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AMERICAN LEGACY LIFE
LINCOLN NATIONAL FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT F INDIVIDUAL FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE POLICY
issued by:
Lincoln National Life Insurance Co.
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, Ind. 46801
(800) 348-0851
The flexible premium variable life insurance policy (policy) offered by Lincoln
National Life Insurance Co. (Lincoln Life) and described in this prospectus is
designed to provide life insurance protection. A policy may be issued only to
persons age 80 or younger and only for an initial premium of $10,000 or more.
The owner may pay a single premium, or subject to certain restrictions, vary
the frequency and amount of premium payments. The level of life insurance bene-
fits payable under the policy may also be increased or decreased subject to
certain restrictions.
An owner may allocate amounts to Lincoln National Flexible Premium Variable
Life Account F (Separate Account). Amounts allocated to the Separate Account
may be invested in the American Variable Insurance Series, which has nine funds
available:
. Global Growth Fund
. Growth Fund
. International Fund
. Growth-Income Fund
. Asset Allocation Fund
. High-Yield Bond Fund
. Bond Fund
. U.S. Government/AAA-Rated Securities Fund
. Cash Management Fund
The amount of the death benefit may, and the policy value will, reflect the in-
vestment experience of the chosen subaccounts of the Separate Account and in-
terest credited to the policy on loans held in the General Account, as well as
the frequency and amount of premiums, and the charges assessed in connection
with the policy. As long as the policy remains in force, the death benefit will
not be less than the current specified amount of the policy. The policy will
remain in force so long as net cash surrender value is sufficient to pay the
monthly deductions imposed in connection with the policy. The owner bears the
entire investment risk for all amounts allocated to the Separate Account; no
minimum policy value or net cash surrender value is guaranteed.
The purchase and ownership of the policy involves various charges which are ex-
plained under the heading Charges and deductions on page 6.
It may not be advantageous to purchase a policy: (1) as a replacement for an-
other type of life insurance; or,
(2) to obtain additional insurance protection if the purchaser already owns an-
other flexible premium variable life insurance policy.
The policy is or may be a Modified Endowment Contract. A life insurance policy
becomes a Modified Endowment Contract if the premiums paid for the policy ex-
ceed certain limits referred to as the 7-pay limitation. Because the issue pre-
mium normally exceeds the 7-pay limitation, the policy will likely be a Modi-
fied Endowment Contract unless it is purchased with cash values transferred
from a pre-existing life insurance policy which is not a Modified Endowment
Contract and the transfer meets the requirements for a tax-free exchange. The
taxation of loans from, or surrenders of, a Modified Endowment Contract is gen-
erally less favorable than applies to such distributions from a life insurance
policy that is not a Modified Endowment Contract. In particular, loans or sur-
renders made from a Modified Endowment Contract are normally reportable income
to the extent of any gain in the policy and such income will also be subject to
an additional 10% income tax if the loan is taken before the owner attains age
59 1/2.
This prospectus is valid only if accompanied or preceded by a prospectus for
American Variable Insurance Series.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR BY ANY STATE REGULATORY AGENCY, NOR HAS THE COMMISSION,
OR ANY STATE REGULATORY AGENCY, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and retain it for future reference.
The date of this prospectus is April 30, 1997.
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TABLE OF CONTENTS
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SUMMARY OF THE POLICY 1
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LINCOLN LIFE AND THE SEPARATE ACCOUNT
Lincoln Life 3
The Separate Account 3
The investment advisor 3
Addition, deletion or substitution of investments 3
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THE POLICY
Requirements for issuance of a policy 4
Units and unit values 4
Premium payment and allocation of premiums 5
Dollar cost averaging program 6
Effective date 6
Right to examine policy 6
Policy termination 6
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CHARGES AND DEDUCTIONS
Surrender charges 6
Cost of insurance charges 7
Charges against the Separate Account 7
Reduction of charges 8
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POLICY BENEFITS
Death benefit 8
Guaranteed death benefit 9
Policy changes 9
Policy value 10
Transfer between subaccounts 10
Loans 11
Policy lapse and reinstatement 11
Surrender of the policy 11
Proceeds and payment options 12
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GENERAL PROVISIONS
The contract 12
Suicide 12
Representations and contestability 12
Incorrect age or sex 13
Change of owner or beneficiary 13
Assignment 13
Reports and records 13
Projection of benefits and values 13
Postponement of payments 13
Accelerated Benefit Election Rider 13
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DISTRIBUTION OF THE POLICY 14
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FEDERAL TAX MATTERS
Tax status of the policy 14
Tax treatment of policy benefits 15
Taxation of the Separate Account 16
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VOTING RIGHTS 16
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STATE REGULATION OF LINCOLN LIFE
AND THE SEPARATE ACCOUNT 17
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SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS 17
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LEGAL PROCEEDINGS 17
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EXPERTS 17
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ADDITIONAL INFORMATION 18
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APPENDIX A: Executive Officers & Directors
of Lincoln National Life
Insurance Co. 19
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APPENDIX B: Illustrations of policy values 24
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APPENDIX C: Definitions for Separate Account F 31
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FINANCIAL STATEMENTS 34
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SUMMARY OF THE POLICY
The following summary is intended to give you a brief explanation of the most
important features of your policy. The summary is not comprehensive and is en-
tirely qualified by more specific information contained elsewhere in this pro-
spectus. Throughout this prospectus, in order to make the following documents
more understandable, we have italicized the special terms.
WHAT TYPE OF POLICY AM I PURCHASING?
Your policy is a flexible premium variable life insurance policy whose primary
purpose is to provide life insurance protection on the insured. As long as
your policy remains in force, the policy will provide for: (1) the payment of
a death benefit to a beneficiary upon the insured's death; (2) policy loan
privileges and surrender privileges; and (3) the payment of the net cash sur-
render value to the owner, if living, on the maturity date.
HOW DOES THE LIFE INSURANCE
PROTECTION WORK?
The policy provides for the payment of benefits upon the death of the insured.
So long as your policy remains in force, the minimum death benefit payable
will be the current specified amount, reduced by any outstanding loan and any
due and unpaid charges. Under certain conditions, a guaranteed death benefit
on the life of the insured in an amount equal to the sum of all premiums paid
will be provided until the maturity date despite the lapse of the policy.
You also have flexibility to adjust the death benefit prior to the maturity
date by increasing or decreasing the specified amount of the policy. During
the first two policy years, the insured may apply for an increase equal to the
lesser of 10% of the original specified amount or $25,000, without evidence of
insurability.
HOW ARE THE PREMIUMS FLEXIBLE?
The owner may choose to pay a single premium or may have flexibility concern-
ing the amount and frequency of premium payments. An issue premium approxi-
mately equal to 80% of the federal maximum premium limitation (as defined in
Section 7702 of the Internal Revenue Code of 1986, as amended) is required to
issue the policy. An owner who has not paid the federal maximum premium limi-
tation may, subject to certain restrictions, make premium payments at any time
and in any amount and at any frequency.
WHAT MAKES MY POLICY VARIABLE?
Your policy is described as variable because the death benefit and the policy
value can vary with the investment performance of amounts you have allocated
to the subaccounts you have selected. While you bear the entire investment
risk on such amounts, you also enjoy the opportunity to obtain market rates of
return on those amounts.
WHAT FUNDS ARE AVAILABLE TO SELECT?
You have the option to allocate amounts to one or more subaccounts of the Sep-
arate Account. Currently the American Variable Insurance Series consists of
nine funds available for investment by the subaccounts:
The Global Growth Fund seeks long-term growth of capital by investing primar-
ily in common stocks or securities with common stock characteristics of is-
suers domiciled around the world. [PLEASE NOTE: AS OF THE DATE OF THIS PRO-
SPECTUS, THE GLOBAL GROWTH FUND IS NOT YET AVAILABLE IN ALL STATES. PLEASE
CONTACT YOUR INVESTMENT DEALER FOR MORE INFORMATION ABOUT THE GLOBAL GROWTH
FUND'S AVAILABILITY.]
The Growth Fund seeks growth of capital by investing primarily in common
stocks or securities with common stock characteristics, such as convertible
preferred stock, which demonstrate the potential for appreciation.
The International Fund seeks long term growth of capital by investing primar-
ily in securities of issuers domiciled outside the United States.
The Growth-Income Fund seeks high growth of capital and income by investing
primarily in common stocks or securities which demonstrate the potential for
appreciation and/or dividends.
The Asset Allocation Fund seeks high total return (including income and capi-
tal gains) consistent with preservation of capital over the long term through
a diversified portfolio that can include common stocks and other equity-type
securities, bonds and other intermediate and long-term fixed-income securities
and money market instruments in any combination.
The High-Yield Bond Fund seeks high current income and secondarily seeks capi-
tal appreciation by investing primarily in intermediate and long term corpo-
rate obligations, with emphasis on higher yielding, higher risk, lower rated
or unrated securities. IN ADDITION TO OTHER RISKS, HIGH-YIELD, HIGH-RISK BONDS
(ALSO KNOWN AS "JUNK BONDS") ARE SUBJECT TO GREATER FLUCTUATIONS IN VALUE AND
RISK OF LOSS OF INCOME AND PRINCIPAL DUE TO DEFAULT BY THE ISSUER THAN ARE IN-
VESTMENTS IN LOWER YIELDING, HIGHER RATED BONDS. FOR FURTHER INFORMATION ON
THE RISKS ASSOCIATED WITH SUCH SECURITIES, PLEASE REFER TO THE PROSPECTUS FOR
THE AMERICAN VARIABLE INSURANCE SERIES, WHICH MUST ACCOMPANY OR PRECEDE THIS
PROSPECTUS AND WHICH SHOULD BE READ CAREFULLY.
The Bond Fund seeks a high level of current income as is consistent with the
preservation of capital by investing in a broad variety of fixed income secu-
rities.
The U.S. Government/AAA-Rated Securities Fund seeks a high level of current
income consistent with prudent investment risk and preservation of capital by
investing primarily in a combination of securities guaranteed by
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the United States Government and other debt securities rated AAA or Aaa.
The Cash Management Fund seeks high current yield while preserving capital by
investing in a diversified selection of money market instruments.
HOW ARE PREMIUMS PROCESSED?
You determine in the application what portions of net premiums are to be allo-
cated to the various subaccounts of the Separate Account. Prior to the record
date, net premiums are automatically allocated to the Cash Management Fund. Af-
ter the record date, the policy value and all subsequent net premiums will au-
tomatically be invested in the subaccounts of the Separate Account in accord
with your instructions in the application. You may change future allocations of
net premiums at any time without charge by notifying us in writing. Subject to
certain restrictions, you may transfer amounts among the subaccounts of the
Separate Account.
WHEN DOES MY POLICY TERMINATE?
Your policy may terminate due to any one of the following: voluntary return or
surrender of the policy, lapse due to insufficient net cash surrender value,
payment of the death benefit, or maturity. During the free look period, you may
return the policy for a refund of all premiums paid. Anytime after the free
look period, you may surrender the policy and receive its net cash surrender
value. In addition to these rights, during the first 24 policy months, the
owner may exchange this policy for a policy of fixed-benefit insurance on the
insured's life under any compatible flexible premium adjustable life policy of-
fered by us.
DO I HAVE ACCESS TO THE POLICY VALUES?
You may access the net cash surrender value through loans. You may borrow the
net cash surrender value at any time. Loans decrease both the death benefit and
future policy values and may have federal income tax consequences.
WHAT CHARGES AND DEDUCTIONS ARE MADE FROM MY POLICY?
SURRENDER CHARGE. During the first 10 years of the policy, a contingent de-
ferred sales charge, called the surrender charge, will be deducted from your
policy value upon lapse or voluntary surrender as compensation for distribution
expenses we incur in the sales process. These distribution expenses include
sales commissions, the cost of printing, the prospectus and sales literature,
and any advertising costs. The initial surrender charge is calculated as 9% of
total premiums paid in the first policy year. Lower sales charges will result
if payment of premium in excess of the issue premium (but subject to federal
maximum premium limitations) is deferred until after the first policy year. The
surrender charge will not exceed $56 per $1000 of specified amount. The surren-
der charge will equal the amounts shown below.
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Percent of total premiums
During policy year paid in first policy year
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1 9.0%
2 8.5%
3 8.0%
4 7.0%
5 6.0%
6 5.0%
7 4.0%
8 3.0%
9 2.0%
10 1.0%
</TABLE>
COST OF INSURANCE CHARGE. The policy value will be reduced on each monthly an-
niversary by the cost of insurance charge. See page 7 for more detailed infor-
mation.
CHARGES AGAINST THE SEPARATE ACCOUNT. A daily mortality and expense risk charge
equivalent to an annual rate of .85% of the daily net assets of the Separate
Account is imposed for the first ten years. In subsequent years, this charge is
reduced to an annual rate of .75%. In addition, a daily administrative charge
equal to an annual rate of .30% of the daily net assets of the Separate Account
is imposed for the first ten years; in subsequent years, this charge is reduced
to .10%. Finally, a daily charge equivalent to an annual rate of .10% of the
daily net assets of the Separate Account is imposed for the first ten years for
the assumption of the guaranteed death benefit risk.
No charges are currently made from the Separate Account for federal or state
income taxes. Should Lincoln Life determine that such taxes may be imposed, the
company reserves the right to make deductions from the policy to pay those tax-
es.
In addition, because the Separate Account purchases shares of the funds in-
volved, the value of the net assets of these subaccounts of the Separate Ac-
count will reflect the fees of the Investment Advisor and other miscellaneous
expenses incurred by those funds. It is estimated that, in the aggregate, such
fees and expenses for the funds, expressed as an annual percentage of each
fund's net assets, will range from .41% to .75%. See page 7 for more detailed
information.
HOW IS MY POLICY AND ITS BENEFITS TAXED?
The taxation of life insurance death benefits and distributions is complex and
is discussed in detail under "Federal tax matters" on pages 14-16. You should
note in particular that the taxation of loans and surrenders of a life insur-
ance policy that becomes a Modified Endowment Contract is generally less favor-
able than applies to such distributions from a life insurance policy
2
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that is not a Modified Endowment Contract. Your policy will be a Modified En-
dowment Contract if the premiums you pay exceed certain limits referred to as
the 7-pay limitation (see pages 15-16). Because the issue premium normally ex-
ceeds the 7-pay limitation, your policy will likely be a Modified Endowment
Contract unless you purchase the policy with cash values transferred from a
pre-existing life insurance policy which is not a Modified Endowment Contract
and the transfer meets the requirements for a tax-free exchange. You should
note, in particular, that loans or surrenders made from a Modified Endowment
Contract are normally reportable income to the extent of any gain in the pol-
icy and such income will also be subject to an additional 10% income tax if
the loan is taken before you attain age 59 1/2. A qualified tax advisor should
be able to help you determine the tax status of your policy.
LINCOLN LIFE AND THE SEPARATE ACCOUNT
LINCOLN LIFE
Lincoln National Life Insurance Co. is a stock life insurance company incorpo-
rated under the laws of Indiana on June 12, 1905. Lincoln Life is principally
engaged in offering individual life insurance policies and annuity contracts,
and ranks among the largest United States stock life insurance companies in
terms of assets and life insurance in force. Lincoln Life is also one of the
leading life reinsurers in the United States. Lincoln Life is licensed in all
states (except New York) and the District of Columbia, Guam, and the Common-
wealth of the Northern Mariana Islands.
Lincoln Life is wholly owned by Lincoln National Corp., a publicly held insur-
ance holding company incorporated under Indiana law on January 5, 1968. The
principal office of Lincoln Life is located at 1300 South Clinton Street, Fort
Wayne, Ind. 46802. The Principal office of Lincoln National Corp. is located
at 200 East Berry Street, Fort Wayne, Ind. 46802. Through subsidiaries, Lin-
coln National Corp. engages primarily in the issuance of health-life insurance
and annuities, property-casualty insurance, and other financial services.
THE SEPARATE ACCOUNT
Lincoln National Flexible Premium Variable Life Account F (Separate Account)
was established by Lincoln Life as a separate account on May 29, 1987. Al-
though the assets of the Separate Account are the property of Lincoln Life,
the laws of Indiana under which the Separate Account was established provide
that the assets in the Separate Account attributable to the policies are not
chargeable with liabilities arising out of any other business which Lincoln
Life may conduct. The assets of the Separate Account shall, however, be avail-
able to cover the liabilities of the General Account of Lincoln Life to the
extent that the Separate Account's assets exceed its liabilities arising under
the policies supported by it. The assets of the Separate Account will be val-
ued once daily at the close of regular trading (currently 4:00 p.m. New York
time) on each day the New York Stock Exchange is open. The New York Stock Ex-
change is currently closed on the following holidays: New Year's Day, Presi-
dents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiv-
ing Day, and Christmas Day.
The Separate Account has been registered as an investment company under the
Investment Company Act of 1940 and meets the definition of "separate account"
under federal securities laws. Registration with the Securities and Exchange
Commission does not involve supervision of the management or investment prac-
tices or policies of the Separate Account or Lincoln Life by the Commission.
The Separate Account is divided into nine subaccounts. Each subaccount invests
exclusively in shares of one of the funds comprising the American Variable In-
surance Series: the Global Growth Fund, the Growth Fund, the International
Fund, the Growth-Income Fund, the Asset Allocation Fund, the High-Yield Bond
Fund, the Bond Fund, the U.S. Government/AAA-Rated Securities Fund, and the
Cash Management Fund. Income and both realized and unrealized gains or losses
from the assets of the Separate Account are credited to or charged against the
Separate Account without regard to the income, gains or losses arising out of
any other business Lincoln Life may conduct. The funds are also invested in by
variable annuity contract holders. For an explanation of the risk involved
with such mixed and/or shared funding, see the prospectus for the underlying
funds.
There is no assurance that any fund of the American Variable Insurance Series
will achieve its stated investment objective. For a complete description of
the American Variable Insurance Series, please refer to the prospectus for the
series which must accompany or precede this prospectus and which should be
read carefully.
THE INVESTMENT ADVISOR
Capital Research and Management Co., an investment management organization
founded in 1931, is the investment advisor to the series and other mutual
funds, including those in The American Funds Group. Capital Research and Man-
agement Co. is located at 333 South Hope Street, Los Angeles, Calif. 90071 and
135 South State College Boulevard, Brea, Calif. 92621. Capital Research and
Management is registered with the Securities and Exchange Commission as an in-
vestment adviser.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
Lincoln Life does not control the investment advisor and therefore cannot
guarantee that the American Vari-
3
<PAGE>
able Insurance Series or any particular funds will be available for investment
by the subaccounts. Lincoln Life reserves the right, subject to compliance with
applicable law, to make additions to, deletions from, or substitutions for the
shares that are held by the Separate Account or that the Separate Account may
purchase. Lincoln Life reserves the right to eliminate the shares of any fund
and to substitute shares of another open-end, registered investment company, if
the shares are no longer available for investment, or if in the judgment of
Lincoln Life further investment in any fund should become inappropriate in view
of the purposes of the Separate Account. Lincoln Life will not substitute any
shares attributable to an owner's interest in a subaccount of the Separate Ac-
count without notice and prior to approval of the Securities and Exchange Com-
mission, to the extent required by the Investment Company Act of 1940 or other
applicable law. Nothing contained herein shall prevent the Separate Account
from purchasing other securities for other series or classes of policies, or
from permitting a conversion between series or classes of policies on the basis
of requests made by policyowners.
Lincoln Life also reserves the right to establish additional subaccounts of the
Separate Account, each of which would invest in a new fund or series of a fund
or in shares of another investment company, with a specified investment objec-
tive. New subaccounts may be established when, at the sole discretion of Lin-
coln Life, marketing needs or investment conditions warrant, and any new
subaccounts may be made available to existing policyowners on a basis to be de-
termined by Lincoln Life. Lincoln Life may also eliminate one or more
subaccounts if, in its sole discretion, marketing, tax, or investment condi-
tions warrant.
In the event of any such substitution or change, Lincoln Life may by appropri-
ate endorsement make such changes in the policy as may be necessary or appro-
priate to reflect such substitution or change. If deemed by Lincoln Life to be
in the best interests of persons having voting rights under the Policies, the
Separate Account may be operated as a management company under the Investment
Company Act of 1940, it may be deregistered under that Act in the event such
registration is no longer required, or it may be combined with other Lincoln
Life separate accounts.
THE POLICY
REQUIREMENTS FOR ISSUANCE OF A POLICY
Individuals wishing to purchase a policy must send a completed application to
Lincoln Life, 1300 South Clinton Street, Fort Wayne, Ind. 46802. The minimum
acceptable premium is $10,000. A policy will generally be issued only to
insureds 80 years of age or under who supply satisfactory evidence of insur-
ability sufficient to Lincoln Life. Acceptance is subject to Lincoln Life's un-
derwriting rules and, except in California, Lincoln Life reserves the right to
reject an application for any reason.
Additional insurance on the life of other persons may be applied for by supple-
mental application. Approval of the additional insurance will be subject to ev-
idence of insurability satisfactory to Lincoln Life.
UNITS AND UNIT VALUES
The value of policy monies invested in each subaccount is accounted for through
the use of units and unit values. A unit is an accounting unit of measure used
to calculate the value of an investment in a specified subaccount. A unit value
is the dollar value of a unit in a specified subaccount on a specified valua-
tion date. Whenever an amount is invested in a subaccount (due to net premium
payments, loan payments, or transfer of values into a subaccount), the amount
purchases units in that subaccount; the number of units purchased is determined
by dividing the dollar amount of the transaction by the unit value on the day
the transaction is made. Similarly, whenever an amount is redeemed from
subaccount (due to loans and loan interest charges, surrenders and surrender
charges, transfers of values out of a subaccount, income tax deductions (if
any), or cost of insurance charges), units are redeemed from that subaccount;
the number of units redeemed is determined by dividing the dollar amount of the
transaction by the unit value on the day the transaction is made.
The unit value is also used to measure the net investment results in a
subaccount. The policy value on any valuation day is the sum of the values in
each subaccount in which policy values are allocated. The value of each
subaccount on each valuation day is determined by multiplying the number of
units held by a policy in each subaccount by the unit value for that subaccount
as determined for that valuation day.
The unit value for a subaccount on a specified valuation date is determined by
dividing the value of all assets owned by that subaccount, net of the
subaccount's liabilities (including any accrued but unpaid daily mortality and
expense risk charges, administrative charges and guaranteed death benefit risk
charges), by the total number of units held by policies in that subaccount. Net
investment results do not increase or decrease the number of units held by the
subaccount.
As discussed under Charges against the Separate Account, on page 7, there is a
reduction in daily asset charges applicable to policies that have been in ex-
istence for more than ten years. To reflect that reduction, the preceding para-
graphs are applied by considering such policies to be funded through separate
subaccounts, the interests in which are reflected in a separately computed and
maintained series of units and unit values. The net investment results applica-
ble to those units will be higher because of the reduction in daily charges ap-
plicable to them.
4
<PAGE>
PREMIUM PAYMENT AND
ALLOCATION OF PREMIUMS
Subject to certain limitations, an owner has considerable flexibility in deter-
mining the frequency and amount of premiums. The first year issue premium is
the only premium payment required under the policy, although additional premi-
ums may be necessary to keep the policy in force. Payment of the issue premium
will not guarantee that the policy will remain in force. The amount of the
first year issue premium is based on the insured's issue age and the specified
amount of the policy and is approximately equal to 80% of the federal maximum
premium limitation at issue, as described below. The owner must pay the issue
premium in full on or before the record date and may pay as much as 100% of the
federal maximum premium limitation at issue.
Any owner who has not chosen to pay the federal maximum premium limitation at
issue will also define a planned periodic premium schedule that provides for
payment of a level premium (which may be zero) at fixed intervals for a speci-
fied period of time. The owner is not required to pay premiums in accord with
this schedule. Furthermore, the owner has flexibility to alter the amount, fre-
quency, and the time period over which planned periodic premiums are paid.
Failure to pay planned periodic premiums will not of itself cause the policy to
lapse, nor will the payment of planned periodic premiums guarantee that the
policy will remain in force. The policy will lapse any time outstanding loans
exceed policy value less surrender charge or policy value less outstanding
loans and less surrender charge is insufficient to pay certain monthly deduc-
tions, and a grace period expires without a sufficient payment. (See Policy
lapse and reinstatement, page 11.) Subject to the first year issue premium re-
quirements and the maximum premium limitations established under section 7702
of the Internal Revenue Code 1986, as amended (the Code), an owner may make
unscheduled premium payments at any time in any amount during the lifetime of
the insured until the maturity date. Monies received that are not designated as
premium payments will be assumed to be loan repayments if there is an outstand-
ing loan on the policy; otherwise, such monies will be assumed to be an
unscheduled premium payment.
PREMIUM LIMITATIONS. In no event can the total of all premiums paid, both
scheduled and unscheduled, exceed the current maximum premium limitations es-
tablished for life insurance policies to meet the definition of life insurance,
as set forth under Section 7702 of the Code. Those limitations will vary by is-
sue age, sex, classification, benefits provided, and even policy duration. If
at any time a premium is paid which would result in total premiums exceeding
the current maximum premium limitation, Lincoln Life will only accept that por-
tion of the premium which will make total premiums equal that amount. Any part
of the premium in excess of that amount will first be applied to reduce any
outstanding loan on the policy, and any further excess will be refunded to the
owner within 7 days of receipt and no further premiums will be accepted until
allowed by subsequent maximum premium limitations.
The tax status of a policy and the tax treatment of distributions from a policy
are dependent in part on whether or not the policy becomes a Modified Endowment
Contract. A policy will become a Modified Endowment Contract if premiums paid
into the policy exceed certain limits referred to as the 7-pay limitation. Be-
cause the issue premium normally exceeds the 7-pay limitation, the policy will
likely be a Modified Endowment Contract unless it has been purchased with cash
values transferred from a pre-existing life insurance policy which is not a
Modified Endowment Contract and the transfer meets the requirements for a tax-
free exchange. The taxation of life insurance death benefits and distributions
is complex and is discussed in detail under "Federal tax matters" on pages 14-
16. Of particular note is the fact that the taxation of loans and surrenders of
a life insurance policy that becomes a Modified Endowment Contract is generally
less favorable than applies to such distributions from a life insurance policy
that is not a Modified Endowment Contract.
NET PREMIUMS. The net premium equals the premium paid.
ALLOCATION OF NET PREMIUMS. In the application for a policy, the owner can al-
locate net premiums or portions thereof to the various subaccounts of the Sepa-
rate Account. Notwithstanding the allocation in the application, all net premi-
ums received prior to the record date will initially be allocated to the Cash
Management Fund. Net premiums received prior to the record date will be cred-
ited to the policy on the later of the policy date or the date the premium is
received. The record date is the date the policy is recorded on the books of
Lincoln Life as an in-force policy, and may coincide with the policy date. Net
premiums will continue to be allocated to the Cash Management Fund until the
record date. When the assets of the Separate Account are next valued following
the record date, the value of the policy's assets in the Cash Management Fund
will automatically be transferred to the subaccounts of the Separate Account in
accord with the owner's percentage allocation in the application. No charge
will be imposed for this initial transfer. Net premiums paid after the record
date will be credited to the policy on the date they are received and will be
allocated in accord with the owner's instructions in the application. The mini-
mum percentage of each premium that may be allocated to any subaccount of the
Separate Account is 10%; percentages must be in whole numbers. The allocation
of future net premiums may be changed without charge at any time by providing
written notification on a form suitable to Lincoln Life, unless the owner has
made previous arrangements with Lincoln Life to allow the allocation of future
net premiums to be changed upon telephone request.
5
<PAGE>
The value of the amount allocated to subaccounts of the Separate Account will
vary with the investment experience of these subaccounts and the owner bears
the entire investment risk. Owners should periodically review their allocations
of premiums and values in light of market conditions, interest rates, and over-
all estate planning requirements.
DOLLAR COST AVERAGING PROGRAM
The owner may wish to make uniform monthly transfers from the Cash Management
Fund to one or more of the subaccounts over a 12, 24 or 36-month period through
the Dollar Cost Averaging (DCA) program. Under the program, the owner desig-
nates the total amount of policy value ($5000 minimum) to be transferred from
the Cash Management Fund to the chosen subaccounts in accord with the most re-
cent premium allocation. The transfers continue until the end of the DCA period
or until the policy value in the Cash Management Fund has been exhausted,
whichever occurs sooner. DCA may also be terminated upon written request by the
owner.
The theory of DCA is that transfers of uniform dollar amounts purchase a
greater number of subaccount units when unit values are relatively low than are
purchased when unit values are higher. This has the effect, when purchases are
made at fluctuating prices, of reducing the aggregate average cost per unit to
less than the average of the unit values on the same purchase dates. However,
participation in the DCA program does not assure the owner of a greater return
on purchases under the program, nor will it prevent or necessarily alleviate
losses in a declining market.
There are no charges associated with the DCA program. In order to participate
in (or terminate participation in) the DCA program, the owner must complete a
written request on a form suitable to Lincoln Life.
EFFECTIVE DATE
For all coverage provided in the original application, the effective date will
be the policy date, provided the policy has been delivered and the issue pre-
mium has been paid prior to death and prior to any change in health or any
other factor affecting insurability of the insured as shown in the application.
The policy date is ordinarily the earlier of the date the full issue premium is
received or the date on which the policy is approved for issue by Lincoln Life.
For any increase, the effective date will be the first monthly anniversary day
on or next following the day the application for the increase is approved.
For any insurance that has been reinstated, the effective date will be the
first monthly anniversary day on or next following the day the application for
reinstatement is approved.
RIGHT TO EXAMINE POLICY
The owner may, until a specified period of time has expired, examine the policy
and return it for refund of all premiums paid. The applicable period of time
will depend on the state in which the policy is issued, but will not expire
sooner than the latest of ten days after receipt of the policy, 45 days after
Part 1 of the application is completed, or ten days after the Notice of With-
drawal Right is mailed or delivered to the owner. Upon cancellation the policy
will be void from the beginning. An owner wanting a refund should return the
policy to either Lincoln Life at its Home Office or to the registered agent who
sold it.
POLICY TERMINATION
All coverage under the policy will terminate when any one of the following oc-
curs: 1) the grace period ends without payment of required premium, 2) the pol-
icy is surrendered, 3) the insured dies, or 4) the policy matures. Under cer-
tain defined conditions, Lincoln Life will continue until the maturity date a
death benefit on the life of the insured in an amount equal to the premiums
paid (See Guaranteed death benefit, page 9).
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the policy to compensate Lincoln
Life for:
1. providing the insurance benefit set forth in the policy and any optional
insurance benefits added by rider;
2. administering the policy;
3. assuming certain risks in connection with the policy;
4. incurring expenses in distributing the policy.
The nature and amount of these charges are described in the following.
SURRENDER CHARGES
Sales charges may be deducted in the form of contingent deferred surrender
charges (referred to as the surrender charge) as compensation for distribution
expenses incurred by Lincoln Life. These expenses include sales commissions,
the cost of printing the prospectus and sales literature, and any advertising
costs. Expressed as a percentage of premiums, the total sales charges imposed
under the policy during the first twelve policy months will depend on the
policy's specified amount, the insured's attained age, the insured's underwrit-
ing class, and the amount of actual premium paid during that period, but in no
event will sales charges exceed 9.0% of the total premium paid in the first
policy year. The following table shows the surrender charge as percent of total
premiums paid during the first policy year. Lower sales charges will result if
payment of premium in excess of the issue premium (total premium must be less
6
<PAGE>
than the federal maximum premium limitation) is deferred until after the first
policy year. The surrender charge will not exceed $56 per $1,000 of specified
amount.
<TABLE>
<CAPTION>
Percent of total premiums
During policy year paid in first policy year
- ------------------------------------------------------------------------------
<S> <C>
1 9.0%
2 8.5%
3 8.0%
4 7.0%
5 6.0%
6 5.0%
7 4.0%
8 3.0%
9 2.0%
10 1.0%
</TABLE>
The sales charge in any policy year is not necessarily related to actual dis-
tribution expenses incurred in that year. Instead, Lincoln Life expects to in-
cur the majority of distribution expenses in the first policy year and to re-
cover any deficiency over the life of the policy from sales charges in subse-
quent years.
COST OF INSURANCE CHARGES
On the policy date and on each monthly anniversary day following, cost of in-
surance charges will be deducted from the policy value. Ordinarily, the cost
of insurance charges are deducted in proportion to the values in the
subaccounts. The cost of insurance charges may be made by some other method if
requested by the owner, and if such method is acceptable to Lincoln Life.
The cost of insurance charges depend upon a number of variables, and the cost
for each policy month can vary from month to month. It will depend, among
other things, on the amount for which Lincoln Life is at risk to pay in the
event of the insured's death. On each monthly anniversary day, Lincoln Life
will determine the monthly cost of insurance for the following month as equal
to:
a. the death benefit on the monthly anniversary day; divided by
b. 1.0032737 (the monthly interest factor equivalent to an annual interest
rate of 4%); minus,
c. the policy value on the monthly anniversary day without regard to the cost
of insurance; divided by
d. 1,000; the result multiplied by
e. the applicable cost of insurance rate per $1,000 as described below.
The cost of insurance rates are based on the sex, attained age, and rate class
of the person insured. The monthly cost of insurance rates may be changed by
Lincoln Life from time to time. A change in the cost of insurance rates will
apply to all persons of the same attained age, sex and rate class and whose
policies have been in effect for the same length of time. The cost of insur-
ance rates will not exceed those described in the table of guaranteed maximum
insurance rates shown in the policy. These rates are based on the l980 Commis-
sioner's Standard Ordinary Mortality Table, Age Last Birthday. Standard rate
classes have guaranteed rates which do not exceed 100% of the applicable ta-
ble.
The rate class of an insured will affect the cost of insurance rate. Lincoln
Life currently places insureds into a standard rate class or rate classes in-
volving a higher mortality risk. In an otherwise identical policy, insureds in
the standard rate class will have a lower cost of insurance than those in the
rate class with the higher mortality risk. The standard rate class is also di-
vided into three categories: preferred plus, preferred and standard. Insureds
who are preferred plus or preferred will generally incur a lower cost of in-
surance than those insureds who are standard.
Lincoln Life also reserves the right to deduct from the policy value any
amounts charged for federal or other Governmental income taxes that might re-
sult from a change in the current tax laws. Current tax laws do not charge in-
come taxes on the policy value.
CHARGES AGAINST THE SEPARATE ACCOUNT
Several charges are made directly or indirectly against the Separate Account
and have the effect of reducing net investment results credited to the
subaccounts.
FUND CHARGES AND EXPENSES. The investment advisor for each of the funds de-
ducts a daily charge as a percent of the net assets in each fund as an asset
management charge. The charge has the effect of reducing the investment re-
sults credited to the subaccounts.
Because the Separate Account purchases shares of the funds involved, the value
of the net assets of the subaccounts of the Separate Account will reflect not
only the fees of the Investment Advisor, but also other miscellaneous expenses
incurred by those funds. The asset management charges, miscellaneous expenses
and total expenses for each of the funds are currently estimated, on the basis
of their most recent fiscal year experience where applicable, to be as fol-
lows:
<TABLE>
<CAPTION>
Asset Misc.
Fund Mgt. Charge* Expenses* Total*
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Growth** .69% .06% .75%
Growth .42% .02% .44%
International .61% .08% .69%
Growth-Income .39% .02% .41%
Asset Allocation .47% .02% .49%
High-Yield Bond .50% .03% .53%
Bond .51% .01% .52%
U.S. Gov't/AAA-Rated .51% .02% .53%
Cash Management .45% .02% .47%
</TABLE>
*Expressed as an annual percentage of each fund's average daily net assets.
**New fund, with no prior fiscal year experience.
See the funds' prospectus for more complete information about the expenses of
the funds.
7
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE. Lincoln Life deducts a daily charge as a
percent of the assets of the Separate Account as a mortality and expense risk
charge. The daily rate charged is equal to an annual rate of .85% of the value
of the net assets of the Separate Account for the first 10 policy years, and
.75% for policy years thereafter. This deduction will not increase for the du-
ration of the policy.
The mortality risk assumed is that insureds may live for a shorter period of
time than estimated and, therefore, a greater amount of death benefits will be
payable. The expense risk assumed is that expenses incurred in issuing and ad-
ministering the policies will be greater than estimated.
GUARANTEED DEATH BENEFIT CHARGE. For the first ten policy years Lincoln Life
deducts a daily charge as a percent of the assets of the Separate Account as a
charge for the guaranteed death benefit. The daily rate charged is equal to an
annual rate of .10% of the value of the net assets of the Separate Account.
This charge compensates Lincoln Life for the risk that the combination of cost
of insurance deductions and poor net investment results may reduce net cash
surrender values to zero and require Lincoln Life to continue until the matu-
rity date a death benefit on the life of the insured in an amount equal to the
sum of premiums paid.
ADMINISTRATIVE CHARGE. Lincoln Life deducts a daily charge as a percent of the
assets of the Separate Account as an administrative charge. The daily rate
charged is equal to an annual rate of .30% of the value of the net assets of
the Separate Account for the first ten policy years, and .10% for policy years
thereafter. This charge compensates Lincoln Life for underwriting, issue, and
other administrative expenses incurred in issuing and maintaining the policy
in force. Although most of these expenses are incurred in the first policy
year, the administrative charge is assessed over the life of the policy. This
charge will not increase for the duration of the policy. Lincoln Life does not
anticipate any profit resulting from this charge.
REDUCTION OF CHARGES
The surrender charge set forth in this prospectus may be reduced because of
special circumstances that result in lower sales or administrative expenses.
In particular, the surrender charge will not be deducted on policies issued to
employees and registered representatives of any member of the selling group
and their spouses and minor children, or to officers, directors, trustees or
bona- fide full-time employees of Lincoln National Corp. or The Capital Group,
Inc. or their affiliated or managed companies (based on the owner's status at
the time the policy was purchased). The amounts of any reductions will reflect
the reduced sales and administrative expenses resulting from the special cir-
cumstances. Reductions will not be unfairly discriminatory against any person,
including the affected policyowners and owners of all other policies funded by
the Separate Account.
POLICY BENEFITS
DEATH BENEFIT
The initial death benefit is equal to the specified amount chosen by the own-
er, subject to certain limitations. The minimum specified amount per $1,000 of
premium results from paying the federal maximum premium limitation at issue.
The maximum specified amount per $1,000 of premium results from paying only
the required issue premium (approximately equal to 80% of the federal maximum
premium limitation at issue) for that specified amount.
As long as the policy remains in force (see Policy lapse and reinstatement,
page 11), Lincoln Life will, upon proof of the insured's death, pay the death
benefit proceeds of the policy to the named beneficiary. The proceeds may be
paid in cash or under one or more of the payment options set forth in the pol-
icy. (See Proceeds and payment options, page 12.) The death benefit proceeds
payable will be increased by any unearned cost of insurance charge, and will
be reduced by any outstanding loan and any due and unpaid charges. (See Policy
lapse and reinstatement, page 11.)
The death benefit is the greater of the specified amount of the policy or a
specified percentage of the policy value on or prior to the date of death. The
specified percentage at any time is based on the attained age of the insured
as of the beginning of the policy year.
* The specified percentages are shown in the table below:
<TABLE>
<CAPTION>
Attained Specified Attained Specified Attained Specified
age percentage age percentage age percentage
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
40 OR
YOUNGER 250% 59 134% 91 104%
41 243 60 130 92 103
42 236 61 128 93 102
43 229 62 126 94 101
44 222 63 124 95 OR 100
45 215 64 122 OLDER
46 209 65 120
47 203 66 119
48 197 67 118
49 191 68 117
50 185 69 116
51 178 70 115
52 171 71 113
53 164 72 111
54 157 73 109
55 150 74 107
56 146 75 105
57 142 THROUGH
58 138 90
</TABLE>
EXAMPLES. For this example, assume that the insured is under the age of 40 and
that there is no outstanding policy loan. A policy with a specified amount of
$250,000 will generally pay $250,000 in life insurance death ben-
8
<PAGE>
efits. However, because the life insurance death benefit cannot be less than
250% (the applicable specified percentage) of policy value, any time the pol-
icy value of this policy exceeds $100,000, the life insurance death benefit
will exceed the $250,000 specified amount. If the policy value equals or ex-
ceeds $100,000, each additional dollar added to the policy value will increase
the life insurance death benefit by $2.50. Thus, for a policy with a specified
amount of $250,000 and a policy value of $200,000, the beneficiary will be en-
titled to a life insurance death benefit of $500,000 (250% x $200,000); a pol-
icy value of $300,000 will yield a life insurance death benefit of $750,000
(250% x $300,000); a policy value of $500,000 will yield a life insurance
death benefit of $1,250,000 (250% x $500,000). Similarly, so long as policy
value exceeds $100,000, each dollar taken out of policy value will reduce the
life insurance death benefit by $2.50. If at any time the policy value multi-
plied by the specified percentage is less than the specified amount, the life
insurance death benefit will equal the specified amount of the policy.
The above example describes a scenario which includes favorable investment
performance. In addition, the applicable percentage of 250% that is used is
for ages 40 or younger. Because the applicable percentage decreases as the at-
tained age increases, the impact of the applicable percentage on the death
benefit payment levels will be lessened as the attained age progresses beyond
age 40.
GUARANTEED DEATH BENEFIT
Lincoln Life expects that the issue premium will ordinarily be sufficient,
when combined with the net investment results, to pay for all charges to the
policy and thereby provide life insurance protection on the insured until age
99. In some situations, however, the combination of poor net investment re-
sults and cost of insurance deductions could result in the net cash surrender
value being reduced to zero. In such situations, the owner may make additional
premium payments into the policy, subject to federal limitations, sufficient
to pay for cost of insurance deductions to keep the policy in force. Alterna-
tively, provided that no outstanding loans exist on the policy, the owner may
allow the policy to lapse and take advantage of the guaranteed death benefit
described below. The presence of any outstanding policy loan voids the guaran-
teed death benefit until the loan is repaid.
The guaranteed death benefit provides that Lincoln Life will continue until
the maturity date a death benefit on the life of the insured in an amount
equal to the sum of premiums paid into the policy, provided no outstanding
policy loans exist and provided the policy entered the grace period due to in-
sufficient net cash surrender value and the grace period has expired. No cash
value will be available to the owner of the lapsed policy. Lincoln Life will
provide the death benefit until the insured reaches the attained age of 99,
when all coverage will terminate.
POLICY CHANGES
EXCHANGES OF POLICY. Before the second anniversary the policy may be exchanged
for a new policy of fixed benefit insurance on the insured's life. The new
policy will be any compatible Flexible Premium Adjustable Life policy offered
by Lincoln Life, subject to any conditions normally applicable to the new pol-
icy. It will have the same policy date and be issued at the same rating class
and issue age as this policy. No evidence of insurability will be required.
The net cash surrender value of the new policy will equal that of this policy
on the date of exchange. The surrender charge of the new policy will equal
that of this policy on the date of exchange. On the date of exchange, the
death benefit of the new policy will equal the death benefit of this policy,
or the net amount at risk on the new policy will equal the net amount at risk
on this policy, at the owner's option. If the total premiums paid into this
policy exceed the federal maximum premium limitation of the new policy, the
death benefit of the new policy will be increased (without evidence of insur-
ability) to the minimum death benefit which will allow compliance with that
limitation.
The request for exchange of the policy must be in writing on a form suitable
to Lincoln Life. This policy must be surrendered to Lincoln Life, and be at
the Home Office while the policy is in force. The owner of the new policy must
be the owner of this policy.
The date of exchange will be the first monthly anniversary day on or next fol-
lowing the latest of the date the owner requests the change to be effective,
the date that the request for exchange and the surrendered policy are received
at the Home Office, or the date the cost of exchange or any other amount due
is paid. The policy may also be exchanged after a material change in the in-
vestment policy of any fund or series of a fund. In that event, a notice of
the change of investment policy will be sent to the owner. Within 60 days af-
ter receipt of the notice, or within 60 days after the effective date of the
change, if later, the policy may be exchanged for a new policy of fixed-bene-
fit insurance on the insured's life. The conditions for such exchange and the
specifications for the new policy are the same as those for an exchange of
policy before the second anniversary, as described above.
The exchange of the policy for a new policy may have federal tax implications.
(See Federal tax matters, pages 14-16).
CHANGES IN AMOUNT OF INSURANCE COVERAGE. The owner may request to increase the
specified amount anytime during the first two years or decrease the specified
amount at any time. The specified amount may not be increased after the second
anniversary of the policy. The request for such a change must be from the
owner and in writing on a form suitable to Lincoln Life. Any request for an
increase must be applied for on a supple-
9
<PAGE>
mental application during the first two policy years; other evidence of insur-
ability will not be required for the increase. The total of all requested in-
creases may not exceed the lesser of 10% of the initial specified amount or
$25,000. Any increase will become effective on the first monthly anniversary
day on or next following the date the application for the increase is ap-
proved. All rights to return or exchange the policy will apply anew to the
amount of the increase. Any decrease will become effective on the first
monthly anniversary day
on or next following the day the request is received by Lincoln Life. Any such
decrease will reduce insurance first against insurance provided by the most
recent increase, next against the next most recent increases successively, and
finally against insurance provided under the original application. The speci-
fied amount after any requested decrease may not be less than $10,000.
POLICY VALUE
The policy provides for the accumulation of policy value, which is calculated
as often as the assets of the Separate Account are valued. The policy value
will vary with the investment performance of the General Account and of the
Separate Account, as well as other factors. In particular, policy value also
depends on any premiums received, any policy loans, and any charges and deduc-
tions assessed the policy. The policy has no guaranteed minimum policy value
or net cash surrender value.
On the policy date, the policy value will be the initial net premium, minus
the cost of insurance for the first month.
On each monthly anniversary day, the policy value is equal to the sum of the
following:
a. The policy value on the preceding day;
b. Any increase due to net investment results in the value of the subaccounts
to which the investment amount is allocated;
c. Interest at not less than the rate shown on the policy schedule on any
outstanding loan amount;
d. Any net premiums received since the preceding day.
Minus the sum of the following:
e. Any decrease due to net investment results in the value of the subaccounts
to which the investment amount is allocated;
f. Any amount charged against the investment amount for federal or other gov-
ernmental income taxes;
g. The cost of insurance for the following month.
On any day other than a monthly anniversary day, the policy value is equal to
the sum of the following:
a. The policy value on the preceding day;
b. Any increase due to net investment results in the value of the subaccounts
to which the investment amount is allocated;
c. Interest at not less than the rate shown on the policy schedule on any
outstanding loan amount;
d. Any net premiums received since the preceding day.
Minus the sum of the following:
e. Any decrease due to net investment results in the value of the subaccounts
to which the investment amount is allocated;
f. Any amount charged against the investment amount for federal or other gov-
ernmental income taxes.
The charges and deductions described above are further discussed in Charges
and deductions, page 6.
GROSS INVESTMENT RESULTS. The gross investment results are equal to the change
in the market value of the assets of a fund from the previous valuation day to
the current day, plus the investment income on those assets during the same
period.
NET INVESTMENT RESULTS. When the assets of the Separate Account are valued,
the net investment results will equal the gross investment results minus the
sum of the following:
a. The mortality and expense risk charge;
b. The guaranteed death benefit charge;
c. The administrative charge; and
d. The asset management charges and any miscellaneous fund expenses.
The charges listed above are explained further in Charges against the separate
account, page 7.
The value of the assets in the funds will be taken at their fair market value
in accordance with accepted accounting practices and applicable laws and regu-
lations.
TRANSFER BETWEEN SUBACCOUNTS
Any time after the record date, the owner may request to transfer an amount
from one subaccount to another. The request to transfer funds must be in writ-
ing on a form suitable to Lincoln Life. Transfers may be made by telephone re-
quest only if the owner has previously authorized telephone transfer in writ-
ing on a form suitable to Lincoln Life. Lincoln Life will follow reasonable
procedures to determine that the telephone requester is authorized to request
such transfer, including requiring certain identifying information contained
in the written authorization. If such procedures are followed, Lincoln Life
will not be liable for any loss arising from any telephone transfer. Transfers
will take effect on the date that the request in writing or by telephone is
received at the Home Office of Lincoln Life. The minimum
10
<PAGE>
amount which may be transferred between subaccounts is $100. The maximum num-
ber of transfers allowed in a policy year is twelve.
LOANS
At any time while the policy is in force the owner may make written request
for a loan against the policy. A written loan agreement will be executed be-
tween the owner and Lincoln Life. The policy will be the sole security for the
loan, and the policy must be assigned to Lincoln Life as part of the loan
agreement. Ordinarily, the loan will be processed within seven days from the
date the request for a loan is received at the Home Office of Lincoln Life.
Payments may be postponed under certain circumstances. (See Postponement of
payments, page 13.)
A loan taken from, or secured by, a policy may have federal income tax conse-
quences. In particular, adverse tax consequences may occur if the policy
lapses with outstanding loans. (See Federal tax matters, pages 14-16.)
LOAN AMOUNT. The amount of all outstanding loans with interest may not exceed
the policy value less surrender charge as of the date of the policy loan. If
at any time the total of policy loans plus loan interest equals or exceeds the
policy value less surrender charge, notice will be sent to the last known ad-
dress of the owner, and any assignee of record, and the policy will enter into
the grace period. If sufficient payment is not received within 61 days after
notice is mailed, the policy will lapse and terminate without value. (See Pol-
icy lapse and reinstatement, page 11.) In addition, the presence of any out-
standing policy loan negates the guaranteed death benefit.
LOAN INTEREST. Interest on any loan will be payable annually in arrears at an
annual rate of 6.0%. Any interest not paid when due will be added to the loan
amount and will bear interest at the same policy loan rate.
DEDUCTION OF LOAN AND LOAN INTEREST. The amount of any loan or unpaid loan in-
terest will be deducted from the investment amount and transferred to the Lin-
coln Life General Account, where it will earn interest at the then currently
declared annual rate, which may not be less than the annual rate of 4.0%. The
current annual rate is 6.0%. The amount will remain a part of the policy val-
ue, but will not be increased or decreased by investment results in the Sepa-
rate Account. Therefore, the policy value could be more or less than what it
would have been if the policy loan had not been made, depending on the invest-
ment results in the Separate Account compared to the interest credited to the
assets transferred to the General Account to secure the loan. In this way, a
loan may have a permanent effect upon both the policy value and the death ben-
efit and may increase or decrease the potential for policy lapse. In addition,
outstanding policy loans reduce the death benefit. Ordinarily, the amount of
any loan or unpaid loan interest will be deducted from the subaccounts in pro-
portion to the values of the subaccounts. The deduction may be made by some
other method if the owner requests it, and if such method is acceptable to
Lincoln Life.
LOAN REPAYMENTS. Loan repayments will ordinarily be allocated to the
subaccount in accord with the most recent premium allocation. They may be al-
located by some other method if the owner requests it, and if such method is
acceptable to Lincoln Life. Any loan not repaid at the time of surrender of
the policy, maturity, or death of the insured will be deducted from the amount
otherwise payable.
POLICY LAPSE AND REINSTATEMENT
Insurance coverage under the policy will be continued in force until the net
cash surrender value is insufficient to cover the monthly deductions, except
that the policy will not be continued beyond the maturity date. Lapse will
only occur when the policy value less surrender charges and less outstanding
policy loans is insufficient to cover the cost of insurance deductions and a
grace period expires without a sufficient payment. Insurance coverage will
continue during the grace period, but the policy will be deemed to have no
policy value for purposes of policy loans and surrenders.
A grace period of 61 days will begin on the date Lincoln Life sends a notice
of any shortfall to the last known address of the owner or any assignee. The
owner must, during the grace period, make a payment sufficient to cover the
monthly deductions and any other charges due under the policy until the end of
the grace period. Failure to make a sufficient payment during the grace period
will cause the policy to lapse. Any net cash surrender value will be returned
to the owner. If the insured dies during the grace period, any due and unpaid
monthly deductions will be deducted from the death benefit.
A lapsed policy may be reinstated at any time within five years after the date
of lapse and before the maturity date by submitting evidence of insurability
satisfactory to Lincoln Life and a premium sufficient to keep the policy in
force for two months. The effective date of a reinstatement will be the first
monthly anniversary day on or next following the day the application for rein-
statement is approved.
SURRENDER OF THE POLICY
The owner may surrender the policy at any time during the lifetime of the in-
sured and receive the net cash surrender value. The net cash surrender value
is equal to the policy value minus any surrender charge, minus any outstanding
loan and minus any unpaid loan interest. The request must be made in writing
on a form suitable to Lincoln Life. The request will be effective the date the
request is received in the Home Office of Lincoln Life, or at a later date if
so requested by the owner. Ordinari-
11
<PAGE>
ly, the surrender will be processed within seven days from the date the re-
quest for surrender is received at the Home Office of Lincoln Life. The tax
treatment of a surrendered policy is discussed under Federal tax matters,
pages 14-16.
PROCEEDS AND PAYMENT OPTIONS
PROCEEDS. The amount payable under the policy on the maturity date, on the
surrender of the policy, or upon the death of any insured person is called the
proceeds of the policy.
The proceeds to be paid on the death of the insured will be the death benefit
minus any outstanding policy loan, and minus any unpaid loan interest. The
proceeds to be paid on the surrender of the policy or on the maturity date
will be the net cash surrender value.
Any amount to be paid at the death of the insured or any other termination of
this policy will be paid in one sum unless otherwise provided. Interest will
be paid on this amount from date of death or maturity to date of payment at a
specified rate, not less than that required by law. All or part of the sum of
this amount and such interest credited to date of payment will be applied to
any payment option.
To the extent allowed by law, proceeds are not to be subject to any claims of
a beneficiary's creditors.
PAYMENT OPTIONS. Upon written request, all or part of the proceeds and inter-
est credited thereon may be applied to any payment option available from Lin-
coln Life at the time payment is to be made. Under certain conditions, payment
options will only be available with the consent of Lincoln Life. Such condi-
tions will exist if the proceeds to be settled under any option are $2,500 or
less, or if any installment or interest payment is $25 or less. In addition,
if any payee is a corporation, partnership, association, trustee, or assignee,
approval by Lincoln Life is needed before any proceeds can be applied to a
payment option.
The owner may elect any payment option while the insured is alive and may
change that election if that right has been reserved. When the proceeds become
payable to a beneficiary, the beneficiary may elect any payment option if the
proceeds are available to the beneficiary in one sum.
The option date is any date the policy terminates under the termination provi-
sion.
Any proceeds payable under the policy may also be settled under any other
method of settlement offered by Lincoln Life on the option date. Additional
interest as determined by Lincoln Life may be paid or credited from time to
time in addition to the payments guaranteed under a payment option.
When proceeds become payable under a payment option, a payment contract will
be issued to the payee in exchange for the policy. Such payment contract may
not be assigned. Any change in payment option may be made only if it is pro-
vided for in the payment contract. Under some of the payment options, proceeds
may be withdrawn under such payment option if provided for in the payment con-
tract. The amount to be withdrawn varies by the payment option.
GENERAL PROVISIONS
THE CONTRACT
The entire contract consists of the policy plus the application and any sup-
plemental application, plus any riders, plus any amendments. The policy is is-
sued in consideration of the application and payment of the initial premium.
Only statements in the application and any supplemental applications can be
used to contest the validity of the policy or defend a claim. These statements
are, in the absence of fraud, considered representations and not warranties. A
change in the policy will be binding on Lincoln Life only if the change is in
writing and the change is made by the President, Vice President, Secretary, or
Assistant Secretary of Lincoln Life.
The policy is nonparticipating; it will not share in the profit or surplus
earnings of Lincoln Life.
SUICIDE
If the insured commits suicide, while sane or insane, within two years from
the policy date, the total liability of Lincoln Life under the policy will be
the premiums paid, minus any policy loan, and minus any loan interest due.
If the insured commits suicide, while sane or insane, within two years from
the effective date of any increase in insurance or reinstatement, our total
liability with respect to such increase will be its cost of insurance and
monthly charges.
REPRESENTATIONS AND CONTESTABILITY
All statements made in an application by, or on behalf of, the insured will,
in the absence of fraud, be deemed representations and not warranties. State-
ments may be used to contest a claim or validity of the policy only if these
statements are contained in the application for issue, reissue, or reinstate-
ment, or in any supplemental application, and a copy of that application or
supplemental application is attached to the policy. The policy will not be
contestable after it has been in force for two years during the lifetime of
the insured. Also, any increase in coverage or any reinstatement will not be
contestable after that increase or reinstatement has been in force two years
from its effective date during the lifetime of the insured. Any contest will
then be based only on the application for the increase or reinstatement and
will be subject to the same conditions as for contest of the policy.
12
<PAGE>
INCORRECT AGE OR SEX
If there is an error in the age or sex of the insured, the excess of the death
benefit over the policy value will be adjusted to that which would be pur-
chased by the most recent cost of insurance at the correct age and sex.
CHANGE OF OWNER OR BENEFICIARY
The owner of the policy is the owner identified in the application, or a suc-
cessor. All rights of the owner belong to the owner while the insured is
alive. The rights pass to the estate of the owner if the owner dies before the
insured. The owner may transfer all ownership rights and privileges to a new
owner. The request must be in writing on a form suitable to Lincoln Life. The
change will be effective the day that the request is received in the Home Of-
fice of Lincoln Life. Lincoln Life will not be responsible for any payment or
other action taken before having recorded the transfer. A change of ownership
will not, in and of itself, affect the interest of any beneficiary. A change
of ownership may have tax consequences.
The beneficiary is identified in the application for the policy, and will re-
ceive the proceeds when the insured dies. The beneficiary may be changed by
the owner while the insured is alive, and provided that any prior designation
does not prohibit such a change. A change will revoke any prior designation of
the beneficiary. The request to change beneficiary must be in writing on a
form suitable to Lincoln Life. Lincoln Life reserves the right to require the
policy for endorsement of the change of beneficiary designation.
If not otherwise provided, the interest of any beneficiary who dies before the
insured will pass to any other beneficiaries according to their interest. Fur-
thermore, if no beneficiary survives the insured, the proceeds will be paid in
one sum to the owner, if living. If the owner is not living, the proceeds will
be paid to the owner's estate.
ASSIGNMENT
Any assignment of the policy will not be binding on Lincoln Life unless it is
in writing on a form suitable to Lincoln Life and is received at the Home Of-
fice. Lincoln Life will not be responsible for the validity of any assignment,
and reserves the right to require the policy for endorsement of any assign-
ment. An assignment of the policy may have tax consequences.
REPORTS AND RECORDS
Lincoln Life will maintain all records relating to the Separate Account. Lin-
coln Life will mail to the owner at least once each year a report, without
charge, which will show the current policy value, the current net cash surren-
der value, the current death benefit, any current policy loans, any premiums
paid, any cost of insurance charges deducted, and any withdrawals made. The
report will also include any other data that may be required where the con-
tract is delivered. In addition, Lincoln Life will provide to policyowners
semi-annually, or otherwise as may be required by regulations under the In-
vestment Company Act of 1940, a report containing information about the opera-
tions of the funds.
Lincoln Life has entered into an agreement with Delaware Management Holdings,
Inc., 2005 Market Street, Philadelphia, PA 19203, to provide accounting serv-
ices to the Separate Account.
PROJECTION OF BENEFITS AND VALUES
At the owner's request, Lincoln Life will provide a report to the owner which
shows projected future results. The request must be in writing on a form suit-
able to Lincoln Life. The report will be comparable in format to those shown
in Appendix B and will be based on assumptions in regard to the death benefit
as may be specified by the owner, planned premium payments as may be specified
by the owner, and such other assumptions as are necessary and specified either
by the owner or Lincoln Life. A reasonable fee may be charged for this projec-
tion.
POSTPONEMENT OF PAYMENTS
Payments of any amount payable on surrender, loan, or benefits payable at
death or maturity may be postponed whenever: (i) the New York Stock Exchange
is closed other than customary week-end and holiday closings, or trading on
the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission; (ii) the Commission by order permits postponement for the
protection of owners; or (iii) an emergency exists, as determined by the Com-
mission, as a result of which disposal of securities is not reasonably practi-
cal or it is not reasonably practical to determine the value of the Separate
Account's net assets. Transfers may also be postponed under such circumstanc-
es.
Requests for surrenders or policy loans of policy values attributable to a
premium paid by check may be delayed until such time as the check has cleared
the owner's bank.
ACCELERATED BENEFIT ELECTION RIDER
This rider is available to issue ages 0 through 80 and gives the owner the
right to receive a portion of the death benefit prior to death if the insured
is diagnosed as having an illness which with reasonable medical certainty will
cause death within 12 months. Upon receipt of proof of loss, up to one-half of
the eligible death benefit (as defined in the rider) may be advanced to the
owner in cash as an initial accelerated benefit. A limited amount of subse-
quent accelerated benefit is also available to pay premiums and interest
charges required on the policy. The amount of all advanced accelerated bene-
fits creates an interest-bearing lien against the death benefit otherwise pay-
able at death. There is no cost of insurance for this rider, but an adminis-
trative expense charge is payable upon application for benefits.
13
<PAGE>
The availability of this rider is subject to approval by the State Insurance
Department of the State in which the policy is issued, and is also subject to
the current underwriting and issue procedures in place at the time of the ap-
plication. The underwriting and issue procedures are subject to change without
notice.
DISTRIBUTION OF THE POLICY
Lincoln Life intends to offer the policy in all jurisdictions where it is li-
censed to do business. American Fund Distributors, Inc. (AFD), the principal
underwriter for the policies, is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers (NASD). The principal business address of AFD is 333 S.
Hope Street, 52nd Floor, Los Angeles, California 90071. The principal business
address of Lincoln Life is 1300 South Clinton Street, Fort Wayne, Ind. 46802.
The policy will be sold by individuals who, in addition to being licensed as
life insurance agents for Lincoln Life, are also its registered representa-
tives. The policy will also be sold by properly licensed representatives of
independent broker-dealers which in turn have selling agreements with AFD and
have been appropriately licensed by state insurance departments as agents of
Lincoln Life. These representatives ordinarily receive commissions and service
fees up to 5.5% of all premiums paid, plus .25% of accumulated policy values
in the second policy year and each year thereafter. The broker-dealer or local
agency receives additional compensation on all premiums paid. In some situa-
tions, the broker-dealer or local agency may elect to share its commission
with the registered representative. Selling representatives may also be eligi-
ble for bonuses and non-cash compensation if certain production levels are
reached. All compensation is paid from Lincoln Life's resources, which include
sales charges made under this policy.
FEDERAL TAX MATTERS
The following discussion is intended to provide a general description of the
federal income tax considerations associated with the policy. It does not pur-
port either to be complete or to cover all situations; this discussion is not
intended to be taken as tax advice. Consult a qualified tax advisor for more
complete information. This discussion is based upon Lincoln Life's understand-
ing of the present federal income tax laws as they are currently interpreted
by the Internal Revenue Service. No representation is made as to the likeli-
hood of continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Federal tax laws may change
without notice and as a result the taxable consequences to the insured,
policyowner, or beneficiary may be altered.
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as amended (the Code) in-
cludes a definition of a life insurance contract for Federal tax purposes.
This definition can be satisfied by complying with either of two tests set
forth in section 7702. Although the Secretary of the Treasury (the Treasury)
is authorized to prescribe regulations interpreting the manner in which the
tests under section 7702 are to be applied, such regulations have not been is-
sued. In addition, section 7702 of the Code was amended by imposing certain
modified requirements with respect to the mortality (i.e., cost of insurance)
and other expense charges that are to be used in determining compliance of the
Policies with section 7702. Guidance as to how these modified requirements are
to be applied is extremely limited. If a policy was determined not to be a
life insurance contract for purposes of section 7702, such policy would not
provide most of the tax advantages normally provided by a life insurance poli-
cy.
With respect to a policy entered into before October 21, 1988, although there
are no regulations interpreting the manner in which the tests are under sec-
tion 7702 are to be applied, Lincoln Life believes that such a policy should
meet the definition of a life insurance contract for federal tax purposes.
However, an exchange of a policy entered into before October 21, 1988, or pos-
sibly other changes, might cause such a policy to be treated as entered into
after October 20, 1988, and in such circumstances, the policy would be subject
to modified mortality and other expense charge requirements. Accordingly, the
owner, of a policy entered into before October 21, 1988, should contact a com-
petent tax advisor before exchanging or making any other change, to such a
policy to determine whether the exchange or change would cause the policy to
be treated as entered into after October 20, 1988.
With respect to a policy entered into after October 20, 1988, that is issued
on the basis of a standard rate class or a rate involving a lower mortality
risk (i.e., a preferred or preferred plus basis), while there is some uncer-
tainty due to the limited guidance on the modified section 7702 requirement,
Lincoln Life nonetheless believes that such a policy should meet the section
7702 definition of a life insurance contract. With respect to a policy entered
into after October 20, 1988, that is issued on a substandard basis (i.e., rate
class involving higher than standard mortality risk), there is even more un-
certainty, in particular as to how the modified requirements are to be applied
in determining whether such a policy meets the section 7702 definition of a
life insurance contract. Thus, it is not clear whether or not such a policy
would satisfy section 7702, particularly if the owner pays the full amount of
premiums permitted under the policy. If it is subsequently determined that a
policy does not satisfy section 7702, Lincoln Life will take whatever steps
are appropriate and necessary to cause such a policy to comply with section
7702, includ-
14
<PAGE>
ing possibly refunding any premiums paid that exceed the limitations allowable
under section 7702 (together with interest or other earnings on any such pre-
miums refunded as required by law). For these reasons, Lincoln Life reserves
the right to modify the policy as necessary to qualify it as a life insurance
contract under section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by regula-
tion or otherwise for the investments of the Separate Account to be "ade-
quately diversified" in order for the policy to be treated as a life insurance
contract for federal tax purposes. The Separate Account, through the various
funds in which it invests, intends to comply with the diversification require-
ments prescribed in Treasury Regulations, which affect how each fund's assets
may be invested. Lincoln Life does not have control over the American Variable
Insurance Series or its investments. Nonetheless, Lincoln Life believes that
the funds will be operated in compliance with the requirements prescribed by
the Treasury.
The regulations relating to diversification requirements do not provide guid-
ance concerning the extent to which policyowners may direct their investments
to the subaccounts of a Separate Account. When additional guidance is provid-
ed, the policy may need to be modified to comply with such guidance. It is not
clear what this additional guidance will provide nor whether it will be ap-
plied on a prospective basis only. For these reasons, Lincoln Life reserves
the right to modify the policy as necessary to prevent the owner from being
considered the owner of the assets of the Separate Account or otherwise to
qualify the policy for favorable tax treatment.
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable life contract will not be treated as a life insurance con-
tract for tax purposes if the owner of the contract has excessive control over
the investments underlying the contract. The issuance of such guidelines may
require the company to impose limitations on a contract owner's right to con-
trol the investment. It is not known whether any such guidelines would have a
retroactive effect.
The following discussion assumes that the policy will qualify as a life insur-
ance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
1. IN GENERAL. Lincoln Life believes that the proceeds and cash value in-
creases of a policy should be treated in a manner consistent with a fixed ben-
efit life insurance policy for federal income tax purposes. Thus, the death
benefit under the policy should be excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code.
A change in a policy's specified amount, a change in death benefit option, the
payment of premiums, the addition of additional insurance, a policy loan, a
lapse with outstanding indebtedness, exchange of a policy, or a surrender may
have tax consequences depending upon the circumstances. In addition, federal
estate and generation skipping transfer, and state and local estate inheri-
tance, and other tax consequences of ownership or receipt of policy proceeds
depend upon the circumstances of each owner or beneficiary. A competent tax
advisor should be consulted for further information. Generally, the owner will
not be deemed to be in constructive receipt of the cash value, including in-
crements thereof, under the policy until there is a distribution. The tax con-
sequences of distributions from, and loans taken from or secured by, a policy
depend on whether the policy is classified as a "Modified Endowment Contract"
under section 7702A.
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a Modified Endow-
ment Contract depending upon the amount of premiums paid in relation to the
death benefit provided under such policy. Because of the premium level contem-
plated under the policies, all policies entered into after June 20, 1988 are
or may become modified endowment contracts. In addition, if a policy is "mate-
rially changed," it may be treated as a Modified Endowment Contract depending
upon such relationship after such change. The premium limitation and material
change rules for determining whether a policy is a Modified Endowment Contract
are extremely complex. Moreover, due to the policy's flexibility, classifica-
tion of a policy as a Modified Endowment Contract will depend upon the circum-
stances of each policy. Accordingly, a prospective owner should contact a com-
petent tax advisor before purchasing a policy to determine the circumstances
in which the policy would be a Modified Endowment Contract. In addition, an
owner should contact a competent tax advisor before paying any additional pre-
mium or making any other change to, including an exchange of, a policy to de-
termine whether such premium payment or change would cause the policy to be
treated as a Modified Endowment Contract.
Lincoln Life will monitor premiums paid into each policy after the date of
this prospectus to determine when a premium payment will exceed the 7-pay lim-
itation and cause the policy to become a Modified Endowment Contract. In sim-
plified terms, the 7-pay limitation is satisfied only if the accumulated pre-
miums paid under a policy do not at any time during the first seven policy
years exceed the sum of the equal annual premiums that would have been paid
for a similar policy providing for fully funded benefits at the end of the
seven year period. If the owner has given Lincoln Life instructions that the
policy should not be allowed to become a Modified Endowment Contract, any pre-
miums in excess of the 7-pay limitation will first be applied to reduce any
outstanding loan on the policy, and any further excess will be refunded to the
owner within 7 days. If the owner has not given Lincoln Life instructions to
the contrary, however, the premium will be paid into the policy and a letter
of notification of Modi-
15
<PAGE>
fied Endowment Contract status will be sent to the owner. The letter of noti-
fication will include the available options, if any, for remedying the Modi-
fied Endowment Contract status of the policy.
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Policies classified as modified endowment contracts are subject to the follow-
ing tax rules: First, all distributions, including distributions upon surren-
der and benefits paid at maturity, from such a policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
cash value immediately before the distribution over the investment in the pol-
icy (described below) at such time. Second, loans taken from, or secured by,
such a policy are treated as distributions from such a policy and taxed ac-
cordingly. Third, a 10 percent additional income tax is imposed on the portion
of any distribution from, or loan taken from or secured by, such a policy that
is included in income except where the distribution or loan is made on or af-
ter the owner attains age 59 1/2, is attributable to the owner's becoming dis-
abled, or is part of a series of substantially equal periodic payments for the
life of the owner or the joint lives of the owner and the owner's beneficiary.
Fourth, the cost of insurance for certain riders which are not "qualified ad-
ditional benefits" may be treated as distributions from such a policy and
taxed accordingly.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Distributions from a policy that is not classified as a Modified Endowment
Contract are generally treated as first recovering the investment in the pol-
icy (described below) and then, only after the return of all such investment
in the policy, as distributing taxable income. An exception to this general
rule occurs in the case of a decrease in the specified amount, or any other
change that reduces benefits under the policy in the first 15-years after the
policy is issued and that results in a cash distribution to the owner in order
for the policy to continue complying with the section 7702 definitional lim-
its. In that case, such distribution will be taxed in whole or in part as or-
dinary income (to the extent of any gain in the policy) under rules prescribed
in section 7702.
Loans from, or secured by, a policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as indebted-
ness of the owner.
Upon a complete surrender or lapse of a policy that is not a Modified Endow-
ment Contract, or when benefits are paid at such a policy's maturity date, if
the amount received plus the amount of indebtedness exceeds the total invest-
ment in the policy, the excess will generally be treated as ordinary income
subject to tax.
Finally, neither distributions (including distributions upon surrender or
lapse) nor loans from, or secured by, a policy that is not a Modified Endow-
ment Contract are subject to the 10 percent additional income tax.
5. POLICY LOAN INTEREST. Generally, interest paid on any loan under a policy
which is owned by an individual is not deductible after 1990. In addition, in-
terest on any loan under a policy owned by a taxpayer and covering the life of
any individual who is an officer of or is financially interested in the busi-
ness carried on by that taxpayer will not be tax deductible to the extent the
aggregate amount of such loans with respect to contracts covering such indi-
vidual exceeds $50,000. No amount of policy loan interest is, however, deduct-
ible if the policy was deemed for federal tax purposes to be a single premium
life insurance contract. For interest paid or accrued after October 13, 1996,
additional rules apply which may reduce or eliminate any interest deduction.
The owner should consult a competent tax advisor concerning the rules and lim-
itations.
6. INVESTMENT IN THE POLICY. Investment in the policy means (i) the aggregate
amount of any premiums or other consideration paid for a policy, minus (ii)
the aggregate amount received under the policy which is excluded from the
gross income of the owner (except that the amount of any loan from, or secured
by, a policy that is a Modified Endowment Contract, to the extent such amount
is excluded from gross income, will be disregarded), plus, (iii) the amount of
any loan from, or secured by, a policy that is a Modified Endowment Contract
to the extent that such amount is included in the gross income of the owner.
7. MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by Lin-
coln Life (or its affiliates) to the same owner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in gross income under section 72 (e) of the Code.
8. TAXATION OF ACCELERATED BENEFIT ELECTION RIDER. Lincoln Life believes that
any benefits paid under the Accelerated Benefit Election Rider generally will
be excludable from the recipient's income.
TAXATION OF THE SEPARATE ACCOUNT
Lincoln Life does not initially expect to incur any income tax upon the earn-
ings or the realized capital gains attributable to the Separate Account. Based
upon these expectations, no charge is being made currently to the Separate Ac-
count for federal income taxes which may be attributable to the Separate Ac-
count. If, however, Lincoln Life determines that it may incur such taxes, it
may assess a charge for those taxes from the policy.
VOTING RIGHTS
To the extent required by law, Lincoln Life will vote shares of the funds held
in the Separate Account at regular and special shareholder meetings of the
funds in accordance with instructions received from persons having voting in-
terests in the Separate Account. If, however,
16
<PAGE>
the Investment Company Act of l940 or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a re-
sult Lincoln Life determines that it is permitted to vote the fund shares in
its own right, it may elect to do so.
The number of votes which each policyowner has the right to instruct will be
determined as one vote for each $100 of policy value in each subaccount. Frac-
tional shares will be allocated for amounts less than $100. The number of
votes which the policyowner has the right to instruct will be determined as of
the date coincident with the date established by the various series for deter-
mining shareholders eligible to vote at the meetings of the funds. Voting in-
structions will be solicited by written communications prior to such meeting
in accordance with procedures established by the funds. Lincoln Life will vote
shares of each fund as to which no timely instructions are received in propor-
tion to the voting instructions which are received with respect to all poli-
cies participating in that fund. Each person having a voting interest will re-
ceive proxy material, reports and other materials relating to the appropriate
portfolio.
DISREGARD OF VOTING INSTRUCTIONS. Lincoln Life may, when required by state in-
surance regulatory authorities, disregard voting instructions if the instruc-
tions require that the shares be voted so as to cause a change in the sub-
classification or investment objective of any of the series of a fund or to
approve or disapprove an investment advisory contract for a fund. In addition,
Lincoln Life itself may disregard voting instructions in favor of changes ini-
tiated by a policyowner in the investment policy or the investment advisor of
a fund if Lincoln Life reasonably disapproves of such changes. A change would
be disapproved only if the proposed change is contrary to state law or prohib-
ited by state regulatory authorities or Lincoln Life determined that the
change would have an adverse effect on its General Account in that the pro-
posed investment policy for any fund may result in overly speculative or un-
sound investments. In the event Lincoln Life does disregard voting instruc-
tions, a summary of that action and the reasons for such action will be in-
cluded in the next semiannual report to policyowners.
STATE REGULATION OF
LINCOLN LIFE AND THE
SEPARATE ACCOUNT
Lincoln Life, a stock life insurance company organized under the laws of Indi-
ana, is subject to regulation by the Insurance Department of the State of In-
diana. An annual statement is filed with the Indiana Department of Insurance
(Department) on or before March 1st of each year covering the operations and
reporting on the financial condition of Lincoln Life as of December 31 of the
preceding year. Periodically, the Commissioner of Insurance examines the lia-
bilities and reserves of Lincoln Life and the Separate Account and certifies
their adequacy, and a full examination of Lincoln Life's operations is con-
ducted by the Department at least once every five years.
In addition, Lincoln Life is subject to the insurance laws and regulations of
other states within which it is licensed or may become licensed to operate.
Generally, the insurance department of any other state applies the laws of the
state of domicile in determining permissible investments.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
Lincoln Life holds title to the assets of the Separate Account. The assets are
kept physically segregated and held separate and apart from the General Ac-
count assets. Records are maintained of all purchases and redemptions of fund
shares held by each subaccount. Additional protection is provided in the form
of a blanket fidelity bond which covers directors and employees of Lincoln
Life. The bond, which was issued by Fidelity and Deposit Company of Maryland
covers up to $25,000,000.
The funds do not issue certificates. Thus, Lincoln Life holds the Separate Ac-
count's assets in an open account in lieu of stock certificates.
LEGAL PROCEEDINGS
There are no material legal or administrative proceedings pending or known to
be contemplated, other then ordinary routine litigation incidental to the
business, to which Lincoln Life or the Separate Account are a party or to
which the assets of the Separate Account are subject. The principal underwrit-
er, AFD, is not engaged in any material litigation of any nature.
EXPERTS
The financial statements of the Separate Account and the financial statements
and schedules of Lincoln Life appearing in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports which also appear elsewhere in this document and in the
registration statement. The financial statements and schedules audited by
Ernst & Young LLP have been included in this document in reliance on their re-
ports given on their authority as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Denis G.
Schwartz, FSA as stated in the opinion filed as an exhibit to the registration
statement.
17
<PAGE>
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange Com-
mission, under the Securities Act of l933, as amended, with respect to the pol-
icy offered hereby. This prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the reg-
istration statement, to all of which reference is made for further information
concerning the Separate Account, Lincoln Life and the policy offered hereby.
Statements contained in this prospectus as to the contents of the policy and
other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
18
<PAGE>
APPENDIX A
Executive officers and directors
Lincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and
position(s) with registrant Principal occupations last five years
- -------------------------------------------------------------------------------
<C> <S>
NANCY J. ALFORD Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Company.
- -------------------------------------------------------------------------------
TIMOTHY J. ALFORD Senior Vice President (formerly Vice President
Senior Vice President and Second Vice President), Lincoln National Life
One Reinsurance Place Insurance Co.
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -------------------------------------------------------------------------------
NEAL E. ARNOLD Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
CARL L. BAKER Vice President and Deputy General Counsel
Vice President and (formerly Associate General Counsel); Lincoln
Deputy General Counsel National Life Insurance Co.
- -------------------------------------------------------------------------------
ROLAND C. BAKER President, First Penn-Pacific Life Insurance Co.
Vice President Formerly: Chairman and CEO, Baker, Ralish,
1801 S. Meyers Road Shipley & Politzer, Inc.
Oakbrook Terrace, Ill. 60181
- -------------------------------------------------------------------------------
DAVID N. BECKER Vice President, Lincoln National Life Insurance
Vice President, Co.
Appointed Actuary and
Valuation Actuary
- -------------------------------------------------------------------------------
JOANN E. BECKER Vice President, Lincoln National Life Insurance
Vice President Co. and Lincoln Investment Management Inc.;
200 East Berry Street (formerly President, The Richard Leahy Corp. and
Fort Wayne, Ind. 46802 President, LNC Equity Sales Corp.)
- -------------------------------------------------------------------------------
JOHN M. BEHRENDT Vice President, Lincoln National Life Insurance
Vice President Co. and Lincoln Financial Group, Inc. Formerly:
President, LNC Equity Sales Corp.
- -------------------------------------------------------------------------------
JON A. BOSCIA President and Chief Executive Officer (formerly
President, Director and Chief Operating Officer), Lincoln National Life
Chief Executive Officer Insurance Co. Formerly: President; Executive Vice
President, Lincoln Investment Management Inc.
- -------------------------------------------------------------------------------
CAROLYN P. BRODY Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
STEVEN R. BRODY Senior Vice President (formerly Executive Vice
Vice President President), Lincoln Investment Management Inc.
200 East Berry Street
Fort Wayne, Ind. 46802
- -------------------------------------------------------------------------------
PRISCILLA S. BROWN Vice President, Lincoln National Life Insurance
Vice President Co. (formerly President, LNC Equity Sales
Corporation and Vice President, Lincoln
Investment Management, Inc.)
- -------------------------------------------------------------------------------
HAROLD B. CARSTENSEN, JR. Vice President, Lincoln National Life Insurance
Vice President Co.
- -------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
APPENDIX A CONTINUED
Executive officers and directors
Lincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and
position(s)
with applicant Principal occupations last five years
- -------------------------------------------------------------------------------
<C> <S>
DONALD C. CHAMBERS, M.D. Senior Vice President and Chief Medical Director
Senior Vice President and (formerly Vice President and Chief Medical
Chief Medical Director Director), Lincoln National Life Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -------------------------------------------------------------------------------
THOMAS L. CLAGG Vice President and Associate General Counsel,
Vice President and Lincoln National Life Insurance Co.
Associate General Counsel
- -------------------------------------------------------------------------------
KENNETH J. CLARK Senior Vice President, Lincoln National Life
Senior Vice President Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -------------------------------------------------------------------------------
KELLY D. CLEVENGER Vice President, Lincoln National Life Insurance
Vice President Co.
- -------------------------------------------------------------------------------
MARTHA O. D'AMBROSIO Vice President and General Auditor, Lincoln
Vice President and National Corp. and Lincoln National Life
General Auditor Insurance Co. Formerly: Senior Manager, KPMG Peat
Marwick.
- -------------------------------------------------------------------------------
JEFFREY K. DELLINGER Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
ARTHUR W. DETORE, M.D. Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Co. Formerly:
Vice President, Lincoln National Risk Management,
Inc.
- -------------------------------------------------------------------------------
C. LAWRENCE EDRIS Vice President (formerly Senior Vice President),
Vice President Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
THOMAS W. FITCH Senior Vice President (formerly Vice President,
Vice President First Penn-Pacific Life Insurance Co. and Lincoln
1801 S. Meyers Road National Life Insurance Co.)
Oakbrook Terrace, Ill. 60181
- -------------------------------------------------------------------------------
ELIZABETH A. FREDERICK Vice President (formerly Second Vice President)
Vice President and and Associate General Counsel, Lincoln National
Associate General Counsel Life Insurance Co.
- -------------------------------------------------------------------------------
LUCY D. GASE Vice President and Assistant Secretary (formerly
Vice President and Second Vice President; Assistant Vice President),
Assistant Secretary Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
MELANIE T. HALL Vice President (formerly Second Vice President;
Vice President Assistant Vice President), Lincoln National Life
Insurance Co.
- -------------------------------------------------------------------------------
PHILLIP A. HARTMAN Vice President, Lincoln National Life Insurance
Vice President Co. and Lincoln Financial Group, Inc.
- -------------------------------------------------------------------------------
J. MICHAEL HEMP Senior Vice President, Lincoln National Life
Senior Vice President Insurance Co. and President, LNC Equity Sales
Corporation; Formerly Regional Chief Executive
Officer, Lincoln Dallas RMO.
- -------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
APPENDIX A CONTINUED
Executive officers and directorsLincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and position(s)
with applicant Principal occupations last five years
- -------------------------------------------------------------------------------
<C> <S>
MATTHEW P. HENDERSON Vice President, Lincoln National Life Insurance
Vice President Co. Formerly: Vice President, Lincoln National
Corp.
- -------------------------------------------------------------------------------
DAVID A. HOPPER Senior Vice President (formerly Vice President),
Senior Vice President Lincoln National Life Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -------------------------------------------------------------------------------
JACK D. HUNTER Executive Vice President and General Counsel,
Executive Vice President, Lincoln National Corp. and Lincoln National Life
General Counsel and Director Insurance Co.
200 East Berry Street
Fort Wayne, Ind. 46802
- -------------------------------------------------------------------------------
DONALD E. KELLER Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
LAWRENCE T. KISSKO Vice President (formerly Senior Vice President),
Vice President Lincoln National Investment Management Co.
- -------------------------------------------------------------------------------
Vice President, Lincoln National Life Insurance
MICHAEL C. LA FRENAIS Co. Formerly: Assistant Vice President, Aurora
Vice President Life Assurance Co.
- -------------------------------------------------------------------------------
Senior Vice President, Lincoln National Life
STEPHEN H. LEWIS Insurance Co. Formerly President, First Penn-
Senior Vice President Pacific Life Insurance Co.
- -------------------------------------------------------------------------------
President (formerly Executive Vice President,
H. THOMAS MCMEEKIN Senior Vice President), Lincoln Investment
Director Management Inc.; Executive Vice President
200 East Berry Street (formerly Senior Vice President), Lincoln
Fort Wayne, Ind. 46802 National Corp.
- -------------------------------------------------------------------------------
Vice President (formerly Senior Vice President),
Lincoln National Life Insurance Co. Formerly:
REED P. MILLER Senior Vice President; Vice President, Lincoln
Vice President National Corp.
- -------------------------------------------------------------------------------
OLIVER H. G. NICHOLS Vice President, Lincoln Investment Management
Vice President Inc. Formerly: Vice President, Aetna Life &
200 East Berry Street Casualty Co.
Fort Wayne, Ind. 46802
- -------------------------------------------------------------------------------
DAVID M. ONGMAN Vice President, Lincoln National Life Insurance
Vice President Co. Formerly: Consultant, Computer Horizons
Group; Vice President, The Associated Group;
Consulting Center Manager, James Martin & Co.
- -------------------------------------------------------------------------------
ARTHUR L. PAGE Vice President, Lincoln National Life Insurance
Vice President Co.
- -------------------------------------------------------------------------------
RAYMOND L. PROSSER Vice President and Associate General Counsel,
Vice President and Lincoln National Life Insurance Co. (formerly
Associate General Counsel Second Vice President and Director of Claims),
One Reinsurance Place Lincoln National Life Insurance Co.; Associate
1700 Magnavox Way General Counsel, Lincoln National Corp. and
Fort Wayne, Ind. 46804 Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
APPENDIX A CONTINUED
Executive officers and directors Lincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and position(s)
with applicant Principal occupations last five years
- -------------------------------------------------------------------------------
<C> <S>
Vice President (formerly Second Vice
STEPHEN E. RAHN President), Lincoln National Life
Vice President Insurance Co.
- -------------------------------------------------------------------------------
Chairman, President and Chief
IAN M. ROLLAND Executive Officer, Lincoln National
Director Corp. (formerly Chairman and Chief
200 East Berry Street Executive Officer, President), Lincoln
Fort Wayne, Ind. 46802 National Life Insurance Co.
- -------------------------------------------------------------------------------
ARTHUR S. ROSS Vice President, Lincoln National Life
Vice President Insurance Co. and Lincoln Financial
Group Inc.
- -------------------------------------------------------------------------------
LAWRENCE T. ROWLAND Executive Vice President (formerly
Executive Vice President and Director Senior Vice President and Second Vice
One Reinsurance Place President), Lincoln National Life
1700 Magnavox Way Insurance Co.
Fort Wayne, Ind. 46804
- -------------------------------------------------------------------------------
Vice President, Chief Financial
Officer and Assistant Treasurer
KEITH J. RYAN (formerly Controller, Business
Vice President, Chief Financial Officer Controls Director), Lincoln National
and Assistant Treasurer Life Insurance Co.
- -------------------------------------------------------------------------------
CASEY J. TRUMBLE Vice President, Lincoln National Corp.
Vice President Formerly: tax partner, KPMG Peat
200 East Berry Street Marwick.
Fort Wayne, Ind. 46802
- -------------------------------------------------------------------------------
WILLIAM K. TYLER Senior Vice President, Lincoln
Senior Vice President National Life Insurance Co.
and Assistant Treasurer
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -------------------------------------------------------------------------------
RICHARD C. VAUGHAN Executive Vice President (formerly
Director Senior Vice President) and Chief
200 East Berry Street Financial Officer, Lincoln National
Fort Wayne, Ind. 46802 Corp.
- -------------------------------------------------------------------------------
MICHAEL R. WALKER Vice President, Lincoln National Life
Vice President Insurance Co. Formerly: Vice
President, Employers Health Insurance
Co; Vice President/HR, Baker Hughes,
Inc.
- -------------------------------------------------------------------------------
ROY V. WASHINGTON Vice President (formerly, Associate
Vice President Counsel), Lincoln National Life
Insurance Co. Formerly: Director of
Compliance, Lincoln National
Investment, Inc.; Compliance
Consultant, Lincoln National Corp.
- -------------------------------------------------------------------------------
JANET C. WHITNEY Vice President and Treasurer, Lincoln
Vice President and National Life Insurance Co. Formerly
Treasurer Vice President and General Auditor,
200 East Berry Street Lincoln National Corp. and Lincoln
Fort Wayne, Ind. 46802 National Life Insurance Co.
- -------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
APPENDIX A CONTINUED
Executive officers and directors
Lincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and
position(s)
with applicant Principal occupations last five years
- -------------------------------------------------------------------------------
<C> <S>
C. SUZANNE WOMACK Secretary and Assistant Vice President, Lincoln
Secretary and National Corp. and Lincoln National Life Insurance
Assistant Vice President Co.
200 East Berry Street
Fort Wayne, Ind. 46802
- -------------------------------------------------------------------------------
O. DOUGLAS WORTHINGTON Vice President, Controller and Assistant Treasurer,
Vice President, Controller Lincoln National Life Insurance Co. Formerly Vice
and Assistant Treasurer President, Lincoln Investment Management Inc.
- -------------------------------------------------------------------------------
MICHAEL L. WRIGHT Senior Vice President, Lincoln National Life
Senior Vice President Insurance Co. Formerly: Executive Vice President &
COO, The Associated Group.
- -------------------------------------------------------------------------------
KATHERINE K. WYSS Vice President (formerly Second Vice President),
Vice President Lincoln National Life Insurance Co.
- -------------------------------------------------------------------------------
</TABLE>
* The principal business address of each person listed, unless otherwise indi-
cated, is 1300 South Clinton Street, P.O. Box 1110, Fort Wayne, Ind. 46801.
23
<PAGE>
APPENDIX B
Illustrations of policy values
The following tables have been prepared to help show how values under the pol-
icy change with investment performance. The tables show death benefits, policy
values, and net cash surrender values for each of the first 10 policy years,
and for every five year period thereafter through the thirtieth policy year,
assuming that the return on the assets invested in the account were a uniform,
gross, after tax, annual rate of 0%, 6%, and 12%. The actual death benefits and
net cash surrender values would be different from those shown if a different
classification was used or if the returns averaged 0%, 6%, and 12% but fluctu-
ated over and under those averages throughout the years.
The death benefits and net cash surrender values shown on pages using current
charges are approximately those likely to be provided under the policy for the
investment returns indicated, assuming that the current cost of insurance
charges are deducted. Although the contract allows for maximum cost of insur-
ance charges specified in the l980 Commissioners Standard Ordinary Mortality
Table, Lincoln Life expects that it will continue to charge the current cost of
insurance charges for the indefinite future. The figures shown on pages using
guaranteed maximum charges show the death benefits and net cash surrender val-
ues which would result if the guaranteed maximum cost of insurance charges were
deducted. However, these are primarily of interest only to show by comparison
the benefits of the lower current cost of insurance charges.
In each of the illustrations an assumed gross investment result is indicated.
The gross investment results used in the illustrations are then reduced by the
asset management charge (current average .51%), the mortality and expense risk
charge (.85% for the first 10 policy years and .75% thereafter), the adminis-
trative charge (.30% for the first 10 policy years and .10% thereafter), the
guaranteed death benefit charge (.10% for the first 10 policy years and 0%
thereafter), and other expenses incurred by the funds including printing, mail-
ing, Directors' fees, etc. (current average .03%) so that the actual numbers in
the illustrations are net of expenses.
24
<PAGE>
AMERICAN LEGACY LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 35
$132,250 specified amount
$25,000 initial premium using current preferred charges
<TABLE>
<CAPTION>
Death benefit Policy value Net cash surrender value
---------------------------- ---------------------------- ---------------------------
Premiums assuming hypothetical
accumulated assuming hypothetical gross assuming hypothetical gross gross
End of at 5% annual investment return of annual investment return of annual investment return of
policy interest ---------------------------- ---------------------------- ---------------------------
year per year 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $26,250 $132,250 $132,250 $132,250 $24,341 $25,808 $ 27,275 $22,091 $23,558 $ 25,025
2 27,563 132,250 132,250 132,250 23,680 26,638 29,770 21,555 24,513 27,645
3 28,941 132,250 132,250 132,250 23,016 27,491 32,508 21,016 25,491 30,508
4 30,388 132,250 132,250 132,250 22,336 28,356 35,502 20,586 26,606 33,752
5 31,907 132,250 132,250 132,250 21,640 29,234 38,780 20,140 27,734 37,280
- ---------------------------------------------------------------------------------------------------------
6 33,502 132,250 132,250 132,250 20,929 30,125 42,372 19,679 28,875 41,122
7 35,178 132,250 132,250 132,250 20,202 31,031 46,315 19,202 30,031 45,315
8 36,936 132,250 132,250 132,250 19,458 31,952 50,644 18,708 31,202 49,894
9 38,783 132,250 132,250 132,250 18,699 32,890 55,404 18,199 32,390 54,904
10 40,722 132,250 132,250 134,600 17,909 33,835 60,631 17,659 33,585 60,381
- ---------------------------------------------------------------------------------------------------------
15 51,973 132,250 132,250 185,406 13,798 39,495 97,071 13,798 39,495 97,071
20 66,332 132,250 132,250 243,724 8,242 45,372 155,238 8,242 45,372 155,238
25 84,659 132,250 132,250 333,731 375 51,134 249,053 375 51,134 249,053
30 108,049 * 0 132,250 488,333 * 0 56,109 400,273 * 0 56,109 400,273
</TABLE>
The hypothetical rates of return shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or fu-
ture investment rates of return. Actual rates of return may be more or less
than those shown. The death benefits and cash value for a contract would be
different from those shown if the actual gross investment return averaged
0.00%, 6.00% and 12.00% over a period of years, but also fluctuated above or
below those averages for individual contract years. No representations can be
made by Lincoln Life or any of the funds that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time. All
values are net of the following charges: administration = .30% first 10 years,
then .10%; asset management = .51% (current average) all years; guaranteed
death benefit = .10% first 10 years only; mortality and expense risk = .85%
first 10 years, then .75%; and miscellaneous expense = .03% all years. Values
illustrated are also net of cost of insurance charges.
*Please refer to the Guaranteed Minimum Death Benefit provision.
25
<PAGE>
AMERICAN LEGACY LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 35
$132,250 specified amount
$25,000 initial premium using current standard charges
<TABLE>
<CAPTION>
Death benefit Policy value Net cash surrender value
---------------------------- ---------------------------- ---------------------------
Premiums assuming hypothetical
accumulated assuming hypothetical gross assuming hypothetical gross gross
End of at 5% annual investment return of annual investment return of annual investment return of
policy interest ---------------------------- ---------------------------- ---------------------------
year per year 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $26,250 $132,250 $132,250 $132,250 $24,328 $25,795 $ 27,262 $22,078 $23,545 $ 25,012
2 27,563 132,250 132,250 132,250 23,654 26,611 29,742 21,529 24,486 27,617
3 28,941 132,250 132,250 132,250 22,978 27,451 32,464 20,978 25,451 30,464
4 30,388 132,250 132,250 132,250 22,286 28,301 35,441 20,536 26,551 33,691
5 31,907 132,250 132,250 132,250 21,578 29,163 38,701 20,078 27,663 37,201
- ---------------------------------------------------------------------------------------------------------
6 33,502 132,250 132,250 132,250 20,854 30,039 42,274 19,604 28,789 41,024
7 35,178 132,250 132,250 132,250 20,115 30,928 46,195 19,115 29,928 45,195
8 36,936 132,250 132,250 132,250 19,359 31,833 50,502 18,609 31,083 49,752
9 38,783 132,250 132,250 132,250 18,574 32,741 55,226 18,074 32,241 54,726
10 40,722 132,250 132,250 134,123 17,759 33,654 60,416 17,509 33,404 60,166
- ---------------------------------------------------------------------------------------------------------
15 51,973 132,250 132,250 184,457 13,477 39,097 96,574 13,477 39,097 96,574
20 66,332 132,250 132,250 242,105 7,656 44,627 154,207 7,656 44,627 154,207
25 84,659 * 0 132,250 330,714 * 0 49,570 246,801 * 0 49,570 246,801
30 108,049 * 0 132,250 482,422 * 0 52,824 395,428 * 0 52,824 395,428
</TABLE>
The hypothetical rates of return shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or fu-
ture investment rates of return. Actual rates of return may be more or less
than those shown. The death benefits and cash value for a contract would be
different from those shown if the actual gross investment return averaged
0.00%, 6.00% and 12.00% over a period of years, but also fluctuated above or
below those averages for individual contract years. No representations can be
made by Lincoln Life or any of the funds that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time. All
values are net of the following charges: administration = .30% first 10 years,
then .10%; asset management = .51% (current average) all years; guaranteed
death benefit = .10% first 10 years only; mortality and expense risk = .85%
first 10 years, then .75%; and miscellaneous expense = .03% all years. Values
illustrated are also net of cost of insurance charges.
*Please refer to the Guaranteed Minimum Death Benefit provision.
26
<PAGE>
AMERICAN LEGACY LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 35
$132,250 specified amount
$25,000 initial premium using guaranteed charges
<TABLE>
<CAPTION>
Death benefit Policy value Net cash surrender value
Premiums --------------------------- --------------------------- ---------------------------
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of at 5% annual investment return of annual investment return of annual investment return of
policy interest --------------------------- --------------------------- ---------------------------
year per year 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $132,250 $132,250 $132,250 $24,327 $25,794 $ 27,261 $22,077 $23,544 $ 25,011
2 27,563 132,250 132,250 132,250 23,650 26,607 29,738 21,525 24,482 27,613
3 28,941 132,250 132,250 132,250 22,964 27,436 32,450 20,964 25,436 30,450
4 30,388 132,250 132,250 132,250 22,268 28,282 35,421 20,518 26,532 33,671
5 31,907 132,250 132,250 132,250 21,558 29,141 38,677 20,058 27,641 37,177
- -------------------------------------------------------------------------------------------------------
6 33,502 132,250 132,250 132,250 20,831 30,013 42,244 19,581 28,763 40,994
7 35,178 132,250 132,250 132,250 20,086 30,895 46,157 19,086 29,895 45,157
8 36,936 132,250 132,250 132,250 19,318 31,786 50,450 18,568 31,036 49,700
9 38,783 132,250 132,250 132,250 18,527 32,687 55,164 18,027 32,187 54,664
10 40,722 132,250 132,250 133,963 17,708 33,593 60,344 17,458 33,343 60,094
- -------------------------------------------------------------------------------------------------------
15 51,973 132,250 132,250 184,181 13,393 38,987 96,430 13,393 38,987 96,430
20 66,332 132,250 132,250 241,706 7,550 44,461 153,953 7,550 44,461 153,953
25 84,659 * 0 132,250 330,125 * 0 49,317 246,362 * 0 49,317 246,362
30 108,049 * 0 132,250 481,519 * 0 52,441 394,688 * 0 52,441 394,688
</TABLE>
The hypothetical rates of return shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or fu-
ture investment rates of return. Actual rates of return may be more or less
than those shown. The death benefits and cash value for a contract would be
different from those shown if the actual gross investment return averaged
0.00%, 6.00% and 12.00% over a period of years, but also fluctuated above or
below those averages for individual contract years. No representations can be
made by Lincoln Life or any of the funds that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time. All
values are net of the following charges: administration = .30% first 10 years,
then .10%; asset management = .51% (current average) all years; guaranteed
death benefit = .10% first 10 years only; mortality and expense risk = .85%
first 10 years, then .75%; and miscellaneous expense = .03% all years. Values
illustrated are also net of cost of insurance charges.
*Please refer to the Guaranteed Minimum Death Benefit provision.
27
<PAGE>
AMERICAN LEGACY LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55 $62,500 specified amount $25,000 initial premium using
current preferred charges
<TABLE>
<CAPTION>
Death benefit Policy value Net cash surrender value
Premiums --------------------------- --------------------------- -----------------------------
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of at 5% annual investment return of annual investment return of annual investment return of
policy interest --------------------------- --------------------------- -----------------------------
year per year 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross 0% gross 6%gross 12% gross
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $62,500 $62,500 $ 62,500 $24,181 $25,649 $ 27,116 $ 21,931 $ 23,399 $ 24,866
2 27,563 62,500 62,500 62,500 23,337 26,300 29,438 21,212 24,175 27,313
3 28,941 62,500 62,500 62,500 22,465 26,954 31,991 20,465 24,954 29,991
4 30,388 62,500 62,500 62,500 21,561 27,609 34,804 19,811 25,859 33,054
5 31,907 62,500 62,500 62,500 20,617 28,261 37,909 19,117 26,761 36,409
- ---------------------------------------------------------------------------------------------------------
6 33,502 62,500 62,500 62,500 19,631 28,912 41,345 18,381 27,662 40,095
7 35,178 62,500 62,500 62,500 18,591 29,556 45,155 17,591 28,556 44,155
8 36,936 62,500 62,500 62,500 17,490 30,188 49,391 16,740 29,438 48,641
9 38,783 62,500 62,500 67,063 16,312 30,803 54,083 15,812 30,303 53,583
10 40,722 62,500 62,500 72,258 15,055 31,402 59,228 14,805 31,152 58,978
- ---------------------------------------------------------------------------------------------------------
15 51,973 62,500 62,500 110,273 7,300 34,778 95,063 7,300 34,778 95,063
20 66,332 * 0 62,500 163,656 * 0 37,378 152,950 * 0 37,378 152,950
25 84,659 * 0 62,500 259,852 * 0 37,420 247,478 * 0 37,420 247,478
30 108,049 * 0 62,500 416,859 * 0 30,849 397,009 * 0 30,849 397,009
</TABLE>
The hypothetical rates of return shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown. the death benefits and cash value for a contract would be
different from those shown if the actual gross investment return averaged 0.00%,
6.00% and 12.00% over a period of years, but also fluctuated above or below
those averages for individual contract years. No representations can be made by
Lincoln Life or any of the funds that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time. All values are
net of the following charges: administration = .30% first 10 years, then .10%;
asset management = .51% (current average) all years; guaranteed death benefit =
.10% first 10 years only; mortality and expense risk = .85% first 10 years, then
.75%; and miscellaneous expense = .03% all years. Values illustrated are also
net of cost of insurance charges.
*Please refer to the Guaranteed Minimum Death Benefit provision.
28
<PAGE>
AMERICAN LEGACY LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55
$62,500 specified amount
$25,000 initial premium using current standard charges
<TABLE>
<CAPTION>
Death benefit Policy value Net cash surrender value
--------------------------- --------------------------- ---------------------------
Premiums assuming hypothetical assuming hypothetical assuming hypothetical
accumulated gross gross gross
End of at 5% annual investment return of annual investment return of annual investment return of
policy interest --------------------------- --------------------------- ---------------------------
year per year 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $62,500 $62,500 $ 62,500 $24,150 $25,617 $ 27,084 $21,900 $23,367 $ 24,834
2 27,563 62,500 62,500 62,500 23,269 26,230 29,367 21,144 24,105 27,242
3 28,941 62,500 62,500 62,500 22,351 26,837 31,872 20,351 24,837 29,872
4 30,388 62,500 62,500 62,500 21,389 27,433 34,627 19,639 25,683 32,877
5 31,907 62,500 62,500 62,500 20,381 28,020 37,667 18,881 26,520 36,167
- -------------------------------------------------------------------------------------------------------
6 33,502 62,500 62,500 62,500 19,314 28,590 41,028 18,064 27,340 39,778
7 35,178 62,500 62,500 62,500 18,187 29,144 44,758 17,187 28,144 43,758
8 36,936 62,500 62,500 62,500 16,978 29,671 48,907 16,228 28,921 48,157
9 38,783 62,500 62,500 66,356 15,674 30,162 53,513 15,174 29,662 53,013
10 40,722 62,500 62,500 71,446 14,261 30,613 58,562 14,011 30,363 58,312
- -------------------------------------------------------------------------------------------------------
15 51,973 62,500 62,500 108,596 5,195 32,812 93,617 5,195 32,812 93,617
20 66,332 * 0 62,500 160,436 * 0 32,742 149,940 * 0 32,742 149,940
25 84,659 * 0 62,500 254,031 * 0 26,759 241,934 * 0 26,759 241,934
30 108,049 * 0 62,500 406,440 * 0 4,776 387,086 * 0 4,776 387,086
</TABLE>
The hypothetical rates of return shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or fu-
ture investment rates of return. Actual rates of return may be more or less
than those shown. The death benefits and cash value for a contract would be
different from those shown if the actual gross investment return averaged
0.00%, 6.00% and 12.00% over a period of years, but also fluctuated above or
below those averages for individual contract years. No representations can be
made by Lincoln Life or any of the funds that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time. All
values are net of the following charges: administration = .30% first 10 years,
then .10%; asset management = .51% (current average) all years; guaranteed
death benefit = .10% first 10 years only; mortality and expense risk = .85%
first 10 years, then .75%; and miscellaneous expense = .03% all years. Values
illustrated are also net of cost of insurance charges.
*Please refer to the Guaranteed Minimum Death Benefit provision.
29
<PAGE>
AMERICAN LEGACY LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55
$62,500 specified amount
$25,000 initial premium using guaranteed charges
<TABLE>
<CAPTION>
Death benefit Policy value Net cash surrender value
Premiums --------------------------- --------------------------- ---------------------------
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of at 5% annual investment return of annual investment return of annual investment return of
policy interest --------------------------- --------------------------- ---------------------------
year per year 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $62,500 $62,500 $ 62,500 $24,148 $25,615 $ 27,082 $21,898 $23,365 $ 24,832
2 27,563 62,500 62,500 62,500 23,263 26,224 29,361 21,138 24,099 27,236
3 28,941 62,500 62,500 62,500 22,342 26,828 31,863 20,342 24,828 29,863
4 30,388 62,500 62,500 62,500 21,379 27,423 34,616 19,629 25,673 32,866
5 31,907 62,500 62,500 62,500 20,368 28,007 37,653 18,868 26,507 36,153
- -------------------------------------------------------------------------------------------------------
6 33,502 62,500 62,500 62,500 19,301 28,575 41,012 18,051 27,325 39,762
7 35,178 62,500 62,500 62,500 18,168 29,124 44,737 17,168 28,124 43,737
8 36,936 62,500 62,500 62,500 16,955 29,646 48,882 16,205 28,896 48,132
9 38,783 62,500 62,500 66,321 15,648 30,134 53,485 15,148 29,634 52,985
10 40,722 62,500 62,500 71,407 14,233 30,582 58,531 13,983 30,332 58,281
- -------------------------------------------------------------------------------------------------------
15 51,973 62,500 62,500 108,522 5,121 32,736 93,554 5,121 32,736 93,554
20 66,332 * 0 62,500 160,306 * 0 32,572 149,819 * 0 32,572 149,819
25 84,659 * 0 62,500 253,728 * 0 26,100 241,646 * 0 26,100 241,646
30 108,049 * 0 62,500 405,112 * 0 300 385,821 * 0 300 385,821
</TABLE>
The hypothetical rates of return shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or fu-
ture investment rates of return. Actual rates of return may be more or less
than those shown. The death benefits and cash value for a contract would be
different from those shown if the actual gross investment return averaged
0.00%, 6.00% and 12.00% over a period of years, but also fluctuated above or
below those averages for individual contract years. No representations can be
made by Lincoln Life or any of the funds that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time. All
values are net of the following charges: administration = .30% first 10 years,
then .10%; asset management = .51% (current average) all years; guaranteed
death benefit = .10% first 10 years only; mortality and expense risk = .85%
first 10 years, then .75%; and miscellaneous expense = .03% all years. Values
illustrated are also net of cost of insurance charges.
*Please refer to the Guaranteed Minimum Death Benefit provision.
30
<PAGE>
APPENDIX C
Definitions for Separate Account F
Age -- The age at the insured's last birthday on the policy date.
Attained age -- The age of the insured on the policy anniversary on or next
preceding any monthly anniversary day.
Beneficiary -- The beneficiary is designated by the owner in the application.
If changed, the beneficiary is as shown in the latest change filed with Lin-
coln Life. If no beneficiary survives the insured, the owner or the owner's
estate will receive the benefit.
Free look period -- The period of time in which the owner may cancel the pol-
icy and receive a refund. The owner may cancel the policy within 10 days of
receipt, or 45 days after Part 1 of the application is signed, or within 10
days after mailing or personal delivery of the Notice of Withdrawal Right.
Fund -- Any of the funds in which the Separate Account may invest; currently,
the American Variable Insurance Series is available.
General account -- The assets of Lincoln Life other than those allocated to
the Separate Account or any other Separate Account.
Gross investment results -- The gross investment results are equal to the
change in the market value of the assets of a fund from the previous valuation
day to the current day, plus the investment income on those assets during the
same period.
Guaranteed death benefit -- The death benefit protection provided by Lincoln
Life on the life of the insured if net cash surrender value has been reduced
to zero and if there are no outstanding policy loans.
Insured -- The person upon whose life the policy is issued, and who is so
named on the Policy Schedule.
Investment amount -- The portion of the policy value invested in the Separate
Account, and equal in amount to the policy value minus any outstanding loans.
Issue premium -- The total premium required to be paid to issue the policy.
Lincoln Life (we, our, us)--Lincoln National Life Insurance Co.
Maturity date -- The policy anniversary following the insured's 99th birthday,
if living. It is the last date insurance coverage can remain in force and the
date any remaining net cash surrender value will be payable.
Monthly anniversary day -- The same date in each month as the policy date.
Net cash surrender value -- The amount payable to the owner upon surrender of
the policy. It is equal to the policy value minus any surrender charge, minus
any outstanding loan and minus any unpaid loan interest.
Net investment results -- The gross investment results of a fund minus the as-
set management charges and any miscellaneous fund expenses, and the mortality
and expense risk charge, minus guaranteed death benefit charge, and minus the
administrative charge.
Option date -- Any date the policy terminates under the termination provision.
Owner (you, your) -- The person so designated in the application or as subse-
quently changed. If a policy has been absolutely assigned, the assignee is the
owner. A collateral assignee is not the owner.
Planned periodic premium -- A scheduled premium of a level amount at a fixed
interval over a specified period of time.
Policy -- The Flexible Premium Variable Life Insurance policy offered by Lin-
coln Life and described in this prospectus.
Policy date -- The date set forth in the policy that is used to determine pol-
icy years and policy months. Policy anniversaries are measured from the policy
date. The policy date is ordinarily the earlier of the date the full initial
premium is received from the owner or the date on which the policy is approved
for issue.
Policy value -- The sum of all values in the Separate Account and in the Gen-
eral Account at any time, irrespective of outstanding loans or surrender
charge.
Proceeds -- The amount payable on the maturity date, or on surrender of the
policy, or after the death of any insured person. The proceeds will be differ-
ent on each of these events.
Record date -- The date the policy is recorded on the books of Lincoln Life as
an in-force policy. Ordinarily, the policy will be recorded as in-force within
three business days after the later of the date we receive the last outstand-
ing requirement or the date of underwriting approval. The record date controls
the timing of the transfer of initial assets from the Cash Management Fund to
the various subaccounts.
Separate Account -- The Lincoln National Flexible Premium Variable Life Ac-
count F, a Separate Account established by Lincoln Life to receive and invest
net premiums paid under the policy.
Series -- Any of the series in which the Separate Account may invest; current-
ly, the sole series is American Variable Insurance Series.
Specified amount -- The minimum death benefit payable under the policy so long
as the policy remains in force. The death benefit proceeds will be reduced by
any outstanding loan and any due and unpaid charges, and increased by any un-
earned loan interest.
31
<PAGE>
Subaccount -- A subdivision of the Separate Account. Each subaccount invests
exclusively in the shares of a specified fund.
Surrender charge -- A charge deducted from policy value upon surrender of the
policy.
Unit -- An accounting unit of measure used to calculate the value of an invest-
ment in a specified subaccount.
Unit value -- The dollar value of a unit in a specified subaccount on a speci-
fied valuation date.
32
