaccount (2.54) (2.39) 2.39 2.56 3.74 3.90
(as if commenced activity 2/8/84)
</TABLE>
*The lifetime of each subaccount is less than the complete period indicated.
See the date the subaccount commenced activity under its name.
There is a subaccount but it is not in the chart because it did not begin ac-
tivity until 1999.
The length of the periods and the last day of each period used in the above ta-
ble are set out in the table heading and in the footnotes above.
B-3
<PAGE>
(B) Average annual total return (to be updated)
Period Ending December 31, 1998
<TABLE>
<CAPTION>
Since
inception
With Without
EGMDB EGMDB
- -----------------------------------------------------------------------------------
<S> <C> <C>
Global Growth Subaccount (commenced activity 4/30/97) 1.98% 2.26%
Global Small Capitalization Subaccount (commenced activity 4/30/98)
Growth Subaccount (commenced activity 4/30/97) 30.32 30.52
International Subaccount (commenced activity 4/30/97) (5.34) (5.18)
Growth-Income Subaccount (commenced activity 4/30/97) 19.34 19.52
Asset Allocation Subaccount (commenced activity 4/30/97) 12.06 12.23
High-Yield Bond Subaccount (commenced activity 4/30/97) 5.25 5.41
Bond Subaccount (commenced activity 4/30/97) 2.95 3.11
U.S. Gov't./AAA Subaccount (commenced activity 4/30/97) 0.86 1.02
Cash Management Subaccount (commenced activity 4/30/97) (5.40) (5.24)
</TABLE>
See the date the subaccount commenced activity next to its name.
There is a subaccount but it is not in the chart because it did not begin ac-
tivity until 1999.
(C) 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)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 hypothet-
ical $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.
B-4
<PAGE>
(D) 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 advertise-
ments, 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 Accumula-
tion Unit Value between the first and last day of the base period being mea-
sured, 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 pro-
duce the cumulative return.
Non-standardized investment results
subaccounts of Account H* (to be updated)
$10,000 invested in
this fund through
American Legacy III
this many years ago...
...would have grown to this amount on December 31, 1998**
<TABLE>
<CAPTION>
With EGMDB
-------------------------------------------------------------------------------
Growth Growth-Income High-Yield Bond Cash Management
- -------------------------------------------------------------------------------------------------------------------
Number Compound Compound Compound Compound
of Growth Growth Growth Growth
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
<CAPTION>
Without EGMDB
-------------------------------------------------------------------------------
Growth Growth-Income High-Yield Bond Cash Management
- -------------------------------------------------------------------------------------------------------------------
Number Compound Compound Compound Compound
of Growth Growth Growth Growth
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 subaccounts for the contracts did not commence activity until
1997, these figures are calculated as if the subaccounts had commenced activity
at the same time as the corresponding underlying funds.
**For purposes of determining these investment results, American Legacy III's
1.40% annual asset charge and administrative fee for those contracts with EGMDB
and 1.25% for those contracts without EGMDB have been taken into account.
However, these examples do not assume redemption at the end of the period.
There is also a subaccount but it is not in the chart because it did not begin
activity until 1999.
B-5
<PAGE>
<TABLE>
<CAPTION>
With EGMDB Without EGMDB
------------------- -------------------
U.S. Govt/AAA U.S. Govt/AAA
- ---------------------------------------------------------------------------
Number Compound Compound
of Growth Growth
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
<CAPTION>
Asset Allocation Asset Allocation
------------------- -------------------
Number Compound Compound
of Growth Growth
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
<CAPTION>
International International
------------------- -------------------
Number Compound Compound
of Growth Growth
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
<CAPTION>
Bond Bond
------------------- -------------------
Number Compound Compound
of Growth Growth
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
<CAPTION>
Global Growth Global Growth
------------------- -------------------
Number Compound Compound
of Growth Growth
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-6
<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 calcula-
tion: first, it determines the dollar amount of the first payout; second, it
credits the contract with a fixed number of annuity units based on the amount
of the first payout; and third, it calculates the value of the annuity units
each period thereafter. These steps are explained below.
The dollar amount of the first periodic variable annuity payout is determined
by applying the total value of the accumulation units credited under the con-
tract valued as of the annuity commencement date (less any premium taxes) to
the annuity tables contained in the contract. The first variable annuity pay-
out 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 bene-
fit per $1,000 of value shown in the contract tables by the number of thou-
sands 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 mea-
suring 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 as-
sociated with employer sponsored plans and where not prohibited by law.
At an annuity commencement date, the contract is credited with annuity units
for each subaccount on which variable annuity payouts are based. The number of
annuity units to be credited is determined by dividing the amount of the first
periodic payout by the value of an annuity unit in each subaccount selected.
Although the number of annuity units is fixed by this process, the value of
such units will vary with the value of the underlying fund. The amount of the
second and subsequent periodic payouts is determined by multiplying the
contractowner's fixed number of annuity units in each subaccount by the appro-
priate annuity unit value for the valuation date ending 14 days prior to the
date that payout is due.
The value of each subaccount's annuity unit will be set initially at $1.00.
The annuity unit value for each subaccount at the end of any valuation date is
determined by multiplying the subaccount annuity unit value for the immedi-
ately preceding valuation date by the product of:
(a) The net investment factor of the subaccount for the valuation period for
which the annuity unit value is being determined, and
(b) A factor to neutralize the assumed investment return in the annuity table.
The value of the annuity units is determined as of a valuation date 14 days
prior to the payment date in order to permit calculation of amounts of annuity
payouts and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
Proof of age, sex and survival
Lincoln Life may require proof of age, sex, or survival of any payee upon
whose age, sex, or survival payments depend.
Federal tax status
General
The operations of the VAA form a part of, and are taxed with, the operations
of Lincoln Life under the Internal Revenue Code of 1986, as amended (the
Code). 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 con-
tract. Under existing federal income tax law, Lincoln Life believes that the
VAA investment income and realized net capital gain are not taxed to the ex-
tent they are retained as part of the reserves under the contract. According-
ly, Lincoln Life does not anticipate that it will incur any federal income tax
liability attributable to the VAA, and therefore it does not intend to make
any provision for such taxes. However, if changes in the federal tax laws or
interpretations thereof result in Lincoln Life's being taxed on income or gain
attributable to the VAA, then Lincoln Life may impose a charge against the VAA
(with respect to some or all (contracts) in order to make provision for pay-
ment of such taxes.
B-7
<PAGE>
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 ac-
counts of insurance companies) underlying the contract be adequately diversi-
fied in accordance with Treasury regulations in order for the contract to
qualify as an annuity contract under Section 72 of the code. The VAA, through
each of the funds, intends to comply with the diversification requirements
prescribed in regulations, which affect how the assets in each of the funds in
which the VAA invests may be invested. Capital Research and Management Company
is not affiliated with Lincoln Life and Lincoln Life does not have control
over the series, or its investments. However, Lincoln Life believes that each
fund in which the VAA owns shares will meet the diversification requirements
and that therefore the contracts will be treated as annuities under the code.
The regulations relating to diversification requirements do not provide guid-
ance concerning the extent to which contractowners may direct their invest-
ments to particular subaccounts of a separate account. When guidance is pro-
vided, the contract may need to be modified to comply with that guidance. For
these reasons, Lincoln Life reserves the right to modify the contract as nec-
essary to prevent the contractowner from being considered the owner of the as-
sets of the VAA.
In addition to the requirements of Section 817(h), code Section 72(s) provides
that contracts will not be treated as annuity contracts for purposes of Sec-
tion 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 des-
ignated 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 con-
tracts satisfy all such code requirements. However, Lincoln Life believes that
such provisions in such contracts meet these requirements. Lincoln Life in-
tends to review such provisions and modify them as necessary to assure that
they comply with the requirements of Section 72(s) when clarified by regula-
tions or otherwise.
Tax status of contracts used with certain plans
The rules governing the tax treatment of contributions and distributions under
qualified plans, as set forth in the code and applicable rulings and regula-
tions, are complex and subject to change. These rules also vary according to
the type of plan and the terms and conditions of the plan itself. Therefore,
no attempt is made herein to provide more than general information about the
use of contracts with the various types of plans, based on Lincoln Life's un-
derstanding of the current federal tax laws as interpreted by the Internal
Revenue Service. Purchasers of contracts for use with such a plan and plan
participants and beneficiaries should consult counsel and other competent ad-
visers as to the suitability of the plan and the contract to their specific
needs, and as to applicable code limitations and tax consequences. Partici-
pants under such plans, as well as contractowners, annuitants, and beneficia-
ries, should also be aware that the rights of any person to any benefits under
such plans may be subject to the terms and conditions of the plans themselves
regardless of the terms and conditions of the contract.
Following are brief descriptions of the various types of plans and of the use
of contracts in connection therewith.
Public school systems and 501(c)(3) organizations [Section 403(b) plans]
Payments made to purchase annuity contracts by public school systems or 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 em-
ployee 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 re-
sults 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 withdraw-
al.
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 dis-
tributed. However, the employee may be required to include these amounts in
gross income prior to distribution if the qualified plan or trust loses its
qualification. Corporate plans qualified under Sections 401(a) or 403(a) of
the code are subject to extensive rules, including limita-
B-8
<PAGE>
tions on maximum contributions or benefits. For plan years beginning after De-
cember 31, 1996, tax exempt organizations (except state and local governments)
may have 401(k) plans.
Distributions of amounts in excess of non-deductible employee contributions are
generally taxable as ordinary income. If an employee or beneficiary receives a
lump-sum distribution, that is, if the employee or beneficiary receives in a
single tax year the total amounts payable with respect to that employee, and
the benefits are paid as a result of the employee's death or separation from
service or after the employee attains 59 1/2, taxable gain may be eligible for
special lump sum averaging treatment. These special tax rules are not available
in all cases.
Self-employed individuals (H.R. 10 or Keogh)
Under code provisions, self-employed individuals may establish plans commonly
known as H.R. 10 or Keogh plans for themselves and their employees. The tax
consequences to participants under such plans depend upon the plan itself. Such
plans are subject to 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 pro-
gram 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 com-
pensation. 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 ba-
sis without regard to the limit on contributions, provided certain requirements
are met. Distributions from IRA's are subject to certain restrictions. Deduct-
ible 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 de-
ductible 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.
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 and local governments and certain tax-exempt or-
ganizations may establish deferred compensation plans. While participants in
such plans may be permitted to specify the form of investment in which their
plan accounts will participate, all such investments are owned by the sponsor-
ing employer and are subject to the claims of its creditors. Plans of state and
local governments established on August 20, 1996, or later, must hold all as-
sets and income in trust (or custodial accounts or an annuity contract) for the
exclusive benefit of participants and their beneficiaries. Section 457 plans
that were in existence before August 20, 1996 are allowed until January 1, 1999
to meet this requirement. The amounts deferred under a plan which meet the re-
quirements of Section 457 of the code are not taxable as income to the partici-
pant 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 compen-
sation. 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 em-
ployee 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. How-
ever, 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. For tax years beginning after December 31, 1996,
B-9
<PAGE>
SIMPLE plans are available and may be in the form of an IRA or part of a
401(k) plan. Under a SIMPLE IRA, employees are permitted to make elective con-
tributions 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. Em-
ployer 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 (gen-
erally, the employee's own non-deductible contributions) constitutes his in-
vestment in the contract. If a distribution is made in the form of annuity
payouts, the employee's investment in the contract (adjusted for certain re-
fund provisions) divided by his life expectancy (or other period for which an-
nuity 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 employ-
ee'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 in-
vestment. Rules generally provide that all distributions which are not re-
ceived as an annuity will be taxed as a pro rata distribution of taxable and
non-taxable amounts (rather than as a distribution first of non-taxable
amounts).
If a surrender of or withdrawal from the contract is effected and a distribu-
tion is made in a single payment, the proceeds may qualify for special lump-
sum distribution treatment under certain qualified plans, as discussed above.
Otherwise, the amount by which the payment exceeds the investment in the con-
tract (adjusted for any prior withdrawals) allocated to that 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 re-
sult in a 50% excise tax. Various other adverse tax consequences may also be
potentially applicable in certain circumstances to these types of plans.
Upon an annuitant's death, the taxation of benefits payable to his beneficiary
generally follow these same principles, subject to a variety of special rules.
Other considerations
It should be understood that the foregoing comments about the federal tax con-
sequences under these contracts are not exhaustive and that special rules are
provided with respect to other tax situations not discussed herein. Further,
the foregoing discussion does not address any applicable state, local, or for-
eign tax laws. In recent years, numerous changes have been made in the federal
income tax treatment of contracts and retirement plans, which are not fully
discussed above. Before an investment is made in any of the above plans, a tax
adviser should be consulted.
Advertising and sales
literature
As set forth in the Prospectus, Lincoln Life may refer to the following orga-
nizations (and others) in its marketing materials:
A.M. Best's Rating System is designed to evaluate the various factors affect-
ing 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 quantita-
tive 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 mea-
sures performance of securities in Europe, Australia and the Far East. The in-
dex reflects the movements of world stock markets by representing the evolu-
tion of an unmanaged portfolio. The EAFE Index offers international diversifi-
cation 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 cur-
B-10
<PAGE>
rently 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 compa-
nies may be noted.
Morningstar is an independent financial publisher offering comprehensive sta-
tistical 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 el-
ement 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 con-
tracts.
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 out-
standing 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 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 subaccounts and adver-
tisement literature.
Dollar-Cost Averaging. (DCA) -- You may systematically transfer on a monthly
basis amounts from certain subaccounts into the subaccounts or the fixed side
of the contract. You may elect to participate in the DCA program at the time
of application or at anytime before the annuity commencement date by complet-
ing 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 com-
mencement 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 tel-
ephone 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 re-
quired 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 tele-
phone authorization has been elected, certain changes may be made by tele-
phone. 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. To the extent that withdrawals
under AWS do not qualify for an exemption from the contingent deferred sales
charge, we will assess any applicable surrender charges on those withdrawals.
See Contingent deferred sales charges. 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, which-
ever is less. We reserve the right to discontinue this service at any time.
B-11
<PAGE>
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 ter-
minate 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 cli-
ents 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 as-
sets of over $58 billion.
Financial Statements
Financial statements for the VAA and Lincoln Life appear on the following
pages. [To be provided by amendment]
B-12
<PAGE>
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT H
REGISTRATION STATEMENT ON FORM N-4
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) List of Financial Statements (to be filed by amendment)
1. Part A The Table of Condensed Financial Information is included in
Part A of this Registration Statement.
2. Part B The following Financial Statements for the Variable Account are
included in Part B of this Registration Statement.
Statement of Net Assets -- December 31, 1998
Statement of Operations -- Year ended December 31, 1998
Statement of Changes in Net Assets -- Years ended December 31, 1998 and
1997
Notes to Financial Statements -- December 31, 1998
Report of Ernst & Young LLP, Independent Auditors
3. Part B The following Statutory Financial Statements and Schedules of
Lincoln National Life Insurance Company are included in the SAI:
Balance Sheets--Years ended December 31, 1998 and 1997
Statements of Income--Years ended December 31, 1998, 1997 and 1996
Statements of Capital and Surplus--Years ended December 31, 1998,
1997, and 1996
Notes to Financial Statements--December 31, 1998
Supplemental Schedule of Selected Statutory Basis Financial
Data--December 31, 1998
Report of Ernst & Young LLP, Independent Auditors
<PAGE>
Item 24. (Continued)
(b) List of Exhibits
(1) Resolutions of the Board of Directors of the Lincoln National Life
Insurance Company establishing Separate Account H are incorporated herein
by reference to Registration Statement on Form N-4 (33-27783) filed on
December 5, 1996.
(2) None.
(3)(a) Underwriting Agreement incorporated by reference to Registration
Statement on Form N-4 (33-27783) filed on December 5, 1996.
(3)(b) Amendment to Underwriting Agreement incorporated by reference to
Registration Statement on Form N-4 (333-18419) filed on March 27, 1998.
(3)(c) Selling Group Agreement incorporated by reference to Registration
Statement on Form N-4 (333-18419) filed on March 27, 1998.
(4) Variable Annuity Contract incorporated herein by reference to
Registration Statement on Form N-4 (333-18419) filed on April 1, 1997.
(5) Application incorporated herein by reference to Registration Statement
on Form N-4 (333-18419) filed on April 1, 1997.
(6) Articles of Incorporation and Bylaws 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) Services Agreement between Delaware Management Holdings, Inc., Delaware
Service Company, Inc. and Lincoln National Life Insurance Company is
incorporated herein by reference to the Registration Statement on Form
S-6 (333-40745) filed on November 21, 1997.
(8)(a) Participation Agreement incorporated herein by reference to Registration
Statement on Form N-4 (333-18419) filed on April 1, 1997.
(8)(b) Amendment to Participation Agreement incorporated herein by reference to
Registration Statement on Form N-4 (333-18419) filed on April 1, 1997.
(8)(c) Amendment to Indemnification Agreement incorporated herein by reference
to Registration Statement on Form N-4 (333-18419) filed on April 1, 1997.
(9) Opinion and consent of Jeremy Sachs, Senior Counsel, Lincoln National
Life Insurance Company as to legality of securities being issued
incorporated herein by reference to Registration Statement on Form N-4
(333-18419) filed on April 1, 1997.
(10) Consent of auditors (to be filed by amendment).
(11) Not applicable.
(12) Not applicable.
(13) Schedule for computation for performance quotations incorporated herein
by reference to Registration Statement on Form N-4 (333-18419) filed on
April 1, 1997.
(14) Other Exhibits:
(a) Organizational Chart of the Lincoln National Insurance
Holding Company System (to be filed by amendment)
(b) Books and Records Report (to be filed by amendment).
Item 25.
DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name Positions and Offices with LNL
- ---- ------------------------------
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 Counsel
Kelly D. Clevenger* Vice President
Jeffrey K. Dellinger* Vice President
John H. Gotta**** Senior Vice President
Jack D. Hunter* Executive Vice President and General Counsel
Donald E. Keller* Vice President
Stephen H. Lewis* Senior Vice President
H. Thomas McMeekin** Director
Reed P. Miller* Vice President
Ian M. Rolland** Director
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, Indiana
46802.
**Principal business address is 200 East Berry Street, Fort Wayne, Indiana
46802-2706.
***Principal business address is 1700 Magnavox Way, One Reinsurance Place,
Fort Wayne, Indiana 46804.
****Principal business address is 900 Cottage Grove Road, Bloomfield, CT
06152-2321.
<PAGE>
Item 26.
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH THE DEPOSITOR OR REGISTRANT
See Exhibit 14(b): Organizational Chart of the Lincoln National Insurance
Holding Company System.
Item 27.
NUMBER OF CONTRACTOWNERS
As of , there were (variable and fixed) Contract
Owners under Account H. (to be updated)
Item 28. Indemnification
See prior filings.
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, 1998) 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>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fort Wayne, and State of Indiana, on the 22nd day of January, 1999.
LINCOLN NATIONAL VARIABLE ANNUITY
ACCOUNT H (Legacy III) (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
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on January 22, 1999, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Gabriel L. Shaheen Chief Executive Officer, January 22, 1999
- ---------------------- President & Director
Gabriel L. Shaheen (Principal Executive
Officer)
- ---------------------- Executive Vice President
Lawrence T. Rowland and Director
/s/ Keith J. Ryan Senior Vice President, Chief January 22, 1999
- ---------------------- Financial Officer and Assistant
Keith J. Ryan Treasurer (Principal Accounting
Officer and Principal Financial
Officer)
/s/ Jon A. Boscia
- ---------------------- Director January 22, 1999
Jon A. Boscia
- ---------------------- Director
H. Thomas McMeekin
/s/ Richard C. Vaughan Director January 22, 1999
- ----------------------
Richard C. Vaughan
</TABLE>
