As filed with the Securities and Exchange Commission on October 22, 1999
1933 Act Registration No. 333-72875
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
POST-EFFECTIVE AMENDMENT NO. 1 TO
Registration Statement
on
FORM S-6
FOR REGISTRATION
Under the
SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
-------------
Lincoln Life Flexible Premium Variable Life Account S
(Exact Name of Registrant)
The Lincoln National Life Insurance Company
(Name of Depositor)
1300 South Clinton Street, Fort Wayne, Indiana 46802
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code
(219) 455-2000
-------------
<TABLE>
<S> <C>
Elizabeth Frederick, Esquire Copy to:
The Lincoln National Life Insurance Company Jeremy Sachs, Esquire
1300 S. Clinton Street The Lincoln National
P.O. Box 1110 Life Insurance Company
Fort Wayne, Indiana 46802 350 Church Street
(Name and Address of Agent for Service) Hartford, CT 06103-1106
</TABLE>
-------------
Approximate date of proposed public offering: Continuous
Indefinite Number of Units of interest in Variable Life Insurance Contracts
(Title of Securities Being Registered)
-------------
An indefinite amount of the securities being offered by the Registration
Statement has been registered pursuant to Rule 24F-2 under the Investment
Company Act of 1940. The first Form 24F-2 for the Registrant is not yet due, as
Registrant commenced operations on May 14, 1999.
It is proposed that this filing will become effective:
[X] immediately on filing, pursuant to Rule 485(b)
[ ] on , pursuant to Rule 485(b)
[ ] 60 days after filing, pursuant to Rule 485(a)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Cross Reference Sheet
(Reconciliation and Tie)
Required by Instruction 4 to Form S-6
<TABLE>
<CAPTION>
Item of Form N-8B-2 Location in Prospectus
- --------------------- ----------------------
<S> <C>
1 Cover Page; Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 Lincoln Life, the Separate Account and the General Account
6(a) Lincoln Life, the Separate Account and the General Account
6(b) *
9 Legal Matters
10(a)-(c) Right to Examine the Policy; Surrenders; Accumulation Unit Value; Reports to
Policyowners
10(d) Policy Loans; Partial Surrenders; Allocation of Premiums
10(e) Reinstatement of a Lapsed Policy
10(f) Right to Instruct Voting of Fund Shares
10(g)-(h) *
10(i) Premium Payments; Allocations and Transfers; Death Benefit; Policy Values; Settlement Options
11 Separate Account--Funds
12 Separate Account--Funds
13 Charges and Fees
14 Policy Rights
15 Premium Payments; Allocations and Transfers
16 Separate Account--Funds
17 Partial Surrenders
18
19 Reports to Policyowners
20 *
21 Policy Loans
22 *
23 The Company
24 Age; Incontestability; Suicide;
25 The Company
26 Fund Participation Agreements
27 The Variable Account
28 Directors and Officers of Lincoln Life
29 The Company
30 *
31 *
32 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item of Form N-8B-2 Location in Prospectus
- --------------------- ----------------------
<S> <C>
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 Separate Account--The Funds; Premium Payments
45 *
46 Partial Surrenders
47 The Variable Account; Partial Surrenders, Allocations and Transfers
48 *
49 *
50 The Variable Account
51 Highlights; Premium Payments;
52 Lincoln Life, the Separate Account and the General Account
53 Tax Matters
54 *
55 *
</TABLE>
- ---------------
* Not Applicable
<PAGE>
Part I
The Lincoln National Life Insurance Company
Lincoln Life Flexible Premium Variable Life Account S
Supplement Dated October 22, 1999 to the Prospectus Dated May 14, 1999
[Note: except to the extent modified or superseded by the Supplement, all
disclosure in the prospectus filed as part of Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-6 (File No. 333-72875) April 30, 1999 is
hereby incorporated herein by this reference.
<PAGE>
The Lincoln National Life Insurance Company
Lincoln Life Flexible Premium Variable Life Account S
Supplement Dated October 22, 1999 to the Prospectus Dated May 14, 1999
Please review this Supplement carefully, because it contains new information
not in the May 14th, 1999 Prospectus. Keep this Supplement with the Prospectus.
1. The following Funds are added to the Cover Page:
American Variable Insurance Series
Growth Fund--Class 2
Growth-Income Fund--Class 2
High-Yield Bond Fund--Class 2
2. The following is added to the table under "Underlying Funds Expenses" on
page 6 of the prospectus:
<TABLE>
<CAPTION>
Total Annual Fund Total Fund
Operating Operating
Expenses Total Waivers Expenses with
Management 12b-1 Other Without Waivers and Waivers and
Fund Fees Fees Expenses or Reductions Reductions Reductions
- ---------------------- ------------ ---------- ---------- ------------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
AVIS Growth 0.40% 0.25% 0.01% 0.66% -- 0.66%
AVIS Growth-Income 0.35% 0.25% 0.01% 0.61% -- 0.61%
AVIS High-Yield Bond 0.50% 0.25% 0.01% 0.76% -- 0.76%
</TABLE>
3. The following is added under "Separate Account--Funds" on page 11 of the
prospectus:
American Variable Insurance Series, managed by Capital Research and Management
Company and distributed by American Funds Distributors, Inc., 333 South Hope
Street, Los Angeles, CA 90071
AVIS Growth Fund--Class 2
AVIS Growth-Income Fund--Class 2
AVIS High-Yield Bond Fund--Class 2
4. The following is added under "Separate Account--Funds" on page 13 of the
prospectus:
AVIS GROWTH FUND (Large Cap U.S. Stocks): The fund seeks to make your
investment grow by investing primarily in common stocks of companies that
appear to offer superior opportunities for growth of capital. The fund is
designed for investors seeking capital appreciation through stocks. Investors
in the fund should have a long-term perspective and be able to tolerate
potentially wide price fluctuations.
AVIS GROWTH-INCOME FUND (Large Cap U.S. Stocks): The fund seeks to make your
investment grow and provide you with income over time by investing primarily in
common stocks or other securities which demonstrate the potential for
appreciation and/or dividends. The fund is designed for investors seeking both
capital appreciation and income.
AVIS HIGH-YIELD BOND FUND (High Yield Bonds): The fund seeks to provide you
with a high level of current income and secondarily capital appreciation by
investing primarily in lower quality debt securities (rated Ba or BB or below
Moody's Investors Service, Inc. or Standard and Poor's Corporation), including
those of non-U.S. issuers. The fund may also invest in equity securities that
provide an opportunity for capital appreciation.
1
<PAGE>
5. "Legal Matters" on page 31 is amended as follows:
Paragraph two is replaced with:
Lincoln Life is presently defending two lawsuits in which Plaintiffs seek to
represent national classes of policyholders in connection with alleged fraud,
breach of contract and other claims relating to the sale of interest-sensitive
universal and participating whole life insurance policies. As of the date of
this prospectus, the courts have not certified a class in either of the suits.
Plaintiffs seek unspecified damages and penalties for themselves and on behalf
of the putative class. Although the relief sought in these cases is
substantial, the cases are in the preliminary stages of litigation, and it is
premature to make assessments about potential loss, if any. Management is
defending these suits vigorously. The amount of liability, if any, which may
ultimately arise as a result of these suits cannot be reasonably determined at
this time.
6. "Preparing for Year 2000" on page 33 is amended as follows:
Paragraph one is replaced with:
Many existing computer programs use only two digits in the date field to
identify the year. If left uncorrected these programs, which were designed and
developed without considering the impact of the upcoming change in the century,
could fail to operate or could produce erroneous results when processing dates
after December 31, 1999. For example, for a bond with a stated maturity date of
July 1, 2000, a computer program could read and interpret the maturity date as
July 1, 1900. This problem is known by many names, such as the "Year 2000
Problem", "Y2K", and the "Millenium Bug".
Paragraph four is replaced with:
In light of the potential problems discussed above, Lincoln Life, as part of
its Year 2000 updating process, has assumed responsibility for correcting all
Information Technology (IT) systems which service the Separate Account.
Delaware is responsible for updating all its IT systems to support these vital
services. The Year 2000 effort, for both IT and non-IT systems, is organized
into four phases:
Paragraph five is replaced with:
The high-priority IT processes and systems--those Lincoln Life uses to maintain
its customers' records and accounts--have been assessed and repaired, and
testing of those processes and systems is more than 99% complete. Our efforts
will continue through the end of 1999 to ensure they remain Y2K-ready. And, we
continue to work closely with our key business partners and suppliers so they
can provide the information and service we need from them. Both companies are
currently on schedule to have their high-priority non-IT systems (elevators,
heating and ventilation, security systems, etc.) remediated and tested by
October 31, 1999.
7. Appendix A beginning on page 40 is amended as follows:
Paragraph 2 on page 41 is replaced with:
In addition, these values reflect the application of the mortality and expense
risk charge, premium load and an assumed premium tax charge on all premium
payments of 5.0% on a guaranteed basis, 2.15% on a current basis. After
deduction of these amounts, the illustrated net annual return is -1.72%, 4.28%
and 10.28% on a maximum charge basis for all years. The illustrated net annual
return on a current charge basis is -1.52%, 4.48% and 10.48% for Policy Years
1-10, and -1.17%, 4.83% and 10.83% for Policy Years 11 and thereafter.
Paragraph 3 on page 41 is replaced with:
The amounts shown also reflect the deduction of Fund investment advisory fees
and other expenses which will vary depending on which funding vehicle is chosen
but which are assumed for purposes of these illustrations to be equivalent to
an annual effective rate of 0.82% of the daily net asset value of the Separate
Account. This rate reflects an arithmetic average of total Fund portfolio
expenses for the year ending December 31, 1998.
Paragraph 4 on page 41 is replaced with:
Certain fund groups waive a portion of fund expenses or reimburse the funds for
such expenses. Those waivers or reimbursements remain in effect for varying
periods of time, are usually reviewed at least yearly for each fund group, and
are within the fund group's control. The effect of discontinuing a waiver or
reimbursement arrangement could result in higher expense levels for the
affected fund, as shown in the portfolio expense table. Assuming those waivers
and reimbursements were discontinued, the Fund investment advisory fees and
other expenses arithmetic average would be equivalent to an annual effective
rate of 1.09% of the daily net asset value of the Separate Account.
On pages 42 to 53, Tables I through XII are replaced in their entirety with the
enclosed tables.
8. Unaudited financial statements as of June 30, 1999 for Account S and Lincoln
National Life Insurance Company are added following page S-35 of the
prospectus.
2
<PAGE>
Table I
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
SIMPLIFIED ISSUE
GUARANTEED INSURANCE COSTS AND MAXIMUM CHARGES ASSUMED
$10,000 ANNUAL PREMIUM
GUIDELINE PREMIUM TEST
FACE AMOUNT $796,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 796,000 796,000 796,000 5,203 5,597 5,992 5,903 6,297 6,692
2 21,525 796,000 796,000 796,000 10,632 11,775 12,969 11,157 12,300 13,494
3 33,101 796,000 796,000 796,000 15,779 18,026 20,469 15,779 18,026 20,469
4 45,256 796,000 796,000 796,000 20,619 24,326 28,522 20,619 24,326 28,522
5 58,019 796,000 796,000 796,000 25,152 30,672 37,183 25,152 30,672 37,183
6 71,420 796,000 796,000 796,000 29,758 37,468 46,943 29,758 37,468 46,943
7 85,491 796,000 796,000 796,000 33,990 44,266 57,431 33,990 44,266 57,431
8 100,266 796,000 796,000 796,000 37,819 51,034 68,696 37,819 51,034 68,696
9 115,779 796,000 796,000 796,000 41,202 57,725 80,781 41,202 57,725 80,781
10 132,068 796,000 796,000 796,000 44,088 64,283 93,731 44,088 64,283 93,731
15 226,575 796,000 796,000 796,000 49,927 93,659 174,459 49,927 93,659 174,459
20 347,193 796,000 796,000 796,000 35,605 110,494 292,459 35,605 110,494 292,459
25 501,136 0 796,000 796,000 0 95,561 473,203 0 95,561 473,203
30 697,610 0 796,000 841,327 0 8,348 786,287 0 8,348 786,287
20 (Age 65) 347,193 796,000 796,000 796,000 35,605 110,494 292,459 35,605 110,494 292,459
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
3
<PAGE>
Table II
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
SIMPLIFIED ISSUE
CURRENT INSURANCE COSTS AND CURRENT CHARGES ASSUMED
$10,000 ANNUAL PREMIUM
GUIDELINE PREMIUM TEST
FACE AMOUNT $796,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 796,000 796,000 796,000 6,996 7,468 7,941 7,696 8,168 8,641
2 21,525 796,000 796,000 796,000 14,014 15,413 16,871 14,539 15,938 17,396
3 33,101 796,000 796,000 796,000 20,761 23,548 26,569 20,761 23,548 26,569
4 45,256 796,000 796,000 796,000 27,245 31,886 37,124 27,245 31,886 37,124
5 58,019 796,000 796,000 796,000 33,468 40,438 48,627 33,468 40,438 48,627
6 71,420 796,000 796,000 796,000 39,821 49,624 61,620 39,821 49,624 61,620
7 85,491 796,000 796,000 796,000 45,887 59,039 75,805 45,887 59,039 75,805
8 100,266 796,000 796,000 796,000 51,839 68,877 91,508 51,839 68,877 91,508
9 115,779 796,000 796,000 796,000 57,439 78,908 108,638 57,439 78,908 108,638
10 132,068 796,000 796,000 796,000 62,637 89,094 127,310 62,637 89,094 127,310
15 226,575 796,000 796,000 796,000 82,151 143,099 253,014 82,151 143,099 253,014
20 347,193 796,000 796,000 796,000 87,492 199,673 458,247 87,492 199,673 458,247
25 501,136 796,000 796,000 945,415 83,517 266,639 815,013 83,517 266,639 815,013
30 697,610 796,000 796,000 1,513,468 55,816 338,935 1,414,456 55,816 338,935 1,414,456
20 (Age 65) 347,193 796,000 796,000 796,000 87,492 199,673 458,247 87,492 199,673 458,247
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges, administrative charges, and premium
load assumed. The current mortality and expense risk charges may be reduced
from 0.70% to 0.35% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.17%, 4.83%,
and 10.83%.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
4
<PAGE>
Table III
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
GUARANTEED ISSUE
GUARANTEED INSURANCE COSTS AND MAXIMUM CHARGES ASSUMED
$10,000 ANNUAL PREMIUM
GUIDELINE PREMIUM TEST
FACE AMOUNT $792,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 792,000 792,000 792,000 5,216 5,610 6,006 5,916 6,310 6,706
2 21,525 792,000 792,000 792,000 10,659 11,803 12,999 11,184 12,328 13,524
3 33,101 792,000 792,000 792,000 15,820 18,071 20,518 15,820 18,071 20,518
4 45,256 792,000 792,000 792,000 20,676 24,390 28,593 20,676 24,390 28,593
5 58,019 792,000 792,000 792,000 25,226 30,757 37,281 25,226 30,757 37,281
6 71,420 792,000 792,000 792,000 29,849 37,576 47,071 29,849 37,576 47,071
7 85,491 792,000 792,000 792,000 34,101 44,401 57,595 34,101 44,401 57,595
8 100,266 792,000 792,000 792,000 37,951 51,199 68,902 37,951 51,199 68,902
9 115,779 792,000 792,000 792,000 41,357 57,923 81,036 41,357 57,923 81,036
10 132,068 792,000 792,000 792,000 44,269 64,519 94,043 44,269 64,519 94,043
15 226,575 792,000 792,000 792,000 50,277 94,167 175,226 50,277 94,167 175,226
20 347,193 792,000 792,000 792,000 36,238 111,500 294,186 36,238 111,500 294,186
25 501,136 0 792,000 792,000 0 97,522 477,028 0 97,522 477,028
30 697,610 0 792,000 850,227 0 12,261 794,605 0 12,261 794,605
20 (Age 65) 347,193 792,000 792,000 792,000 36,238 111,500 294,186 36,238 111,500 294,186
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
5
<PAGE>
Table IV
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
GUARANTEED ISSUE
CURRENT INSURANCE COSTS AND CURRENT CHARGES ASSUMED
$10,000 ANNUAL PREMIUM
GUIDELINE PREMIUM TEST
FACE AMOUNT $792,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 792,000 792,000 792,000 6,714 7,177 7,641 7,414 7,877 8,341
2 21,525 792,000 792,000 792,000 13,457 14,821 16,243 13,982 15,346 16,768
3 33,101 792,000 792,000 792,000 19,939 22,647 25,585 19,939 22,647 25,585
4 45,256 792,000 792,000 792,000 26,170 30,672 35,756 26,170 30,672 35,756
5 58,019 792,000 792,000 792,000 32,158 38,911 46,852 32,158 38,911 46,852
6 71,420 792,000 792,000 792,000 38,299 47,791 59,416 38,299 47,791 59,416
7 85,491 792,000 792,000 792,000 44,183 56,914 73,155 44,183 56,914 73,155
8 100,266 792,000 792,000 792,000 49,988 66,480 88,401 49,988 66,480 88,401
9 115,779 792,000 792,000 792,000 55,485 76,270 105,069 55,485 76,270 105,069
10 132,068 792,000 792,000 792,000 60,634 86,256 123,281 60,634 86,256 123,281
15 226,575 792,000 792,000 792,000 80,935 140,144 246,796 80,935 140,144 246,796
20 347,193 792,000 792,000 792,000 88,207 197,744 449,097 88,207 197,744 449,097
25 501,136 792,000 792,000 927,501 84,889 264,736 799,570 84,889 264,736 799,570
30 697,610 792,000 792,000 1,486,106 57,594 336,696 1,388,884 57,594 336,696 1,388,884
20 (Age 65) 347,193 792,000 792,000 792,000 88,207 197,744 449,097 88,207 197,744 449,097
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges, administrative charges, and premium
load assumed. The current mortality and expense risk charges may be reduced
from 0.70% to 0.35% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.17%, 4.83%,
and 10.83%.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
6
<PAGE>
Table V
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 PREFERRED NONSMOKER RISK
FULLY UNDERWRITTEN
GUARANTEED INSURANCE COSTS AND MAXIMUM CHARGES ASSUMED
$10,000 ANNUAL PREMIUM
GUIDELINE PREMIUM TEST
FACE AMOUNT $840,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 840,000 840,000 840,000 5,061 5,450 5,841 5,761 6,150 6,541
2 21,525 840,000 840,000 840,000 10,339 11,464 12,639 10,864 11,989 13,164
3 33,101 840,000 840,000 840,000 15,326 17,531 19,929 15,326 17,531 19,929
4 45,256 840,000 840,000 840,000 19,994 23,623 27,734 19,994 23,623 27,734
5 58,019 840,000 840,000 840,000 24,343 29,738 36,106 24,343 29,738 36,106
6 71,420 840,000 840,000 840,000 28,751 36,275 45,529 28,751 36,275 45,529
7 85,491 840,000 840,000 840,000 32,770 42,782 55,623 32,770 42,782 55,623
8 100,266 840,000 840,000 840,000 36,368 49,224 66,429 36,368 49,224 66,429
9 115,779 840,000 840,000 840,000 39,497 55,548 77,978 39,497 55,548 77,978
10 132,068 840,000 840,000 840,000 42,104 61,691 90,303 42,104 61,691 90,303
15 226,575 840,000 840,000 840,000 46,074 88,066 166,020 46,074 88,066 166,020
20 347,193 840,000 840,000 840,000 28,642 99,430 273,457 28,642 99,430 273,457
25 501,136 0 840,000 840,000 0 73,985 431,117 0 73,985 431,117
30 697,610 0 0 840,000 0 0 690,950 0 0 690,950
20 (Age 65) 347,193 840,000 840,000 840,000 28,642 99,430 273,457 28,642 99,430 273,457
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
7
<PAGE>
Table VI
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 PREFERRED NONSMOKER RISK
FULLY UNDERWRITTEN
CURRENT INSURANCE COSTS AND CURRENT CHARGES ASSUMED
$10,000 ANNUAL PREMIUM
GUIDELINE PREMIUM TEST
FACE AMOUNT $840,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 840,000 840,000 840,000 7,148 7,625 8,103 7,848 8,325 8,803
2 21,525 840,000 840,000 840,000 14,151 15,564 17,036 14,676 16,089 17,561
3 33,101 840,000 840,000 840,000 20,733 23,538 26,579 20,733 23,538 26,579
4 45,256 840,000 840,000 840,000 26,935 31,584 36,835 26,935 31,584 36,835
5 58,019 840,000 840,000 840,000 32,804 39,753 47,929 32,804 39,753 47,929
6 71,420 840,000 840,000 840,000 38,779 48,511 60,443 38,779 48,511 60,443
7 85,491 840,000 840,000 840,000 44,491 57,498 74,117 44,491 57,498 74,117
8 100,266 840,000 840,000 840,000 50,148 66,942 89,311 50,148 66,942 89,311
9 115,779 840,000 840,000 840,000 55,533 76,638 105,956 55,533 76,638 105,956
10 132,068 840,000 840,000 840,000 60,606 86,559 124,173 60,606 86,559 124,173
15 226,575 840,000 840,000 840,000 80,487 139,991 247,583 80,487 139,991 247,583
20 347,193 840,000 840,000 840,000 87,928 197,344 449,424 87,928 197,344 449,424
25 501,136 840,000 840,000 927,195 87,322 265,995 799,306 87,322 265,995 799,306
30 697,610 840,000 840,000 1,487,568 65,195 340,889 1,390,250 65,195 340,889 1,390,250
20 (Age 65) 347,193 840,000 840,000 840,000 87,928 197,344 449,424 87,928 197,344 449,424
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges, administrative charges, and premium
load assumed. The current mortality and expense risk charges may be reduced
from 0.70% to 0.35% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.17%, 4.83%,
and 10.83%.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
8
<PAGE>
Table VII
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
SIMPLIFIED ISSUE
GUARANTEED INSURANCE COSTS AND MAXIMUM CHARGES ASSUMED
$25,000 ANNUAL PREMIUM FOR SEVEN YEARS
CASH VALUE ACCUMULATION TEST
FACE AMOUNT $656,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 656,000 656,000 656,000 17,486 18,617 19,749 19,236 20,367 21,499
2 53,813 656,000 656,000 656,000 35,807 39,245 42,821 37,120 40,557 44,134
3 82,754 656,000 656,000 656,000 53,717 60,667 68,187 53,717 60,667 68,187
4 113,142 656,000 656,000 656,000 71,206 82,909 96,082 71,206 82,909 96,082
5 145,049 656,000 656,000 656,000 88,285 106,018 126,790 88,285 106,018 126,790
6 178,551 656,000 656,000 656,000 105,943 131,082 161,729 105,943 131,082 161,729
7 213,729 656,000 656,000 656,000 123,160 157,129 200,237 123,160 157,129 200,237
8 224,415 656,000 656,000 656,000 117,938 160,869 218,038 117,938 160,869 218,038
9 235,636 656,000 656,000 656,000 112,489 164,520 237,536 112,489 164,520 237,536
10 247,418 656,000 656,000 656,000 106,765 168,041 258,905 106,765 168,041 258,905
15 315,775 656,000 656,000 836,521 72,778 182,612 398,854 72,778 182,612 398,854
20 403,017 656,000 656,000 1,112,790 23,955 187,019 608,000 23,955 187,019 608,000
25 514,362 0 656,000 1,478,268 0 166,957 912,397 0 166,957 912,397
30 656,471 0 656,000 1,958,864 0 91,769 1,345,411 0 91,769 1,345,411
20 (Age 65) 403,017 656,000 656,000 1,112,790 23,955 187,019 608,000 23,955 187,019 608,000
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
9
<PAGE>
Table VIII
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
SIMPLIFIED ISSUE
CURRENT INSURANCE COSTS AND CURRENT CHARGES ASSUMED
$25,000 ANNUAL PREMIUM FOR SEVEN YEARS
CASH VALUE ACCUMULATION TEST
FACE AMOUNT $656,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 656,000 656,000 656,000 20,198 21,467 22,736 21,948 23,217 24,486
2 53,813 656,000 656,000 656,000 40,725 44,577 48,584 42,037 45,890 49,896
3 82,754 656,000 656,000 656,000 60,847 68,636 77,060 60,847 68,636 77,060
4 113,142 656,000 656,000 656,000 80,580 93,700 108,462 80,580 93,700 108,462
5 145,049 656,000 656,000 656,000 99,934 119,826 143,117 99,934 119,826 143,117
6 178,551 656,000 656,000 656,000 119,904 148,118 182,495 119,904 148,118 182,495
7 213,729 656,000 656,000 656,000 139,488 177,632 226,007 139,488 177,632 226,007
8 224,415 656,000 656,000 656,000 135,365 183,687 247,950 135,365 183,687 247,950
9 235,636 656,000 656,000 681,082 131,087 189,849 272,105 131,087 189,849 272,105
10 247,418 656,000 656,000 724,929 126,612 196,093 298,574 126,612 196,093 298,574
15 315,775 656,000 656,000 1,005,191 101,575 231,534 479,276 101,575 231,534 479,276
20 403,017 656,000 656,000 1,396,308 66,100 268,683 762,907 66,100 268,683 762,907
25 514,362 656,000 656,000 1,973,920 22,780 312,675 1,218,317 22,780 312,675 1,218,317
30 656,471 0 656,000 2,819,992 0 360,219 1,936,861 0 360,219 1,936,861
20 (Age 65) 403,017 656,000 656,000 1,396,308 66,100 268,683 762,907 66,100 268,683 762,907
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges, administrative charges, and premium
load assumed. The current mortality and expense risk charges may be reduced
from 0.70% to 0.35% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.17%, 4.83%,
and 10.83%.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
10
<PAGE>
Table IX
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
GUARANTEED ISSUE
GUARANTEED INSURANCE COSTS AND MAXIMUM CHARGES ASSUMED
$25,000 ANNUAL PREMIUM FOR SEVEN YEARS
CASH VALUE ACCUMULATION TEST
FACE AMOUNT $652,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 652,000 652,000 652,000 17,499 18,630 19,763 19,249 20,380 21,513
2 53,813 652,000 652,000 652,000 35,834 39,273 42,851 37,147 40,586 44,164
3 82,754 652,000 652,000 652,000 53,758 60,712 68,236 53,758 60,712 68,236
4 113,142 652,000 652,000 652,000 71,262 82,973 96,153 71,262 82,973 96,153
5 145,049 652,000 652,000 652,000 88,359 106,103 126,888 88,359 106,103 126,888
6 178,551 652,000 652,000 652,000 106,035 131,190 161,857 106,035 131,190 161,857
7 213,729 652,000 652,000 652,000 123,271 157,263 200,401 123,271 157,263 200,401
8 224,415 652,000 652,000 652,000 118,070 161,034 218,244 118,070 161,034 218,244
9 235,636 652,000 652,000 652,000 112,644 164,718 237,790 112,644 164,718 237,790
10 247,418 652,000 652,000 652,000 106,946 168,277 259,216 106,946 168,277 259,216
15 315,775 652,000 652,000 837,646 73,128 183,120 399,391 73,128 183,120 399,391
20 403,017 652,000 652,000 1,114,289 24,589 188,025 608,819 24,589 188,025 608,819
25 514,362 0 652,000 1,480,261 0 168,918 913,627 0 168,918 913,627
30 656,471 0 652,000 1,961,507 0 95,681 1,347,226 0 95,681 1,347,226
20 (Age 65) 403,017 652,000 652,000 1,114,289 24,589 188,025 608,819 24,589 188,025 608,819
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
11
<PAGE>
Table X
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 NONSMOKER RISK
GUARANTEED ISSUE
CURRENT INSURANCE COSTS AND CURRENT CHARGES ASSUMED
$25,000 ANNUAL PREMIUM FOR SEVEN YEARS
CASH VALUE ACCUMULATION TEST
FACE AMOUNT $652,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 652,000 652,000 652,000 19,972 21,234 22,496 21,722 22,984 24,246
2 53,813 652,000 652,000 652,000 40,286 44,111 48,089 41,598 45,423 49,402
3 82,754 652,000 652,000 652,000 60,207 67,937 76,297 60,207 67,937 76,297
4 113,142 652,000 652,000 652,000 79,754 92,771 107,419 79,754 92,771 107,419
5 145,049 652,000 652,000 652,000 98,942 118,675 141,785 98,942 118,675 141,785
6 178,551 652,000 652,000 652,000 118,766 146,757 180,869 118,766 146,757 180,869
7 213,729 652,000 652,000 652,000 138,231 176,078 224,085 138,231 176,078 224,085
8 224,415 652,000 652,000 652,000 134,010 181,952 245,726 134,010 181,952 245,726
9 235,636 652,000 652,000 674,756 129,665 187,955 269,577 129,665 187,955 269,577
10 247,418 652,000 652,000 718,068 125,160 194,066 295,748 125,160 194,066 295,748
15 315,775 652,000 652,000 996,644 100,755 229,429 475,201 100,755 229,429 475,201
20 403,017 652,000 652,000 1,387,598 66,880 267,274 758,148 66,880 267,274 758,148
25 514,362 652,000 652,000 1,962,412 24,159 311,335 1,211,214 24,159 311,335 1,211,214
30 656,471 0 652,000 2,803,439 0 358,784 1,925,492 0 358,784 1,925,492
20 (Age 65) 403,017 652,000 652,000 1,387,598 66,880 267,274 758,148 66,880 267,274 758,148
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges, administrative charges, and premium
load assumed. The current mortality and expense risk charges may be reduced
from 0.70% to 0.35% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.17%, 4.83%,
and 10.83%.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
12
<PAGE>
Table XI
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 PREFERRED NONSMOKER RISK
FULLY UNDERWRITTEN
GUARANTEED INSURANCE COSTS AND MAXIMUM CHARGES ASSUMED
$25,000 ANNUAL PREMIUM FOR SEVEN YEARS
CASH VALUE ACCUMULATION TEST
FACE AMOUNT $684,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 684,000 684,000 684,000 17,396 18,524 19,653 19,146 20,274 21,403
2 53,813 684,000 684,000 684,000 35,621 39,047 42,611 36,934 40,359 43,924
3 82,754 684,000 684,000 684,000 53,428 60,352 67,843 53,428 60,352 67,843
4 113,142 684,000 684,000 684,000 70,808 82,462 95,580 70,808 82,462 95,580
5 145,049 684,000 684,000 684,000 87,770 105,424 126,105 87,770 105,424 126,105
6 178,551 684,000 684,000 684,000 105,303 130,323 160,829 105,303 130,323 160,829
7 213,729 684,000 684,000 684,000 122,384 156,184 199,086 122,384 156,184 199,086
8 224,415 684,000 684,000 684,000 117,015 159,718 216,595 117,015 159,718 216,595
9 235,636 684,000 684,000 684,000 111,404 163,135 235,752 111,404 163,135 235,752
10 247,418 684,000 684,000 684,000 105,503 166,391 256,723 105,503 166,391 256,723
15 315,775 684,000 684,000 828,239 70,327 179,053 394,905 70,327 179,053 394,905
20 403,017 684,000 684,000 1,101,759 19,524 179,979 601,973 19,524 179,979 601,973
25 514,362 0 684,000 1,463,603 0 153,226 903,345 0 153,226 903,345
30 656,471 0 684,000 1,939,421 0 64,381 1,332,057 0 64,381 1,332,057
20 (Age 65) 403,017 684,000 684,000 1,101,759 19,524 179,979 601,973 19,524 179,979 601,973
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
13
<PAGE>
Table XII
FLEXIBLE PREMIUM CORPORATE VARIABLE UNIVERSAL LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45 PREFERRED NONSMOKER RISK
FULLY UNDERWRITTEN
CURRENT INSURANCE COSTS AND CURRENT CHARGES ASSUMED
$25,000 ANNUAL PREMIUM FOR SEVEN YEARS
CASH VALUE ACCUMULATION TEST
FACE AMOUNT $684,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Investment Gross Annual Investment Gross Annual Investment
at Return of Return of Return of
Policy 5% Interest --------------------------------- --------------------------------- ----------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------ --------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 684,000 684,000 684,000 20,332 21,605 22,879 22,082 23,355 24,629
2 53,813 684,000 684,000 684,000 40,862 44,726 48,746 42,174 46,039 50,058
3 82,754 684,000 684,000 684,000 60,872 68,678 77,122 60,872 68,678 77,122
4 113,142 684,000 684,000 684,000 80,407 93,543 108,325 80,407 93,543 108,325
5 145,049 684,000 684,000 684,000 99,515 119,410 142,712 99,515 119,410 142,712
6 178,551 684,000 684,000 684,000 119,228 147,419 181,785 119,228 147,419 181,785
7 213,729 684,000 684,000 684,000 138,577 176,657 224,981 138,577 176,657 224,981
8 224,415 684,000 684,000 684,000 134,257 182,459 246,612 134,257 182,459 246,612
9 235,636 684,000 684,000 684,000 129,839 188,408 270,485 129,839 188,408 270,485
10 247,418 684,000 684,000 720,599 125,289 194,484 296,791 125,289 194,484 296,791
15 315,775 684,000 684,000 1,001,946 100,691 229,594 477,729 100,691 229,594 477,729
20 403,017 684,000 684,000 1,399,347 67,279 267,327 764,567 67,279 267,327 764,567
25 514,362 684,000 684,000 1,989,733 27,470 312,532 1,228,076 27,470 312,532 1,228,076
30 656,471 0 684,000 2,861,123 0 361,961 1,965,111 0 361,961 1,965,111
20 (Age 65) 403,017 684,000 684,000 1,399,347 67,279 267,327 764,567 67,279 267,327 764,567
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Value as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Value as a percentage of the Total Account Value
will be less than or equal to those illustrated. Where a zero value is shown,
the Policy will lapse without payment of additional premium.
Assumes no Policy loan has been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges, administrative charges, and premium
load assumed. The current mortality and expense risk charges may be reduced
from 0.70% to 0.35% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.17%, 4.83%,
and 10.83%.
These investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Surrender Value for a Policy would be different
from those shown in the actual investment rates of return averaged 0%, 6%, and
12% over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
14
<PAGE>
Lincoln Life Flexible Premium
Variable Life Account S
I-1
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
STATEMENT OF ASSETS AND LIABILITY (UNAUDITED)
June 30, 1999
<TABLE>
<CAPTION>
American American
Century Century Baron
VP Income VP Capital
& Growth International Asset
Combined Subaccount Subaccount Subaccount
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ 10,212 $ -- $ -- $ --
Investments at Market - Unaffiliated
(Cost $23,064) 23,860 1,065 1,003 1,022
--------- ------- ------- -------
Total Assets 34,072 1,065 1,003 1,022
Liability - Payable to The Lincoln National
Life Insurance Company -- -- -- --
--------- ------- ------- -------
NET ASSETS $ 34,072 $ 1,065 $ 1,003 $ 1,022
========= ======= ======= =======
Percent of net assets 100.00% 3.13% 2.95% 3.00%
========= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100
Unit value $ 10.65 $ 10.03 $ 10.22
------- ------- -------
NET ASSETS $ 1,065 $ 1,003 $ 1,022
======= ======= =======
<CAPTION>
BT EAFE BT BT Delaware Delaware
Equity Equity 500 Small Cap Premium Premium
Index Index Index Delchester Devon
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ -- $ -- $ -- $ 1,000 $ 1,023
Investments at Market - Unaffiliated
(Cost $23,064) 986 1,061 1,042 -- --
------- ------- ------- ------- -------
Total Assets 986 1,061 1,042 1,000 1,023
Liability - Payable to The Lincoln National
Life Insurance Company -- -- -- -- --
------- ------- ------- ------- -------
NET ASSETS $ 986 $ 1,061 $ 1,042 $ 1,000 $ 1,023
======= ======= ======= ======= =======
Percent of net assets 2.89% 3.12% 3.06% 2.93% 3.00%
======= ======= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100 100 100
Unit value $ 9.86 $ 10.61 $ 10.42 $ 10.00 $ 10.23
------- ------- ------- ------- -------
NET ASSETS $ 986 $ 1,061 $ 1,042 $ 1,000 $ 1,023
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Delaware Delaware Fidelity
Premium Delaware Premium VIP
International Premium Small Cap Growth
Equity REIT Value Service Class
Subaccount Subaccount Subaccount Subaccount
--------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ 992 $ 999 $ 1,025 $ --
Investments at Market - Unaffiliated
(Cost $23,064) -- -- -- 1,060
------- ------- ------- -------
Total Assets 992 999 1,025 1,060
Liability - Payable to The Lincoln National
Life Insurance Company -- -- -- --
------- ------- ------- -------
NET ASSETS $ 992 $ 999 $ 1,025 $ 1,060
======= ======= ======= =======
Percent of net assets 2.91% 2.93% 3.01% 3.11%
======= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100 100
Unit value $ 9.92 $ 9.99 $ 10.25 $ 10.60
------- ------- ------- -------
NET ASSETS $ 992 $ 999 $ 1,025 $ 1,060
======= ======= ======= =======
<CAPTION>
Fidelity
VIP II Fidelity
Asset VIP II Janus Janus
Manager Contrafund Aggressive Janus Worldwide
Service Class Service Class Growth Balanced Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- --------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ -- $ -- $ -- $ -- $ --
Investments at Market - Unaffiliated
(Cost $23,064) 1,043 1,044 1,070 1,045 1,045
------- ------- ------- ------- -------
Total Assets 1,043 1,044 1,070 1,045 1,045
Liability - Payable to The Lincoln National
Life Insurance Company -- -- -- -- --
------- ------- ------- ------- -------
NET ASSETS $ 1,043 $ 1,044 $ 1,070 $ 1,045 $ 1,045
======= ======= ======= ======= =======
Percent of net assets 3.06% 3.06% 3.14% 3.07% 3.07%
======= ======= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100 100 100
Unit value $ 10.43 $ 10.44 $ 10.70 $ 10.45 $ 10.45
------- ------- ------- ------- -------
NET ASSETS $ 1,043 $ 1,044 $ 1,070 $ 1,045 $ 1,045
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
I-2
<PAGE>
<TABLE>
<CAPTION>
LN LN
LN Capital Equity-
Bond Appreciation Income
Subaccount Subaccount Subaccount
------------ -------------- ------------
<S> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ 1,013 $ 1,076 $ 1,019
Investments at Market - Unaffiliated
(Cost $23,064) -- -- --
------- ------- -------
Total Assets 1,013 1,076 1,019
Liability - Payable to The Lincoln National Life
Insurance Company -- -- --
------- ------- -------
NET ASSETS $ 1,013 $ 1,076 $ 1,019
======= ======= =======
Percent of net assets 2.97% 3.16% 2.99%
======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100
Unit value $ 10.13 $ 10.76 $ 10.19
------- ------- -------
NET ASSETS $ 1,013 $ 1,076 $ 1,019
======= ======= =======
<CAPTION>
LN LN MFS MFS
Money Social Capital MFS Total
Market Awareness Opportunities Research Return
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ 1,002 $ 1,063 $ -- $ -- $ --
Investments at Market - Unaffiliated
(Cost $23,064) -- -- 1,044 1,066 1,015
------- ------- ------- ------- -------
Total Assets 1,002 1,063 1,044 1,066 1,015
Liability - Payable to The Lincoln National Life
Insurance Company -- -- -- -- --
------- ------- ------- ------- -------
NET ASSETS $ 1,002 $ 1,063 $ 1,044 $ 1,066 $ 1,015
======= ======= ======= ======= =======
Percent of net assets 2.95% 3.12% 3.06% 3.13% 2.98%
======= ======= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100 100 100
Unit value $ 10.02 $ 10.63 $ 10.44 $ 10.66 $ 10.15
------- ------- ------- ------- -------
NET ASSETS $ 1,002 $ 1,063 $ 1,044 $ 1,066 $ 1,015
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AMT
MFS Mid-Cap AMT OCC
Utilities Growth Partners Managed
Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ -- $ -- $ -- $ --
Investments at Market - Unaffiliated
(Cost $23,064) 1,013 1,073 1,030 1,025
------- ------- ------- -------
Total Assets 1,013 1,073 1,030 1,025
Liability - Payable to The Lincoln National Life
Insurance Company -- -- -- --
------- ------- ------- -------
NET ASSETS $ 1,013 $ 1,073 $ 1,030 $ 1,025
======= ======= ======= =======
Percent of net assets 2.97% 3.15% 3.02% 3.01%
======= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100 100
Unit value $ 10.13 $ 10.73 $ 10.30 $ 10.25
------- ------- ------- -------
NET ASSETS $ 1,013 $ 1,073 $ 1,030 $ 1,025
======= ======= ======= =======
<CAPTION>
Oppenheimer Templeton
Main Street Asset Templeton Templeton
Growth and Allocation International Stock
Income Class 2 Class 2 Class 2
Subaccount Subaccount Subaccount Subaccount
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Assets
Investments at Market - Affiliated
(Cost $10,004) $ -- $ -- $ -- $ --
Investments at Market - Unaffiliated
(Cost $23,064) 1,060 1,013 1,012 1,023
------- ------- ------- -------
Total Assets 1,060 1,013 1,012 1,023
Liability - Payable to The Lincoln National Life
Insurance Company -- -- -- --
------- ------- ------- -------
NET ASSETS $ 1,060 $ 1,013 $ 1,012 $ 1,023
======= ======= ======= =======
Percent of net assets 3.11% 2.97% 2.97% 3.00%
======= ======= ======= =======
Net assets are represented by:
Units in accumulation period 100 100 100 100
Unit value $ 10.60 $ 10.13 $ 10.12 $ 10.23
------- ------- ------- -------
NET ASSETS $ 1,060 $ 1,013 $ 1,012 $ 1,023
======= ======= ======= =======
</TABLE>
See accompanying notes.
I-3
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
STATEMENT OF OPERATIONS (UNAUDITED)
Period from May 14, 1999 to June 30, 1999
<TABLE>
<CAPTION>
American American
Century Century Baron
VP Income VP Capital
& Growth International Asset
Combined Subaccount Subaccount Subaccount
---------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ 68 $ -- $ -- $12
Dividends from net realized gains on
investments -- -- -- --
Mortality and expense guarantees -- -- -- --
------ ---- ---- ---
NET INVESTMENT INCOME 68 -- -- 12
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 1,004 65 3 10
------ ---- ---- ---
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1,004 65 3 10
------ ---- ---- ---
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $1,072 $ 65 $ 3 $22
====== ==== ==== ===
<CAPTION>
BT EAFE BT BT Delaware Delaware
Equity Equity 500 Small Cap Premium Premium
Index Index Index Delchester Devon
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ -- $ -- $ -- $ 2 $ --
Dividends from net realized gains on
investments -- -- -- -- --
Mortality and expense guarantees -- -- -- -- --
----- ---- ---- --- ----
NET INVESTMENT INCOME -- -- -- 2 --
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized gain (loss) on investments -- -- -- -- --
Net change in unrealized appreciation or
depreciation on investments (14) 61 42 (2) 23
----- ---- ---- ------ ----
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (14) 61 42 (2) 23
----- ---- ---- ------ ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ (14) $ 61 $ 42 $ -- $ 23
===== ==== ==== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Delaware Delaware Fidelity
Premium Delaware Premium VIP
International Premium Small Cap Growth
Equity REIT Value Service Class
Subaccount Subaccount Subaccount Subaccount
--------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ -- $ -- $ -- $ --
Dividends from net realized gains on
investments -- -- -- --
Mortality and expense guarantees -- -- -- --
---- ---- ---- ----
NET INVESTMENT INCOME -- -- -- --
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments (8) (1) 25 60
------ ------ ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (8) (1) 25 60
------ ------ ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $(8) $(1) $ 25 $ 60
===== ===== ==== ====
<CAPTION>
Fidelity
VIP II Fidelity
Asset VIP II Janus Janus
Manager Contrafund Aggressive Janus Worldwide
Service Class Service Class Growth Balanced Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- --------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ -- $ -- $41 $10 $ 1
Dividends from net realized gains on
investments -- -- -- -- --
Mortality and expense guarantees -- -- -- -- --
---- ---- --- --- ---
NET INVESTMENT INCOME -- -- 41 10 1
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments -- -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 43 44 29 35 44
---- ---- --- --- ---
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 43 44 29 35 44
---- ---- --- --- ---
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 43 $ 44 $70 $45 $45
==== ==== === === ===
</TABLE>
See accompanying notes.
I-4
<PAGE>
<TABLE>
<CAPTION>
LN LN
LN Capital Equity-
Bond Appreciation Income
Subaccount Subaccount Subaccount
------------ -------------- ------------
<S> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ -- $ -- $ --
Dividends from net realized gains on
investments -- -- --
Mortality and expense guarantees -- -- --
---- ---- ----
NET INVESTMENT INCOME -- -- --
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments -- -- --
Net change in unrealized appreciation or
depreciation on investments 13 76 19
---- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 13 76 19
---- ---- ----
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 13 $ 76 $ 19
==== ==== ====
<CAPTION>
LN LN MFS MFS
Money Social Capital MFS Total
Market Awareness Opportunities Research Return
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ 2 $ -- $ -- $ -- $ --
Dividends from net realized gains on
investments -- -- -- -- --
Mortality and expense guarantees -- -- -- -- --
--- ---- ---- ---- ----
NET INVESTMENT INCOME 2 -- -- -- --
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments -- -- -- -- --
Net change in unrealized appreciation or
depreciation on investments -- 63 44 66 15
--- ---- ---- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- 63 44 66 15
--- ---- ---- ---- ----
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 2 $ 63 $ 44 $ 66 $ 15
=== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
AMT
MFS Mid-Cap AMT OCC
Utilities Growth Partners Managed
Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ -- $ -- $ -- $ --
Dividends from net realized gains on
investments -- -- -- --
Mortality and expense guarantees -- -- -- --
---- ---- ---- ----
NET INVESTMENT INCOME -- -- -- --
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 13 73 30 25
---- ---- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 13 73 30 25
---- ---- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 13 $ 73 $ 30 $ 25
==== ==== ==== ====
<CAPTION>
Oppenheimer Templeton
Main Street Asset Templeton Templeton
Growth and Allocation International Stock
Income Class 2 Class 2 Class 2
Subaccount Subaccount Subaccount Subaccount
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Net Investment Income:
Dividends from investment income $ -- $ -- $ -- $ --
Dividends from net realized gains on
investments -- -- -- --
Mortality and expense guarantees -- -- -- --
---- ---- ---- ----
NET INVESTMENT INCOME -- -- -- --
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 60 13 12 23
---- ---- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 60 13 12 23
---- ---- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 60 $ 13 $ 12 $ 23
==== ==== ==== ====
</TABLE>
See accompanying notes.
I-5
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
Period from May 14, 1999 to June 30, 1999
<TABLE>
<CAPTION>
American American
Century Century Baron
VP Income VP Capital
& Growth International Asset
Combined Subaccount Subaccount Subaccount
---------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ 68 $ -- $ -- $ 12
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 1,004 65 3 10
------- ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 1,072 65 3 22
Change From Unit Transactions:
Participant purchases 33,000 1,000 1,000 1,000
Participant withdrawals -- -- -- --
------- ------ ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 33,000 1,000 1,000 1,000
------- ------ ------ ------
TOTAL INCREASE IN NET ASSETS 34,072 1,065 1,003 1,022
------- ------ ------ ------
NET ASSETS AT JUNE 30, 1999 $34,072 $1,065 $1,003 $1,022
======= ====== ====== ======
<CAPTION>
BT EAFE BT BT Delaware Delaware
Equity Equity 500 Small Cap Premium Premium
Index Index Index Delchester Devon
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ -- $ -- $ -- $ 2 $ --
Net realized gain (loss) on investments -- -- -- -- --
Net change in unrealized appreciation or
depreciation on investments (14) 61 42 (2) 23
------- ------ ------ -------- ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (14) 61 42 -- 23
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000 1,000 1,000
Participant withdrawals -- -- -- -- --
------- ------ ------ ------- ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000 1,000 1,000
------- ------ ------ ------- ------
TOTAL INCREASE IN NET ASSETS 986 1,061 1,042 1,000 1,023
------- ------ ------ ------- ------
NET ASSETS AT JUNE 30, 1999 $ 986 $1,061 $1,042 $1,000 $1,023
======= ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Delaware Delaware Fidelity
Premium Delaware Premium VIP
International Premium Small Cap Growth
Equity REIT Value Service Class
Subaccount Subaccount Subaccount Subaccount
--------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ -- $ -- $ -- $ --
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments (8) (1) 25 60
-------- -------- ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (8) (1) 25 60
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000 1,000
Participant withdrawals -- -- -- --
------- ------- ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000 1,000
------- ------- ------ ------
TOTAL INCREASE IN NET ASSETS 992 999 1,025 1,060
------- ------- ------ ------
NET ASSETS AT JUNE 30, 1999 $ 992 $ 999 $1,025 $1,060
======= ======= ====== ======
<CAPTION>
Fidelity
VIP II Fidelity
Asset VIP II Janus Janus
Manager Contrafund Aggressive Janus Worldwide
Service Class Service Class Growth Balanced Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- --------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ -- $ -- $ 41 $ 10 $ 1
Net realized gain (loss) on investments -- -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 43 44 29 35 44
------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 43 44 70 45 45
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000 1,000 1,000
Participant withdrawals -- -- -- -- --
------ ------ ------ ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------
TOTAL INCREASE IN NET ASSETS 1,043 1,044 1,070 1,045 1,045
------ ------ ------ ------ ------
NET ASSETS AT JUNE 30, 1999 $1,043 $1,044 $1,070 $1,045 $1,045
====== ====== ====== ====== ======
</TABLE>
See accompanying notes.
I-6
<PAGE>
<TABLE>
<CAPTION>
LN LN
LN Capital Equity-
Bond Appreciation Income
Subaccount Subaccount Subaccount
------------ -------------- ------------
<S> <C> <C> <C>
Changes From Operations:
Net investment income $ -- $ -- $ --
Net realized gain (loss) on investments -- -- --
Net change in unrealized appreciation or
depreciation on investments 13 76 19
------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 13 76 19
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000
Participant withdrawals -- -- --
------ ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000
------ ------ ------
TOTAL INCREASE IN NET ASSETS 1,013 1,076 1,019
------ ------ ------
NET ASSETS AT JUNE 30, 1999 $1,013 $1,076 $1,019
====== ====== ======
<CAPTION>
LN LN MFS MFS
Money Social Capital MFS Total
Market Awareness Opportunities Research Return
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ 2 $ -- $ -- $ -- $ --
Net realized gain (loss) on investments -- -- -- -- --
Net change in unrealized appreciation or
depreciation on investments -- 63 44 66 15
------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 2 63 44 66 15
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000 1,000 1,000
Participant withdrawals -- -- -- -- --
------ ------ ------ ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------
TOTAL INCREASE IN NET ASSETS 1,002 1,063 1,044 1,066 1,015
------ ------ ------ ------ ------
NET ASSETS AT JUNE 30, 1999 $1,002 $1,063 $1,044 $1,066 $1,015
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AMT
MFS Mid-Cap AMT OCC
Utilities Growth Partners Managed
Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ -- $ -- $ -- $ --
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 13 73 30 25
------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 13 73 30 25
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000 1,000
Participant withdrawals -- -- -- --
------ ------ ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000 1,000
------ ------ ------ ------
TOTAL INCREASE IN NET ASSETS 1,013 1,073 1,030 1,025
------ ------ ------ ------
NET ASSETS AT JUNE 30, 1999 $1,013 $1,073 $1,030 $1,025
====== ====== ====== ======
<CAPTION>
Oppenheimer Templeton
Main Street Asset Templeton Templeton
Growth and Allocation International Stock
Income Class 2 Class 2 Class 2
Subaccount Subaccount Subaccount Subaccount
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Changes From Operations:
Net investment income $ -- $ -- $ -- $ --
Net realized gain (loss) on investments -- -- -- --
Net change in unrealized appreciation or
depreciation on investments 60 13 12 23
------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 60 13 12 23
Change From Unit Transactions:
Participant purchases 1,000 1,000 1,000 1,000
Participant withdrawals -- -- -- --
------ ------ ------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 1,000 1,000 1,000 1,000
------ ------ ------ ------
TOTAL INCREASE IN NET ASSETS 1,060 1,013 1,012 1,023
------ ------ ------ ------
NET ASSETS AT JUNE 30, 1999 $1,060 $1,013 $1,012 $1,023
====== ====== ====== ======
</TABLE>
See accompanying notes.
I-7
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements (Unaudited)
1. Accounting Policies & Account
Information
The Account:
Lincoln Life Flexible Premium Variable Life Account S (the Variable
Account) is a segregated investment account of The Lincoln National Life
Insurance Company (Lincoln Life) and is registered as a unit investment
trust with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended. The operations of the Variable Account,
which commenced on May 14, 1999, are part of the operations of Lincoln
Life.
The assets of the Variable Account are owned by Lincoln Life. The portion
of the Variable Account's assets supporting the variable life policies
may not be used to satisfy liabilities arising out of any other business
of Lincoln Life.
Basis of Presentation:
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for unit investment trusts.
Investments:
The assets of the Variable Account are divided into variable sub-accounts
each of which is invested in shares of one of thirty-three portfolios of
thirteen diversified open-end management investment companies, each
portfolio with its own investment objective. The variable sub-accounts
are:
American Century Variable Products Group, Inc.
VP Income & Growth Fund
VP International Fund
Baron Capital Funds Trust
Baron Capital Asset Fund
BT Insurance Funds Trust
EAFE Equity Index
Fund Equity 500 Index Fund
Small Cap Index Fund
Delaware Group Premium Fund, Inc.
Delchester Series
Devon Series
International Equity Series
REIT Series
Small Cap Value Series
Fidelity Variable Insurance Fund Service Class:
Growth Portfolio
Fidelity Variable Insurance Products Fund II Service Class:
Asset Manager Portfolio
Contrafund Portfolio
Janus Aspen Series
Aggressive Growth Portfolio
Balanced Portfolio
Worldwide Growth Portfolio
Lincoln National (LN) Funds:
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS Variable Insurance Trust:
MFS Capital Opportunities Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
Neuberger Berman Advisers Management Trust (AMT)
AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
OCC Accumulation Trust:
Managed Portfolio
I-8
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements (Unaudited) (Continued)
OppenheimerFunds
Oppenheimer Main Street Growth and Income Fund/VA
Templeton Variable Products Series Fund:
Templeton Asset Allocation
Fund-Class 2
Templeton International Fund-Class 2
Templeton Stock Fund-Class 2
Investments in the variable sub-accounts are stated at the closing net
asset value per share on June 30, 1999, which approximates fair value.
The difference between cost and fair value is reflected as unrealized
appreciation and depreciation of investments.
Investment transactions are accounted for on a trade date basis. The cost
of investments sold is determined by the average cost method.
Dividends:
Dividends paid to the Variable Account are automatically reinvested in
shares of the variable sub-accounts on the payable date. Dividend income
is recorded on the ex-dividend date.
Federal Income Taxes:
Operations of the Variable Account form a part of and are taxed with
operations of Lincoln Life, which is taxed as a "life insurance company"
under the Internal Revenue Code. The Variable Account will not be taxed
as a regulated investment company under Subchapter M of the Internal
Revenue Code. Using current federal income tax law, no federal income
taxes are payable with respect to the Variable Account's net investment
income and the net realized gain on investments.
2. Mortality and Expense Guarantees
& Other Transactions With Affiliates
Amounts are paid to Lincoln Life for mortality and expense guarantees at
a percentage of the current value of the Variable Account each day. The
current rate of deduction, stated as an annual percentage, is .70% during
the first ten years and .35% thereafter. The mortality and expense risk
charges for each of the variable sub-accounts are reported in the
statement of operations.
Prior to the allocation of premiums to the Variable Account, Lincoln Life
deducts a premium load for sales and administrative expenses associated
with the startup and maintenance of the policy. The premium load is 10.5%
for year one, 7.5% for years two through five, 3.5% for years six and
seven, and 1.5% thereafter.
Lincoln Life charges a monthly administrative fee of $6 currently,
guaranteed not to exceed $10 per month during all policy years. This
charge is for items such as premium billing and collection, policy value
calculation, confirmations and periodic reports.
Lincoln Life assumes responsibility for providing the insurance benefit
included in the policy. Lincoln Life charges a monthly deduction of the
cost of insurance and any charges for supplemental riders. The cost of
insurance charge depends on the attained age, risk classification, gender
classification (in accordance with state law) and the current net amount
at risk. On a monthly basis, the administrative fee and the cost of
insurance charge are deducted proportionately for the value of each
variable sub-account and/or fixed account funding options. The fixed
account is part of the general account of Lincoln Life and is not
included in these financial statements.
I-9
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements
(Unaudited) (Continued)
Under certain circumstances, Lincoln Life reserves the right to charge a
transfer fee of $25 for each transfer after the twelfth transfer per year
between variable sub-accounts. For the period ended June 30, 1999, no
transfer fees were deducted from the variable sub-accounts.
In the period ended June 30, 1999 there were no fees charged by Lincoln
Life for premium loads (deducted from premium payments), administrative
fees and the amount deducted for the cost of insurance, both of which
would be included in participant withdrawals in the statement of changes
in net assets, for variable sub-accounts.
I-10
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements (Unaudited) (Continued)
3. Net Assets
The following is a summary of net assets owned at June 30, 1999.
<TABLE>
<CAPTION>
American American
Century Century Baron
VP Income VP Capital
& Growth International Asset
Combined Subaccount Subaccount Subaccount
---------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $33,000 $1,000 $1,000 $1,000
Accumulated net investment income 68 -- -- 12
Accumulated net realized gain (loss) on
investments -- -- -- --
Net unrealized appreciation (depreciation) on
investments 1,004 65 3 10
------- ------ ------ ------
$34,072 $1,065 $1,003 $1,022
======= ====== ====== ======
<CAPTION>
BT EAFE BT BT Delaware Delaware
Equity Equity 500 Small Cap Premium Premium
Index Index Index Delchester Devon
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $1,000 $1,000 $1,000 $1,000 $1,000
Accumulated net investment income -- -- -- 2 --
Accumulated net realized gain (loss) on
investments -- -- -- -- --
Net unrealized appreciation (depreciation) on
investments (14) 61 42 (2) 23
------ ------ ------ -------- ------
$ 986 $1,061 $1,042 $1,000 $1,023
====== ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Delaware Delaware Fidelity
Premium Delaware Premium VIP
International Premium Small Cap Growth
Equity REIT Value Service Class
Subaccount Subaccount Subaccount Subaccount
--------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $ 1,000 $ 1,000 $ 1,000 $ 1,000
Accumulated net investment income -- -- -- --
Accumulated net realized gain (loss) on
investments -- -- -- --
Net unrealized appreciation (depreciation) on
investments (8) (1) 25 60
--------- --------- ------- -------
$ 992 $ 999 $ 1,025 $ 1,060
======== ======== ======= =======
<CAPTION>
Fidelity
VIP II Fidelity
Asset VIP II Janus Janus
Manager Contrafund Aggressive Janus Worldwide
Service Class Service Class Growth Balanced Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- --------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Accumulated net investment income -- -- 41 10 1
Accumulated net realized gain (loss) on
investments -- -- -- -- --
Net unrealized appreciation (depreciation) on
investments 43 44 29 35 44
------- ------- ------- ------- -------
$ 1,043 $ 1,044 $ 1,070 $ 1,045 $ 1,045
======= ======= ======= ======= =======
</TABLE>
I-11
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements (Unaudited) (Continued)
<TABLE>
<CAPTION>
LN LN
LN Capital Equity-
Bond Appreciation Income
Subaccount Subaccount Subaccount
------------ -------------- ------------
<S> <C> <C> <C>
Unit Transactions:
Accumulation units $1,000 $1,000 $1,000
Accumulated net investment income -- -- --
Accumulated net realized gain (loss) on
investments -- -- --
Net unrealized appreciation (depreciation) on
investments 13 76 19
------ ------ ------
$1,013 $1,076 $1,019
====== ====== ======
<CAPTION>
LN LN MFS MFS
Money Social Capital MFS Total
Market Awareness Opportunities Research Return
Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $1,000 $1,000 $1,000 $1,000 $1,000
Accumulated net investment income 2 -- -- -- --
Accumulated net realized gain (loss) on
investments -- -- -- -- --
Net unrealized appreciation (depreciation) on
investments -- 63 44 66 15
------ ------ ------ ------ ------
$1,002 $1,063 $1,044 $1,066 $1,015
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AMT
MFS Mid-Cap AMT OCC
Utilities Growth Partners Managed
Subaccount Subaccount Subaccount Subaccount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $1,000 $1,000 $1,000 $1,000
Accumulated net investment income -- -- -- --
Accumulated net realized gain (loss) on
investments -- -- -- --
Net unrealized appreciation (depreciation) on
investments 13 73 30 25
------ ------ ------ ------
$1,013 $1,073 $1,030 $1,025
====== ====== ====== ======
<CAPTION>
Oppenheimer Templeton
Main Street Asset Templeton Templeton
Growth and Allocation International Stock
Income Class 2 Class 2 Class 2
Subaccount Subaccount Subaccount Subaccount
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $1,000 $1,000 $1,000 $1,000
Accumulated net investment income -- -- -- --
Accumulated net realized gain (loss) on
investments -- -- -- --
Net unrealized appreciation (depreciation) on
investments 60 13 12 23
------ ------ ------ ------
$1,060 $1,013 $1,012 $1,023
====== ====== ====== ======
</TABLE>
I-12
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements (Unaudited) (Continued)
4. Purchases and Sales of Investments
The aggregate cost of investments purchased and the aggregate proceeds from
investments sold were as follows for the period from May 14, 1999 through June
30, 1999.
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
----------- -----------
<S> <C> <C>
American Century VP Income & Growth Fund $ 1,000 $--
American Century VP International Fund 1,000 --
Baron Capital Asset Fund 1,012 --
BT EAFE Equity Index Fund 1,000 --
BT Equity 500 Index Fund 1,000 --
BT Small Cap Index Fund 1,000 --
Delaware Premium Delchester Series 1,002 --
Delaware Premiun Devon Series 1,000 --
Delaware Premium International Equity Series 1,000 --
Delaware Premium REIT Series 1,000 --
Delaware Premium Small Cap Value Series 1,000 --
Fidelity VIP Growth Service Class Portfolio 1,000 --
Fidelity VIP II Asset Manager Service Class Portfolio 1,000 --
Fidelity VIP II Contrafund Service Class Portfolio 1,000 --
Janus Aggressive Growth Portfolio 1,041 --
Janus Balanced Portfolio 1,010 --
Janus Worldwide Growth Portfolio 1,001 --
LN Bond Fund 1,000 --
LN Capital Appreciation Fund 1,000 --
LN Equity-Income Fund 1,000 --
LN Money Market Fund 1,002 --
LN Social Awareness Fund 1,000 --
MFS Capital Opportunities Series 1,000 --
MFS Research Series 1,000 --
MFS Total Return Series 1,000 --
MFS Utilities Series 1,000 --
AMT Mid-Cap Growth Portfolio 1,000 --
AMT Partners Portfolio 1,000 --
OCC Managed Portfolio 1,000 --
Oppenheimer Main Street Growth and Income Fund 1,000 --
Templeton Asset Allocation Class 2 Fund 1,000 --
Templeton International Class 2 Fund 1,000 --
Templeton Stock Class 2 Fund 1,000 --
------- ---
$33,068 $--
======= ===
</TABLE>
I-13
<PAGE>
Lincoln Life Flexible Premium Variable Life Account S
Notes to Financial Statements (Unaudited) (Continued)
5. Investments
The following is a summary of investments owned at June 30, 1999.
<TABLE>
<CAPTION>
Net
Shares Asset Value of Cost of
Outstanding Value Shares Shares
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
American Century VP Income & Growth Fund 143 $ 7.44 $ 1,065 $ 1,000
American Century VP International Fund 123 8.18 1,003 1,000
Baron Capital Asset Fund 65 15.66 1,022 1,012
BT EAFE Equity Index Fund 85 11.64 986 1,000
BT Equity 500 Index Fund 74 14.25 1,061 1,000
BT Small Cap Index Fund 96 10.85 1,042 1,000
Delaware Premium Delchester Series 124 8.07 1,000 1,002
Delaware Premiun Devon Series 68 15.14 1,023 1,000
Delaware Premium International Equity Series 57 17.43 992 1,000
Delaware Premium REIT Series 107 9.37 999 1,000
Delaware Premium Small Cap Value Series 61 16.74 1,025 1,000
Fidelity VIP Growth Service Class Portfolio 23 45.65 1,060 1,000
Fidelity VIP II Asset Manager Service Class Portfolio 59 17.62 1,043 1,000
Fidelity VIP II Contrafund Service Class Portfolio 40 26.06 1,044 1,000
Janus Aggressive Growth Portfolio 31 34.62 1,070 1,041
Janus Balanced Portfolio 42 24.95 1,045 1,010
Janus Worldwide Growth Portfolio 32 32.74 1,045 1,001
LN Bond Fund 83 12.21 1,013 1,000
LN Capital Appreciation Fund 43 25.11 1,076 1,000
LN Equity-Income Fund 45 22.74 1,019 1,000
LN Money Market Fund 100 10.00 1,002 1,002
LN Social Awareness Fund 26 41.01 1,063 1,000
MFS Capital Opportunities Series 60 17.44 1,044 1,000
MFS Research Series 52 20.48 1,066 1,000
MFS Total Return Series 56 18.10 1,015 1,000
MFS Utilities Series 50 20.23 1,013 1,000
AMT Mid-Cap Growth Portfolio 65 16.60 1,073 1,000
AMT Partners Portfolio 50 20.72 1,030 1,000
OCC Managed Portfolio 23 44.57 1,025 1,000
Oppenheimer Main Street Growth and Income Fund 46 23.20 1,060 1,000
Templeton Asset Allocation Class 2 Fund 48 21.05 1,013 1,000
Templeton International Class 2 Fund 51 19.77 1,012 1,000
Templeton Stock Class 2 Fund 48 21.21 1,023 1,000
------- -------
$34,072 $33,068
======= =======
</TABLE>
I-14
<PAGE>
The Lincoln National Life Insurance Company
Balance Sheets -- Statutory Basis
LNL Statutory Financial Statements
<TABLE>
<CAPTION>
June 30
1999
-----
(unaudited)
-----------
(in millions)
-------------
<S> <C>
Admitted assets
Cash and investments:
Bonds $ 24,259.7
Preferred stocks 243.2
Unaffiliated common stocks 162.6
Affiliated common stocks 330.3
Mortgage loans on real estate 4,088.2
Real estate 440.9
Policy loans 1,609.9
Other investments 440.9
Cash and short-term investments 1,414.6
-----------
Total cash and investments 32,990.3
Premiums and fees in course of collection (71.0)
Accrued investment income 473.0
Reinsurance recoverable 221.3
Funds withheld by ceding companies 36.5
Federal income taxes recoverable from parent company 89.5
Goodwill 47.6
Other admitted assets 81.7
Separate account assets 41,079.4
-----------
Total admitted assets $ 74,948.3
===========
Liabilities and capital and surplus
Liabilities:
Future policy benefits and claims $ 12,399.1
Other policyholder funds 16,705.8
Amounts withheld or retained by Company as agent or trustee 1,217.8
Funds held under reinsurance treaties 810.6
Asset valuation reserve 488.4
Interest maintenance reserve 122.5
Other liabilities 427.3
Short-term loan payable to parent company --
Net transfers due from separate accounts (789.2)
Separate account liabilities 41,079.4
-----------
Total liabilities 72,461.7
Capital and surplus:
Common stock, $2.50 par value:
Authorized, issued and outstanding shares--10 million
(owned by Lincoln National Corporation) 25.0
Surplus notes due to Lincoln National Corporation 1,250.0
Paid-in surplus 1,942.6
Unassigned deficit (731.0)
-----------
Total capital and surplus 2,486.6
-----------
Total liabilities and capital and surplus $ 74,948.3
===========
</TABLE>
L-1
See accompanying notes.
<PAGE>
The Lincoln National Life Insurance Company
Statements of Operations -- Statutory Basis
LNL Statutory Financial Statements
<TABLE>
<CAPTION>
Six Months Ended
June 30 June 30
1999 1998
---- ----
(unaudited)
-----------
(in millions)
-------------
<S> <C> <C>
Premiums and other revenues:
Premiums and deposits $ 3,666.0 $ 7,753.7
Net investment income 1,100.7 1,050.7
Amortization of interest maintenance reserve 12.9 11.7
Commissions and expense allowances on reinsurance ceded 380.7 82.2
Expense charges on deposit funds 83.8 83.3
Separate account investment management and administration
service fees 210.3 195.7
Other income 68.8 11.6
---------- ----------
Total revenues 5,523.2 9,188.9
Benefits and expenses:
Benefits and settlement expenses 4,459.7 7,875.4
Underwriting, acquisition, insurance and other expenses 635.7 2,140.2
---------- ----------
Total benefits and expenses 5,095.4 10,015.6
---------- ----------
Gain (loss) from operations before dividends to policyholders,
income taxes and net realized gain on investments 427.8 (826.7)
Dividends to policyholders 41.3 28.6
---------- ----------
Gain (loss) from operations before federal income taxes and net
realized gain on investments 386.5 (855.3)
Federal income taxes (credit) 104.3 (29.7)
---------- ----------
Gain (loss) from operations before net realized gain on investments 282.2 (825.6)
Net realized gain on investments, net of income tax expense and
excluding net transfers to the interest maintenance reserve 58.4 44.2
---------- ----------
Net income (loss) $ 340.6 $ (781.4)
========== ==========
</TABLE>
See accompanying notes.
L-2
<PAGE>
The Lincoln National Life Insurance Company
Statements of Changes in Capital and
Surplus -- Statutory Basis
LNL Statutory Financial Statements
<TABLE>
<CAPTION>
Six Months Ended
June 30 June 30
1999 1998
---- ----
(unaudited)
-----------
(in millions)
-------------
<S> <C> <C>
Capital and surplus at beginning of year $ 2,564.5 $ 2,968.4
Correction of prior year's asset valuation reserve -- --
Correction of prior year's admitted assets -- --
---------- ----------
2,564.5 2,968.4
Capital and surplus increase (decrease):
Net income (loss) 340.6 (781.4)
Difference in cost and admitted investment amounts (4.9) (154.9)
Nonadmitted assets (12.1) (3.1)
Regulatory liability for reinsurance -- --
Life policy reserve valuation basis -- --
Asset valuation reserve (3.9) (64.3)
Proceeds from surplus notes from shareholder -- 500.0
Paid-in surplus 12.4 100.0
Separate account receivable due to change in valuation -- --
Dividends to shareholder (410.0) (110.0)
---------- ----------
Capital and surplus at end of year $ 2,486.6 $ 2,454.7
========== ==========
</TABLE>
See accompanying notes.
L-3
<PAGE>
The Lincoln National Life Insurance Company
Statements of Cash Flows --
Statutory Basis
LNL Statutory Financial Statements
<TABLE>
<CAPTION>
Six Months Ended
June 30 June 30
1999 1998
---- ----
(unaudited)
-----------
(in millions)
-------------
<S> <C> <C>
Operating activities
Premiums, policy proceeds and other considerations received $ 3,914.2 $ 8,030.1
Allowances and reserve adjustments paid on reinsurance ceded 190.0 (192.9)
Investment income received 1,040.9 984.5
Separate account investment management and administration
service fees 210.3 195.7
Benefits paid (4,282.8) (3,823.9)
Insurance expenses paid (804.3) (2,684.9)
Federal income taxes recovered (paid) (128.5) 34.1
Dividends to policyholders (38.8) (30.3)
Other income received and expenses paid, net 210.5 (551.4)
---------- ----------
Net cash provided by operating activities 311.5 1,961.0
Investing activities
Sale, maturity or repayment of investments 3,448.9 5,113.9
Purchase of investments (3,848.4) (8,920.8)
Other sources including reinsured policy loans 314.7 766.8
---------- ----------
Net cash used in investing activities (84.8) (3,040.1)
Financing activities
Surplus paid-in 12.5 600.0
Proceeds from surplus notes from shareholder -- --
Proceeds from borrowings from shareholder -- --
Repayment of borrowings from shareholder (140.0) (120.0)
Dividends paid to shareholder (410.0) (110.0)
---------- ----------
Net cash provided by (used in) financing activities (537.5) 370.0
---------- ----------
Net decrease in cash and short-term investments (310.8) (709.1)
Cash and short-term investments at beginning of year 1,725.4 2,133.0
---------- ----------
Cash and short-term investments at end of year $ 1,414.6 $ 1,423.9
========== ==========
</TABLE>
See accompanying notes.
L-4
<PAGE>
The Lincoln National Life Insurance Company
Notes to Statutory-Basis Financial Statements -- (Unaudited)
LNL Statutory Financial Statements
1. Basis of Presentation
The accompanying statutory-basis financial statements have been prepared
in conformity with accounting practices prescribed or permitted by the
Indiana Department of Insurance ("Insurance Department"), except that
they do not contain complete notes. These financial statements are
unaudited and include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results. For further
information, refer to the statutory-basis financial statements and notes
as of December 31, 1998 and 1997, and for each of the three years in the
period ended December 31, 1998 included in this registration
statement.
Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the entire
year ending December 31, 1999.
2. Acquisitions and Sales of Subsidiaries
In May 1999, the Lincoln National Life Insurance Company (the Company) and
Lincoln Life & Annuity Company of New York announced their intention to
transfer a block of direct individual disability income business to
MetLife. Under an indemnity reinsurance agreement, MetLife will provide
administrative services and assume liability for the Company's
approximately $65 million of annual disability income premium. At closing,
the Company will transfer cash equal to statutory reserves, net of ceding
commissions, of approximately $500 million. Closing is targeted for the
fourth quarter of 1999. The Company stopped writing disability income
insurance in early 1996 but acquired additional disability income business
in the 1998 transaction where the Company acquired the individual life
insurance and annuity business of CIGNA.
L-5
<PAGE>
Part II
FEES AND CHARGES REPRESENTATION
Lincoln Life represents that the fees and charges deducted under the
Policies, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
Lincoln Life.
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of The Lincoln National Life
Insurance Company (LNL) provides that LNL will indemnify certain
persons against expenses, judgments and certain other specified costs
incurred by any such person if he/she is made a party or is threatened
to be made a party to a suit or proceeding because he/she was a
director, officer, or employee of LNL, as long as he/she acted in good
faith and in a manner he/she reasonably believed to be in the best
interests of, or not opposed to the best interests of, LNL. Certain
additional conditions apply to indemnification in criminal
proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LNL in connection with suits by,
or in the right of, LNL.
Please refer to Article VII of the By-Laws of LNL (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements of
Indiana law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities
Act of 1933.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 28(a) above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
such action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus supplement consisting of xx pages; The Prospectus is
incorporated into Part I of this Post-Effective Amendment No. 1,
respectively, by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 333-72875), as filed
electronically on April 30, 1999;
The undertaking to file reports;
The signatures;
Written consents of the following:
1. Ernst & Young, LLP
<PAGE>
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2;
(1) Resolution of the Board of Directors of The Lincoln National Life
Insurance Company and related documents authorizing establishment of
Account (filed with original filing of this Registration Statement).
(2) Not applicable.
(3) (a) Form of Selling Group Agreement.
(b) Not applicable.
(4) Not applicable.
(5) (a) Proposed Forms of Policy and Application.(10)
(b) Riders.(10)
(6) (a) Articles of Incorporation of The Lincoln National Life Insurance
Company.(2)
(b) Bylaws of The Lincoln National Life Insurance Company.(2)
(7) Not applicable.
(8) Fund Participation Agreements.
Agreements between The Lincoln National Life Insurance Company and:
(a) American Century Variable Products Group, Inc.(7)
(b) American Variable Insurance Series
(c) Baron Capital Funds Trust(8)
(d) BT Insurance Funds Trust(6)
(e) Delaware Group Premium Fund, Inc.(4)
(f) Fidelity Variable Insurance Products Fund(1)
(g) Fidelity Variable Insurance Products Fund II(1)
(h) Janus Aspen Series(8)
(i) Lincoln National Funds (not applicable)
(j) MFS(R) Variable Insurance Trust(5)
(k) Neuberger & Berman Advisers Management Trust(8)
(l) OCC Accumulation Trust(6)
(m) OppenheimerFunds*
(n) Templeton Variable Products Series Fund(9)
(9) Services Agreement between The Lincoln National Life Insurance Co. and
Delaware Management Co.(3)
(10) See Exhibit 1(5).
See Exhibit 1(5).
Not applicable.
Not applicable.
Not applicable.
Not applicable.
Consent of Ernst & Young, LLP, Independent Auditors.
Not applicable.
*To be filed by amendment.
(1) Incorporated by reference to Registration Statement on Form N-4 (File No.
333-04999) filed on September 26, 1996.
(2) Incorporated by reference to Registration Statement on Form N-4 (file No.
33-27783) filed on December 5, 1996.
(3) Incorporated by reference to Registration Statement on Form S-6 (File No.
33-40745) filed on November 21, 1997.
(4) Incorporated by reference to Registration Statement on Form N-4 (File No.
33-25990) filed on April 22, 1998.
(5) Incorporated by reference to Registration Statement on Form S-6 (File No.
333-42479) filed on April 28, 1998.
(6) Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-42479) filed on May 12, 1998.
(7) Incorporated by reference to Registration Statement on Form N-4 (File No.
333-42507 2/26/99).
(8) Incorporated by reference to Registration Statement on Form N-4 (File No.
333-50817) filed on April 23, 1999.
(9) Incorporated by reference to Registration Statement on Form S-6 (File No.
333-42507) filed on February 26, 1999.
(10) Incorporated by reference to Registration Statement on Form S-6 (File No.
333-72875) Filed on February 24, 1999.
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby severally constitute and appoint John H. Gotta,
Robert A. Picarello and Gary W. Parker, individually, our true and lawful
attorneys-in-fact, with full power to each of them to sign for us, in our names
and in the capacities indicated below, any and all Registration Statements on
Form S-6 which may be filed with the Securities and Exchange Commission under
the Securities Act of 1933, on behalf of the Company in its own name or in the
name of one of its Separate Accounts, hereby ratifying and confirming our
signatures as they may be signed by any of our attorneys-in-fact to said
Registration Statement.
WITNESS our hands and common seal on this 18th day of December, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Gabriel L. Shaheen President, Chief Executive Officer and Director
- -------------------------- (Principal Executive Officer)
Gabriel L. Shaheen
/s/ Lawrence T. Rowland Executive Vice President and Director
- --------------------------
Lawrence T. Rowland
/s/ Keith J. Ryan Senior Vice President, Assistant Treasurer and Chief Financial
- -------------------------- Officer
Keith J. Rya (Principal Financial Officer and Principal Accounting Officer)
/s/ H. Thomas McMeekin Director
- --------------------------
H. Thomas McMeekin
/s/ Richard C. Vaughan Director
- --------------------------
Richard C. Vaughan
/s/ Jon A. Boscia Director
- --------------------------
Jon A. Boscia
</TABLE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby severally constitute and appoint John H. Gotta,
Robert A. Picarello and Gary W. Parker, individually, our true and lawful
attorneys-in-fact, with full power to each of them to sign for us, in our names
and in the capacities indicated below, any and all amendments to Registration
Statement No. 333-72875 filed with the Securities and Exchange Commission under
the Securities Act of 1933, on behalf of the Company in its own name or in the
name of one of its Separate Accounts, hereby ratifying and confirming our
signatures as they may be signed by any of our attorneys-in-fact to any such
amendment to said Registration Statement.
WITNESS our hands and common seal on this 28th day of April, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
President, Chief Executive Officer and Director
- -------------------------- (Principal Executive Officer)
Gabriel L. Shaheen
- -------------------------- Executive Vice President and Director
Lawrence T. Rowland
/s/ Todd R. Stephenson Senior Vice President, Chief Financial Officer and Assistant
- -------------------------- Treasurer
Todd R. Stephenson (Principal Financial Officer)
- -------------------------- Vice President and Controller,
Keith J. Ryan (Principal Accounting Officer)
- -------------------------- Director
H. Thomas McMeekin
- -------------------------- Director
Richard C. Vaughan
- -------------------------- Director
Jon A. Boscia
</TABLE>
STATE OF INDIANA )
) SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
28th day of April, 1999.
/s/ Janet L. Lindenberg
----------------------------------------
Notary Public
Commission Expires: 7-10-2001
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby severally constitute and appoint John H. Gotta,
Robert A. Picarello and Gary W. Parker, individually, our true and lawful
attorneys-in-fact, with full power to each of them to sign for us, in our names
and in the capacities indicated below, any and all amendments to Registration
Statement No. 333-72875 filed with the Securities and Exchange Commission under
the Securities Act of 1933, on behalf of the Company in its own name or in the
name of one of its Separate Accounts, hereby ratifying and confirming our
signatures as they may be signed by any of our attorneys-in-fact to any such
amendment to said Registration Statement.
WITNESS our hands and common seal on this 29th day of April, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
- -------------------------- President, Chief Executive Officer and Director
Gabriel L. Shaheen (Principal Executive Officer)
Executive Vice President and Director
- --------------------------
Lawrence T. Rowland
Senior Vice President, Chief Financial Officer and Assistant
- -------------------------- Treasurer
Todd R. Stephenson (Principal Financial Officer)
/s/ Keith J. Ryan Vice President and Controller,
- -------------------------- (Principal Accounting Officer)
Keith J. Ryan
Director
- --------------------------
H. Thomas McMeekin
Director
- --------------------------
Richard C. Vaughan
Director
- --------------------------
Jon A. Boscia
</TABLE>
STATE OF INDIANA )
) SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
29th day of April, 1999.
/s/ Janet L. Lindenberg
----------------------------------------
Notary Public
Commission Expires: 7-10-2001
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Lincoln Life Flexible Premium Variable Life Account S [Reg. No.
333-72875], certifies that it meets all of the requirements for effectiveness of
this Amendment to the Registration Statement on Form S-6 pursuant to Rule 485(b)
under the Securities Act of 1933 and has caused this Post-Effective Amendment
No. 1 to be signed on its behalf by the undersigned duly authorized, in the City
of Hartford and State of Connecticut on the 22nd day of October, 1999.
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE
LIFE ACCOUNT S
(Registrant)
By: /s/ John H. Gotta
-----------------------------------
John H. Gotta
Senior Vice President
The Lincoln National Life Insurance
Company
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
(Name of Depositor)
By: /s/ John H. Gotta
-----------------------------------
John H. Gotta
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to Registration Statement (File No. 333-72875)
has been signed below on October 22, 1999 by the following persons, as officers
and directors of the Depositor, in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- ---------------------------- -----------------------------------------------
<S> <C>
/s/ Gabriel L. Shaheen* President, Chief Executive Officer and
- -------------------------- Director (Principal Executive Officer)
Gabriel L. Shaheen
/s/ Jack D. Hunter* Executive Vice President, General Counsel
- -------------------------- and Director
Jack D. Hunter
/s/ Lawrence T. Rowland* Executive Vice President and Director
- --------------------------
Lawrence T. Rowland
/s/ Ian M. Rolland* Director
- --------------------------
Ian M. Rolland
/s/ H. Thomas McMeekin* Director
- --------------------------
H. Thomas McMeekin
/s/ Richard C. Vaughan* Director
- --------------------------
Richard C. Vaughan
/s/ Todd R. Stephenson* Senior Vice President, Chief Financial Officer
- -------------------------- and Assistant Treasurer
Todd R. Stephenson (Principal Financial Officer)
/s/ Keith J. Ryan* Vice President and Controller
- -------------------------- (Principal Accounting Officer)
Keith J. Ryan
*By /s/ John H. Gotta
- --------------------------
John H. Gotta
Attorney-in-Fact
</TABLE>
BROKER-DEALER SELLING AGREEMENT
AGREEMENT by and among The Lincoln National Life Insurance Company, an
Indiana corporation ("Company") doing business as a life insurance company, a
registered Broker-Dealer with the Securities and Exchange Commission ("SEC")
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. ("NASD"); [BROKER-DEALER NAME]
("Broker-Dealer"), also a registered Broker-Dealer with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and a member of
the NASD; and ("Agency"); and each additional insurance agency signatory hereto
(each of which shall also be referred to herein as "Agency").
WITNESSETH:
WHEREAS, the Company proposes to have Broker-Dealer's registered
representatives ("Representatives") who are also licensed to sell insurance in
appropriate jurisdictions solicit and sell certain variable insurance contracts
(the "Insurance Securities") more particularly described in this Agreement and
which are deemed to be securities under the Securities Act of 1933, and to sell
certain non-variable insurance contracts (the "Fixed Policies") more
particularly described in this Agreement (collectively the "Policies"); and
WHEREAS, the Company is the principal distributor of the Insurance
Securities and shall be responsible for the training and supervision of persons
involved with the solicitation and offer or sale of any of the Insurance
Securities, and proposes to delegate, to the extent legally permitted, said
training and supervisory duties to Broker-Dealer; and
WHEREAS, as full compensation, the Company will pay to Broker-Dealer, or,
if required by state law, to Agency, the compensation provided for in Schedule
A-1 on premiums paid to the Company on Policies sold by Broker-Dealer after this
Agreement becomes effective;
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. Appointment of Broker-Dealer. The Company hereby appoints Broker-Dealer
to sell the Policies through its Representatives and to provide certain
administrative services to facilitate solicitations for and sales of the
Policies.
Broker-Dealer agrees that its authority is limited to the solicitation and
marketing of the Policies in accordance with this Agreement and Broker-Dealer
agrees that it will not make, alter, modify or discharge any contract or extend
any provision thereof, or extend the time for payment of premiums or waive any
forfeiture or guarantee dividends or estimate future interest, mortality or
expense factors except through the use of authorized illustrations and
projections approved by the Company, or deliver any contract unless the
applicant is at the time of delivery in good health and insurable condition, or
incur any debts or liability against the Company. Nothing in this Agreement
shall create or be construed to create an exclusive authority to represent the
Company or to effect sales of Policies, either with respect to a specific
geographic territory, or otherwise.
2. The Policies. The Policies issued by the Company to which this
Agreement applies
Page 1
<PAGE>
are listed in Schedule B-1. Schedule B-1 may be amended at any
time by the Company. The Company in its sole discretion and without notice to
Broker-Dealer, may suspend sales of any Policies or may amend any policies or
contracts evidencing such Policies if, in the Company's opinion, such suspension
or amendment is: (1) necessary for compliance with federal, state, or local
laws, regulations, or administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to the Company. In all other situations,
the Company shall provide 30 days notice to Broker-Dealer prior to suspending
sales of any Policies or amending any policies or contracts evidencing such
Policies.
3. Securities Licensing. Broker-Dealer shall, at all times when performing
its functions under this agreement, be registered as a securities broker with
the SEC and be a member of the NASD and licensed or registered as a securities
broker-dealer in the states and other local jurisdictions that require such
licensing or registration in connection with variable insurance contract sales
activities or the supervision of Representatives who perform such activities in
the respective location.
4. Insurance Licensing. Broker-Dealer shall, at all times when performing
its functions under this agreement, be validly licensed as an insurance agency
in the states and other local jurisdictions that require such licensing or
registration in connection with Broker-Dealer's variable or fixed insurance
contract sales activities; or, in those states in which Broker-Dealer cannot or
does not obtain a corporate agent's license, shall maintain a contractual
relationship with an agency, which shall be validly licensed as an insurance
agency in such jurisdiction or jurisdictions. Such contractual relationship
shall be set forth in an agreement substantially equivalent to that set forth as
Exhibit A. Broker-Dealer shall provide the Company with a list of all licensed
insurance agencies relied upon by Broker-Dealer to comply with this paragraph
and covenants to maintain the completeness and accuracy of such list, and to
cause each such agency to become a signatory hereto(each of which shall
thereupon also be an "Agency" hereunder).
5. Appointments. Broker-Dealer shall assist the Company in the appointment
of Representatives under the applicable insurance laws to sell the Policies.
Broker-Dealer shall fulfill all requirements set forth in the General Letter of
Recommendation, attached as Schedule C-1 with respect to the Company, in
conjunction with the submission of licensing/appointment papers for all
applicants as insurance agents of the Company. All such licensing/appointment
papers should be submitted by Broker-Dealer to the Company or its duly appointed
agent. Notwithstanding such submission, the Company shall have sole discretion
to appoint, refuse to appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of the Company.
6. Securing Applications.
(a) All applications for the Company Policies shall be made on
application forms supplied by the Company and all payments collected by
Broker-Dealer or any Representative of Broker-Dealer shall be remitted promptly
in full, together with such application forms and any other required
documentation, directly to the Company at the address indicated on such
application or to such other address as the Company may, from time-to-time,
designate in writing. Broker-Dealer shall review all such applications for
completeness. Checks in payment on any such Policy shall be drawn to the order
of "The Lincoln National Life Insurance Company." All applications are subject
to acceptance or rejection by the Company at its sole discretion.
(b) All records or information obtained hereunder by Broker-Dealer
shall not be disclosed or used except as expressly authorized herein, and
Broker-Dealer will keep such records and information confidential, to be
disclosed only as authorized or if expressly required by federal or state
Page 2
<PAGE>
regulatory authorities.
7. Money Received by Broker-Dealer. All money payable in connection with
any of the Policies, whether as premium or otherwise, and whether paid by or on
behalf of any policyholder, contract owner or anyone else having an interest in
the Policies, is the property of the Company and shall be transmitted
immediately in accordance with the administrative procedures of the Company
without any deduction or offset for any reason, including, by way of example but
not limitation, any deduction or offset for compensation claimed by
Broker-Dealer.
8. Supervision of Representatives.
(a) To the extent the Company and its representatives assist
Broker-Dealer and its representatives in the sale of the Policies, the Company
shall have full responsibility for the training and supervision of its
representatives, and such representatives will be qualified under applicable
federal and state law. The Company's representatives may receive compensation
for such sales activity in addition to the compensation paid by the Company to
Broker-Dealer or Agency as provided in Schedule A-1.
(b) Broker-Dealer shall have full responsibility for the training
and supervision of all Representatives associated with Broker-Dealer who are
engaged directly or indirectly in the offer or sale of the Insurance Securities,
and all such persons shall be subject to the control of and supervision of
Broker-Dealer with respect to such persons' securities regulated activities, and
to the control of Broker-Dealer or its appropriate licensed insurance agency
subsidiary with respect to such person's insurance regulated activities, in
connection with the solicitation and sale of and other communication with
respect to the Policies. Broker-Dealer, prior to allowing its Representatives to
solicit for sales or sell the Policies, shall require such Representatives to be
validly insurance licensed, registered and appointed by the Company as fixed
and/or variable contract agents in accordance with the jurisdictional
requirements of the place where the solicitations and sales take place as well
as the solicited person's or entity's place of residence; will cause such
Representatives to qualify under applicable federal and state laws to engage in
the sale of the Insurance Securities; will cause such Representatives to be
registered representatives of Broker-Dealer before such Representatives engage
in the solicitation of applications for the Insurance Securities; and will cause
such Representatives to limit solicitation of applications for the Policies to
jurisdictions where the Company has authorized such solicitation. Broker-Dealer
shall cause such Representatives' qualifications to be certified to the
satisfaction of the Company and shall notify the Company if any Representative
ceases to be a registered representative of Broker-Dealer or ceases to maintain
the proper licensing required for the sale of any of the Policies.
(c) Each party shall be liable for its own negligence and misconduct
hereunder.
9. Compliance with NASD Conduct Rules and Federal and State Securities
Laws. Broker-Dealer and the Company each shall fully comply with the
requirements of the NASD and of the Securities Exchange Act of 1934 and all
other applicable federal or state laws and will establish such rules and
procedures as may be necessary to cause diligent supervision of the securities
activities of the Broker-Dealer's Representatives and the Company's
representatives, respectively.
10. Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision of Broker-Dealer or
otherwise fails to meet the rules and standards imposed by Broker-Dealer on its
Representatives, Broker-Dealer shall advise the Company of this
Page 3
<PAGE>
fact and shall immediately notify such Representative that he or she is no
longer authorized to sell any of the Policies and Broker-Dealer shall take
whatever additional action may be necessary to terminate the sales activities of
such Representative relating to the Policies.
11. Prospectuses, Sales Promotion Material and Advertising.
(a) Broker-Dealer shall be provided with prospectuses relating to
the Insurance Securities and such other material as the Company determines to be
necessary or desirable for use in connection with sales of such Policies. No
sales promotion materials or any advertising relating to the Insurance
Securities shall be used by Broker-Dealer unless the specific item has been
approved in writing by the Company, which consent shall not be unreasonably
withheld or delayed.
(b) Broker-Dealer shall be provided with advertising and sales
material relating to the fixed Policies and such other material as the Company
determines to be necessary or desirable for use in connection with sales of such
Policies. No sales promotion materials or any advertising relating to the Fixed
Policies shall be used by Broker-Dealer unless the specific item has been
approved in writing by the Company, which consent shall not be unreasonably
withheld or delayed.
(c) In addition, Broker-Dealer shall not print, publish or
distribute any advertisement, circular or any document relating to the Company
unless such advertisement, circular or document shall have been approved in
writing by the Company; provided, however, that nothing herein shall prohibit
Broker-Dealer from advertising fixed or variable insurance in general or on a
generic basis.
(d) Broker-Dealer agrees that all computer software containing the
rates and values of products issued by the Company whether or not distributed
through the Company, all rate books, computer printouts, client files, policies,
brochures, prospectuses, sales promotion materials, whether in hard copy or
computer format, containing the name/logo of the Company or any affiliated
company, are furnished to Broker-Dealer in confidence, and Broker-Dealer agrees
to refrain from reproducing, publishing, or disclosing such material other than
in the ordinary course of business. Broker-Dealer further agrees that all such
property shall be returned to the Company upon demand or upon termination of
this Agreement.
12. Right of Rejection. The Company, in its sole discretion, may reject
any applications or payments remitted by Representative through Broker-Dealer
and may refund an applicant's payments to the applicant. In the event such
refunds are made and if Broker-Dealer has received compensation based on an
applicant's payment that is refunded, Broker-Dealer shall promptly repay such
compensation to the Company. If repayment is not promptly made, the Company may
at its sole option deduct any amounts due it from Broker-Dealer from future
commissions otherwise payable to Broker-Dealer pursuant to this agreement. This
provision shall survive termination of this Agreement.
13. Compensation.
(a) Commissions, Fees and Allowances. Sales compensation payable to
Broker-Dealer in connection with the Policies shall be paid by the Company to
the Agency, (or, only if Broker-Dealer is also a corporate insurance agency
permitted to receive such compensation, to Broker-Dealer in its capacity as an
Agency) and Broker-Dealer hereby appoints Agency to receive on its behalf any
and all compensation that may be due and payable to Broker-Dealer in accordance
with the provisions set forth in Schedule A. The Company will provide
Broker-Dealer or Agency with a
Page 4
<PAGE>
copy of its current Schedule of Sales Compensation for the Policies. These fees
and commissions will be paid as a percentage of premiums received and accepted
by the Company on applications obtained by the various Representatives of
Broker-Dealer. Upon termination of this Agreement all compensation to the Agency
hereunder shall cease; however, Broker-Dealer and/or Agency shall continue to be
liable for any chargebacks or for any other amounts advanced by or otherwise due
to the Company hereunder.
(b) Changes to Compensation Schedule. The Company may, upon at least
ten (10) days prior written notice, change its Schedule of Sales Compensation.
Any such change shall apply to compensation due on applications received by the
Company after the effective date of such notice.
(c) Restrictions.
(i) If Broker-Dealer, Agency or any Representative shall
rebate or offer to rebate all or any part of a premium on a policy issued by the
Company in violation of applicable state insurance laws or regulations, or if
Broker-Dealer, Agency or any Representative shall withhold any premium on any
Policy issued by the Company, or if Broker-Dealer, Agency or any Representative
rebates or offers to rebate all or any part of a commission paid or payable upon
the sale of a Policy in violation of applicable state insurance laws or
regulations, the Company may, at its option, terminate this Agreement.
(ii) If Broker-Dealer, Agency or any Representative shall at
any time induce or endeavor to induce any owner of a Policy to relinquish the
Policy except under circumstances where there is reasonable grounds for
believing the Policy or interest therein is not suitable for such person, any
and all compensation due hereunder shall cease and terminate.
(iii) Nothing in this Agreement shall be construed as giving
Broker-Dealer or Agency the right to incur any indebtedness on behalf of the
Company. Broker-Dealer and Agency each hereby authorizes the Company to set off
their respective liabilities to the Company against any and all amounts
otherwise payable to them by the Company.
14. Policy Delivery. The Company may, upon written request of
Broker-Dealer, transmit Policies to Broker-Dealer for delivery to Policyowners.
Broker-Dealer hereby agrees to deliver all such Policies to policyowners
promptly upon its receipt thereof from the Company. Broker-Dealer agrees that
the indemnification provisions of this Agreement include any and all costs,
expenses, loss, damages and attorneys' fees resulting from Broker-Dealer's
failure to perform or inability to prove performance of the undertakings
described in this paragraph, and authorizes the Company to set off any amount it
owes the Company under this paragraph against any and all amounts otherwise
payable to or on behalf of Broker-Dealer by the Company pursuant to this
agreement. The Company reserves the right to revoke or withdraw this privilege,
in whole or in part, at any time, and without prior notice.
15. Indemnification.
(a) The Company shall indemnify and hold Broker-Dealer and Agency
harmless from any and all cost, expense, loss or damages, including reasonable
attorneys' fees, resulting from any negligent, fraudulent or unauthorized acts
or omissions by the Company, its employees and authorized agents.
Page 5
<PAGE>
(b) Broker-Dealer and Agency shall indemnify and hold the Company
harmless from any and all costs, expenses, loss or damages, including reasonable
attorneys' fees, resulting from any negligent, fraudulent or unauthorized acts
or omissions of Broker-Dealer or its Representatives.
16. Waiver. Failure of any party to insist upon strict compliance with any
of the conditions of this Agreement shall not be construed as a waiver of any of
the conditions, but the same shall remain in full force and effect. No waiver of
any of the provisions of this Agreement shall be deemed, or shall constitute a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.
17. Independent Contractors.
(a) The Company is an independent contractor with respect to
Broker-Dealer, its Representatives and Agency. Nothing contained in this
Agreement shall create, or shall be construed to create, the relationship of
employer and employee between the Company and Broker-Dealer, its Representatives
or Agency.
(b) Broker-Dealer shall, in its sole discretion, select the persons
from whom it will solicit applications for Policies, as well as the time, manner
and place of solicitation.
18. Limitations. No party other than the Company shall have the authority
to make, alter, or discharge any policy, contract, or certificate issued by the
Company, to waive any forfeiture or to grant, permit, or extend the time for
making any payments, or to guarantee earnings or rates, or to alter the forms
which the Company may prescribe or substitute other forms in place of those
prescribed by the Company, or to enter into any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of the Company.
19. Fidelity Bond.
(a) Broker-Dealer represents that all of its directors, officers,
employees and Representatives who are appointed pursuant to this Agreement as
the Company agents for state insurance law purposes or who have access to funds
of the Company, including but not limited to funds submitted with applications
for the Policies or funds being returned to owners, shall at all times be
covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by Broker-Dealer at Broker-Dealer's expense. Such bond shall be, at
least, of the form, type and amount required under the NASD Conduct Rules.
Broker-Dealer shall maintain Errors and Omissions insurance coverage in an
amount and with a company satisfactory to the Company. The Company may require
evidence, satisfactory to it, that such coverage is in force and Broker-Dealer
shall give prompt written notice to the Company of any notice of cancellation or
change of coverage.
(b) Broker-Dealer shall assign any proceeds received from the
fidelity bonding company to the Company to the extent of any loss to the Company
due to activities covered by the bond. If there is any deficiency amount,
whether due to a deductible or otherwise, Broker-Dealer shall promptly pay the
Company such amount on demand and Broker-Dealer hereby indemnifies and holds
harmless the Company from any such deficiency and from the costs of collection
thereof (including reasonable attorneys' fees).
20. Binding Effect. This Agreement shall be binding on and shall inure to
the benefit of
Page 6
<PAGE>
the parties to it and their respective successors and assigns; provided however,
that Broker-Dealer may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Company.
21. Regulations. The parties agree to observe and comply with all
applicable local, state, and federal laws and rules or regulations, and to fully
co-operate with any regulatory authority having jurisdiction with respect
thereto.
22. Notices. All notices or communications shall be sent in writing and to
the addresses shown below or to such other address as the party may request by
giving written notice to the other parties. Notices shall be effective
immediately upon date of postmark in the mail, if received, or upon receipt if
delivered by any other means, unless otherwise specifically provided.
The Lincoln National Life Insurance Company
Hartford, CT 06152-2303
Attn: Marc Belletsky
23. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Indiana.
24. Amendment of Agreement. The Company reserves the right to amend this
Agreement at any time, and the submission of an application to purchase a policy
by Broker-Dealer after notice of any such amendment shall constitute agreement
to any such amendment.
25. Termination.
(a) This Agreement may be terminated immediately by any party upon
written notice or if the Company or Broker-Dealer shall cease to be a registered
Broker-Dealer under the Securities Exchange Act of 1934 or a member of the NASD.
In the event of such termination, commissions, fees and allowances for the first
contract year and for renewal years shall be payable, based upon the
compensation schedule set forth in Schedule A-1.
(b) This Agreement will automatically terminate:
(i) Upon the death or total and permanent physical or mental
disability of Broker-Dealer, if an individual.
(ii) Upon dissolution of Broker-Dealer, if a corporation or a
partnership, including LLC and LLP.
(iii) At the end of any calendar year during which
Broker-Dealer has not maintained the minimum life premium and persistency
requirements, if any, as set forth in Schedule A-1.
(c) Termination of this Agreement will result in the termination of all
agreements with Representatives of Broker-Dealer.
Page 7
<PAGE>
(d) Payment of broker compensation at a level that is higher than the
level of broker compensation set forth in Schedule A-1 will, at the option of
the Company, result in the termination of this Agreement.
26. Effective Date. This Agreement shall be effective on the
day of 19
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:________________________________________
Print Name: Stanley E. Brallier
Title: Vice President, Lincoln Corporate Specialty Markets
Date: ________________________________
[BROKER-DEALER NAME]
By: ___________________________________
Print Name: ____________________________
Title: _________________________________
Date: ________________________________
By: ___________________________________
Print Name: ____________________________
Title: _________________________________
Date: ________________________________
Page 8
<PAGE>
Page 9
<PAGE>
EXHIBIT A
"SAMPLE" SECURITIES SUPERVISION AGREEMENT
This Agreement is effective _______________, 199__ by and between
__________________ ("Broker-Dealer"), and _________________ (Agency) is made in
consideration of the mutual benefit to be derived.
RECITALS
Broker-Dealer is a broker and dealer in securities which is licensed and
qualified to transact business pursuant to rules and regulations promulgated by
the Securities and Exchange Commission ("SEC"), the National Association of
Securities Dealers, Inc. ("NASD"), and other governmental agencies.
Agency is licensed pursuant to state insurance law as an insurance agency
with authority to sell certain variable contracts which are also subject to
regulation by the SEC and/or NASD.
Agency has contracted and will contract with various individuals to sell
life insurance and annuity contracts. Those contracted individuals who are also
licensed by the NASD as registered representatives, have variable contract
authority under their insurance agent or broker license, and who wish to sell
variable insurance products through Agency, must also enter into a Sales
Representative Agreement with Broker-Dealer. (Such dually-licensed individuals
are hereinafter referred to as "registered agents.")
In order to avoid the necessity of duplicate licensing, the employment of
additional personnel, and providing related office facilities, Agency wishes to
engage Broker-Dealer to provide management and administrative services to Agency
for the operation of Agency with regard to all matters subject to regulation by
the SEC and/or NASD.
In order to meet its obligations under the Securities Exchange Act of
1934, satisfy the requirements of its license with the NASD, and exercise its
rights and responsibilities under the Sales Representative Agreements,
Broker-Dealer wishes to undertake such services of behalf of the Agency.
AGREEMENT
1. Term. This Agreement commences as of the effective date and shall continue
throughout the calendar 1998 and year to year thereafter, unless sooner
terminated. This Agreement may be terminated after December 31, 1998 by either
party upon at least ninety (90) days notice, or at
Page 10
<PAGE>
any time by the consent of both parties.
2. Performance of Services by Broker-Dealer. During the term of this Agreement,
Broker-Dealer will furnish the following services (hereinafter referred to as
the "Services") to the Agency.
2.01 Standards of Conduct. Broker-Dealer will establish, maintain, and
enforce standards of conduct for registered agents of the Agency, which
standards shall meet or exceed the conduct requirements for registered
representatives set forth in the Conduct Rules promulgated by the NASD.
2.02. Supervisory Procedures. Broker-Dealer will establish and implement
supervisory procedures for the securities sales activity of the Agency which
meet or exceed the requirements set forth in the NASD Conduct Rules.
2.03 Suitability. Broker-Dealer will establish standards and guidelines
for reasonably determining whether a variable contract is "suitable" for the
customer to whom it is recommended, based upon the facts, if any, disclosed by
such customer as to his/her other security holdings and as to his/her financial
situations and needs.
2.04. Advertising & Sales Literature. Broker-Dealer will develop and
implement procedures for reviewing and approving all advertising and sales
promotional material relating to variable products developed and used by the
Agency or its registered agents.
2.05 Recordkeeping Requirements. Broker-Dealer will be responsible for
recording all securities transactions of the Agency, and maintaining books and
records with respect to such transactions in such manner as will meet
requirements of Section 17(a) of the Securities Exchange Act of 1934 and the
rules promulgated thereunder.
2.06 Audits. Broker-Dealer will oversee all audits of the Agency's
securities transactions by the NASD or other securities regulatory authorities.
Broker-Dealer shall have full and complete access to all books and records of
the Agency for this purpose. Broker-Dealer will also conduct field audits of the
agents and associated persons as necessary or appropriate to assure ongoing
compliance with the requirements of the SEC and/or NASD.
2.07 Training. Broker-Dealer will be responsible for training the
registered agents of the Agency in the uses and operation of variable contracts
and standards of conduct for securities salesmen. Broker-Dealer will undertake
this activity in such a manner as will assure a proper level of competence among
such agents.
Page 11
<PAGE>
2.08. Miscellaneous. Broker-Dealer agrees to undertake all other actions
as are necessary and proper to assure that the Agency and its registered agents
are in compliance with all rules and regulations pertaining to the sale of
securities promulgated by the SEC, NASD, and state securities regulators.
3. Representation by Broker-Dealer. Broker-Dealer represents to the Agency that
it and its personnel have substantial experience in the conduct of the type of
services required by this Agreement. Broker-Dealer agrees to cause its personnel
to use their best efforts in pursuit of the services.
4. Parties Bound. This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors and assigns;
provided, that no party may, without the prior written consent of the other
party hereto, assign or transfer any duties or obligations here under or any
interest herein.
5. Governing Law. This Agreement is being executed and delivered and is intended
to be performed in the State of __________ and elsewhere, and the substantive
laws of such state and the applicable laws of the United States of America shall
govern the validity, construction, enforcement and interpretation of this
Agreement, unless otherwise specified herein.
This Agreement has been executed and is effective as of the date first
above written.
Page 12
<PAGE>
Schedule C-1
General Letter of Recommendation
Broker-Dealer hereby certifies to The Lincoln National Life Insurance
Company (the "Company") that all the following requirements will be fulfilled in
conjunction with the submission of appointment papers for all applicants as
agents of the Company submitted by Broker-Dealer. Broker-Dealer will, upon
request, forward proof of compliance with same to the Company in a timely
manner.
1. We have made a thorough and diligent inquiry and investigation relative to
each applicant's identity, residence, business reputation, and experience
and declare that each applicant is personally known to us, has been
examined by us, is known to be of good moral character, has a good
business reputation, is reliable, is financially responsible and is worthy
of appointment as a variable annuity agent of the Company. This inquiry
and background investigation has included a credit and criminal check on
each applicant. Based upon our investigation, we vouch for each applicant
and certify that each individual is trustworthy, competent and qualified
to act as an agent for the Company to hold himself out in good faith to
the general public.
2. We have on file a B-300, B-301, or U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative requirements
for the registration of each applicant as a registered representative
through our NASD member firm, and each applicant is presently registered
as an NASD registered representative.
The above information in our files indicates no fact or condition which
would disqualify the applicant from receiving a license or appointment and
all the findings of all investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state each applicant is licensed in, and that, all such persons
have fulfilled the appropriate examination, education and training
requirements.
4. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or all
risks written by these applicants, to the end that the insurance interest
of the public will be properly protected.
5. We will not permit any applicant to transact insurance as an agent until
duly licensed and appointed by the Company. No applicants have been given
a contract or furnished supplies, nor have any applicants been permitted
to write, solicit business, or act as an agent in any capacity, and they
will not be so permitted until the certificate of authority applied for is
received.
Page 13
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is entered into as of this 15th day of October, 1999 among
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ("Lincoln National"), a life
insurance company organized under the laws of the State of Indiana, AMERICAN
VARIABLE INSURANCE SERIES ("Series"), an open-end management investment company
organized under the laws of the Commonwealth of Massachusetts, AMERICAN FUNDS
DISTRIBUTORS, INC. ("AFD"), a corporation organized under the laws of the State
of California, and having a business address of 333 South Hope Street, Los
Angeles, California 90071, and CAPITAL RESEARCH AND MANAGEMENT COMPANY ("CRMC"),
a corporation organized under the laws of the State of Delaware, and having a
business address of 333 South Hope Street, Los Angeles, California 90071.
WITNESSETH:
WHEREAS, Lincoln National proposes to issue to the public, now and in the
future, certain multi-manager variable annuity contracts and variable life
insurance policies ("Contracts") as set forth in Appendix A;
WHEREAS, Lincoln National has established one or more separate accounts
("Accounts"), as set forth in Appendix B, for the purposes of issuing the
Contracts and has or will register the Account with the United States Securities
and Exchange Commission ("the SEC") as an unit investment trust under the
Investment Company Act of 1940 ("the 1940 Act") unless exempt therefrom;
WHEREAS, the Series has received a "Mixed and Shared Funding Order" from
the SEC granting relief from the certain provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit shares of the Series to be
sold to variable annuity and life insurance separate accounts of unaffiliated
insurance companies;
WHEREAS, the Series is divided into various funds ("Funds"), some of which
are set forth in Appendix C, each Fund being subject to certain fundamental
investment policies some of which may not be changed without a majority vote of
the shareholders of such Fund;
WHEREAS, certain Funds will serve as the underlying investments
for the Contracts as set forth in Appendix C;
WHEREAS, AFD, a registered broker-dealer, will provide certain services to
Lincoln National with regard to the Contracts; and
WHEREAS, CRMC is the investment adviser for the Series.
NOW THEREFORE, in consideration of the foregoing and of mutual covenants
and
1
<PAGE>
conditions set forth herein and for other good and valuable consideration,
Lincoln National, the Accounts, the Series, AFD and CRMC hereby agree as
follows:
1. The Series and CRMC each represents and warrants to Lincoln National
that: (i) a registration statement under the Securities Act of 1933 ("1933 Act")
and under the 1940 Act with respect to the Series has been filed with the SEC in
the form previously delivered to Lincoln National, and copies of any and all
amendments thereto will be forwarded to Lincoln National at the time that they
are filed with the SEC; (ii) the Series is, and shall be at all times while this
Agreement is in force, lawfully organized, validly existing, and properly
qualified as an open-end management investment company; and (iii) the Series
registration statement and any further amendments or supplements thereto will,
when they become effective, conform in all material respects to the requirements
of the 1933 Act and the 1940 Act, and the rules and regulations of the SEC
thereunder, and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statement therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Series by
Lincoln National expressly for use therein.
2. The Series will furnish to Lincoln National such information with
respect to the Series in such form and signed by such of its officers as Lincoln
National may reasonably request, and will warrant that the statements therein
contained when so signed will be true and correct. The Series will advise
Lincoln National immediately of: (a) any request by the SEC (i) for amendment of
the registration statement relating to the Series or (ii) for additional
information; (b) the issuance by the SEC of any stop order suspending the
effectiveness of the registration statement of the Series or the initiation of
any proceeding for that purpose; (c) the institution of any proceeding,
investigation or hearing involving the offer or sale of the Contracts or the
Series of which it becomes aware; or (d) the happening of any material event, if
known, which makes untrue any statement made in the registration statement of
the Series or which requires the making of a change therein in order to make any
statement made therein not misleading.
3. The Series will use best efforts to register for sale under the 1933
Act and, if required, under state securities laws, such additional shares of the
Series as may reasonably be necessary for use as the funding vehicle for the
Contracts.
4. The Series agrees to make Class 1 and Class 2 shares of all of its
Funds available to the Contracts. To the extent Lincoln National uses Class 2
shares, it will be entitled to a fee from the Series of .25% per annum of Class
2 assets attributable to the Contracts to offset Contract marketing expenses for
as long as the Series' Rule 12b-1 plan remains in effect. Fund shares to be made
available to Accounts for the Contracts shall be sold by the Series and
purchased by Lincoln National for a given Account at the net asset value
(without the imposition of a sales load) next computed after receipt of each
order by the Series or its designee, as established in accordance with the
provisions of the then current prospectus of the Series. For purposes of this
Paragraph 4, Lincoln National shall be a designee of the Series for receipt of
such
2
<PAGE>
orders from each Account, and receipt by such designee by 4:00 p.m. Eastern
time shall constitute receipt by the Series only if the net purchase or
redemption orders are transmitted to the Series by Lincoln National by 10:00
a.m. Eastern time on the day following Lincoln National's receipt of that
information. "Business Day" shall mean any day on which the New York Stock
Exchange ("NYSE") is open for trading and on which the Series calculates its net
asset value pursuant to the rules of the SEC. The Series will make its shares
available indefinitely for purchase at the applicable net asset value per share
on those days on which the Series calculates its net asset value pursuant to the
rules of the SEC, and the Series shall use its best efforts to calculate such
net asset value on each day on which the NYSE is open for trading. The Series
shall make the net asset value per share for each of the Funds available to
Lincoln National (using a mutually agreed upon format) on a daily basis as soon
as reasonably practical after the Series calculates its net asset value per
share, and the Series shall use its best efforts to make such net asset value
per share available by 6:00 p.m. Eastern time. The Series, and its investment
adviser, CRMC, are responsible for maintaining net asset values for the Funds in
accordance with the requirements of the 1940 Act and its current prospectus.
Shares of particular Funds shall be ordered in such quantities and at such times
as determined by Lincoln National to be necessary to meet the requirements of
the Contracts. Payment for shares purchased shall be made in federal funds
transmitted by wire by 2:00 p.m. Eastern time as long as the banking system is
open for business. If the banking system is closed, payment will be transmitted
the next day that the banking system is open for business. If payment is
received by the Series after 2:00 p.m., Eastern time on such Business Day,
Lincoln National shall, upon the Series' request, promptly reimburse the Series
for any charges, costs, fees, interest or other expenses incurred in connection
with any advances, borrowing, or overdrafts. The Series will confirm receipt of
each trade (using a mutually agreed upon format) by 1:00 p.m. Eastern time on
the Business Day the trade is placed with the Series.
The Series reserves the right to temporarily suspend sales if the Board of
Trustees of the Series deems it appropriate and in the best interests of the
Series or in response to the order of an appropriate regulatory authority.
5. The Contracts funded through the Accounts will provide for the
allocation of net amounts among certain subaccounts for investment in such
shares of the Funds as may be offered from time to time in the Contracts. The
selection of the particular subaccount is to be made by the Contract owner and
such selection may be changed in accordance with the terms of the Contracts.
6. Transfer of the Series' shares will be by book entry only. No stock
certificates will be issued to the Account. Shares ordered from a particular
Fund will be recorded by the Series as instructed by Lincoln National in an
appropriate title for the corresponding Account or subaccount.
7. The Series shall furnish notice promptly to Lincoln National (using a
mutually agreed upon format) of any dividend or distribution payable on any
shares underlying subaccounts. Lincoln National hereby elects to receive all
such dividends and distributions as are
3
<PAGE>
payable on shares of a Fund recorded in the title for the corresponding
subaccount in additional shares of that Fund. The Series shall notify Lincoln
National of the number of shares so issued. Lincoln National reserves the right
to revoke this election and to receive all such income dividends and capital
gain distributions in cash.
8. The Series shall redeem its shares in accordance with the terms of its
then current prospectus. For purposes of this Paragraph 8, Lincoln National
shall be a designee of the Series for receipt of requests for redemption from
each Account, and receipt by such designee by 4:00 p.m. Eastern time shall
constitute receipt by the Series; provided that the Series receives notice of
such request for redemption by 10:00 a.m. Eastern time on the following Business
Day. Lincoln National shall purchase and redeem the shares of Funds offered by
the then current prospectus of the Series in accordance with the provisions of
such prospectus. The Series agrees to redeem, upon Lincoln National's request,
any full or fractional shares of the designated portfolio held by Lincoln
National. Payment shall be made in federal funds transmitted by wire by 2:00
p.m. Eastern time as long as the banking system is open for business. If the
banking system is closed, payment will be transmitted the next day that the
banking system is open for business. If payment is received by Lincoln Life
after 2:00 p.m., Eastern time on such Business Day, the Series shall, upon
Lincoln National's request, promptly reimburse Lincoln National for any charges,
costs, fees, interest or other expenses incurred in connection with any
advances, borrowing, or overdrafts. The Series will confirm receipt of each
trade (using a mutually agreed upon format) by 1:00 p.m. Eastern time on the
Business Day the trade is placed with the Series.
9. The Series shall pay all expenses incidental to its performance under
this Agreement. The Series shall see to it that all of its shares are registered
and authorized for issue in accordance with applicable federal and state laws
prior to their purchase for the Accounts. The Series shall bear the expenses for
the cost of registration of its shares, preparation of prospectuses to be sent
to existing Contract owners, proxy materials and reports, the printing and
distribution of such items to each Contract owner who has allocated net amounts
to any Subaccount, the preparation of all statements and notices required from
it by any federal or state law, and taxes on the issue or transfer of the
Series' shares subject to this Agreement. The Series will provide Lincoln
National, at least once a year, with enough copies of its Statement of
Additional Information to be able to distribute one to each Contract owner or
prospective Contract owner who requests such Statement of Additional
Information.
10. Lincoln National shall bear the expenses for the cost of printing and
distribution of Series prospectuses to be sent to prospective Contract owners.
The Series shall provide, at its expense, such documentation (in camera ready or
other mutually agreeable form) and other assistance as is reasonably necessary
in order for Lincoln National once each year (or more frequently if the
prospectus for the Series is amended) to have the prospectus or prospectuses for
the Contracts and the Series prospectus printed together in one or more
documents. With respect to any Series prospectus that is printed in combination
with any one or more Contract prospectus (the "Prospectus Booklet"), the Series
shall bear the costs of printing and mailing the Prospectus Booklet to existing
Contract owners based on the ratio of the number of pages of the
4
<PAGE>
Series prospectuses included in the Prospectus Booklet to the number of pages in
the Prospectus Booklet as a whole. With respect to any Series report that is
printed in combination with any one or more reports of investment options for
the Contracts (the "Report Booklet"), the Series shall bear the costs of
printing and mailing the Report Booklet to existing Contract owners based on the
ratio of the number of pages of the Series report included in the Report Booklet
to the number of pages in the Report Booklet as a whole.
11. Lincoln National represents and warrants to the Series that any
information furnished in writing by Lincoln National to the Series for use in
the registration statement of the Series will not result in the registration
statement's failing to conform in all material respects to the requirements of
the 1933 Act and the 1940 Act and the rules and regulations thereunder or
containing any untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
12. Lincoln National and its affiliates shall make no representations
concerning the Series' shares except those contained in the then current
prospectus of the Series, in such printed information subsequently issued on
behalf of the Series or other funds managed by CRMC as supplemental to the
appropriate fund prospectus, or in materials approved by AFD.
13. Shares of the Series may be offered to separate accounts of various
insurance companies in addition to Lincoln National. The Series shall comply
with the provisions of Section 817 of the Internal Revenue Code of 1986 as
amended and the regulations thereunder ("Section 817").
14. The parties to this Agreement recognize that due to differences in tax
treatment or other considerations, the interests of various Contract owners
participating in one or more Funds might, at some time, be in conflict. Each
party shall report to the other party any potential or existing conflict of
which it becomes aware. The Board of Trustees of the Series shall promptly
notify Lincoln National of the existence of irreconcilable material conflict and
its implications. If such a conflict exists for which Lincoln National is
responsible as determined by the Board of Trustees, Lincoln National will, at
its own expense, take whatever action it deems necessary to remedy such
conflict; in any case, Contract owners will not be required to bear such
expenses.
15. Lincoln National agrees to indemnify and hold the Series harmless
against, any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and reasonable other expenses) to which the Series
may be subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements arise as a result of Lincoln National: (a) making untrue
statements of material facts or omitting material fact in the registration
statement, prospectus or sales literature of the Contracts and/or Accounts; (b)
making untrue statements of material facts that the Series includes in its
materials, provided the Series relies on information supplied by Lincoln
National; (c) engaging in unlawful conduct with respect to the sale of the
Contracts or Fund shares; and (d) materially breaching this Agreement or a
representation or warranty.
5
<PAGE>
16. The Series and CRMC each agrees to indemnify and hold Lincoln National
harmless against, any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and reasonable other expenses) to which Lincoln
National may be subject under any statute, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements arise as a result of the Series', AFD's or CRMC's (a)
making untrue statements of material facts or omitting material facts in the
registration statement, prospectus or sales literature of the Series; (b) making
untrue statements of material facts that the Series includes in its materials,
provided Lincoln National relies on information supplied by or on behalf of the
Series; (c) engaging in unlawful conduct with respect to the sale of the
Contracts or Fund shares; (d) materially breaching this Agreement or a
representation or warranty; and (e) failing to comply with the requirements of
Section 817 and regulations thereunder.
17. Lincoln National shall be responsible for assuring that the Accounts
provide pass-through voting privileges to Contract owners so long as and to the
extent that the Securities and Exchange Commission continues to interpret the
1940 Act to require pass-through voting privileges for the Contracts.
18. AFD will be responsible for conducting training activities for Lincoln
National's wholesalers regarding CRMC's approach to investment management in
connection with Lincoln National's wholesaler support of the Series. Training
will include initial sessions as to CRMC's investment approach and strategies,
background in CRMC's investment results, information on CRMC's portfolio
counselors managing the Series and general information on CRMC. AFD will provide
such periodic additional training and refresher training as may be requested by
Lincoln National. AFD will provide speakers and panelists at national sales
meetings conducted by Lincoln National regarding the Series.
In consideration of the activities performed by AFD for Lincoln National,
Lincoln National will pay AFD .25% on each new Contract purchase payment.
19. The parties understand that there is no intention to create a joint
venture in the subject matter of this Agreement. Accordingly, the right to
terminate this Agreement and to engage in any activity not inconsistent with
this Agreement is absolute. This Agreement will terminate:
(i) By any party at any time upon six months' written
notice to the other parties; or
(ii) at the option of Lincoln National or the Series, upon ten
calendar days' prior written notice to the other parties, if a
final non-appealable administrative or judicial decision is
entered against any other party which has a material impact on
the Contracts;
(iii) at the option of Lincoln National, upon ten calendar days'
prior written
6
<PAGE>
notice to the other parties, if shares of the Series are not
reasonably available;
(iv) at the option of Lincoln National, immediately upon written
notice to the other parties, if the Series or CRMC fails to
meet the requirements for either diversification under Section
817 or registered investment company status or if the Board of
the Series terminates the Class 2 Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act; or
(v) immediately in the event the Series' shares are not
registered, issued or sold in accordance with
applicable state and/or federal law or such law
precludes the use of such shares as an underlying
investment for the Contracts issued or to be issued
by Lincoln National; in such event prompt notice
shall be given by Lincoln National or the Series to
the other parties.
The effective date for termination pursuant to any notice required under
this Paragraph shall be calculated beginning with the date of receipt of such
notice to all other parties.
20. All notices, consents, waivers, and other communications under this
Agreement must be in writing, and will be deemed to have been duly received (a)
when delivered by hand (with written confirmation of receipt), (b) when sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) the day after it is sent by
a nationally recognized overnight delivery service, in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
If to Lincoln National:
The Lincoln National Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46801
Attention: Steven M. Kluever, Second Vice President
Facsimile No.: 219-455-1773
If to Series:
American Variable Insurance Series
333 S. Hope Street, 55th Floor
Los Angeles, California 90071
Attention: Michael J. Downer, Senior Vice President
Facsimile No.: 213-486-9041
If to CRMC:
Capital Research and Management Company
333 S. Hope Street, 55th Floor
7
<PAGE>
Los Angeles, CA 90071
Attention: Michael J. Downer, Senior Vice President and Legal
Counsel
Facsimile No.: 213-486-9041
If to AFD:
American Funds Distributors, Inc.
333 S. Hope Street, 34th Floor
Los Angeles, California 90071
Attention: Michael J. Downer, Secretary and Legal Counsel
Facsimile No.: 213-486-9041
21. If this Agreement terminates, any provision of this Agreement
necessary to the orderly windup of business under it will remain in effect as to
that business, after termination.
22. If this Agreement terminates, the Series, at Lincoln National's
option, will continue to make additional shares of the Series available for all
Contracts existing as of the effective date of termination (under the same terms
and conditions as were in effect prior to termination of this Agreement with
respect to existing Contract owners), unless the Series liquidates or applicable
laws prohibit further sales. Lincoln National agrees not to redeem shares unless
legitimately required to do so according to a Contract owner's request or under
an order from the SEC.
23. The obligations of the Series under this Agreement are not binding
upon any of the Trustees, officers, employees, or shareholders (except CRMC if
it is a shareholder) of the Series individually, but bind only the Series'
assets. When seeking satisfaction for any liability of the Series in respect of
this Agreement, Lincoln National and the Account agree not to seek recourse
against said Trustees, officers, employees, or shareholders, or any of them, or
any of their personal assets for such satisfaction. Notwithstanding the
foregoing, if Lincoln National seeks satisfaction for the Series for any losses,
claims, damages, liabilities or litigation in respect of this Agreement, Lincoln
National and the Accounts shall also have recourse against AFD and CRMC, which
shall be jointly and severally liable for all amounts due Lincoln National and
not recovered from the Series.
24. This Agreement shall be construed in accordance with the laws of the
State of California.
25. This Agreement and the parties' rights, duties, and obligations under
this Agreement are not transferable or assignable by any of them without the
express, prior written consent of the other party hereto. Any attempt by a party
to transfer or assign this Agreement or any of its rights, duties or obligations
under this Agreement without such consent is void.
26. The following Paragraphs shall survive any termination of this
Agreement: 4, 7, 8, 15, 16, 19, 20-25.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the date first above written.
<TABLE>
<S> <C>
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY (on behalf of the Accounts
and itself)
Attest:
By: _______________________________
___________________________ Its: (Insert title)
AMERICAN VARIABLE INSURANCE SERIES
Attest:
By: _______________________________
___________________________ Its: Senior Vice President
AMERICAN FUNDS DISTRIBUTORS, INC.
Attest:
By: _______________________________
___________________________ Its: President
CAPITAL RESEARCH AND MANAGEMENT
COMPANY
Attest:
By: _______________________________
___________________________ Its: Executive Vice President
</TABLE>
9
<PAGE>
Appendix A
Lincoln VUL
Lincoln VULdb
Lincoln CVUL
D-L ChoicePlus variable annuity
MultiFund individual variable annuity
MultiFund group variable annuity
Lincoln SVUL
Appendix B
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Flexible Premium Variable Life Account S
Lincoln Life Variable Annuity Account N
Lincoln National Variable Annuity Account C
Lincoln Life Variable Annuity Account Q
Lincoln Life Flexible Premium Variable Life Account R
Appendix C
American Variable Insurance Series
Global Growth Fund Class 2
Global Small Capitalization Fund Class 2
International Fund Class 2
Growth Fund Class 2
Growth-Income Fund Class 2
High-Yield Bond Fund Class 2
10
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the Post-
Effective Amendment No. 1 to the Registration Statement (Form S-6 No. 333-72875)
pertaining to the Lincoln Life Flexible Premium Variable Life Separate Account
S, and to the use therein of our report dated February 1, 1999, with respect to
the statutory-basis financial statements of The Lincoln National Life Insurance
Company.
/s/ Ernst & Young LLP
------------------------
Ernst & Young LLP
Fort Wayne, Indiana
October 19, 1999
