<PAGE> 1
As filed with the Securities and Exchange Commission on May 1, 1996
Registration No. 33-76434
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 4 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
(Exact name of Trust)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Name of depositor)
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, IN 46801
(Complete address of depositor's principal executive offices)
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Name and complete address
of agent for service: Copy to:
Carl L. Baker, Esquire Roy V. Washington, Esquire
Vice President & Associate Counsel
Deputy General Counsel The Lincoln National
The Lincoln National Life Insurance Company
Life Insurance Company 1300 South Clinton Street
1300 South Clinton Street P.O. Box 1110
P.O. Box 1110 Fort Wayne, Indiana 46801
Fort Wayne, IN 46801
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Flexible Premium Variable Life Insurance Policies--Registration of
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The 24f-2 Notice for the trusts most recent fiscal year,
1995, was filed with the Securities and Exhange Commission on February 27,
1996.
It is proposed that this filing will become effective on April 30, 1996
pursuant to paragraph (b) of Rule 485.
This filing is made pursuant to Rule 6c-3 and Rule 6e-3(T), as amended,
under the Investment Company Act of 1940.
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
FOR LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ----------------------------------------------------------------
1 Cover Page
2 Cover Page
3 Not applicable
4 Distribution of the Policy
5 Lincoln Life, The General Account and The Separate Account
6 The Separate Account
7 Not applicable
8 Not applicable
9 Legal Proceedings
10 Summary; The Policy; The Separate Account; The American Variable
Insurance Series; Charges and Deductions; Policy Benefits; Voting
Rights; General Provisions
11 Summary; The American Variable Insurance Series
12 Summary; The American Variable Insurance Series
13 Summary; Charges and Deductions; The American Variable Insurance
Series
14 Summary; Requirements for Issuance of Policy
15 Premium Payment and Allocation of Premiums
16 Premium Payment and Allocation of Premiums; The American Variable
Insurance Series
17 Summary; Charges and Deductions; Policy Benefits; The American
Variable Insurance Series
18 Premium Payment and Allocation of Premiums; The American Variable
Insurance Series
19 General Provisions; Voting Rights
20 Not Applicable
21 Policy Benefits; General Provisions
22 Not applicable
23 Safekeeping of the Account Assets
24 General Provisions
25 The American Variable Insurance Series
26 Not Applicable
27 The American Variable Insurance Series
28 Executive Officers and Directors of The Lincoln National Life
Insurance Co.
29 Lincoln Life, The General Account, and The Separate Account
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
<PAGE> 3
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- -----------------------------------------------------------------
34 Not applicable
35 The Policy
36 Not applicable
37 Not applicable
38 Summary; Distribution of the Policy
39 Summary; Distribution of the Policy
40 Not applicable
41 Distribution of the Policy
42 Not applicable
43 Not applicable
44 Charges and Deductions
45 Not applicable
46 Policy Benefits
47 The American Variable Insurance Series
48 Not applicable
49 Not applicable
50 Not applicable
51 Cover Page; Summary; Charges and Deductions; Policy Benefits;
The Policy
52 The American Variable Insurance Series
53 Federal Tax Matters
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Not applicable
<PAGE> 4
AMERICAN LEGACY VARIABLE LIFE
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
issued by:
Lincoln National Life Insurance Co.
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, Indiana 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 specified amount of $50,000
or more. Subject to the payment of a minimum premium for the first policy year,
an owner may, subject to certain restrictions, vary the frequency and amount of
premium payments. The level of life insurance benefits payable under the policy
may also be increased or decreased subject to certain restrictions.
An owner may choose to allocate amounts either to the General Account of
Lincoln Life (General Account) or to the Lincoln Life Flexible Premium Variable
Life Account J (Separate Account). Amounts allocated to the Separate Account
may be invested in the American Variable Insurance Series, which has eight
funds available:
- - 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
investment experience of the chosen subaccounts of the Separate Account and
interest credited to the policy by 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
explained under the heading "Charges and deductions" on page 8.
It may not be advantageous to purchase a policy as: (1) a replacement for
another type of life insurance; or, (2) to obtain additional insurance
protection if the purchaser already owns another flexible premium variable life
insurance policy.
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, 1996.
<PAGE> 5
TABLE OF CONTENTS
PAGE
- -----------------------------------------------------
SUMMARY OF THE POLICY 3
- -----------------------------------------------------
LINCOLN LIFE, THE GENERAL ACCOUNT,
AND THE SEPARATE ACCOUNT
Lincoln Life 5
The General Account 5
The Separate Account 5
The investment advisor 6
Addition, deletion or substitution of investments 6
- -----------------------------------------------------
THE POLICY
Requirements for issuance of a policy 6
Premium payment and allocation of premiums 6
Dollar Cost Averaging Program 8
Effective date 8
Right to examine policy 8
Policy termination 8
- -----------------------------------------------------
CHARGES AND DEDUCTIONS
Percent of premium charge 8
Contingent Deferred Sales Charge 9
Contingent Deferred Administrative Charge 9
Surrender charge 9
Monthly deductions 9
Cost of insurance charges 9
Monthly charge 10
Asset management charge 10
Mortality and expense risk charge 11
Other charges 11
Reduction of charges 11
Exchange of Lincoln Life
Universal Life policies 11
Term conversion credits 11
- -----------------------------------------------------
POLICY BENEFITS
Death benefit and death benefit types 12
Death benefit guarantee 13
Policy changes 13
Policy value 13
Transfer between subaccounts 14
Transfer to and from the General Account 14
Loans 14
Withdrawals 15
Policy lapse and reinstatement 15
Surrender of the policy 16
Proceeds and payment options 16
- -----------------------------------------------------
GENERAL PROVISIONS
The Contract 16
Suicide 17
Representations and contestability 17
Incorrect age or sex 17
Change of owner or beneficiary 17
Assignment 17
Reports and records 17
Projection of benefits and values 17
Postponement of payments 17
Riders 18
- -----------------------------------------------------
DISTRIBUTION OF THE POLICY 19
- -----------------------------------------------------
FEDERAL TAX MATTERS
Tax status of the policy 19
Tax treatment of policy benefits 20
Taxation of the Separate Account 21
- -----------------------------------------------------
VOTING RIGHTS 22
- -----------------------------------------------------
STATE REGULATION OF LINCOLN LIFE
AND THE SEPARATE ACCOUNT 22
- -----------------------------------------------------
SAFEKEEPING OF THE ACCOUNT'S ASSETS 22
- -----------------------------------------------------
LEGAL PROCEEDINGS 22
- -----------------------------------------------------
EXPERTS 22
- -----------------------------------------------------
ADDITIONAL INFORMATION 23
- -----------------------------------------------------
APPENDIX A: Table of base minimum premiums 24
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APPENDIX B: Table of surrender charges 26
- -----------------------------------------------------
APPENDIX C: Executive Officers & Directors
of Lincoln National Life
Insurance Co. 28
- -----------------------------------------------------
APPENDIX D: Illustrations of policy values 33
- -----------------------------------------------------
APPENDIX E: Definitions 42
- -----------------------------------------------------
FINANCIAL STATEMENTS 44
2
<PAGE> 6
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
entirely qualified by more specific information contained elsewhere in this
prospectus. For the definition of terms used in this prospectus, see Appendix
E. 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, withdrawal rights, and surrender privileges; and (3) the payment of
the net cash surrender 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.
The policy contains two types of death benefit coverage. If you choose Type 1,
the death benefit is the greater of the specified amount of the policy or a
specified percentage of policy value. If you choose Type 2, the death benefit
is the greater of the specified amount of the policy plus the policy value or a
specified percentage of policy value. So long as your policy remains in force,
the minimum death benefit payable under either option will be the current
specified amount, reduced by any outstanding loan and any due and unpaid
charges, and increased by any unearned loan interest. (See Death benefit and
death benefit types, p. 12.)
You also have significant flexibility to adjust the death benefit prior to the
maturity date by increasing or decreasing the specified amount of the policy.
Any increase in the specified amount will require additional evidence of
insurability satisfactory to us and will result in additional charges. Any
voluntary decrease during the first 8 years of the policy or during the 8 years
following an increase in the specified amount will result in partial surrender
charges.
HOW ARE THE PREMIUMS FLEXIBLE?
You have considerable flexibility concerning the amount and frequency of
premium payments. During the first three policy years, your policy will lapse
unless either the total of all premiums paid (minus any partial withdrawals and
minus any outstanding loans) is at all times at least equal to the death
benefit guarantee monthly premium times the number of months since the initial
policy date (including the current month) or the net cash surrender value of
the policy is greater than zero. In order to place your policy in force, you
must pay at least the first two death benefit guarantee monthly premiums. In
addition, you will be asked to determine a planned periodic premium schedule,
although you will not be required to adhere to that premium schedule. Instead,
after the first policy year, you may, subject to certain restrictions, make
premium payments in any amount and at any frequency. (See Premium payment and
allocation of premiums, p. 6.)
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 our General Account and to one or
more subaccounts of the Separate Account. Amounts allocated to the General
Account earn a current declared interest rate, subject to the minimum
guaranteed rate shown on the Policy Schedule. The subaccounts of the Separate
Account invest in the American Variable Insurance Series. Currently the
American Variable Insurance Series consists of eight funds available for
investment by the subaccounts:
The Growth Fund seeks growth of capital by investing primarily in common stocks
or securities with common stock characteristics.
The International Fund seeks long term growth of capital by investing primarily
in securities of issuers domiciled outside the United States.
The Growth-Income Fund seeks growth of capital and income by investing
primarily in common stocks, but other securities may be held when deemed
advisable, including preferred stocks and corporate bonds, including
convertible bond.
The Asset Allocation Fund seeks total return (including income and capital
gains) and preservation of capital over the long term through a diversified
portfolio that can include common stock and other equity type securities (such
as convertible bonds and preferred stock), bonds and other intermediate and
long-term fixed-income securities and money moarket instruments (debt securities
maturing in one year or less).
The High-Yield Bond Fund seeks high current income and secondarily seeks
capital appreciation by investing primarily in intermediate and long term
corporate 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
investments 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
securities including: marketable corporate debt securities, loan participation,
U.S. government securities, mortgage-related securities, other asset-backed
securities and cash or money market instruments. [PLEASE NOTE: AS OF THE DATE
OF THIS PROSPECTUS, THE BOND FUND IS NOT YET AVAILABLE IN ALL STATES. PLEASE
CONSULT YOUR INVESTMENT DEALER FOR CURRENT INFORMATION ABOUT THE BOND FUND'S
AVAILABILITY.]
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 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.
3
<PAGE> 7
HOW ARE PREMIUMS PROCESSED?
You determine in the application what portions of net premiums are to be
allocated to the General Account or the various subaccounts of the Separate
Account. Prior to the record date, net premiums are automatically allocated to
the General Account. After the record date, the policy value and all subsequent
net premiums will automatically be invested in the General Account and the
subaccounts of the Separate Account in accordance 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 General Account and 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 failure to pay required premiums or 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 and before the second
policy anniversary, you may surrender the policy and receive its net cash
surrender value plus any excess sales load. (See Charges and deductions, p. 8.)
After the second policy anniversary, you may surrender the policy and receive
its net cash surrender value.
DO I HAVE ACCESS TO THE POLICY VALUES?
You may access the net cash surrender value through loans or withdrawals. You
may borrow the net cash surrender value at any time. In addition, subject to
some restrictions and charges, you may withdraw portions of the net cash
surrender value after the first policy year. Loans and withdrawals 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?
Sales charges will be deducted from your policy in two forms (a percent of
premium charge and a Contingent Deferred Sales Charge) 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. To the extent that such
distribution expenses are not recovered through explicit sales charges, we will
recover them from our other assets or surplus, including income from mortality
and expense risk charges and cost of insurance charges.
PERCENT OF PREMIUM CHARGE. A percent of premium charge is currently deducted
from each premium you pay. The total charge currently consists of the sum of
the following:
a. 3.25% for charges deemed to be sales loads as defined by the Investment
Company Act of 1940. This item is guaranteed not to exceed 3.25%.
b. 2.50% for premium taxes and other taxes not deemed to be sales loads as
defined by the Investment Company Act of 1940. Any increase in this item
must first be approved by the Securities and Exchange Commission and, in
any event, this item is guaranteed not to exceed 4.50%.
CONTINGENT DEFERRED SALES CHARGE (CDSC). During the first 8 policy years, the
policy value is subject to a Contingent Deferred Sales Charge which is deducted
if the policy is surrendered or if the specified amount is voluntarily reduced.
During the first two policy years, the CDSC is no greater than 44% of the
required base minimum premium for the policy. Upon actual surrender or
voluntary reduction of specified amount in the first two years of the policy,
the actual CDSC is subject to maximum allowable Federal sales load limitations.
(See Charges and deductions, p. 8.) During the third and subsequent policy
years, the CDSC will equal the CDSC during the first policy year times the
percent indicated in the table on the following page.
CONTINGENT DEFERRED ADMINISTRATIVE CHARGE (CDAC). During the first 8 policy
years, the policy value is subject to a Contingent Deferred Administrative
Charge which is deducted if the policy is surrendered or if the specified
amount is voluntarily reduced. The CDAC is no greater than 88% of the required
base minimum premium for the policy. During the second and subsequent policy
years, the CDAC will equal the first year CDAC times the percent indicated in
the following table.
An additional CDAC will be imposed under the policy in the event of each
requested increase in specified amount and applies during the 8 years following
such increase. If a requested increase in specified amount occurs, additional
premium will be required if the current net cash surrender value is not
sufficient to cover the CDAC associated with the increase.
4
<PAGE> 8
<TABLE>
<CAPTION>
During policy year Percent of CDSC and CDAC
(or after an increase) to be deducted
- ---------------------------------------------------------------------
<S> <C>
2 100%
3 100%
4 100%
5 100%
6 75%
7 50%
8 25%
</TABLE>
SURRENDER CHARGE. The total of all Contingent Deferred Sales Charges and all
Contingent Deferred Administrative Charges is collectively referred to as the
surrender charge.
OTHER CHARGES AND DEDUCTIONS. The policy value will be reduced by certain
monthly deductions equal to the sum of a monthly cost of insurance charge
(including the cost of any optional insurance benefits) and a monthly charge
equal to $7.50 per month. Currently, no charge is made for transfers of amounts
among the General Account and the subaccounts, although a maximum of $10 per
transfer may be charged. A Withdrawal charge consisting of a processing fee and
a possible early withdrawal penalty is deducted from each withdrawal. The early
withdrawal penalty portion is applicable only at times when the surrender
charge is greater than zero. As a current practice, the withdrawal charge is
equal to 3% of the withdrawn amount during the first eight policy years, and is
equal to $10 at all other times. This charge is guaranteed not to exceed the
greater of $25 or 5% of the withdrawn amount at times when the surrender charge
is greater than zero and is guaranteed not to exceed $25 at all other times.
A daily charge of .0022191% (which is equivalent to an annual rate of .81%) of
the average daily net assets of the Separate Account is currently imposed for
Lincoln Life's assumption of certain mortality and expense risks. This charge
is guaranteed not to exceed .90%.
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
taxes.
In addition, because the Separate Account purchases shares of the funds
involved, the value of the net assets of these subaccounts of the Separate
Account will reflect the fees of the investment advisor and other miscellaneous
expenses incurred by those funds.
HOW ARE MY POLICY BENEFITS TAXED?
The taxation of life insurance death benefits and distributions is complex and
is discussed in detail under "Federal tax matters" on pages 19-21. You should
note in particular that the taxation of loans, withdrawals and surrenders of a
life insurance policy that becomes a Modified Endowment Contract is generally
less favorable than distributions from a life insurance policy that is not a
Modified Endowment Contract. Your policy will be a Modified Endowment Contract
if the premiums you pay exceed certain limits referred to as the 7-pay
Limitation.
LINCOLN LIFE, THE
GENERAL ACCOUNT AND
THE SEPARATE ACCOUNT
LINCOLN LIFE
Lincoln National Life Insurance Co. is a stock life insurance company
incorporated under the laws of Indiana on June 12, 1905. Lincoln Life is
principally engaged in offering individual life insurance policies and annuity
policies, 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) the District of Columbia, Guam, and
the Virgin Islands.
Lincoln Life is wholly owned by Lincoln National Corp., a publicly held
insurance 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 LincolnNational Corp. is
located at 200 East Berry Street, Fort Wayne, Ind. 46802. Through subsidiaries,
Lincoln National Corp. engages primarily in the issuance of health-life
insurance and annuities, property-casualty insurance, and other financial
services.
THE GENERAL ACCOUNT
The General Account refers to the General Account of Lincoln Life. The General
Account consists of all assets owned by Lincoln Life other than those allocated
to any of its separate accounts, including the Separate Account. The General
Account supports Lincoln Life's insurance and annuity obligations. Because of
applicable exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933, and the
General Account has not been registered as an investment company under the
Investment Company Act of 1940.
THE SEPARATE ACCOUNT
Lincoln Life Flexible Premium Variable Life Account J (Separate Account) was
established by Lincoln Life as a Separate Account on March 9, 1994. Although
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 the Separate Account shall, however, be available 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 valued once daily
at the close of trading (currently 4:00 p.m. New York time) on each day the New
York Stock Exchange is open. The New York Stock Exchange
5
<PAGE> 9
is currently closed on the following holidays: New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving 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
practices or policies of the Separate Account or Lincoln Life by the
Commission.
The Separate Account is divided into eight subaccounts. Each subaccount invests
exclusively in shares of one of the funds comprising the American Variable
Insurance Series: the Growth Fund, the International Fund, the Bond Fund,
the Growth-Income Fund, the Asset Allocation Fund, the High-Yield 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 Lincoln Life
variable annuity contract holders. For an explanation of the risk involved with
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
Management Co. is located at 333 South Hope Street, Los Angeles, Calif. 90071
and 135 South State College Boulevard, Brea, Calif. 92621.
ADDITION, DELETION, OR
SUBSTITUTION OF INVESTMENTS
Lincoln Life does not control the investment advisor and therefore cannot
guarantee that the American Variable 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 Account without notice and prior
approval of the Securities and Exchange Commission, 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
objective. New subaccounts may be established when, at the sole discretion of
Lincoln Life, marketing needs or investment conditions warrant, and any new
subaccounts may be made available to existing policyowners on a basis to be
determined by Lincoln Life. Lincoln Life may also eliminate one or more
subaccounts if, in its sole discretion, marketing, tax, or investment
conditions warrant.
In the event of any such substitution or change, Lincoln Life may by
appropriate endorsement make such changes in the policy as may be necessary or
appropriate 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
specified amount of a policy is $50,000. A policy will generally be issued only
to insureds 80 years of age or under who supply satisfactory evidence of
insurability sufficient to Lincoln Life. Acceptance is subject to Lincoln
Life's underwriting 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
supplemental application. Approval of the additional insurance will be subject
to evidence of insurability satisfactory to Lincoln Life.
PREMIUM PAYMENT AND
ALLOCATION OF PREMIUMS
Subject to certain limitations, an owner has considerable flexibility in
determining the frequency and amount of premiums. During the first three policy
years, the policy will lapse unless either the total of all premiums paid
(minus any partial withdrawals and minus any outstand-
6
<PAGE> 10
ing loans) is at all times at least equal to the death benefit guarantee
monthly premium times the number of months since the initial policy date
(including the current month) or the net cash surrender value of the policy is
greater than zero. Payment of the death benefit guarantee monthly premium
during the first three policy years will guarantee that the policy will remain
in force for the first three policy years despite negative net cash surrender
value (see Death benefit guarantee, p. 13), but continued payment of such
premiums will not guarantee that the policy will remain in force thereafter.
The amount of the death benefit guarantee monthly premium is based on the base
minimum premium per $1,000 of specified amount (determined by the insured's
age, sex, and underwriting class) and includes additional amounts to cover
charges for additional benefits, monthly charges, and substandard extra
charges. A table of base minimum premiums per $1,000 of specified amount is in
Appendix A, p. 24-25.
The owner may designate in the application one of several ways to pay the death
benefit guarantee monthly premium. The owner may elect to pay the first twelve
months of premiums in full prior to commencement of insurance coverage.
Alternatively, the owner may elect to pay a level planned periodic premium on a
quarterly or semi-annual basis sufficient to meet the premium requirements.
Premiums may also be paid monthly if paid by a pre-authorized check. Premiums,
other than the initial premium, are payable only at the Home Office of Lincoln
Life.
Each owner will also define a planned periodic premium schedule that provides
for payment of a level premium at fixed intervals for a specified 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, frequency, 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 equal to or in excess of the
required death benefit guarantee monthly premiums guarantee that the policy
will remain in force beyond the first three policy years. Unless the policy is
being continued under the death benefit guarantee, (see Death benefit
guarantee, p. 13), the policy will lapse any time outstanding loans with
interest exceed policy value less surrender charge or policy value less
outstanding loans and less surrender charge is insufficient to pay certain
monthly deductions, and a grace period expires without a sufficient payment.
(See Policy lapse and reinstatement, p. 15.) Subject to the minimum premiums
required to keep the policy in force 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 outstanding 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
established 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 issue 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 portion 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 cause the policy to fail the 7-pay test set forth under Section
7702A of the Code. 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 test and cause the policy to become a Modified Endowment
Contract. If the owner has given Lincoln Life instructions that the policy
should not be allowed to become a Modified Endowment Contract, any premiums 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 of receipt. 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 Modified Endowment Contract status will be sent to the owner.
The letter of notification will include the available options, if any, for
remedying the Modified Endowment Contract status of the policy.
NET PREMIUMS. The net premium equals the premium paid less the percent of
premium charge (see Percent of premium charge, p. 8).
ALLOCATION OF NET PREMIUMS. In the application for a policy, the owner can
allocate net premiums or portions thereof to the General Account and the
various subaccounts of the Separate Account. Notwithstanding the allocation in
the application, all net premiums received prior to the record date will
initially be allocated to the General Account. Net premiums received prior to
the record date will be credited 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 General
Account 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
General Account will automatically be transferred to the General Account and
the
7
<PAGE> 11
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 minimum percentage of each premium
that may be allocated to the General Account or 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.
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. The value of the amount allocated to the General
Account will earn a current interest rate guaranteed to be at least equal to
the General Account guaranteed interest rate shown on the policy schedule.
Owners should periodically review their allocations of premiums and values in
light of market conditions, interest rates, and overall estate planning
requirements.
DOLLAR COST AVERAGING PROGRAM
The owner may wish to make uniform monthly transfers from the General Account
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 designates
the total amount of policy value to be transferred from the General Account to
the chosen subaccounts in accord with the most recent premium allocation. The
transfers continue until the end of the DCA period or until the policy value in
the General Account 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 initial
premium 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 initial 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
Withdrawal 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
occurs: 1) the grace period ends without payment of required premium, and the
policy is not being continued under the death benefit guarantee provision, 2)
the policy is surrendered, 3) the insured dies, or 4) the policy matures.
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 more fully below.
PERCENT OF PREMIUM CHARGE. A percent of premium charge is currently deducted
from each premium you pay. The total charge currently consists of the sum of
the following:
8
<PAGE> 12
a. 3.25% for charges deemed to be sales loads as defined by the Investment
Company Act of 1940. This item is guaranteed not to exceed 3.25%.
b. 2.50% for premium taxes and other taxes not deemed to be sales loads as
defined by the Investment Company Act of 1940. Any increase in this item
must first be approved by the Securities and Exchange Commission and, in
any event, this item is guaranteed not to exceed 4.50%.
CONTINGENT DEFERRED SALES CHARGE (CDSC). During the first 8 policy years, the
policy value is subject to a Contingent Deferred Sales Charge (CDSC) which is
deducted if the policy is surrendered or upon a voluntary reduction in
specified amount. During the first policy year, the CDSC is approximately equal
to 44% (less at older ages) of the required base minimum premium for the
designated specified amount. The base minimum premium required varies with the
age, sex, and rating class of the insured. To determine the first year CDSC per
$1,000 of specified amount, multiply the surrender charge found in the table of
surrender charges (see Appendix B, pp. 26-27) times one-third. (For example,
the surrender charge for a male preferred smoker age 35 is $9.99 per $1000 of
specified amount, or $999 for a policy with $100,000 specified amount.
One-third of the surrender charge, or $333, is the CDSC for the policy.)
Furthermore, upon surrender of the policy or voluntary reduction in specified
amount at any time during the first two policy years, the total sales charges
actually deducted (the sales charge component of the percent of premium charge
plus the CDSC) will never exceed the following maximum: 30% of premiums paid up
to the first 12 death benefit guarantee monthly premiums, plus 10% of premiums
paid up to the next 12 death benefit guarantee monthly premiums, plus the sales
charge component of the percent of premium charge on premiums paid in excess of
those amounts.
During the third and subsequent policy years, the CDSC will equal the CDSC
during the first policy year times the percent indicated in the table below.
CONTINGENT DEFERRED ADMINISTRATIVE CHARGE (CDAC). During the first 8 policy
years, the policy value is subject to a Contingent Deferred Administrative
Charge (CDAC) which is deducted if the policy is surrendered or upon a
voluntary reduction in specified amount. During the first policy year, the CDAC
is approximately equal to 88% (less at older ages) of the required base minimum
premium for the designated specified amount. To determine the first year CDAC
per $1,000 of specified amount, multiply the surrender charge found in the
table of surrender charges (see Appendix B, pp. 26-27) times two-thirds. (For
example, the surrender charge for a male preferred smoker age 35 is $9.99 per
$1000 of specified amount, or $999 for a policy with $100,000 specified amount.
Two-thirds of the SC, or $666, is the CDAC for the policy).
During the second and subsequent policy years the CDAC will equal the CDAC
during the first policy year times the percent indicated in the table below.
An additional CDAC will be imposed under the policy in the event of each
requested increase in specified amount. The additional CDAC is an amount per
$1,000 of increased specified amount and will be deducted upon the surrender of
the policy or upon a voluntary reduction of the increased specified amount at
any time during the 8 years following such increase. The amount of the CDAC
will be equal to the CDAC that would apply to a newly issued policy at the age
of the insured at the time of the increase. The percentage of the CDAC
applicable in any year after the increase is shown in the table below, where
"policy year" is calculated from the date of the increase.
<TABLE>
<CAPTION>
During policy year Percent of CDSD and CDAC
(or after an increase) to be deducted
- ---------------------------------------------------------------------
<S> <C>
2 100%
3 100%
4 100%
5 100%
6 75%
7 150%
8 125%
</TABLE>
When the owner requests an increase in the specified amount, no additional
premium is required provided that the current net cash surrender value is
sufficient to cover the CDAC associated with the increase, as well as the
increase in the cost of insurance charges which result from the increase in
specified amount. However, if the net cash surrender value is insufficient to
cover such costs, additional premium will be required for the increase to be
granted, and the percent of premium charge will be deducted from that
additional premium.
Surrender charge. The total of all Contingent Deferred Sales Charges and all
Contingent Deferred Administrative Charges is collectively referred to as the
surrender charge.
Monthly deductions. On the policy date and on each monthly anniversary day
following, deductions will be made from the policy value. These deductions are
of two types: A monthly charge and a monthly cost of insurance deduction.
Ordinarily, the monthly deductions are deducted from the policy value in
proportion to the values in the General Account and the subaccounts. The
monthly deductions may be made by some other method if requested by the owner,
and if such method is acceptable to Lincoln Life.
Cost of insurance charges. On the policy date and on each monthly anniversary
day following, cost of insurance charges will be deducted from the policy
value. Ordinarily, the cost of insurance charges are deducted in proportion to
the values in the General Account and 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. On each monthly anniversary
day,
9
<PAGE> 13
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, rate class of
the person insured, and specified amount of the policy. In states requiring
unisex rates, in federally qualified pension plan sales, in employer sponsored
situations, and in any other situation where unisex rates are required by law,
the cost of insurance rates are not based on sex. 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, rate
class, and specified amount and whose policies have been in effect for the same
length of time. The cost of insurance 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 Commissioner's Standard Ordinary Mortality Table,
Age last birthday, for attained ages under sixteen; on the 1980 Commissioner's
Standard Ordinary Nonsmoker Mortality Table Age last birthday, or the 1980
Commissioner's Standard Ordinary Smoker Mortality Table Age last birthday, for
attained ages sixteen and over, depending on the smoking status of the insured.
Standard rate classes have guaranteed rates which do not exceed 100% of the
applicable table.
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
involving 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
divided into four categories: Standard smoker, Preferred smoker, Standard
nonsmoker, and Preferred nonsmoker. Insureds who are Standard nonsmoker or
Preferred nonsmoker will generally incur a lower cost of insurance than those
insureds who are in the smoker rate classes. Likewise, insureds who are
Preferred smoker or Preferred nonsmoker will generally incur a lower cost of
insurance than similarly situated insureds who are Standard smoker or Standard
nonsmoker respectively.
The specified amount of the policy will affect the cost of insurance rates
applied to a specific policy. In general, policies with a specified amount of
$200,000 or more will have lower current cost of insurance rates than policies
with smaller specified amounts.
Monthly charge. A monthly charge of $7.50 is deducted from the policy value
each month the policy is in force to compensate Lincoln Life for continuing
administration of the policy, premium billings, overhead expenses, and other
miscellaneous expenses. Lincoln Life does not anticipate any profits from this
charge. This charge is guaranteed not to increase during the life of the
policy.
ASSET MANAGEMENT CHARGE. The investment advisor for each of the funds deducts 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 results credited
to the subaccounts.
The investment advisor for the American Variable Insurance Series deducts a
daily charge as a percent of the net assets in each particular fund which is
equivalent to the following annual rates:
- - GROWTH FUND: 0.60% on the first $30 million, plus 0.50% greater than
$30 million but not exceeding $600 million, plus 0.45% greater than
$600 million but not exceeding $1.2 billion, plus 0.42% greater than
$1.2 billion but not exceeding $2.0 billion, plus 0.37% in excess of
$2.0 billion;
- - INTERNATIONAL FUND: 0.90% of the first $60 million, plus 0.78%
greater than $60 million but not exceeding $600 million, plus 0.60%
greater than $600 million but not exceeding $1.2 billion, plus 0.48%
greater than $1.2 billion but not exceeding $2.0 billion, plus 0.465% in
excess of $2.0 billion;
- - GROWTH-INCOME FUND: 0.60% of the first $30 million, plus 0.50%
greater than $30 million but not exceeding $600 million, plus 0.45% greater
than $600 million but not exceeding $1.5 billion, plus 0.40% greater than $1.5
billion and $2.5 billion, plus 0.32% in excess of $2.5 billion;
- - ASSET ALLOCATION FUND: 0.60% of the first $30 million, plus 0.50% greater
than $30 million but not exceeding $600 million, plus 0.42% in excess of
$600 million;
- - HIGH-YIELD BOND FUND: 0.60% of the first $30 million, plus 0.50% greater than
$30 million but not exceeding $600 million, plus 0.46% in excess of
$600 million.
- - BOND FUND: 0.60% of the first $30 million, plus 0.50% in excess of
$30 million;
- - U.S. GOVERNMENT/AAA-RATED SECURITIES FUND: 0.60% on the first $30 million,
plus 0.50% greater than $30 million but not exceeding $600 million, plus
0.40% in excess of $600 million;
- - CASH MANAGEMENT FUND: 0.50% on the first $100 million, plus 0.42% greater
than $100 million but not exceeding $400 million, plus 0.38% in excess of
$400 million.
10
<PAGE> 14
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.
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. This charge has the effect of reducing gross investment results
credited to the subaccounts. The daily rate currently charged is .0022191%
(which is equivalent to an annual rate of .81 of 1%) of the value of the net
assets of the Separate Account. This deduction may increase or decrease, but is
guaranteed not to exceed .90 of 1% in any policy year.
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
administering the policies will be greater than estimated.
OTHER CHARGES. Two other miscellaneous charges are occasionally incurred: a
withdrawal charge and a transfer charge. The withdrawal charge is incurred when
the owner of the policy requests a withdrawal from the policy value; the charge
is deducted from the withdrawn amount and the balance is paid to the owner.
Withdrawals may be made any time after the first policy year, but only one
withdrawal may be made per year. The withdrawal charge consists of a processing
fee and a possible early withdrawal penalty. The early withdrawal penalty
portion is applicable only at times when the surrender charge is greater than
zero. As a current practice, the withdrawal charge is equal to 3% of the
withdrawn amount during the first eight policy years, and is equal to $10 at
all other times. The first $10 of the Withdrawal charge is currently applied as
a processing fee and the remainder, if any, constitutes an early withdrawal
penalty. The early withdrawal penalty portion first reduces any remaining CDSC
and any excess reduces any remaining CDAC; any excess of the early withdrawal
penalty over the surrender charge will be waived. The withdrawal charge is
guaranteed not to exceed the greater of $25 or 5% of the withdrawn amount at
times when the surrender charge is greater than zero and is guaranteed not to
exceed $25 at all other times.
The transfer charge is incurred when the owner requests that funds be
transferred from one subaccount or the General Account to another subaccount or
the General Account. The transfer charge is $10, and is deducted from the
amount transferred; however, the transfer charge is currently being waived for
all transfers. The maximum number of transfers allowed between subaccounts in a
policy year is twelve.
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 may make deductions from the policy to pay those taxes. (See Federal
tax matters, p. 19).
REDUCTION OF CHARGES
The percent of premium charge, surrender charge and monthly charge set forth in
this prospectus may be reduced because of special circumstances that result in
lower sales or administrative expenses. In particular, the percent of premium
charge and surrender charge will not be deducted on policies issued to
employees and registered representative 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
circumstances. Reductions will not be unfairly discriminatory against any
person, including the affected policyowners and owners of all other policies
funded by the Separate Account.
EXCHANGE OF LINCOLN LIFE
UNIVERSAL LIFE POLICIES
Existing Lincoln Life Universal Life policies may currently be exchanged for a
policy described in this prospectus. Because Lincoln Life's expenses are
reduced in such exchanges, as a current practice the percent of premium charge
will be waived on the amount of policy value exchanged. In addition, as a
current practice the Contingent Deferred Sales Charge and the Contingent
Deferred Administrative Charge will be reduced to 25% of the normal charges for
the specified amount transferred and further reduced by the amount of any
surrender charge collected on the surrendered policy. All additional premiums
will be subject to the percent of premium charge and any increase in specified
amount will be subject to additional surrender charges. Existing Lincoln Life
Variable Life policies may not be exchanged unless or until Lincoln Life
receives special exemptive relief from the Securities and Exchange Commission
to honor such exchange requests.
TERM CONVERSION CREDITS
Lincoln Life currently has a term conversion program which gives premium
credits to the policy if the owner is converting from a term insurance policy.
Term insurance policies issued by Lincoln Life or by most other life insurance
company may be converted to the policy under this program and receive term
conversion credits. Except for guaranteed term conversion privileges provided
under some Lincoln Life term insurance policies or otherwise provided by
special agreement, all term insurance policy conversions are subject to
evidence of insurability satisfactory to Lincoln Life. All conversion credits
are deposited in the policy without the percent of premium charge. The amount
of the term conversion credits and the requirements for qualification for those
credits is subject to change by Lincoln Life, but such changes will not
11
<PAGE> 15
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 AND DEATH BENEFIT TYPES
As long as the policy remains in force (see Policy lapse and reinstatement, p.
15), Lincoln Life will, upon proof of the insured's death, pay the death
benefit proceeds of the policy to the named beneficiary in accordance with the
designated death benefit type. The proceeds may be paid in cash or under one or
more of the payment options set forth in the policy. (See Proceeds and payment
options, p. 16.) The death benefit proceeds payable under the designated death
benefit type will be increased by any unearned loan interest, and will be
reduced by any outstanding loan and any due and unpaid charges. (See Policy
lapse and reinstatement, p. 15.) These proceeds will be further increased by
any additional insurance on the insured provided by rider.
The policy provides two death benefit types: Type 1, basic coverage, and Type
2, basic plus policy value coverage. Generally, the owner designates the death
benefit type in the application. The owner may change the death benefit type at
any time. (See Policy changes, p. 13.)
TYPE 1. 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 anytime is based on the attained age of the insured
as of the beginning of the policy year.
TYPE 2. The death benefit is equal to the greater of the specified amount plus
the policy value 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.
Under a Type 1 basic coverage, the net amount at risk decreases as the policy
value increases. (The net amount at risk is equal to the death benefit less the
policy value.) Under a Type 2 basic plus policy value coverage, the net amount
at risk remains constant, so the cost of insurance deduction will be relatively
higher on a Type 2 basic plus policy value coverage than on a Type 1 basic
coverage. As a result, policy values under a Type 1 basic coverage tend to
increase faster than under a Type 2 basic plus policy value coverage, assuming
favorable investment performance. Because of this, policyowners that are more
interested in achieving higher policy values more quickly (assuming favorable
investment experience) would be more likely to select a Type 1 basic coverage.
In contrast, the death benefit under Type 2 will increase or decrease as the
policy value increases or decreases. Consequently, policyowners who are more
interested in increasing total death benefits (assuming favorable investment
experience) would be more likely to select a Type 2 basic plus policy value
coverage.
* The specified percentages are shown in the table that follows:
<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 both examples, assume that the insured is under the age of 40 and
that there is no outstanding policy loan.
Under Type 1, a policy with a specified amount of $250,000 will generally pay
$250,000 in life insurance proceeds. However, because life insurance proceeds
cannot be less than 250% (the applicable specified percentage) of policy value,
any time the policy value of this policy exceeds $100,000, life insurance
proceeds will exceed the $250,000 specified amount. If the policy value equals
or exceeds $100,000, each additional dollar added to the policy value will
increase the life insurance proceeds 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 entitled to life insurance proceeds of $500,000 (250% x $200,000); a
policy value of $300,000 will yield life insurance proceeds of $750,000 (250% x
$300,000); a policy value of $500,000 will yield life insurance proceeds 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
proceeds by $2.50. If at any time the policy value multiplied by the specified
percentage is less than the specified amount, the life insurance proceeds will
equal the specified amount of the policy.
Under Type 2, a policy with a specified amount of $250,000 will generally pay
life insurance proceeds of $250,000 plus policy value. Thus, for example, a
policy with a specified amount of $250,000 and policy value of $50,000 will
yield life insurance proceeds equal to $300,000 ($250,000 + $50,000); a policy
value of $100,000 will yield life insurance proceeds of $350,000 ($250,000 +
$100,000). The life insurance proceeds cannot, however, be less than 250%
12
<PAGE> 16
(the applicable specified percentage) of policy value. As a result, if the
policy value of the policy exceeds $166,667, the life insurance proceeds will
be greater than the specified amount plus policy value. Each additional dollar
added to policy value above $166,667 will increase the life insurance proceeds
by $2.50. A policy with a policy value of $200,000 will therefore have life
insurance proceeds of $500,000 (250% x $200,000); a policy value of $500,000
will yield life insurance proceeds of $1,250,000 (250% x $500,000); a policy
value of $1,000,000 will yield life insurance proceeds of $2,500,000 (250% x
$1,000,000).
Similarly, any time policy value exceeds $166,667, each dollar withdrawn from
policy value will reduce the life insurance proceeds by $2.50. If at any time,
however, policy value multiplied by the specified percentage is less than the
specified amount plus policy value, then the life insurance proceeds will be
the specified amount plus policy value.
The above examples describe scenarios which include 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 attained
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.
DEATH BENEFIT GUARANTEE
Lincoln Life expects payment of the required death benefit guarantee monthly
premiums will be sufficient, when combined with net investment results, to pay
for all charges to the policy during the first three policy years, and thereby
provide life insurance protection on the insured for that period. In some
situations, however, the combination of poor net investment results and monthly
deductions could result in the net cash surrender value being reduced to zero.
In such situations, Lincoln Life will continue the policy in force for the
first three policy years, provided the death benefit guarantee monthly premium
requirement continues to be met. Lincoln Life makes no charge for this
additional benefit.
POLICY CHANGES
CHANGE IN TYPE OF DEATH BENEFIT. The owner may also change the type of death
benefit coverage from Type 1 to Type 2 or from Type 2 to Type 1. The request
for such a change must be made in writing on a form suitable to Lincoln Life.
The change will be effective on the first monthly anniversary day on or next
following the day Lincoln Life receives the request. No change in the type of
death benefit will be allowed if the resulting specified amount would be less
than the minimum specified amount of $50,000.
If the change is from Type 1 to Type 2, the insured's specified amount after
such change will be equal to the insured's specified amount prior to such
change minus the policy value on the date of change.
If the change is from Type 2 to Type 1, the insured's specified amount after
such change will be equal to the insured's specified amount prior to such
change plus the policy value on the date of change.
CHANGES IN AMOUNT OF INSURANCE COVERAGE. In addition to the above changes, the
owner may request to increase or decrease the specified amount at any time. The
request for such a change must be from the owner and in writing on a form
suitable to Lincoln Life. 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 specified amount after any requested decrease may not
be less than $50,000. Any request for an increase must be applied for on a
supplemental application. Such increase will be subject to evidence of
insurability satisfactory to Lincoln Life and to its issue rules and limits at
the time of increase. Furthermore, such increase will not be allowed unless the
net cash surrender value is sufficient to cover the next monthly deductions and
the surrender charge for the increase. Any increase will become effective on
the first monthly anniversary day on or next following the day the application
for increase is approved.
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
deductions 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
sum of the following:
a. The monthly charge;
b. The cost of insurance for the first month;
c. Any charges for extra benefits.
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 General Account guaranteed interest
rate shown on the policy schedule on amounts allocated to the General
Account;
d. Interest at not less than the rate shown on the policy schedule on any
outstanding loan amount;
e. Any net premiums received since the preceding day.
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Minus the sum of the following:
f. Any decrease due to net investment results in the value of the
subaccounts to which the investment amount is allocated;
g. Any withdrawals;
h. Any amount charged against the investment amount for federal or other
governmental income taxes;
i. All partial surrender charges deducted since the preceding day;
j. The monthly charge;
k. The cost of insurance for the following month;
l. Any charges for extra benefits.
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 General Account guaranteed interest rate
shown on the policy schedule on amounts allocated to the General
Account;
d. Interest at not less than the rate shown on the policy schedule on any
outstanding loan amount;
e. Any net premiums received since the preceding day.
Minus the sum of the following:
f. Any decrease due to net investment results in the value of the
subaccounts to which the investment amount is allocated;
g. Any withdrawals;
h. Any amount charged against the investment amount for federal or other
governmental income taxes;
i. All partial surrender charges deducted since the preceding day.
The charges and deductions described above are further discussed in Charges and
deductions, p. 8.
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. The net investment results are the gross investment
results minus the asset management charges and any miscellaneous fund expenses,
and minus the mortality and expense risk charge.
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
regulations.
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
writing on a form suitable to Lincoln Life; transfers may be made by telephone
request only if the owner has previously authorized telephone transfers in
writing on a form suitable to Lincoln Life. Lincoln Life will follow reasonable
procedures to determine that the telephone requester is authorized to request
such transfers, 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 is received at the Home Office at
Lincoln Life. A transfer charge of $10 is made for each transfer and is
deducted from the amount transferred; however, the transfer charge is currently
being waived for all transfers. The minimum amount which may be transferred
between subaccounts is $100. The maximum number of transfers allowed in a
policy year is twelve.
TRANSFER TO AND FROM THE GENERAL ACCOUNT
Any time after the record date, the owner may also request to transfer amounts
from the Separate Account to the General Account. However, transfers from the
General Account to the Separate Account are subject to some restrictions. A
maximum of 20% of the unloaned policy value in the General Account may be
transferred to the Separate Account in any period of 12 consecutive months.
However, as a current practice, the 20% maximum transfer limitation does not
apply for the first six policy months. There is no minimum transfer amount;
however, if the unloaned amount in the General Account is $500 or less, the
owner may transfer the entire unloaned amount out of the General Account. A
transfer charge of $10 is made for each transfer and may be deducted from the
amount transferred; however, the transfer charge is currently being waived for
all transfers.
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 between
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, p.
17.)
A loan taken from, or secured by, a policy may have federal income tax
consequences. In particular, adverse tax consequences may occur if the policy
lapses with outstanding loans. (See Federal tax matters, p. 19.)
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
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total of policy loans plus loan interest equals or exceeds the policy value
less surrender charge, notice will be sent to the last known address 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 Policy lapse
and reinstatement, p 15.)
LOAN INTEREST. Interest on any loan will be payable annually in advance at an
annual rate of 6.0%, which is 6.38% effective annual rate of interest. 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. Ordinarily the amount of any loan or
unpaid loan interest will be deducted from the General Account and the
subaccounts in proportion to the value in each. The deduction may be made by
some other method if the owner requests, and if such method is acceptable to
Lincoln Life. Amounts deducted from the Separate Account will be transferred to
the Lincoln Life General Account, where they will earn interest at an annual
rate of no less than 4.0%; currently, loaned amounts earn interest at an annual
rate of 5.0%. The amount will remain a part of the policy value, but will not
be increased or decreased by investment results in the Separate 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 investment 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 benefit and
may increase or decrease the potential for policy lapse. In addition,
outstanding policy loans reduce the death benefit.
LOAN REPAYMENTS. Loan repayments will ordinarily be allocated to the General
Account and the subaccounts in accord with the most recent premium allocation.
They may be allocated 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.
WITHDRAWALS
Any time after the first policy year, and during the lifetime of the insured, a
cash withdrawal may be made from the policy value. The amount and timing of the
withdrawal is subject to certain limitations. The minimum withdrawal is $500
and only one withdrawal may be made during a policy year. During any year in
which the surrender charge is greater than zero, the amount of the withdrawal
may not be more than 20% of the net cash surrender value (except that Lincoln
Life has the current practice of waiving the 20% limitation after the eighth
policy year). During any year in which the surrender charge is equal to zero,
the amount of the withdrawal may not be more than the net cash surrender value.
As a current practice, the withdrawal charge is equal to 3% of the withdrawn
amount during the first 8 policy years, and is equal to $10 at all other times.
This charge is guaranteed not to exceed the greater of $25 or 5% of the
withdrawn amount at times when the surrender charge is greater than zero and is
guaranteed not to exceed $25 at all other times. The owner should be aware that
withdrawals may result in the owner incurring a tax liability. (See Federal tax
matters, p. 19.)
Deduction of withdrawal. When a withdrawal is made, the policy value will be
reduced by the amount of the withdrawal. The amount will be deducted from the
General Account and the subaccounts in proportion to the values in the General
Account and 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.
EFFECT OF WITHDRAWALS ON DEATH BENEFIT AND COST OF INSURANCE. A withdrawal may
affect the death benefit amount in one of several ways. First, if the death
benefit type is Type 1, the specified amount will automatically be reduced by
the amount of the withdrawal, and thus will lower the death benefit by the same
amount. If the death benefit is Type 2, this reduction in the specified amount
does not occur, but the death benefit is lowered by the amount the policy value
is decreased by the withdrawal. In addition, since the death benefit is
required to be at least equal to the specified percentage multiplied times the
policy value, a reduction in the policy value will sometimes result in a
reduction in the death benefit equal to the specified percentage times the
reduction in policy value. (See Death benefit and death benefit types, p. 12.)
In such cases, where the death benefit is reduced by an amount greater than the
withdrawal, the subsequent cost of insurance will be reduced (under either type
of death benefit) to reflect the excess reduction in death benefit.
No withdrawal will be allowed if the resulting insured's specified amount would
be less than $50,000. The request for withdrawal must be in writing on a form
suitable to Lincoln Life.
Ordinarily, withdrawals will be processed within seven days from the date the
request for a withdrawal is received at the Home Office of Lincoln Life.
Payment of the withdrawal amount may be postponed under certain circumstances.
(See Postponement of payments, p. 17.)
POLICY LAPSE AND REINSTATEMENT
During the first three policy years, insurance coverage under the policy will
be continued in force as long as the total premiums paid (minus any partial
withdrawals and minus any outstanding loans) equals or exceeds the death
benefit guarantee monthly premium times the number of months since the policy
date, including the current month. Unless coverage is being continued under the
death benefit guarantee (see Death benefit guarantee, p. 13) lapse will occur
when the policy value less surrender charges and less outstanding loans is
insufficient to cover the monthly deductions and the grace period expires
without a sufficient payment. Insurance coverage will continue during the grace
period, but the policy will be
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deemed to have no policy value for purposes of policy loans and surrenders.
Regardless of premium payments or current net cash surrender value, coverage
will never be continued beyond the maturity date of the policy.
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, plus, if lapse occurs during the first two policy years, any required
refund of excess sales charge. If the insured dies during the grace period,
regardless of the cause of 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
reinstatement is approved.
SURRENDER OF THE POLICY
The owner may surrender the policy at any time during the lifetime of the
insured 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 plus any unearned 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. Ordinarily, the surrender will be processed within
seven days from the date the request for surrender is received at the Home
Office of Lincoln Life. The surrender of the policy may have tax consequences.
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 plus any unearned 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 interest
credited thereon may be applied to any payment option available from Lincoln
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
conditions 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
provision.
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 provided
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 contract.
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
supplemental application, plus any riders, plus any amendments. The policy is
issued 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 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.
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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, plus any unearned loan interest, minus
any prior withdrawals, and minus the cost of any riders.
If the insured commits suicide, while sane or insane, within two years from the
effective date of any increase in insurance, our total liability with respect
to such increase will be its cost of insurance and monthly charges.
If the insured commits suicide, while sane or insane, within two years from the
effective date of any reinstatement, our total liability with respect to such
reinstatement will be the premiums paid since the effective date of the
reinstatement, minus any policy loan, plus any loan interest, minus any prior
withdrawals, and minus the cost of any riders.
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. Statements
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
reinstatement, 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.
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 purchased
by the most recent cost of insurance at the correct age and sex. The resulting
death benefit will not be less than the percentage of the policy value required
by the death benefit provision at the insured's correct age.
CHANGE OF OWNER OR BENEFICIARY
The owner of the policy is the owner identified in the application, or a
successor. 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
Office 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
receive 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.
Furthermore, 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
Office. Lincoln Life will not be responsible for the validity of any
assignment, and reserves the right to require the policy for endorsement of any
assignment. An assignment of the policy may have tax consequences.
REPORTS AND RECORDS
Lincoln Life will maintain all records relating to the Separate Account.
Lincoln 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
surrender 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 contract is delivered.
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
suitable to Lincoln Life. The report will be comparable in format to those
shown in Appendix D 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 projection.
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
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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 Commission, as a result of which disposal of securities is
not reasonably practical or it is not reasonably practical to determine the
value of the Separate Account's net assets. Transfers may also be postponed
under such circumstances.
Requests for surrenders or policy loans of policy values representing premiums
paid by check may be delayed until such time as the check has cleared the
owner's bank.
RIDERS
The availability of the riders listed below 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 application. The underwriting and issue procedures are subject to change
without notice.
TERM RIDER FOR COVERED INSURED. The spouse and/or children of the Primary
Insured may be added as an Other Insured on the base plan. Likewise, other
individuals can be added as an Other Insured. The Term Rider for Covered
Insured is a term rider available for issue ages 0 to 80 and the cost of
insurance is deducted monthly for this benefit. Up to three such riders may be
added to a base policy. The maximum amount which may be issued on any rider
equals the amount of coverage on the policy multiplied times 19. The minimum
amount is $25,000 for each Other Insured.
CHILDREN'S TERM RIDER. The Children's Term Rider is a term rider available for
children (natural, adopted, or stepchild) of the Primary Insured. Children 15
days to age 24 inclusive are covered. The rider is available in units of $1,000
with a minimum of $2,000 and a maximum of $20,000 per any one family. The cost
of insurance for this rider is deducted monthly.
GUARANTEED INSURABILITY RIDER. This rider is available for issue ages 0 to 40
and it is available for the Primary Insured, and/or those covered under the
Term Rider for Covered Insured. This rider allows the Covered Insured to
purchase, without evidence of insurability, additional insurance on the option
dates, or alternate option dates. It can be purchased in units of $1,000, with
a minimum amount of $10,000 and a maximum amount of $100,000 or the specified
amount, if less. Total amount of options exercised may not exceed five times
the option amount. There are eight regular option dates, beginning at age 25,
every three years thereafter, and the last option is at age 46. An alternate
option date will occur three months after marriage, birth of a child, or
adoption of a child. Exercising an alternate option date reduces the next
regular option date. This rider is not available for substandard risks. The
cost of insurance for this rider is deducted monthly from the policy value.
ACCIDENTAL DEATH BENEFIT RIDER. This rider is available for the Primary
Insured, and/or those covered under the Term Rider for Covered Insured. The
Accidental Death Benefit Rider provides an additional life insurance benefit in
the case of accidental death. It is available for ages 5 through 69. The
minimum amount which can be purchased is $10,000 and the maximum amount is two
times the specified amount on the Covered Insured, not to exceed a total of
$350,000 in all policies, in all companies, for that insured. The cost of
insurance for this rider is deducted monthly from the policy value.
WAIVER OF COST OF INSURANCE RIDER. This rider is available for ages 5 through
64. It waives the total cost of insurance for the policy, the monthly charge,
and the cost of any additional benefit riders, after the Primary Insured has
been totally disabled for six consecutive months and the claim for total
disability has been approved. The cost of insurance for this rider is deducted
monthly from the policy value.
DISABILITY BENEFIT PAYMENT RIDER. This rider is available for ages 5 through
64. If the Covered Insured (Primary Insured or Other Insureds) under this rider
has been totally disabled for six consecutive months, and the claim for total
disability has been approved, a disability benefit amount will be paid as a
premium to the policy. The minimum benefit which can be selected is $50 per
month. The maximum is two times the death benefit guarantee monthly premium.
The cost of insurance for this rider is deducted monthly from the policy value.
CONVALESCENT CARE BENEFIT RIDER. This rider may be available in several forms
which differ by the amount and duration of benefit payments and also by the
conditions required to receive benefit payments. The rider is available for the
Primary Insured only and its availability may stipulate certain minimum or
maximum policy specified amounts. The rider provides benefit payments when the
health of the insured is such that covered convalescent care services are
necessary. The cost of insurance for this rider is deducted monthly from the
policy value.
CONTINGENT OPTION RIDER. The Contingent Option Rider is a guaranteed
insurability rider that gives the owner the right to purchase an additional
policy without evidence of insurability upon the death of the designated person
(the Option Life). Available to issue ages 0 through 80. The cost of insurance
for this rider is based on the Contingent Option Amount and is deducted monthly
from the policy value.
RETIREMENT OPTION RIDER. The Retirement Option Rider is a guaranteed
insurability rider that gives the owner the right to purchase an additional
policy without evidence of insurability within 60 days after a specific date
(the option date). The option date, determined at the issue of the rider, may
be the owner's anticipated retirement date or some other date after which
additional insurance may be needed. Available to issue ages 0 through 70. The
cost of insurance for this rider is based
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on the retirement option amount and is deducted monthly from the policy value.
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 subsequent accelerated benefit is also
available to pay premiums and interest charges required on the policy. The
amount of all advanced accelerated benefits creates an interest-bearing lien
against the death benefit otherwise payable at death. There is no cost of
insurance for this rider, but an administrative expense charge is payable upon
application for benefits.
JOINT LIFE TERM RIDER FOR COVERED INSUREDS. This rider is available for issue
ages 20 to 80. This rider provides term insurance for two, three, or four
individuals and pays the Joint Life Term death benefit upon the death of the
first to die of the Covered Insureds. The cost of insurance and monthly charges
for this rider are deducted monthly from the policy value.
LAST SURVIVOR TERM RIDER FOR COVERED INSUREDS. This rider is available for
issue ages 20 to 85 if the average of the ages does not exceed 80. This rider
provides term insurance for two, three, or four individuals and pays the Last
Survivor Term death benefit upon the death of the last to die of the Covered
Insureds. The cost of insurance and monthly charges for this rider are deducted
monthly from the policy value. The minimum issue amount is $25,000; the maximum
issue amount is equal to 19 times the specified amount of the policy.
LAST SURVIVOR CONTINGENT OPTION INSURABILITY RIDER AND LAST SURVIVOR RETIREMENT
OPTION INSURABILITY RIDER. These riders are only available if a Last Survivor
Term Rider for covered insureds is on the policy. The Last Survivor Contingent
Option Rider is a guaranteed insurability rider that gives the owner the right
to purchase an additional last survivor policy without evidence of insurability
upon the death of the designated person (the option life). The Last Survivor
Retirement Option Insurability Rider grants a similar benefit to be exercised
with 60 days of the option date. The option date is chosen at issue and cannot
be later than age 80 of the oldest insured. Available to issue ages 20 through
70 of the oldest insured. The cost of insurance for this rider is based on the
contingent option amount and is deducted monthly from the policy value. The
minimum issue amount is $100,000; the maximum issue amount is 5 times the
specified amount of the Last Survivor Term rider to which it is attached.
DISTRIBUTION OF THE POLICY
The policy will be sold by individuals who, in addition to being licensed as
life insurance agents for Lincoln Life, are also its registered
representatives. Lincoln Life is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers.
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
purport 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
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood 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")
includes 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. With respect to a policy which has an "accelerated death
benefit rider", there is some uncertainty as to qualification of the policy as
life insurance due to the limited guidance provided. 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 issued. 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 policy.
With respect to a policy (other than a policy in respect of a smoker) issued on
the basis of a standard rate class or a rate class involving a lower mortality
risk (i.e., preferred basis), while there is some uncertainty due to the lack
of regulations and the limited guidance on the modified section 7702
requirements, Lincoln Life nonetheless believes that such a policy should meet
the section 7702 definition of a life insurance contract. With respect to a
19
<PAGE> 23
policy issued on a substandard basis (i.e., a rate class involving higher than
standard mortality risk), a policy in respect of a smoker issued on a standard
rate class or a rate class with a lower mortality risk, or a policy which has a
last survivor of multiple insureds or first to die of multiple insureds
feature, there is even less guidance 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, including possibly refunding any premiums
paid that exceed the limitations allowable under section 7702 (together with
interest or other earnings on any premiums 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
regulation or otherwise for the investments of the Separate Account to be
"adequately 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
requirements 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
guidance concerning the extent to which policyowners may direct their
investments to the subaccounts of a Separate Account. When additional guidance
is provided, 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 applied 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 contract
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
control 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
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
1. IN GENERAL. Lincoln Life believes that the proceeds and cash value increases
of a policy should be treated in a manner consistent with a fixed benefit 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
partial withdrawal, 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 inheritance, 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 increments thereof, under the policy until
there is a distribution. The tax consequences 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
Endowment Contract depending upon the amount of premiums paid in relation to
the death benefit provided under such policy. In addition, if a policy is
"materially 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,
classification of a policy as a Modified Endowment Contract will depend upon
the circumstances of each policy. Accordingly, a prospective owner should
contact a competent 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 premium or making any other change to, including an exchange of, a
policy to determine 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 test and
cause the policy to become a Modified Endowment Contract. If the owner has
given Lincoln Life instructions that the policy should not be allowed to become
a Modified Endowment Contract, any premiums in excess of the 7-pay Limitation
will first be applied to reduce any out-
20
<PAGE> 24
standing 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 Modified Endowment Contract status will be sent to the owner.
The letter of notification will include the available options, if any, for
remedying the Modified Endowment Contract status of the policy.
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Policies classified as a Modified Endowment Contracts are subject to the
following tax rules: First, all distributions, including distributions upon
surrender 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
policy (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
accordingly. Third, a 10% 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 after
the owner attains age 59 1/2, is attributable to the owner's becoming disabled,
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 additional
benefits" such as the Convalescent Care Rider 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 policy
(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, a change in death
benefits from Type 2 to Type 1, 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 limits. In that case, such distribution will
be taxed in whole or in part as ordinary 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
indebtedness of the owner.
Upon a complete surrender or lapse of a policy that is not a Modified Endowment
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 investment 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 Endowment
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. In addition, interest 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 business 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 individual exceeds $50,000.
No amount of policy loan interest is, however, deductible if the policy was
deemed for federal tax purposes to be a single premium life insurance contract.
The owner should consult a competent tax advisor as to whether the policy would
be so deemed.
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
Lincoln 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 CONVALESCENT CARE BENEFIT RIDER AND ACCELERATED BENEFIT ELECTION
RIDER. The tax treatment of benefits paid under the Convalescent Care Benefit
Rider and Accelerated Benefit Election Rider, as well as the tax treatment of a
policy with such riders, is uncertain. Future legislation or interpretations
may treat all or part of such payments as taxable distributions from the
policy. Alternatively, such payments may be excluded from taxable income to the
extent they are used to pay for actual long-term care services or are
considered a death benefit under section 101(a)(1) of the Code. A competent tax
advisor should be consulted for further information.
TAXATION OF THE SEPARATE ACCOUNT
Lincoln Life does not initially expect to incur any income tax upon the
earnings or the realized capital gains attributable to the Separate Account.
Based upon these expectations, no charge is being made currently to the
Separate Account for Federal income taxes which may be attributable to the
Separate Account. If, however, Lincoln Life determines that it may incur such
taxes, it may assess a charge for those taxes from the Separate Account.
21
<PAGE> 25
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
interests in the Separate Account. If, however, the Investment Company Act of
l940 or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result 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.
Fractional 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
determining shareholders eligible to vote at the meetings of the funds. Voting
instructions 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
proportion to the voting instructions which are received with respect to all
Policies participating in that fund. Each person having a voting interest will
receive proxy material, reports and other materials relating to the appropriate
portfolio.
DISREGARD OF VOTING INSTRUCTIONS. Lincoln Life may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
sub-classification or investment objective of any of the funds 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 initiated 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 prohibited
by state regulatory authorities or Lincoln Life determined that the change
would have an adverse effect on its General Account in that the proposed
investment policy for any fund may result in overly speculative or unsound
investments. In the event Lincoln Life does disregard voting instructions, a
summary of that action and the reasons for such action will be included 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
Indiana, is subject to regulation by the Insurance Department of the State of
Indiana. 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 Department examines the liabilities and
reserves of Lincoln Life and the Separate Account and certifies their adequacy,
and a full examination of Lincoln Life's operations is conducted 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
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 Account
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 Co. of Maryland covers up to
$25,000,000.
The funds do not issue certificates. Thus, Lincoln Life holds the Separate
Account's assets in an open account in lieu of stock certificates.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. Lincoln Life is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
EXPERTS
The financial statements of the Separate Account and consolidated financial
statements and schedules of Lincoln Life appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, to the extent indicated in their reports thereon also appearing
elsewhere herein and in the registration statement. Such financial statements
and schedules have been included herein in reliance upon such reports given
upon the authority of such firm 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.
22
<PAGE> 26
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of l933, as amended, with respect to the
policy offered hereby. This prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
Registration 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.
23
<PAGE> 27
APPENDIX A
Base minimum premiums Prf NS = Preferred nonsmoker
Per $1,000 of specified amount* Std NS = Standard nonsmoker
Male (or unisex), age last birthday Prf SM = Preferred smoker
Std SM = Standard smoker
<TABLE>
<CAPTION>
Age Prf NS Std NS Prf SM Std SM Age Prf NS Std NS Prf SM Std SM
- ------------------------------------------------------------------------------------
0 ** 3.62 ** **
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2.12 41 8.33 8.81 11.82 12.18
2 2.12 42 8.80 9.28 12.88 13.24
3 2.12 43 9.17 9.77 13.81 14.29
4 2.12 44 9.69 10.29 15.17 15.53
5 2.12 45 10.12 10.84 16.46 16.94
- ------------------------------------------------------------------------------------
6 2.12 46 10.59 11.43 17.58 18.18
7 2.12 47 11.34 12.18 18.69 19.41
8 2.13 48 11.98 13.06 20.10 20.82
9 2.21 49 12.86 13.94 21.52 22.24
10 2.31 50 13.80 15.00 22.98 23.82
- ------------------------------------------------------------------------------------
11 2.41 51 14.92 16.24 24.75 25.59
12 2.65 52 16.0 17.47 26.57 27.53
13 3.00 53 17.27 18.71 28.74 29.82
14 3.18 54 18.73 20.29 31.04 32.12
15 3.35 55 20.26 22.06 33.39 34.59
- ------------------------------------------------------------------------------------
16 3.59 3.71 4.29 4.41 56 21.90 23.82 35.66 36.98
17 3.94 4.06 4.64 4.76 57 23.72 25.76 36.62 38.06
18 4.12 4.24 4.82 4.94 58 25.72 27.88 37.59 39.15
19 4.12 4.24 4.82 4.94 59 27.78 30.18 38.68 40.36
20 4.12 4.24 5.00 5.12 60 30.13 32.65 39.90 41.70
- ------------------------------------------------------------------------------------
21 4.12 4.24 5.05 5.29 61 32.83 35.47 41.25 43.17
22 4.12 4.24 5.05 5.29 62 34.55 37.43 42.79 44.83
23 4.12 4.24 5.23 5.47 63 35.58 38.70 44.46 46.74
24 4.12 4.24 5.41 5.65 64 36.80 40.04 46.01 48.65
25 4.12 4.24 5.41 5.65 65 38.03 41.51 47.93 50.57
- ------------------------------------------------------------------------------------
26 4.17 4.29 5.41 5.65 66 38.73 42.39 51.20 52.47
27 4.36 4.48 5.41 5.65 67 39.58 43.30 53.53 54.93
28 4.57 4.69 5.41 5.65 68 41.17 45.11 55.99 57.52
29 4.78 4.90 5.60 5.84 69 43.28 47.35 58.82 60.26
30 5.01 5.13 5.94 6.18 70 45.66 49.78 61.93 63.21
- ------------------------------------------------------------------------------------
31 5.26 5.38 6.18 6.42 71 48.30 52.46 65.39 66.41
32 5.52 5.64 6.50 6.74 72 51.55 55.63 69.24 70.09
33 5.80 5.92 6.84 7.08 73 55.35 59.42 73.74 74.33
34 6.09 6.21 7.20 7.44 74 59.69 63.68 78.52 78.90
35 6.40 6.52 7.58 7.82 75 64.41 68.23 83.30 83.55
- ------------------------------------------------------------------------------------
36 6.73 6.85 7.99 8.23 76 69.46 72.85 87.78 88.03
37 7.08 7.20 8.42 8.66 77 74.84 77.72 92.28 92.54
38 7.21 7.57 9.11 9.35 78 80.70 82.95 96.81 97.06
39 7.60 7.96 9.88 10.24 79 87.32 88.72 101.48 101.74
40 8.02 8.38 10.76 11.12 80 94.43 95.11 106.44 106.69
- ------------------------------------------------------------------------------------
</TABLE>
* To determine the death benefit guarantee monthly premium, multiply the
specified amount divided by 1000 times the number shown for the age and
classification of the insured, then add $100 per policy and divide the result
by 12. Additional amounts are required for riders and/or substandards.
** This classification is not available below the age of 16.
24
<PAGE> 28
APPENDIX A CONTINUED
Prf NS = Preferred nonsmoker
Base minimum premiums Std NS = Standard nonsmoker
Per $1,000 of specified amount* Prf SM = Preferred smoker
Female, age last birthday Std SM = Standard smoker
<TABLE>
<CAPTION>
Age Prf NS Std NS Prf SM Std SM Age Prf NS Std NS Prf SM Std SM
- ------------------------------------------------------------------------------------------------------------
0 ** 2.98 ** **
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.76 41 7.06 7.42 9.29 9.53
2 1.76 42 7.43 7.79 9.88 10.24
3 1.76 43 7.70 8.18 10.58 10.94
4 1.76 44 7.99 8.59 11.64 12.00
5 1.76 45 8.42 9.02 12.70 13.06
- ------------------------------------------------------------------------------------------------------------
6 1.76 46 8.76 9.48 13.46 13.94
7 1.76 47 9.24 9.96 14.34 14.82
8 1.76 48 9.63 10.47 15.28 15.88
9 1.83 49 10.06 11.02 16.52 17.12
10 1.90 50 10.69 11.65 17.75 18.35
- ------------------------------------------------------------------------------------------------------------
11 1.98 51 11.57 12.53 19.04 19.76
12 2.12 52 12.33 13.41 20.46 21.18
13 2.15 53 13.21 14.29 21.75 22.59
14 2.24 54 14.15 15.35 23.16 24.00
15 2.33 55 14.92 16.24 24.57 25.41
- ------------------------------------------------------------------------------------------------------------
16 2.30 2.42 2.76 2.88 56 15.62 16.94 25.69 26.65
17 2.40 2.52 2.88 3.00 57 16.38 17.82 26.92 27.88
18 2.51 2.63 3.06 3.18 58 17.15 18.71 28.04 29.12
19 2.62 2.74 3.13 3.25 59 18.03 19.59 29.27 30.35
20 2.73 2.85 3.28 3.40 60 19.26 20.82 31.04 32.12
- ------------------------------------------------------------------------------------------------------------
21 2.85 2.97 3.43 3.55 61 20.73 22.41 33.21 34.41
22 2.98 3.10 3.58 3.70 62 22.73 24.53 35.60 36.92
23 3.12 3.24 3.74 3.86 63 25.08 27.00 36.75 38.19
24 3.25 3.37 3.92 4.04 64 27.61 29.65 37.97 39.53
25 3.41 3.53 4.10 4.22 65 30.19 32.47 39.19 40.87
- ------------------------------------------------------------------------------------------------------------
26 3.56 3.68 4.29 4.41 66 32.23 34.59 39.74 41.52
27 3.73 3.85 4.49 4.61 67 33.48 35.93 40.14 42.12
28 3.90 4.02 4.71 4.83 68 33.83 36.35 41.44 42.92
29 4.09 4.21 4.93 5.05 69 34.44 36.92 43.19 44.63
30 4.28 4.40 5.17 5.29 70 35.49 38.12 45.32 46.67
- -----------------------------------------------------------------------------------------------------------
31 4.37 4.61 5.42 5.54 71 37.48 40.19 47.97 49.20
32 4.59 4.83 5.69 5.81 72 39.99 42.75 51.10 52.29
33 4.82 5.06 5.97 6.09 73 43.05 45.85 54.79 55.89
34 5.06 5.30 6.27 6.39 74 46.75 49.51 59.11 60.04
35 5.32 5.56 6.58 6.70 75 50.82 53.53 63.83 64.47
- ------------------------------------------------------------------------------------------------------------
36 5.59 5.83 6.79 7.03 76 55.39 57.93 68.68 69.06
37 5.76 6.12 7.14 7.38 77 60.51 62.76 73.61 73.86
38 6.06 6.42 7.50 7.74 78 66.49 68.31 79.00 79.26
39 6.38 6.74 7.88 8.12 79 73.50 74.73 84.97 85.22
40 6.71 7.07 8.58 8.82 80 81.21 81.89 91.60 91.86
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* To determine the death benefit guarantee monthly premium, multiply the
specified amount divided by 1000 times the number shown for the age and
classification of the insured, then add $100 per policy and divide the result
by 12. Additional amounts are required for riders and/or substandards.
** This classification is not available below the age of 16.
25
<PAGE> 29
APPENDIX B
Prf NS = Preferred nonsmoker
SURRENDER CHARGES Std NS = Standard nonsmoker
PER $1,000 OF SPECIFIED AMOUNT* Prf SM = Preferred smoker
MALE (OR UNISEX), AGE LAST BIRTHDAY Std SM = Standard smoker
<TABLE>
<CAPTION>
Age Prf NS Std NS Prf SM Std SM Age Prf NS Std NS Prf SM Std SM
- --------------------------------------------------------------------------------------
0 ** 3.52 ** **
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2.79 41 10.98 11.62 15.60 16.06
2 2.79 42 11.59 12.23 16.98 17.47
3 2.79 43 12.10 12.89 18.22 18.85
4 2.79 44 12.78 13.57 20.02 20.48
5 2.79 45 13.35 14.30 21.71 22.35
- --------------------------------------------------------------------------------------
6 2.79 46 13.97 15.09 23.19 23.98
7 2.79 47 14.96 16.06 24.66 25.61
8 2.79 48 15.80 17.23 26.53 27.48
9 2.90 49 16.96 18.39 28.40 29.35
10 3.04 50 18.22 19.80 30.34 31.44
- --------------------------------------------------------------------------------------
11 3.17 51 19.69 21.43 32.65 33.77
12 3.48 52 21.14 23.06 35.07 36.32
13 3.96 53 22.79 24.68 37.93 39.36
14 4.18 54 24.73 26.77 40.96 42.39
15 4.42 55 26.73 29.11 44.07 45.65
- --------------------------------------------------------------------------------------
16 4.73 4.88 5.65 5.81 56 28.91 31.44 47.06 48.40
17 5.19 5.35 6.12 6.27 57 31.31 33.99 48.33 48.40
18 5.43 5.59 6.36 6.51 58 33.95 36.81 48.40 48.40
19 5.43 5.59 6.36 6.51 59 36.65 39.82 48.40 48.40
20 5.43 5.59 6.58 6.75 60 39.75 43.08 48.40 48.40
- --------------------------------------------------------------------------------------
21 5.43 5.59 6.67 6.97 61 43.32 46.82 48.40 48.40
22 5.43 5.59 6.67 6.97 62 45.58 48.40 48.40 48.40
23 5.43 5.59 6.89 7.22 63 46.97 48.40 48.40 48.40
24 5.43 5.59 7.13 7.44 64 48.40 48.40 48.40 48.40
25 5.43 5.59 7.13 7.44 65 48.40 48.40 48.40 48.40
- --------------------------------------------------------------------------------------
26 5.50 5.65 7.13 7.44 66 48.40 48.40 48.40 48.40
27 5.74 5.92 7.13 7.44 67 48.40 48.40 48.40 48.40
28 6.03 6.18 7.13 7.44 68 48.12 48.12 48.40 48.40
29 6.31 6.47 7.37 7.70 69 47.85 47.85 48.35 48.35
30 6.60 6.78 7.83 8.14 70 47.62 47.62 48.28 48.28
- --------------------------------------------------------------------------------------
31 6.93 7.08 8.14 8.47 71 47.42 47.42 48.21 48.21
32 7.28 7.44 8.56 8.89 72 47.24 47.24 48.18 48.18
33 7.66 7.81 9.02 9.33 73 47.06 47.06 48.17 48.17
34 8.03 8.18 9.50 9.81 74 46.79 46.79 48.14 48.14
35 8.45 8.60 9.99 10.32 75 46.44 46.44 47.85 47.85
- --------------------------------------------------------------------------------------
36 8.87 9.04 10.54 10.85 76 46.06 46.06 46.81 46.81
37 9.35 9.50 11.11 11.42 77 45.38 45.38 45.65 45.65
38 9.50 9.99 12.01 12.34 78 44.08 44.08 44.37 44.37
39 10.03 10.49 13.02 13.51 79 42.67 42.67 42.96 42.96
40 10.58 11.04 14.19 14.67 80 41.12 41.12 41.41 41.41
- --------------------------------------------------------------------------------------
</TABLE>
* For requested increases in the specified amount, the applicable surrender
charge will be two-thirds that of the corresponding surrender charge listed
above.
** This classification is not available below the age of 16.
26
<PAGE> 30
APPENDIX B CONTINUED
Prf NS = Preferred nonsmoker
SURRENDER CHARGES Std NS = Standard nonsmoker
PER $1,000 OF SPECIFIED AMOUNT* Prf SM = Preferred smoker
FEMALE, AGE LAST BIRTHDAY Std SM = Standard smoker
<TABLE>
<CAPTION>
Age Prf NS Std NS Prf SM Std SM Age Prf NS Std NS Prf SM Std SM
- -------------------------------------------------------------------------------------------------------------
0 ** 2.90 ** **
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2.31 41 9.31 9.79 12.25 12.56
2 2.31 42 9.79 10.27 13.02 13.51
3 2.31 43 10.14 10.78 13.95 14.43
4 2.31 44 10.54 11.33 15.36 15.84
5 2.31 45 11.11 11.90 16.76 17.23
- -------------------------------------------------------------------------------------------------------------
6 2.31 46 11.55 12.50 17.75 18.39
7 2.31 47 12.19 13.13 18.92 19.56
8 2.31 48 12.72 13.82 20.17 20.97
9 2.40 49 13.27 14.54 21.80 22.59
10 2.51 50 14.10 15.36 23.43 24.22
- -------------------------------------------------------------------------------------------------------------
11 2.62 51 15.27 16.52 25.12 26.07
12 2.79 52 16.28 17.69 26.99 27.94
13 2.82 53 17.42 18.85 28.69 29.81
14 2.95 54 18.68 20.26 30.56 31.68
15 3.06 55 19.69 21.43 32.43 33.53
- -------------------------------------------------------------------------------------------------------------
16 3.04 3.19 3.63 3.78 56 20.61 22.35 33.90 35.16
17 3.17 3.32 3.78 3.96 57 21.63 23.52 35.53 36.81
18 3.30 3.45 4.03 4.18 58 22.62 24.68 37.00 38.43
19 3.45 3.61 4.14 4.29 59 23.78 25.85 38.63 40.06
20 3.61 3.76 4.31 4.47 60 25.41 27.48 40.96 42.39
- -------------------------------------------------------------------------------------------------------------
21 3.76 3.92 4.51 4.66 61 27.37 29.57 43.82 45.41
22 3.92 4.09 4.71 4.88 62 29.99 32.36 46.97 48.40
23 4.11 4.27 4.93 5.08 63 33.09 35.64 48.40 48.40
24 4.29 4.44 5.17 5.32 64 36.43 39.12 48.40 48.40
25 4.49 4.64 5.39 5.57 65 39.84 42.86 48.40 48.40
- -------------------------------------------------------------------------------------------------------------
26 4.69 4.86 5.65 5.81 66 43.19 46.35 48.40 48.40
27 4.91 5.08 5.92 6.07 67 45.56 48.40 48.40 48.40
28 5.15 5.30 6.20 6.36 68 46.75 48.40 48.40 48.40
29 5.39 5.54 6.51 6.67 69 48.17 48.17 48.31 48.31
30 5.65 5.81 6.82 6.97 70 47.78 47.78 47.97 47.97
- -------------------------------------------------------------------------------------------------------------
31 5.76 6.07 7.15 7.30 71 47.41 47.41 47.67 47.67
32 6.05 6.36 7.50 7.66 72 46.96 46.96 47.41 47.41
33 6.36 6.67 7.88 8.03 73 46.38 46.38 47.11 47.11
34 6.67 7.00 8.27 8.43 74 45.76 45.76 46.71 46.71
35 7.02 7.33 8.69 8.84 75 45.13 45.13 46.22 46.22
- -------------------------------------------------------------------------------------------------------------
36 7.37 7.70 8.95 9.26 76 44.54 44.54 45.73 45.73
37 7.59 8.07 9.42 9.72 77 43.99 43.99 45.30 45.30
38 7.99 8.47 9.90 10.21 78 43.48 43.48 44.06 44.06
39 8.40 8.89 10.41 10.71 79 42.51 42.51 42.65 42.65
40 8.84 9.33 11.33 11.64 80 40.94 40.94 41.07 41.07
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* For requested increases in the specified amount, the applicable surrender
charge will be two-thirds that of the corresponding surrender charge listed
above.
** This classification is not available below the age of 16.
27
<PAGE> 31
APPENDIX C
EXECUTIVE OFFICERS AND DIRECTORS
LINCOLN NATIONAL LIFE INSURANCE CO.
<TABLE>
<CAPTION>
NAME, ADDRESS AND POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
TIMOTHY J. ALFORD Senior Vice President (formerly Vice President and Second Vice President),
SENIOR VICE PRESIDENT Lincoln National Life Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -----------------------------------------------------------------------------------------------------------------------------
NEAL ARNOLD Vice President (formerly Second Vice President), Lincoln National Life Insurance Co.
Vice President
- -----------------------------------------------------------------------------------------------------------------------------
ROBERT A. ANKER President and Chief Operating Officer, Lincoln National Corp. and Chairman and
Chairman of the Board, Chief Executive Officer (formerly President and Chief Operating Officer) Lincoln
Executive Officer and Director National Life Insurance Co. Formerly: Chairman; President, American States
200 East Berry Street Insurance Co.; Executive Vice President, American States Life Insurance Co.
Fort Wayne, Ind. 46802
- -----------------------------------------------------------------------------------------------------------------------------
CARL L. BAKER Vice President and Deputy General Counsel (formerly Associate General Counsel);
Vice President and Lincoln National Life Insurance Co.
Deputy General Counsel
- -----------------------------------------------------------------------------------------------------------------------------
ROLAND C. BAKER President, First Penn-Pacific Life Insurance Co. Formerly: Chairman and CEO,
Vice President Baker, Ralish, Shipley & Politzer, Inc.
1801 S. Meyers Road
Oakbrook Terrace, Ill. 60181
- -----------------------------------------------------------------------------------------------------------------------------
DAVID N. BECKER Vice President, Lincoln National Life Insurance Co.
Vice President,
Appointed Actuary and
Valuation Actuary
- -----------------------------------------------------------------------------------------------------------------------------
JOANN E. BECKER Vice President, Lincoln National Life Insurance Co. and Lincoln Investment
Vice President Management Co., Inc.; President, The Richard Leahy Corp. and President, LNC Equity Sales
200 East Berry Street Corp.
Fort Wayne, Ind. 46802
- -----------------------------------------------------------------------------------------------------------------------------
JOHN M. BEHRENDT Vice President, Lincoln National Life Insurance Co. and Lincoln Financial
Vice President Group, Inc. Formerly: President, LNC Equity Sales Corp.
- -----------------------------------------------------------------------------------------------------------------------------
JON A. BOSCIA President and Chief Operating Officer, Lincoln National Life Insurance Co.
President, Director and Formerly: President; Executive Vice President, Lincoln Investment
Chief Operating Officer Management Co., Inc.
- -----------------------------------------------------------------------------------------------------------------------------
CAROLYN P. BRODY Vice President (formerly Second Vice President), Lincoln National Life Insurance Co.
Vice President
- -----------------------------------------------------------------------------------------------------------------------------
STEVEN R. BRODY Senior Vice President (formerly Executive Vice President), Lincoln National
Vice President Investment Management Co.
200 East Berry Street
Fort Wayne, Ind. 46802
- -----------------------------------------------------------------------------------------------------------------------------
HAROLD B. CARSTENSEN, JR. Vice President, Lincoln National Life Insurance Co. Formerly: Software
Vice President Director, Magnavox Electronic Systems Co.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 32
APPENDIX C CONTINUED
EXECUTIVE OFFICERS AND DIRECTORS
LINCOLN NATIONAL LIFE INSURANCE CO.
<TABLE>
<CAPTION>
NAME, ADDRESS AND POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
DONALD C. CHAMBERS, M.D. Senior Vice President and Chief Medical Director (formerly Vice President and
Senior Vice President and Chief Medical Director), Lincoln National Life Insurance Co.
Chief Medical Director
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -----------------------------------------------------------------------------------------------------------------------------
THOMAS L. CLAGG Vice President and Associate General Counsel, Lincoln National Life Insurance
Vice President and Co.
Associate General Counsel
- -----------------------------------------------------------------------------------------------------------------------------
KENNETH J. CLARK Senior Vice President (formerly Vice President), Lincoln National Life Insurance Co.
Senior Vice President
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -----------------------------------------------------------------------------------------------------------------------------
KELLY D. CLEVENGER Vice President, Lincoln National Life Insurance Co.
Vice President
- -----------------------------------------------------------------------------------------------------------------------------
MARTHA O. D'AMBROSIO Vice President and General Auditor, Lincoln National Corp. and Lincoln National Life
Vice President and Insurance Co. Formerly: Senior Manager, KPMG Peat Marwick.
General Auditor
- -----------------------------------------------------------------------------------------------------------------------------
ARTHUR W. DETORE, M.D. Vice President (formerly Second Vice President), Lincoln National Life Insurance Co.
Vice President Formerly: Vice President, Lincoln National Risk Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
C. LAWRENCE EDRIS Vice President (formerly Senior Vice President), Lincoln National Life Insurance Co.
Vice President
- -----------------------------------------------------------------------------------------------------------------------------
THOMAS W. FITCH Vice President, First Penn-Pacific Life Insurance Co. and Lincoln National
Vice President Life Insurance Co.
1801 S. Meyers Road
Oakbrook Terrace, Ill. 60181
- -----------------------------------------------------------------------------------------------------------------------------
ELIZABETH A. FREDERICK Vice President (formerly Second Vice President) and Associate General Counsel,
Vice President and Lincoln National Life Insurance Co.
Associate General Counsel
- -----------------------------------------------------------------------------------------------------------------------------
LUCY D. GASE Vice President and Assistant Secretary (formerly Second Vice President; Assistant Vice
Vice President and President), Lincoln National Life Insurance Co.
Assistant Secretary
- -----------------------------------------------------------------------------------------------------------------------------
MELANIE T. HALL Vice President (formerly Second Vice President; Assistant Vice President), Lincoln
Vice President National Life Insurance Co.
- -----------------------------------------------------------------------------------------------------------------------------
PHILLIP A. HARTMAN Vice President, Lincoln National Life Insurance Co.
Vice President and Lincoln Financial Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
J. MICHAEL HEMP Senior Vice President (formerly Regional Chief Executive Officer), Lincoln Dallas RMO
Senior Vice President
- -----------------------------------------------------------------------------------------------------------------------------
MATTHEW P. HENDERSON Vice President, Lincoln National Life Insurance Co. (formerly
Vice President Vice President, Second Vice President), Lincoln National Corp.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 33
APPENDIX C CONTINUED
EXECUTIVE OFFICERS AND DIRECTORS
LINCOLN NATIONAL LIFE INSURANCE CO.
<TABLE>
<CAPTION>
NAME, ADDRESS AND POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
DAVID A. HOPPER Vice President, Lincoln National Life Insurance Co.
Vice President
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -----------------------------------------------------------------------------------------------------------------------------
JAMES R. HOREIN Senior Vice President, Lincoln National Life Insurance Co.
Senior Vice President
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- -----------------------------------------------------------------------------------------------------------------------------
JACK D. HUNTER Executive Vice President and General Counsel, Lincoln National Corp. and The
Executive Vice President, Lincoln National Life Insurance Co.
General Counsel and Director
200 East Berry Street
Fort Wayne, Ind. 46802
- -----------------------------------------------------------------------------------------------------------------------------
J. MICHAEL KEEFER Vice President and Associate General Counsel, Lincoln National Corp.
Vice President and
Associate General Counsel
200 East Berry Street
Fort Wayne, Ind. 46802
- -----------------------------------------------------------------------------------------------------------------------------
DONALD E. KELLER Vice President (formerly Second Vice President), Lincoln National Life Insurance Co.
Vice President
- -----------------------------------------------------------------------------------------------------------------------------
LAWRENCE T. KISSKO Vice President, Lincoln National Investment Management Co.
Vice President
- -----------------------------------------------------------------------------------------------------------------------------
MICHAEL C. LA FRENAIS Vice President, Lincoln National Life Insurance Co. Formerly: Assistant Vice President,
Vice President Aurora Life Assurance Co.
- -----------------------------------------------------------------------------------------------------------------------------
STEPHEN H. LEWIS Senior Vice President, Lincoln National Life Insurance Co. Formerly
Senior Vice President President, First Penn-Pacific Life Insurance Co.
- -----------------------------------------------------------------------------------------------------------------------------
EDWARD B. MARTIN Vice President (formerly Senior Vice President), Lincoln National Life Insurance Co.;
Vice President President and CEO (formerly Executive Vice President and COO), Corporate Benefit
Systems Services Corp.
- -----------------------------------------------------------------------------------------------------------------------------
H. THOMAS MCMEEKIN President (formerly Executive Vice President, Senior Vice President), Lincoln National
Director Investment Management Co.; Executive Vice President (formerly Senior Vice
200 East Berry Street President), Lincoln National Corp.
Fort Wayne, Ind. 46802
- -----------------------------------------------------------------------------------------------------------------------------
REED P. MILLER Vice President (formerly Senior Vice President), Lincoln National Life Insurance
Vice President Co. Formerly: Senior Vice President; Vice President, Lincoln National Corp.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 34
APPENDIX C CONTINUED
Executive Officers and Directors
Lincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and position(s)
with registrant Principal occupations last five years
- --------------------------------------------------------------------------------
<S> <C>
OLIVER H. G. NICHOLS Vice President, Lincoln National Investment
Vice President Management Co. Formerly Vice President, Aetna,
Berry Street Life & Casualty Co.
Fort Wayne, Ind. 46802
- --------------------------------------------------------------------------------
DAVID M. ONGMAN Vice President Lincoln National Life Insurance
Vice President, Co. Formerly: Consultant, Computer Horizon
Group; Vice President, The Associated Group;
Consulting Center Manager, James Martin & Co.
- --------------------------------------------------------------------------------
ARTHUR L. PAGE Vice President (formerly Second Vice
Vice President President), Lincoln National Life Insurance
Co.
- --------------------------------------------------------------------------------
RAYMOND L. PROSSER Vice President and Associate General Counsel,
Vice President and Lincoln National Life Insurance Co.
Associate General Counsel (formerly Second Vice President
One Reinsurance Place and Director of Claims), Lincoln National Life
1700 Magnavox Way Insurance Co.; Associate General Counsel,
Fort Wayne, Ind. 46804 Lincoln National Corp. and Lincoln National
Life Insurance Co.
- --------------------------------------------------------------------------------
IAN M. ROLLAND Chairman and Chief Executive Officer, Lincoln
Director National Corp. (formerly Chairman and
200 East Berry Street Chief Executive Officer, President),
Fort Wayne, Ind. 46802 Lincoln National Life Insurance Co.
- --------------------------------------------------------------------------------
ARTHUR S. ROSS Vice President, Lincoln National Life
Vice President Insurance Co. and Lincoln Financial Group
Inc. Formerly: Director of PR, Guthrie Group;
President and COO, Quorum Comm.
- --------------------------------------------------------------------------------
LAWRENCE T. ROWLAND Senior Vice President (formerly Vice
Senior Vice President President and Second Vice President),
One Reinsurance Place Lincoln National Life Insurance Co.
1700 Magnavox Way
Fort Wayne, Ind. 46804
- --------------------------------------------------------------------------------
KEITH J. RYAN Vice President, Chief Financial Officer and
Vice President, Chief Assistant Treasurer (formerly Controller,
Financial Officer and Business Controls Director), Lincoln National
Assistant Treasurer Life Insurance Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GABRIEL L. SHAHEEN Executive Vice President (formerly Senior
Executive Vice President Vice President; Vice President), Lincoln
and Director National Life Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- --------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 35
APPENDIX C CONTINUED
Executive Officers and Directors
Lincoln National Life Insurance Co.
<TABLE>
<CAPTION>
Name, address and position(s)
with registrant Principal occupations last five years
- ------------------------------------------------------------------------------
<S> <C>
JOHN L. STEINKAMP Vice President and Associate General Counsel,
Vice President and Lincoln National Corp.
Associate General Counsel
200 East Berry Street
Fort Wayne, Ind. 46802
- ------------------------------------------------------------------------------
CASEY J. TRUMBLE Vice President, Lincoln National Corp.
Vice President Formerly: tax partner, KPMG Peat Marwick.
200 East Berry Street
Fort Wayne, Ind. 46802
- ------------------------------------------------------------------------------
JAMES A. TUNIS Vice President, Lincoln National Life
Vice President Insurance Co. (formerly President),
Lincoln National Information Services, Inc.
- ------------------------------------------------------------------------------
WILLIAM K. TYLER
Senior Vice President and Senior Vice President, Lincoln National Life
Assistant Treasurer Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
- ------------------------------------------------------------------------------
MICHAEL R. WALKER Vice President, Lincoln National Life
Vice President Insurance Co. Formerly: Vice President,
Employers Health Insurance Co; Vice President
Baker Hughes, Inc.
- ------------------------------------------------------------------------------
JANET C. WHITNEY Vice President and Treasurer, Lincoln
Vice President and National Life Insurance Co. (formerly Vice
Treasurer President and General Auditor), Lincoln
200 East Berry Street National Corp. and Lincoln National
Fort Wayne, Ind. 46802 Life Insurance Co.
- ------------------------------------------------------------------------------
MICHAEL D. WILKINS Vice President and Associate General Counsel,
Vice President and Lincoln National Corp.
Associate General Counsel
200 East Berry Street
Fort Wayne, Ind. 46802
- ------------------------------------------------------------------------------
C. SUZANNE WOMACK Secretary and Assistant Vice President,
Secretary and Lincoln National Corp. and Lincoln
Assistant Vice President National Life Insurance Co.
200 East Berry Street
Fort Wayne, Ind. 46802
- ------------------------------------------------------------------------------
O. DOUGLAS WORTHINGTON Vice President, Controller and Assistant
Vice President, Controller Treasurer, Lincoln National Life Insurance
and Assistant Treasurer Co. (formerly Vice President), Lincoln
National Investment Management Co.
- ------------------------------------------------------------------------------
MICHAEL L. WRIGHT Senior Vice President, Lincoln National
Senior Vice President Life Insurance Co. Formerly:
Executive Vice President & COO; Senior Vice
President, The Associated Group.
- ------------------------------------------------------------------------------
KATHERINE K. WYSS Vice President (formerly Second Vice
Vice President President), Lincoln National Life Insurance
Co.
- ------------------------------------------------------------------------------
</TABLE>
* The principal business address of each person listed, unless otherwise
indicated, is 1300 South Clinton Street, P.O. Box 1110, Fort Wayne, Ind. 46801.
32
<PAGE> 36
APPENDIX D
Illustrations of Policy Values
The following tables have been prepared to help show how values under the
policy change with investment performance. The tables show Type 1 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 different policyowner underwriting assumptions were used or if the
returns averaged 0%, 6%, and 12% but fluctuated 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 percent of premium
charge is deducted, the current cost of insurance charges are deducted, and the
current mortality and expense risk charge is deducted. Although the contract
allows for a maximum percent of premium charge, maximum cost of insurance
charges specified in the l980 Commissioners Standard Ordinary Smoker and
Nonsmoker tables, and a Maximum mortality and expense risk charge of .90%,
Lincoln Life expects that it will continue to charge the current percent of
premium charge, the current cost of insurance charges, and the current
mortality and expense risk charge for the indefinite future. The figures shown
on pages using guaranteed maximum charges show the death benefits and net cash
surrender values which would result if the guaranteed maximum percent of
premium charge, the guaranteed maximum cost of insurance charges, and the
guaranteed Maximum mortality and expense risk charge were deducted. However,
these are primarily of interest only to show by comparison the benefits of the
lower current charges.
In each of the illustrations, the gross investment result is indicated and the
net investment result is listed below in parentheses. The net investment
results are lower than the gross investment results because the daily asset
management charge and the daily mortality and expense risk charge are deducted
from the gross investment results. The gross investment results used in the
illustrations are also reduced because of other expenses reflected in the value
of the net assets of the funds, including printing, mailing, Directors' fees,
etc. For purposes of the illustrations, this reduction is .04%, which is the
estimated recent average of these expenses. The asset management charge is
.51%, which is the current average charge for the eight subaccounts. The
mortality and expense risk charge is .81% for the current actual charge and
.90% for the guaranteed maximum charge. Thus, for example, based on current
charges and expenses a 6% gross return results in a 4.64% net return. The net
return is indicated in parentheses below the gross return.
33
<PAGE> 37
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 35
Standard nonsmoker
$100,000 specified amount
$1,325 annual premium using current charges
<TABLE>
<CAPTION>
Death benefit Policy value
---------------------------------- ------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ---------------------------------- ------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.36% net) (4.64% net) (10.64% net) (-1.36% net) (4.64% net) (10.64% net)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $100,000 $100,000 $100,000 $ 974 $ 1,041 $ 1,108
2 2,852 100,000 100,000 100,000 1,928 2,123 2,326
3 4,386 100,000 100,000 100,000 2,859 3,245 3,664
4 5,996 100,000 100,000 100,000 3,766 4,408 5,133
5 7,688 100,000 100,000 100,000 4,650 5,615 6,750
- ----------------------------------------------------------------------------------------------------------------
6 9,463 100,000 100,000 100,000 5,509 6,865 8,525
7 11,328 100,000 100,000 100,000 6,340 8,159 10,477
8 13,285 100,000 100,000 100,000 7,146 9,498 12,625
9 15,341 100,000 100,000 100,000 7,923 10,885 14,989
10 17,499 100,000 100,000 100,000 8,671 12,319 17,592
- ----------------------------------------------------------------------------------------------------------------
15 30,021 100,000 100,000 100,000 11,921 20,246 35,204
20 46,003 100,000 100,000 100,945 14,112 29,497 64,296
25 66,400 100,000 100,000 150,502 14,697 40,124 112,315
30 92,433 100,000 100,000 232,497 13,117 52,587 190,571
<CAPTION>
Net cash surrender value
------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of ------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.36% net) (4.64% net) (10.64% net)
- ------------------------------------------------------
<S> <C> <C> <C>
1 $ 114 $ 181 $ 248
2 1,068 1,263 1,466
3 1,999 2,385 2,804
4 2,906 3,548 4,273
5 3,790 4,755 5,890
- ------------------------------------------------------
6 4,864 6,220 7,880
7 5,910 7,729 10,047
8 6,931 9,283 12,410
9 7,923 10,885 14,989
10 8,671 12,319 17,592
- ------------------------------------------------------
15 11,921 20,246 35,204
20 14,112 29,497 64,296
25 14,697 40,124 112,315
30 13,117 52,587 190,571
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .81% current mortality
and expense risk charge and other expenses estimated at .04%. Values
illustrated are also net of any other applicable contract charges, such as
premium expense, administration, and cost of insurance charges.
34
<PAGE> 38
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 35
Standard nonsmoker
$100,000 specified amount
$1,325 annual premium using guaranteed charges
<TABLE>
<CAPTION>
Death benefit Policy value
------------------------------------ ------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------ ------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.45% net) (4.55% net) (10.55% net) (-1.45% net) (4.55% net) (10.55% net)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $100,000 $100,000 $100,000 $ 946 $ 1,011 $ 1,076
2 2,852 100,000 100,000 100,000 1,871 2,061 2,259
3 4,386 100,000 100,000 100,000 2,773 3,149 3,556
4 5,996 100,000 100,000 100,000 3,652 4,276 4,980
5 7,688 100,000 100,000 100,000 4,506 5,443 6,544
- -------------------------------------------------------------------------------------------------
6 9,463 100,000 100,000 100,000 5,333 6,649 8,260
7 11,328 100,000 100,000 100,000 6,134 7,897 10,145
8 13,285 100,000 100,000 100,000 6,908 9,187 12,216
9 15,341 100,000 100,000 100,000 7,654 10,520 14,492
10 17,499 100,000 100,000 100,000 8,370 11,897 16,997
- -------------------------------------------------------------------------------------------------
15 30,021 100,000 100,000 100,000 11,455 19,469 33,876
20 46,006 100,000 100,000 100,000 13,471 28,214 61,591
25 66,400 100,000 100,000 143,727 13,803 38,057 107,259
30 92,433 100,000 100,000 220,959 11,378 48,954 181,114
<CAPTION>
Net cash surrender value
------------------------------------
Assuming hypothetical
gross (and net)
End of annual investment return of
------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.45% net) (4.55% net) (10.55% net)
- -----------------------------------------------
<S> <C> <C> <C>
1 $ 86 $ 151 $ 216
2 1,011 1,201 1,399
3 1,913 2,289 2,696
4 2,792 3,416 4,120
5 3,646 5,583 5,684
- -----------------------------------------------
6 4,688 6,004 7,615
7 5,704 7,467 9,715
8 6,693 8,972 12,001
9 7,654 10,520 14,492
10 8,370 11,897 16,997
- -----------------------------------------------
15 11,455 19,469 33,876
20 13,471 28,214 61,591
25 13,803 38,057 107,259
30 11,378 48,954 181,114
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .90% guaranteed
maximum mortality and expense risk charge and other expenses estimated at .04%.
Values illustrated are also net of any other applicable contract charges, such
as premium expense, administration, and cost of insurance charges.
35
<PAGE> 39
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 35
Standard smoker
$100,000 specified amount
$1,675 annual premium using current charges
<TABLE>
<CAPTION>
Death benefit Policy value
----------------------------------------- -------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------------ -------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.36% net) (4.64% net) (10.64% net) (-1.36% net) (4.64% net) (10.64% net)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,759 $100,000 $100,000 $100,000 $ 1,222 $ 1,306 $ 1,390
2 3,605 100,000 100,000 100,000 2,419 2,664 2,920
3 5,544 100,000 100,000 100,000 3,580 4,065 4,592
4 7,580 100,000 100,000 100,000 4,706 5,513 6,425
5 9,718 100,000 100,000 100,000 5,797 7,009 8,435
- --------------------------------------------------------------------------------------------------------
6 11,693 100,000 100,000 100,000 6,856 8,558 10,644
7 14,320 100,000 100,000 100,000 7,871 10,152 13,064
8 16,794 100,000 100,000 100,000 8,844 11,793 15,719
9 19,393 100,000 100,000 100,000 9,775 13,486 18,639
10 22,121 100,000 100,000 100,000 10,667 15,235 21,854
- --------------------------------------------------------------------------------------------------------
15 37,951 100,000 100,000 100,000 14,332 24,747 43,575
20 58,155 100,000 100,000 124,674 16,317 35,605 79,410
25 83,940 100,000 100,000 184,309 16,189 48,283 137,544
30 116,849 100,000 100,000 282,506 12,958 63,633 231,562
<CAPTION>
Net cash surrender value
-------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of -------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.36% net) (4.64% net) (10.64% net)
- ------------------------------------------------
<S> <C> <C> <C>
1 $ 190 $ 274 $ 358
2 1,387 1,632 1,888
3 2,548 3,033 3,560
4 3,674 4,481 5,393
5 4,765 5,977 7,403
- --------------------------------------------
6 6,082 7,784 9,870
7 7,355 9,636 12,548
8 8,586 11,535 15,461
9 9,775 13,486 18,639
10 10,667 15,235 21,854
- --------------------------------------------
15 14,332 24,747 43,575
20 16,317 35,605 79,410
25 16,189 48,283 137,544
30 12,958 63,633 231,562
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .81% current mortality
and expense risk charge and other expenses estimated at .04%. Values
illustrated are also net of any other applicable contract charges, such as
premium expense, administration, and cost of insurance charges.
36
<PAGE> 40
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 35
Standard Smoker
$100,000 Specified Amount
$1,675 Annual Premium using guaranteed charges
<TABLE>
<CAPTION>
Death benefit Policy value
----------------------------------------- -------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------------ -------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.45% net) (4.55% net) (10.55% net) (-1.45% net) (4.55% net) (10.64% net)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,759 $100,000 $100,000 $100,000 $ 1,168 $ 1,249 $ 1,331
2 3,605 100,000 100,000 100,000 2,303 2,539 2,786
3 5,544 100,000 100,000 100,000 3,401 3,868 4,374
4 7,580 100,000 100,000 100,000 4,461 5,233 6,107
5 9,718 100,000 100,000 100,000 5,478 6,636 7,998
- -----------------------------------------------------------------------------------------------------------
6 11,693 100,000 100,000 100,000 6,451 8,073 10,062
7 14,320 100,000 100,000 100,000 7,376 9,544 12,316
8 16,794 100,000 100,000 100,000 8,253 11,050 14,779
9 19,393 100,000 100,000 100,000 9,078 12,589 17,474
10 22,121 100,000 100,000 100,000 9,849 14,160 20,424
- -----------------------------------------------------------------------------------------------------------
15 37,951 100,000 100,000 100,000 12,824 22,528 40,195
20 58,155 100,000 100,000 114,207 13,892 31,650 72,743
25 93,940 100,000 100,000 167,836 12,016 41,284 125,251
30 116,849 100,000 100,000 255,030 5,445 51,382 209,041
<CAPTION>
Net cash surrender value
-------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of -------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.45% net) (4.55% net) (10.64% net)
- --------------------------------------------------
<S> <C> <C> <C>
1 $ 136 $ 217 $ 299
2 1,271 1,507 1,754
3 2,369 2,836 3,342
4 3,429 4,201 5,075
5 4,446 5,604 6,966
- --------------------------------------------------
6 5,677 7,299 9,288
7 6,860 9,028 11,800
8 7,995 10,792 14,521
9 9,078 12,589 17,474
10 9,849 14,160 20,424
- --------------------------------------------------
15 12,824 22,528 40,195
20 13,892 31,650 72,743
25 12,016 41,284 125,251
30 5,445 51,382 209,041
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .90% guaranteed
maximum mortality and expense risk charge and other expenses estimated at .04%.
Values illustrated are also net of any other applicable contract charges, such
as premium expense, administration, and cost of insurance charges.
37
<PAGE> 41
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55
Standard nonsmoker
$100,000 specified amount
$3,300 annual premium using current charges
<TABLE>
<CAPTION>
Death benefit Policy value
----------------------------------------- -------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------------ -------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.36% net) (4.64% net) (10.64% net) (-1.36% net) (4.64% net) (10.64% net)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,465 $100,000 $100,000 $100,000 $ 2,187 $ 2,346 $ 2,505
2 7,103 100,000 100,000 100,000 4,283 4,739 5,215
3 10,923 100,000 100,000 100,000 6,288 7,183 8,156
4 14,935 100,000 100,000 100,000 8,218 9,697 11,373
5 19,146 100,000 100,000 100,000 10,068 12,281 14,894
- ------------------------------------------------------------------------------------------------------------
6 23,569 100,000 100,000 100,000 11,820 14,922 18,742
7 28,212 100,000 100,000 100,000 13,479 17,629 22,964
8 33,088 100,000 100,000 100,000 15,036 20,403 27,607
9 38,207 100,000 100,000 100,000 16,487 23,246 32,725
10 43,582 100,000 100,000 100,000 17,825 26,159 38,384
- ------------------------------------------------------------------------------------------------------------
15 74,770 100,000 100,000 100,000 22,666 42,083 78,174
20 114,574 100,000 100,000 158,052 23,420 61,337 147,712
25 165,374 100,000 100,000 275,505 16,348 87,033 262,386
30 230,211 0 130,154 469,588 0 123,956 447,227
<CAPTION>
Net cash surrender value
-------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of -------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.36% net) (4.64% net) (10.64% net)
- ------------------------------------------------
<S> <C> <C> <C>
1 $ 0 $ 0 $ 0
2 1,372 1,828 2,304
3 3,377 4,272 5,245
4 5,307 6,786 8,462
5 7,157 9,370 11,983
- ------------------------------------------------
6 9,637 12,738 16,558
7 12,023 16,174 21,508
8 14,308 19,676 26,879
9 16,487 23,246 32,725
10 17,825 26,159 38,384
- ------------------------------------------------
15 22,666 42,083 78,174
20 23,420 61,337 147,712
25 16,348 87,033 262,386
30 0 123,956 447,227
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .81% current mortality
and expense risk charge and other expenses estimated at .04%. Values
illustrated are also net of any other applicable contract charges, such as
premium expense, administration, and cost of insurance charges.
38
<PAGE> 42
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55
Standard nonsmoker
$100,000 specified amount
$3,300 annual premium using guaranteed charges
<TABLE>
<CAPTION>
Death benefit Policy value
----------------------------------------- -------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------------ -------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.45% net) (4.55% net) (10.55% net) (-1.45% net) (4.55% net) (10.55% net)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,465 $100,000 $100,000 $100,000 $ 2,119 $ 2,274 $ 2,429
2 7,103 100,000 100,000 100,000 4,146 4,589 5,052
3 10,923 100,000 100,000 100,000 6,078 6,947 7,892
4 14,935 100,000 100,000 100,000 7,912 9,345 10,970
5 19,146 100,000 100,000 100,000 9,639 11,779 14,308
- -------------------------------------------------------------------------------------------------------
6 23,569 100,000 100,000 100,000 11,254 14,246 17,935
7 28,212 100,000 100,000 100,000 12,748 16,742 21,884
8 33,088 100,000 100,000 100,000 14,106 19,258 26,187
9 38,207 100,000 100,000 100,000 15,317 21,788 30,889
10 43,582 100,000 100,000 100,000 16,367 24,324 36,043
- -------------------------------------------------------------------------------------------------------
15 74,770 100,000 100,000 100,000 18,746 37,057 71,598
20 114,574 100,000 100,000 144,151 13,628 49,369 134,720
25 165,374 0 100,000 250,426 0 60,512 238,501
30 230,211 0 100,000 422,884 0 71,091 402,747
<CAPTION>
Net cash surrender value
-------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of -------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.45% net) (4.55% net) (10.55% net)
- ------------------------------------------------
<S> <C> <C> <C>
1 $ 0 $ 0 $ 0
2 1,235 1,678 2,141
3 3,167 4,036 4,981
4 5,001 6,434 8,059
5 6,728 8,868 11,397
- ------------------------------------------
6 9,071 12,063 15,752
7 11,292 15,287 20,428
8 13,379 18,530 25,459
9 15,317 21,788 30,889
10 16,367 24,324 36,043
- ------------------------------------------
15 18,746 37,057 71,598
20 13,628 49,369 134,720
25 0 60,512 238,501
30 0 71,091 402,747
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .90% guaranteed
maximum mortality and expense risk charge and other expenses estimated at .04%.
Values illustrated are also net of any other applicable contract charges, such
as premium expense, administration, and cost of insurance charges.
39
<PAGE> 43
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55
Standard smoker
$100,000 specified amount
$4,300 annual premium using current charges
<TABLE>
<CAPTION>
Death benefit Policy value
----------------------------------------- ---------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------------ ---------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.36% net) (4.74% net) (10.64% net) (-1.36% net) (4.64% net) (10.64% net)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,515 $100,000 $100,000 $100,000 $ 2,647 $ 2,848 $ 3,049
2 9,256 100,000 100,000 100,000 5,192 5,763 6,360
3 14,234 100,000 100,000 100,000 7,628 8,745 9,962
4 19,460 100,000 100,000 100,000 9,963 11,807 13,901
5 24,948 100,000 100,000 100,000 12,190 14,949 18,216
- ------------------------------------------------------------------------------------------------------------
6 30,711 100,000 100,000 100,000 14,306 18,177 22,959
7 36,761 100,000 100,000 100,000 16,315 21,504 28,199
8 43,114 100,000 100,000 100,000 18,193 24,921 33,991
9 49,785 100,000 100,000 100,000 19,938 28,437 40,422
10 56,789 100,000 100,000 100,000 21,535 32,057 47,589
- ------------------------------------------------------------------------------------------------------------
15 97,427 100,000 100,000 115,668 27,411 52,630 99,714
20 149,293 100,000 100,000 201,273 29,038 80,493 188,105
25 215,488 100,000 127,158 350,571 23,133 121,103 333,877
30 299,971 100,000 179,706 596,961 3,669 171,149 568,534
<CAPTION>
Net cash surrender value
---------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of ---------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.36% net) (4.64% net) (10.64% net)
- -------------------------------------------------
<S> <C> <C> <C>
1 $ 0 $ 0 $ 0
2 627 1,198 1,795
3 3,063 4,180 5,397
4 5,398 7,242 9,336
5 7,625 10,384 13,651
- -------------------------------------------------
6 10,882 14,753 19,536
7 14,032 19,222 25,917
8 17,052 23,780 32,850
9 19,938 28,437 40,422
10 21,535 32,057 47,589
- -------------------------------------------------
15 27,411 52,630 99,714
20 29,038 80,493 188,105
25 23,133 121,103 333,877
30 3,669 171,149 568,534
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .81% current mortality
and expense risk charge and other expenses estimated at .04%. Values
illustrated are also net of any other applicable contract charges, such as
premium expense, administration, and cost of insurance charges.
40
<PAGE> 44
AMERICAN LEGACY VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male issue age 55
Standard smoker
$100,000 specified amount
$4,300 annual premium using guaranteed charges
<TABLE>
<CAPTION>
Death benefit Policy value
----------------------------------------- -------------------------------------
Assuming hypothetical Assuming hypothetical
Premiums gross (and net) gross (and net)
accumulated annual investment return of annual investment return of
End of at 5% ------------------------------------------ -------------------------------------
policy interest 0% gross 6% gross 12% gross 0% gross 6% gross 12% gross
year per year (-1.45% net) (4.55% net) (10.55% net) (-1.45% net) (4.55% net) (10.55% net)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,515 $100,000 $100,000 $100,000 $ 2,300 $ 2,487 $ 2,675
2 9,256 100,000 100,000 100,000 4,465 4,987 5,534
3 14,234 100,000 100,000 100,000 6,492 7,499 8,600
4 19,460 100,000 100,000 100,000 8,380 10,026 11,901
5 24,948 100,000 100,000 100,000 10,124 12,565 15,469
- -----------------------------------------------------------------------------------------------------------
6 30,711 100,000 100,000 100,000 11,712 15,110 19,334
7 36,761 100,000 100,000 100,000 13,126 17,651 23,533
8 43,114 100,000 100,000 100,000 14,348 20,175 28,107
9 49,785 100,000 100,000 100,000 15,355 22,670 33,111
10 56,798 100,000 100,000 100,000 16,129 25,129 38,619
- -----------------------------------------------------------------------------------------------------------
15 97,427 100,000 100,000 100,000 15,924 36,933 78,144
20 149,293 100,000 100,000 160,847 4,985 47,453 150,324
25 215,488 100,000 100,000 281,804 0 55,113 268,385
30 299,971 100,000 100,000 476,731 0 57,830 454,030
<CAPTION>
Policy value
-------------------------------------
Assuming hypothetical
gross (and net)
annual investment return of
End of -------------------------------------
policy 0% gross 6% gross 12% gross
year (-1.45% net) (4.55% net) (10.55% net)
- ----------------------------------------------
<S> <C> <C> <C>
1 $ 0 $ 0 $ 0
2 0 422 969
3 1,927 2,934 4,035
4 3,815 5,461 7,336
5 5,559 8,000 10,904
- ----------------------------------------------
6 8,288 11,687 15,911
7 10,844 15,368 21,250
8 13,207 19,033 26,965
9 15,355 22,670 33,111
10 16,129 25,129 38,619
- -----------------------------------------------
15 15,924 36,933 78,144
20 4,985 47,453 150,324
25 0 55,113 268,385
30 0 57,830 454,030
</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 rates of 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. Values
illustrated are net of a .51% asset management charge, a .90% guaranteed
maximum mortality and expense risk charge and other expenses estimated at .04%.
Values illustrated are also net of any other applicable contract charges, such
as premium expense, administration, and cost of insurance charges.
41
<PAGE> 45
Appendix E
Definitions
Separate Account -- The Lincoln Life Flexible Premium Variable Life Account J,
a Separate Account established by Lincoln Life to receive and invest net
premiums paid under the policy.
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.
Base minimum premium -- A premium per $1,000 of specified amount used in the
calculation of the death benefit guarantee monthly premium. The base minimum
premium is also used in determining the Contingent Deferred Sales Charge and
the Contingent Deferred Administrative Charge.
Beneficiary -- The beneficiary is designated by the owner in the application.
If changed, the beneficiary is as shown in the latest change filed with Lincoln
Life. If no beneficiary survives the insured, the owner or the owner's estate
will receive the benefit.
Contingent Deferred Administrative Charge (CDAC) -- An administrative charge
for underwriting, issue, and initial administration of the policy, which is
imposed under the policy and deducted upon surrender of the policy or voluntary
reduction in the specified amount. The Contingent Deferred Administrative
Charge is part of the total surrender charge.
Contingent Deferred Sales Charge (CDSC) -- A sales charge based upon the base
minimum premium required for the first policy year, which is imposed under the
policy and deducted upon surrender of the policy or voluntary reduction in the
specified amount. The Contingent Deferred Sales Charge is part of the total
surrender charge.
Cost of insurance charge -- A charge deducted monthly from the policy value to
provide the life insurance protection for the insured.
Death benefit guarantee -- The guarantee that, provided the death benefit
guarantee monthly premium requirements are met, the policy will not lapse
during the first three policy years due to negative net cash surrender value.
Death benefit guarantee monthly premium -- The minimum monthly premium which
must be paid each month or in advance during the first policy year and which
must continue to be paid in the second and third policy years if the policy
does not have positive net cash surrender value. Failure to pay this premium
when required will result in the policy lapsing at the end of the grace period.
Free look period -- The period of time in which the owner may cancel the policy
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.
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 amounts invested in the
General Account (including any outstanding loans).
Lincoln Life (we, our us) -- Lincoln National Life Insurane 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.
Mortality and expense risk charge -- A daily charge deducted from the assets of
the Separate Account to provide for the risks of excessive mortality and
expense.
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 plus any unearned loan interest.
Net investment results -- The gross investment results of a fund minus the
asset management charges and any miscellaneous fund expenses, and minus the
mortality and expense risk charge.
Option date -- Any date the policy terminates under the Termination Provision.
The term option date may also be used with certain riders.
Owner (you, your) -- The person so designated in the application or as
subsequently 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
Lincoln Life and described in this prospectus.
42
<PAGE> 46
Policy date -- The date set forth in the policy that is used to determine
policy 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
General 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
different on each of these events.
Record Date -- The record date is 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 outstanding requirement or the date of underwriting approval. The
record date controls the timing of the transfer of initial assets from the
General Account to the various subaccounts.
Series -- Any of the series in which the Separate Account may invest.
Currently, 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
unearned loan interest.
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 or upon a voluntary reduction in specified amount during the first 8
policy years or during the 8 years following a requested increase in specified
amount. The surrender charge is equal to the combination of the Contingent
Deferred Sales Charge and the Contingent Deferred Administrative Charge.
43
<PAGE> 47
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Percent Cash High-Yield Growth-
of net Management Bond Income
assets Combined Account Account Account
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in American Variable
Insurance Series at net asset value:
-Cash Management Fund
452 shares at $11.01 per share
(cost-$5,035) 2.2% $ 4,982 $4,982
-High-Yield Bond Fund
962 shares at $13.91 per share
(cost-$13,396) 5.9 13,384 $13,384
-Growth-Income Fund
2,118 shares at $30.29 per share
(cost-$64,846) 28.0 64,153 $64,153
-Growth Fund
2,512 shares at $37.82 per share
(cost-$101,058) 41.5 95,018
-U.S. Government/AAA-Rated Securities Fund
222 shares at $11.47 per share
(cost-$2,544) 1.1 2,552
-International Fund
1,584 shares at $13.63 per share
(cost-$21,750) 9.4 21,596
-Asset Allocation Fund
2,066 shares at $13.35 per share
(cost-$27,602) 12.0 27,585
----- -------- ------ ------- -------
TOTAL ASSETS (Cost - $236,231) 100.1 229,270 4,982 13,384 64,153
LIABILITY- Payable to Lincoln National Life
Insurance Co. 0.1 147 3 6 41
----- -------- ------ ------- -------
NET ASSETS 100.0% $229,123 $4,979 $13,378 $64,112
===== ======== ====== ======= =======
UNITS OUTSTANDING 4,858 12,456 56,876
====== ======= =======
NET ASSET VALUE PER UNIT $1.025 $ 1.074 $ 1.127
====== ======= =======
</TABLE>
See accompanying Notes to financial statements.
44
<PAGE> 48
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S.
Government/
AAA-Rated Asset
Growth Securities International Allocation
Account Account Account Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in American Variable
Insurance Series at net asset value:
-Cash Management Fund
452 shares at $11.01 per share
(cost-$5,035)
-High-Yield Bond Fund
962 shares at $13.91 per share
(cost-$13,396)
-Growth-Income Fund
2,118 shares at $30.29 per share
(cost-$64,846)
-Growth Fund
2,512 shares at $37.82 per share
(cost-$101,058) $95,018
-U.S. Government/AAA-Rated Securities Fund
222 shares at $11.47 per share
(cost-$2,544) $2,552
-International Fund
1,584 shares at $13.63 per share
(cost-$21,750) $21,596
-Asset Allocation Fund
2,066 shares at $13.35 per share
(cost-$27,602) $27,585
------- ------ ------- -------
TOTAL ASSETS (Cost - $236,231) 95,018 2,552 21,596 27,585
LIABILITY- Payable to Lincoln National Life
Insurance Co. 54 2 19 22
------- ------ ------- -------
NET ASSETS $94,964 $2,550 $21,577 $27,563
======= ====== ======= =======
UNITS OUTSTANDING 89,036 2,415 20,437 24,633
======= ====== ======= =======
NET ASSET VALUE PER UNIT $ 1.067 $1.056 $ 1.056 $ 1.119
======= ====== ======= =======
</TABLE>
See accompanying Notes to financial statements.
45
<PAGE> 49
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
STATEMENT OF OPERATIONS
PERIOD FROM JUNE 21, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Cash High-Yield Growth-
Management Bond Income
Combined Account Account Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
-Dividends from investment income $ 1,804 $ 151 $ 418 $ 424
-Dividends from net realized gain
on investments 10,582 - - 2,477
-Mortality and expense risk charge (317) (14) (22) (79)
------- ------ ----- ------
NET INVESTMENT INCOME 12,069 137 396 2,822
Net realized and unrealized
gain(loss) on investments:
-Net realized gain (loss) on investments 171 (1) 4 95
-Net change in unrealized appreciation or
depreciation on investments (6,961) (53) (12) (693)
------- ------ ----- ------
NET GAIN (LOSS) ON INVESTMENTS (6,790) (54) (8) (598)
------- ------ ----- ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,279 $ 83 $ 388 $2,224
======= ====== ===== ======
</TABLE>
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM JUNE 21, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Cash High-Yield
Management Bond Growth-Incom
Combined Account Account Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes from operations:
-Net investment income $ 12,069 $ 137 $ 396 $ 2,822
-Net realized gain (loss) on
investments 171 (1) 4 95
-Net change in unrealized appreciation
or depreciation on investments (6,961) (53) (12) (693)
-------- ------ ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 5,279 83 388 2,224
Net increase from unit transactions 223,844 4,896 12,990 61,888
-------- ------ ------- -------
TOTAL INCREASE IN NET ASSETS
AND NET ASSETS AT DECEMBER 31, 1995 $229,123 $4,979 $13,378 $64,112
======== ====== ======= =======
</TABLE>
See accompanying Notes to financial statements.
46
<PAGE> 50
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
STATEMENT OF OPERATIONS
PERIOD FROM JUNE 21, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S.
Government/
AAA-Rated Asset
Growth Securities International Allocation
Account Account Account Account
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
-Dividends from investment income $ 244 $117 $146 $ 304
-Dividends from net realized gain
on investments 6,801 - 392 912
-Mortality and expense risk charge (124) (9) (30) (39)
------- ---- ---- ------
NET INVESTMENT INCOME 6,921 108 508 1,177
Net realized and unrealized
gain(loss) on investments:
Net realized gain (loss) on investments (19) - 10 82
Net change in unrealized appreciation or
depreciation on investments (6,040) 8 (154) (17)
------- ---- ---- ------
NET GAIN (LOSS) ON INVESTMENTS (6,059) 8 (144) 65
------- ---- ---- ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 862 $116 $364 $1,242
======= ==== ==== ======
</TABLE>
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM JUNE 21, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S.
Government/
AAA-Rated Asset
Growth Securities International Allocation
Account Account Account Account
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes from operations:
-Net investment income $ 6,921 $ 108 $ 508 $ 1,177
-Net realized gain (loss) on
investments (19) - 10 82
-Net change in unrealized appreciation
or depreciation on investments (6,040) 8 (154) (17)
------- ------ ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 862 116 364 1,242
Net increase from unit transactions 94,102 2,434 21,213 26,321
------- ------ ------- -------
TOTAL INCREASE IN NET ASSETS
AND NET ASSETS AT DECEMBER 31, 1995 $94,964 $2,550 $21,577 $27,563
======= ====== ======= =======
</TABLE>
47
<PAGE> 51
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE
LIFE ACCOUNT J
NOTES TO FINANCIAL
STATEMENTS
December 31, 1995
1. ACCOUNTING POLICIES
The Separate Account: Lincoln Life Flexible Premium Variable Life Account J
(Separate Account) was established as investment account of Lincoln National
Life Insurance Company (Lincoln Life) on March 9, 1994. The Separate Account
was registered on May 2, 1994, under the Investment Company Act of 1940, as
amended, as a unit investment trust, and commenced investment activity on June
21, 1995.
Investments: The Separate Account invests in the American Variable Insurance
Series (AVIS) which consists of seven funds: Cash Management Fund, High-Yield
Bond Fund, Growth-Income Fund, Growth Fund, U.S. Government/AAA-Rated
Securities Fund, International Fund, and Asset Allocation Fund (funds).
Investments in the funds are stated at the closing net asset values per share
on December 31, 1995. AVIS is registered as an open-end management investment
company.
Investment transactions are accounted for on a trade date basis and dividend
income is recorded on the ex-dividend date. The cost of investments sold is
determined by the average cost method.
Dividends: Dividends paid to the Separate Account are automatically reinvested
in shares of the funds on the payable date.
Federal Income Taxes: Operations of the Separate Account form a part of and are
taxed with operations of Lincoln Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. Using current law, no federal
income taxes are payable with respect to the Separate Account's net investment
income and the net realized gain on investments.
2. MORTALITY AND EXPENSE RISK CHARGE AND OTHER TRANSACTIONS WITH AFFILIATE
Percent of premium charge: Prior to allocation of net premiums to the Separate
Account, premiums paid are reduced by a percent of premium charge equal to 5.75
% of the premium. Amounts retained during 1995 by Lincoln Life for such
charges were $7,624.
Separate Account charges: Amounts are charged daily to the Separate Account by
Lincoln Life for a mortality and expense risk charge at a current annual rate
of .81% of the average daily net asset value of the Separate Account. These
charges are made in return for Lincoln Life's assumption of risks associated
with adverse mortality experience or excess administrative expenses in
connection with policies issued.
Other charges: Other charges, which are paid to Lincoln Life by redeeming
Separate Account units are for monthly administrative charges, the cost of
insurance, transfer and withdrawal charges, and contingent surrender charges.
These other charges for 1995 amounted to $12,332.
The monthly administrative charge amounts to $7.50 for each policy in force and
is intended to compensate Lincoln Life for continuing administration of the
policies, premium billings, overhead expenses, and other miscellaneous expenses.
Lincoln Life assumes the responsibility for providing the insurance benefits
included in the policy. The cost of insurance is determined each month based
upon the applicable insurance rate and the current death benefit. The cost of
insurance can vary from month to month since the determination of both the
insurance rate and the current death benefit depends upon a number of variables
as described in the Separate Account's prospectus.
The transfer charge amounts to $10 each time a policyowner tranfers funds from
one account to another; however, the transfer charge is currently being waived
for all transfers. The withdrawal charge is currently the greater of $10 or 3%
of the amount withdrawn for each withdrawal from the policy value by the
policyowner.
Surrender charges are deducted if the policy is surrendered during the first
eight policy years. Surrender charges in the first five years are
approximately 132% of the required base minimum annual premium. Surrender
charges in years six through eight decrease by policy year to 0% in the ninth
year. Additional surrender charges are deducted upon surrender of increases to
the specified amount.
48
<PAGE> 52
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
NOTES TO FINANCIAL STATEMENTS CONTINUED
3. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
A summary of changes from unit transactions for the period from June 21, 1995
to December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Units Amount
- ----------------------------------------------------------------------------
<S> <C> <C>
Cash Management Account:
Purchases 5,745 $5,799
Redemptions (887) (903)
------- --------
4,858 4,896
High-Yield Bond Account:
Purchases 13,754 14,355
Redemptions (1,298) (1,365)
------- --------
12,456 12,990
Growth-Income Account:
Purchases 73,067 79,545
Redemptions (16,191) (17,657)
------- --------
56,876 61,888
Growth Account:
Purchases 108,822 115,001
Redemptions (19,786) (20,899)
------- --------
89,036 94,102
U.S. Government/AAA-Rated
Securities Account:
Purchases 2,495 2,516
Redemptions (80) (82)
------- --------
2,415 2,434
International Account:
Purchases 22,942 23,828
Redemptions (2,505) (2,615)
------- --------
20,437 21,213
Asset Allocation Account:
Purchases 38,363 41,105
Redemptions (13,730) (14,784)
------- --------
24,633 26,321
--------
NET INCREASE FROM
UNIT TRANSACTIONS $223,844
========
</TABLE>
49
<PAGE> 53
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT J
NOTES TO FINANCIAL STATEMENTS CONTINUED
4. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and the aggregate proceeds from
investments sold were as follows for 1995:
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash Management Account $ 5,446 $ 410
High-Yield Bond Account 13,813 421
Growth-Income Account 70,564 5,813
Growth Account 107,406 6,329
U.S. Government/AAA-Rated Securities Account 2,613 69
International Account 22,554 814
Asset Allocation Account 33,269 5,749
-------- -------
$255,665 $19,605
======== =======
</TABLE>
50
<PAGE> 54
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors of Lincoln National Life Insurance Company and
Policyowners of Lincoln Life Flexible Premium Variable Life Account J
We have audited the accompanying statement of assets and liability of Lincoln
Life Flexible Premium Variable Life Account J (Separate Account) as of December
31, 1995, and the related statements of operations and changes in net assets
for the period from June 21, 1995 (commencement of operations) to December
31, 1995. These financial statements are the responsiblility of the Separate
Account's Management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lincoln Life Flexible
Premium Variable Life Account J at December 31, 1995, and the results of its
operations and the changes in its net assets for the period from June 21, 1995
to December 31, 1995 in conformity with generally accepted accounting
principles.
/S/ Ernst & Young LLP
Fort Wayne, Indiana
March 13, 1996
51
<PAGE> 55
This page was intentionally left blank.
52
<PAGE> 56
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of __ pages.
The signatures.
The following exhibits:
1. (1) Certified Resolution of the Board of Directors of the Company
establishing the Account.*
(2) Not applicable.
(3) (a) Proposed Form of Underwriting Agreement.*
(b) Form of Agents Contract.*
(c) Commission Schedule (Revised).*
(4) Not applicable.
(5) Form of Policy.*
<PAGE> 57
(6) (a) Certificate of Incorporation of the Company.*
(b) By-Laws of the Company.*
(7) Not applicable.
(8) Proposed Form of Participation Agreement (Revised).*
(9) Proposed Form of Indemnification Agreement (Revised).*
(10) Form of Application.*
2. See Exhibit 1(5)
3. Opinion and Consent of Jeremy Sachs, Esquire.*
4. Not applicable.
5. Opinion and Consent of Denis G. Schwartz, FSA, Assistant Vice President
(Revised).*
6. Consent of Ernst & Young LLP, Independent Auditors.
7. Memorandum describing the Company's issuance, transfer and redemption and
conversion procedures for the Policy.*
8. Other Exhibits.*
(1) Power of Attorney - Jack D. Hunter
(2) Power of Attorney - Gabriel Shaheen
(3) Power of Attorney - Ian M. Rolland
(4) Power of Attorney - Robert A. Anker
(5) Power of Attorney - O. Douglas Worthington
(6) Power of Attorney - Jon A. Boscia
(7) Power of Attorney - Richard C. Vaughan
*Previously filed as an exhibit to the registration statement.
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, The Lincoln National Life Insurance Company has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned hereunto duly authorized, in the City of Fort Wayne, State
of Indiana, on April , 1996.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY on its own
behalf and on behalf of LINCOLN NATIONAL FLEXIBLE PREMIUM
VARIABLE LIFE ACCOUNT J
By: /S/ REED P. MILLER
-----------------------------
Edward B. Martin, Vice President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ ROBERT A. ANKER Chairman, Chief Executive 4-30-96
- ------------------- Officer and Director ----
Robert A. Anker (Principal Executive
Officer)
/S/ JON A. BOSCIA President, Chief Operating 4-30-96
- ------------------- Officer and Director ----
Jon A. Boscia
/S/ GABRIEL SHAHEEN Director and Executive
- ------------------- Vice President ----
Gabriel Shaheen
/S/ O. DOUGLAS WORTHINGTON Vice President, Controller ----
- -------------------------- and Assistant Treasurer
O. Douglas Worthington (Chief Accounting Officer
and Chief Financial Officer)
/S/ H. THOMAS MCMEEKIN Director ----
- ----------------------
H. Thomas McMeekin
<PAGE> 59
/S/KEITH J. RYAN Vice President, Chief 4-30-96
- -------------------- Financial Officer and ----
Keith J. Ryan Assistant Treasurer
(Principal Financial Officer)
/S/ IAN M ROLLAND Director 4-30-96
- ------------------ ----
Ian M. Rolland
/S/ RICHARD C VAUGHAN Director 4-30-96
- ---------------------- ----
Richard C. Vaughan
/S/ JACK D. HUNTER Director 4-30-96
- ------------------ ----
Jack D. Hunter
<PAGE> 1
EXHIBIT 6
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the Post-
Effective Amendment No. 4 to the Registration Statement (Form S-6 No. 33-76434)
and related Prospectus pertaining to the Lincoln National Flexible Premium
Variable Life Account J and to the use therein of our reports (a) dated February
7, 1996 with respect to the consolidated financial statements of The Lincoln
National Life Insurance Company and (b) dated March 13, 1996 with respect to
the financial statements of Lincoln National Flexible Premium Variable Life
Account J.
/S/ Ernest & Young LLP
Fort Wayne, Indiana
April 26, 1996
