The Lincoln Elite Series of Funds

Transcription

1 FOR LIFE Variable Universal Life Insurance The Lincoln Elite Series of Funds Client Investment Options Guide The Lincoln National Life Insurance Company Lincoln Life & Annuity Company of New York Not a deposit Not FDIC-insured May go down in value Not insured by any federal government agency Not guaranteed by any bank or savings association

2 We believe... LINCOLN FOR LIFE Financial You should have Growth protection the freedom potential stems contributes to to choose your from quality financial success allocations and diversity 2

3 Your policy should help you achieve your goals You ve got what it takes to succeed Protect what s important in your life as you build for the future. With Lincoln variable universal life (VUL) insurance, you can. You want the best of both worlds financial protection and account value growth potential. Your policy offers the advantages of: Valuable death benefit coverage This can replace income for your family or protect your business. Tax-deferred growth potential Complement your strategy with investment options available through the Lincoln Elite Series of Funds. Flexibility and choice Select your own allocation from among the more than 70 investment options across all asset classes. Opt for a more structured course from one of several asset allocation and profile funds. Experience opportunities available with some of the nation s leading investment managers. The strength of Lincoln Lincoln VUL policy guarantees are backed by the claims-paying ability of Lincoln, a company with more than a 100-year heritage of strength and integrity. With any VUL product, certain fees and costs are involved, including monthly cost of insurance, administrative expense and premium load charges, as well as daily charges on assets invested in the variable subaccounts for mortality and expense risk, and asset management fees. Please consult the prospectus or ask your financial advisor for more detailed information. 3

4 Portfolio offerings from Lincoln With the Lincoln Elite Series of Funds, you can create a portfolio tailored to your individual needs from an array of investment choices. U.S. Equity options Large-cap Value Delaware VIP Value Series* FTVIPT Mutual Shares Securities Fund LVIP MFS Value Fund LVIP SSgA Large Cap 100 Fund LVIP Wells Fargo Intrinsic Value Fund Blend American Funds Growth-Income Fund SM Fidelity VIP Contrafund Portfolio LVIP Delaware Social Awareness Fund* LVIP Dimensional U.S. Equity Fund LVIP SSgA S&P 500 Index Fund ** LVIP Vanguard Domestic Equity ETF Fund Mid-cap Small-cap AllianceBernstein VPS Small/Mid Cap Value Portfolio LVIP Delaware Special Opportunities Fund* LVIP Mid-Cap Value Fund (subadvised by Wellington Management) Delaware VIP Small Cap Value Series* LVIP Columbia Value Opportunities Fund LVIP SSgA Small/Mid Cap 200 Fund International/Global options Value Large-cap LVIP Mondrian International Value Fund LVIP SSgA Developed International 150 Fund LVIP Templeton Growth Fund Small/mid-cap Delaware VIP Emerging Markets Series* LVIP SSgA Emerging Markets 100 Fund LVIP SSgA Small-Cap Index Fund Blend American Funds International Fund SM LVIP Dimensional Non-U.S. Equity Fund LVIP SSgA International Index Fund LVIP Vanguard International Equity ETF Fund Fixed Income options Short duration Intermediate duration High quality Delaware VIP Limited-Term Diversified Income Series* LVIP Money Market Fund (subadvised by Delaware Investments*) LVIP Delaware Bond Fund* LVIP Global Income Fund (subadvised by Franklin and Mondrian) LVIP SSgA Bond Index Fund LVIP Dimensional/Vanguard Total Bond Fund Medium quality LVIP Delaware Diversified Floating Rate Fund* Delaware VIP Diversified Income Series* Low quality LVIP J.P. Morgan High Yield Fund Other fund options Risk-based asset allocation* LVIP Protected Profile Conservative Fund LVIP Protected Profile Moderate Fund LVIP Protected Profile Growth Fund LVIP SSgA Conservative Index Allocation Fund LVIP SSgA Conservative Structured Allocation Fund LVIP SSgA Global Tactical Allocation Fund LVIP SSgA Moderate Index Allocation Fund LVIP SSgA Moderate Structured Allocation Fund LVIP SSgA Moderately Aggressive Index Allocation Fund LVIP SSgA Moderately Aggressive Structured Allocation Fund Balanced/asset allocation BlackRock Global Allocation V.I. Fund FTVIPT Franklin Income Securities Fund Alternative assets DWS Alternative Asset Allocation VIP Portfolio PIMCO VIT CommodityRealReturn Strategy Portfolio 4 Each fund has been assigned to a style box by Lincoln based on its investment focus and portfolio composition. The funds portfolios are subject to change and may not always reflect the characteristics of their assigned box. Market cap: Large-cap companies (L) have a market capitalization ranging from greater than $5 billion to greater than $9.1 billion, depending on fund manager investment classifications. Mid-cap companies (M) have a market capitalization ranging from between $1 $5 billion to between $1.3 $9.1 billion, depending on fund manager investment classifications. Small-cap companies (S) have a market capitalization ranging from less than $1 billion to less than $1.3 billion, depending on fund manager investment classifications. Equity style: Value (V) focuses primarily on companie a blend of both value and growth stocks. Growth (G) expected to continue growing. Fixed income style: The vertical axis shows the credit as measured by a bond s effective duration. Duration: Short-range maturity (S) is up to 3.5 years. greater than 6 years.

5 Growth American Funds Growth Fund SM Delaware VIP U.S. Growth Series* Fidelity VIP Growth Portfolio LVIP Capital Growth Fund (subadvised by Wellington Management) LVIP Janus Capital Appreciation Fund LVIP T. Rowe Price Growth Stock Fund MFS VIT Growth Series Delaware VIP Smid Cap Growth Series* Fidelity VIP Mid Cap Portfolio LVIP T. Rowe Price Structured Mid-Cap Growth Fund LVIP Turner Mid-Cap Growth Fund LVIP Baron Growth Opportunities Fund Growth American Funds Global Growth Fund SM LVIP MFS International Growth Fund American Funds Global Small Capitalization Fund SM Long duration LVIP BlackRock Inflation Protected Bond Fund Specialty/sector AllianceBernstein VPS Global Thematic Growth Portfolio Delaware VIP REIT Series* LVIP Cohen & Steers Global Real Estate Fund MFS VIT Utilities Series s whose stock is believed to be selling below its true worth. Blend (B) focuses on focuses primarily on companies whose stock is believed to be fairly valued but is quality of the long bonds owned; the horizontal axis shows interest rate sensitivity Intermediate-range maturity (I) is 3.5 years to 6 years. Long-range maturity (L) is Investing internationally involves risks not associated with investing solely in the United States, such as currency fluctuation, political risk, differences in accounting, and the limited availability of information. Funds that invest in small- and/or mid-size company stocks typically involve greater risk, particularly in the short term, than those investing in larger, more established companies. An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share (or for the LVIP Money Market Fund $10.00 per share), it is possible to lose money by investing in the Fund. Funds that concentrate investments in one region or industry may carry greater risk than more broadly diversified funds. The return of principal in bond portfolios is not guaranteed. Bond portfolios have the same interest rate, inflation, credit, prepayment and market risks that are associated with the underlying bonds owned by the Fund (or account). Asset allocation does not ensure a profit, nor protect against loss in a declining market. High-yield portfolios may invest in high-yield or lower-rated fixed income securities (junk bonds), which may experience higher volatility and increased risk of nonpayment or default. REITs involve risks such as refinancing, economic conditions in the real estate industry, changes in property values, dependency on real estate management, and other risks associated with a portfolio that concentrates its investments in one sector or geographic region. Investing in emerging markets can be riskier than investing in well-established foreign markets. International investing involves special risks not found in domestic investing, including increased political, social, and economic instability. Floating rate funds should not be considered alternatives to CDs or money market funds and should not be considered as cash alternatives. Exchange-traded funds (ETFs) in this lineup are available through collective trusts or mutual funds. Investors cannot invest directly in an ETF. *Investments in Delaware Investments VIP Series and LVIP Delaware Funds managed by Delaware Investment Advisors, a series of Delaware Management Business Trust, are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN and its holding companies, including their subsidiaries or related companies, and are subject to investment risk, including possible delays in prepayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Series or Funds, the repayment of capital from the Series or Funds, or any particular rate of return. This fund is operated as a fund of funds, which invests primarily in other funds rather than in individual securities. Funds of this nature may be more expensive than other investment options. These types of funds are asset allocation funds; asset allocation does not ensure a profit nor protect against loss. The protection strategy used by this fund is separate and distinct from any annuity or insurance contract riders or features. This fund is not guaranteed or insured by Lincoln or any other insurance company or other entity. An index is unmanaged, and one cannot invest directly in an index. ** Standard & Poor s, S&P, S&P 500, Standard & Poor s 500 and 500 are trademarks of Standard & Poor s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. and have been licensed for use by Lincoln Variable Insurance Products Trust and its affiliates. The Product is not sponsored, endorsed, sold or promoted by Standard & Poor s and Standard & Poor s makes no representation regarding the advisability of purchasing the Product. This fund will typically seek to gain exposure to the commodity markets by investing in commoditylinked derivative instruments, swap transactions, or index- and commodity-linked structured notes. These instruments may subject the Fund to greater volatility than investments in traditional securities. This fund is nondiversified, which means it may incur greater risk by concentrating its assets in a smaller number of issuers than a diversified fund. AllianceBernstein VPS refers to AllianceBernstein Variable Products Series Fund, Inc. American Funds refers to underlying investments in the American Funds Insurance Series. BlackRock V.I. refers to BlackRock Variable Series Funds, Inc. Delaware VIP refers to Delaware Variable Insurance Products Trust. DWS VIP refers to DWS Variable Series II. Fidelity Investments is a registered trademark of FMR Corp. Fidelit y VIP refers to Fidelity Variable Insurance Products. FTVIPT refers to Franklin Templeton Variable Insurance Products Trust. If the Fund starts with FTVIPT, it means the Fund is a series of FTVIPT; however, FTVIPT is not a part of the Fund s name. LVIP refers to Lincoln Variable Insurance Products Trust. MFS VIT refers to MFS Variable Insurance Trust. PIMCO VIT refers to PIMCO Variable Insurance Trust. SSgA refers to State Street Global Advisors. 5

6 Adding diversification to your investment strategy A mix of both equities and bonds is essential for any investor s portfolio. Overweighting in one or the other, however, can increase your exposure to market volatility. Diversifying your assets across a broad selection of funding options can be a good strategy for reducing that exposure while it can t guarantee profits or protect against losses, it can help you achieve balance and minimize risk in your portfolio. Asset allocation is a long-term investment approach to help you create a more diversified portfolio. Your assets can be allocated based on investment goals, risk tolerance, and time horizon. You can create an allocation that matches your investment objectives by choosing your own allocations or by selecting the same mix of options as either of the following sample asset allocations. Equity Income sample allocation This asset mix, which invests in a diversified portfolio of 10 underlying investment options, targets a balance between capital appreciation and current income. Its composition includes a broad reach of global developed and emerging market equities, along with investment-grade fixed income. Capital Appreciation sample allocation This asset mix is designed primarily to provide long-term capital growth with a secondary focus on current income. It incorporates a portfolio of 10 underlying investment options spanning a variety of asset classes such as global developed equities, emerging markets, and REIT equities, along with investment-grade fixed income. 6

7 4% 9% 50% 32% 30% 42% 14% 19% Equity Income sample allocation* Capital Appreciation sample allocation* U.S. Equities LVIP MFS Value 15% 18% American Funds Growth 11% 14% Fidelity VIP Mid Cap 6% 10% Subtotal 32% 42% International Equities LVIP Templeton Growth 6% 8% American Funds Global Growth 6% 8% American Funds Global Small Capitalization 2% 3% Subtotal 14% 19% Fixed Income LVIP Delaware Bond 40% 24% Delaware VIP Limited-Term Diversified Income 10% 6% Subtotal 50% 30% Other Delaware VIP Emerging Markets 3% 6% Delaware VIP REIT 1% 3% Subtotal 4% 9% *These sample allocations were developed by Lincoln Investment Advisors Corporation, a registered investment advisor (RIA). They are not available for direct election; each investment option in the chosen allocation must be selected individually at time of application. This is a sample, and is not intended as investment advice for any individual. 7

8 Accessing additional expertise If building your own investment portfolio is not for you, Lincoln has partnered with State Street Global Advisors (SSgA), Dimensional Fund Advisors, and Vanguard, three of the world s leading money managers, to make available a variety of quality investment options in three management styles. Investment style Style description Cost Lincoln option Active management Investment manager continually monitors the portfolio and market to make informed decisions in an effort to outperform a benchmark index Higher fees LVIP Profile Funds LVIP SSgA Global Tactical Allocation Fund Passive management Investment manager makes minimal investment decisions to track the stated index as closely as possible Lower fees LVIP SSgA Index Allocation Funds Hybrid management A combination of active and passive investment styles used in an effort to outperform the benchmark while minimizing cost Moderate fees LVIP SSgA Structured Allocation Funds LVIP Total Bond Fund LVIP Vanguard ETF Funds Dimensional management Captures specific dimensions of risk identified by academic research and seeks enhanced returns through portfolio design while minimizing transaction costs Moderate fees LVIP Dimensional Funds Each style has different features and cost implications that you ll need to weigh against one another. Because each investor has different goals, risk tolerance and cost awareness, you should talk with your advisor about what strategy is right for you. 8

9 LVIP Risk-Based Profile Funds Allocation breakdown as of March 7, 2012 With Lincoln s variable universal life insurance, you have the choice of three LVIP Protected Profile Funds, which are fund of funds options that invest primarily in other funds rather than individual securities. The LVIP Protected Profile Funds provide a built-in assetallocation, together with a risk management strategy designed to help reduce the effects of market volatility on your portfolio. The protection strategy seeks to capture upside potential and minimize loss due to unexpected swings in the market by holding a consistent position in short exchange-traded futures, a type of options contract which increases in value when markets decline. When the portfolio value drops, the futures are sold and the proceeds are reinvested in the portfolio. U.S. Equities 60% 31% 9% LVIP Protected Profile Conservative Fund 30% 40% 42% 47% 18% LVIP Protected Profile Moderate Fund 23% LVIP Protected Profile Growth Fund LVIP SSgA S&P 500 Index (Mellon) 17% 20% 23% LVIP SSgA Small Cap Index (Mellon) 4% 7% 7% Delaware VIP U.S. Growth 3% 3% 3% LVIP SSgA Large Cap 100 2% 4% 4% Delaware VIP Value 2% 3% 3% PIMCO CommodityRealReturn Strategy 1% 1% 2% LVIP Cohen and Steers Global Real Estate 1% 2% 3% Fidelity VIP Mid Cap 1% 2% 2% Subtotal 31% 42% 47% International Equities LVIP SSgA International Index 5% 9% 13% LVIP Mondrian International Value 2% 3% 3% LVIP SSgA Developed International 150 2% 3% 3% LVIP SSgA Emerging Markets 100 0% 1% 2% LVIP MFS International Growth 0% 2% 2% Subtotal 9% 18% 23% Fixed Income LVIP Delaware Bond 31% 16% 12% Delaware VIP Diversified Income 8% 7% 6% LVIP Global Income 6% 5% 4% LVIP BlackRock Inflation Protected Bond 5% 4% 3% LVIP Delaware Diversified Floating Rate 4% 4% 2% American Funds Mortgage Fund SM (Retail) 3% 1% 1% LVIP J.P. Morgan High Yield 2% 3% 2% Subtotal 60% 40% 30% LVIP Protected Profile Funds are managed by Lincoln Investment Advisors Corporation, with consulting services provided by Wilshire Associates and Milliman Financial Risk Managment LLC. Fund allocations are as of December 30, Past performance does not guarantee future returns, and processes used may not achieve the desired results. The protection strategy used by the LVIP Protected Profile Funds is separate and distinct from any annuity or insurance contract riders or features. These Funds are not guaranteed or insured by Lincoln or any other insurance company or other entity. Profile Funds may be more expensive than other investment options. The Profile Funds are asset allocation funds; asset allocation does not ensure a profit or protect against loss. Please note that asset allocation may not be appropriate for all investors, particularly those interested in directing their investments on their own. These are target allocations that are subject to change and do not include fund assets allocated to exchange-traded futures. Funds that invest in small company stocks typically involve greater risk, particularly in the short term, than those investing in larger, more established companies. International investing involves special risks not found in domestic investing, including currency, economic, and political risks. 9

10 LVIP SSgA Allocation Funds Lincoln has partnered with SSgA Funds Management Inc., an affiliate of State Street Global Advisors, to develop and make available seven fund of funds investment options in three risk categories. LVIP SSgA Structured Allocation Funds Allocation breakdown as of March 7, % 22% 18% 40% 26% 34% 30% 32% 38% LVIP SSgA Conservative Structured Allocation Fund LVIP SSgA Moderate Structured Allocation Fund LVIP SSgA Moderately Aggressive Structured Allocation Fund U.S. Equities LVIP SSgA Large Cap 100 9% LVIP SSgA Large Cap % LVIP SSgA Large Cap % LVIP SSgA S&P 500 Index 9% LVIP SSgA S&P 500 Index 13% LVIP SSgA S&P 500 Index 14% LVIP SSgA Small/Mid Cap 200 2% LVIP SSgA Small/Mid Cap 200 4% LVIP SSgA Small/Mid Cap 200 5% LVIP SSgA Small-Cap Index 2% LVIP SSgA Small-Cap Index 4% LVIP SSgA Small-Cap Index 5% International Equities LVIP SSgA Developed International 150 7% LVIP SSgA Developed International % LVIP SSgA Developed International % LVIP SSgA Emerging Markets 100 4% LVIP SSgA Emerging Markets 100 6% LVIP SSgA Emerging Markets % LVIP SSgA International Index 7% LVIP SSgA International Index 10% LVIP SSgA International Index 11% Fixed Income LVIP SSgA Bond Index 50% LVIP SSgA Bond Index 30% LVIP SSgA Bond Index 25% SPDR Barclays Capital TIPS ETF (IPE) 10% SPDR Barclays Capital TIPS ETF (IPE) 10% SPDR Barclays Capital TIPS ETF (IPE) 5% LVIP SSgA Index Allocation Funds Allocation breakdown as of March 7, % 22% 18% 40% 34% 30% 38% 26% 32% LVIP SSgA Conservative Index Allocation Fund LVIP SSgA Moderate Index Allocation Fund LVIP SSgA Moderately Aggressive Index Allocation Fund U.S. Equities LVIP SSgA S&P 500 Index 18% LVIP SSgA S&P 500 Index 26% LVIP SSgA S&P 500 Index 28% LVIP SSgA Small-Cap Index 4% LVIP SSgA Small-Cap Index 8% LVIP SSgA Small-Cap Index 10% International Equities LVIP SSgA International Index 14% LVIP SSgA International Index 20% LVIP SSgA International Index 22% SPDR S&P Emerging Markets ETF (GMM) 4% SPDR S&P Emerging Markets ETF (GMM) 6% SPDR S&P Emerging Markets ETF (GMM) 10% Fixed Income LVIP SSgA Bond Index 50% LVIP SSgA Bond Index 30% LVIP SSgA Bond Index 25% SPDR Barclays Capital TIPS ETF (IPE) 10% SPDR Barclays Capital TIPS ETF (IPE) 10% SPDR Barclays Capital TIPS ETF (IPE) 5% 10

11 LVIP SSgA Global Tactical Allocation Fund Allocation breakdown as of January 31, % 35.1% 38.3% 23.5% U.S. Equities LVIP SSgA Large Cap % LVIP SSgA S&P 500 Index 11.0% SPDR S&P 500 (SPY) 9.4% SPDR S&P Midcap 400 ETF (MDY) 3.3% LVIP SSgA Small/Mid Cap % LVIP SSgA Small-Cap Index 1.0% International Equities LVIP SSgA Developed International % LVIP SSgA International Index 6.0% LVIP SSgA Emerging Markets % SPDR S&P Emerging Markets ETF (GMM) 2.8% SPDR S&P World Ex-U.S. ETF (GWL) 2.0% State Street Global Advisors is the world s largest institutional asset manager. SSgA focuses single-mindedly on designing and delivering competitive investment strategies and integrated solutions to their clients worldwide. With more than $1.8 trillion in assets under management as of December 31, 2011, and 29 locations and 10 investment centers across five continents, SSgA is one of the world s leading money managers.* Fund allocations are as of January 31, Each SSgA Allocation Fund is operated as a fund of funds, which invests primarily in other funds rather than in individual securities. Funds of this nature may be more expensive than other investment options. These funds are asset allocation funds; asset allocation does not ensure a profit or protect against loss. Funds that invest in small company stocks typically involve greater risk, particularly in the short term, than those investing in larger, more established companies. International investing involves special risks not found in domestic investing, including currency, economic, and political risks. *State Street Global Advisors, December 31, U.S. Bonds LVIP SSgA Bond Index 15.5% SPDR Barclays Capital TIPS ETF (IPE) 5.1% SPDR DB International Government Inflation Protected Bond ETF (WIP) 4.1% SPDR Barclays Capital Intermediate Term Credit Bond (ITR) 4.0% SPDR Barclays Capital Aggregate Bond (LAG) 3.0% ishares iboxx $ Investment Grade Corporate Bond 2.0% SPDR Barclays Capital High Yield Bond ETF (JNK) 1.0% Dreyfus Daily Sweep (CASH) 0.3% SPDR Barclays Capital Short Term Corporate Bond (SCPB) 0.1% Other SPDR Gold Shares (GLD) 3.2% 11

12 LVIP Dimensional Funds Lincoln has developed two investment options in partnership with Dimensional Fund Advisors (Dimensional). These fund of funds options provide you access to Dimensional s risk-managed asset allocation strategy while also leveraging Lincoln expertise in risk management. The Dimensional difference Dimensional Fund Advisors brings a new model of investing that uses academic research to develop their distinct investment strategies. It s this innovative design and a cost-aware execution that sets them apart. Dimensional Fund Advisors: key principles Focus on investing, not forecasting Rather than trying to outguess the market, Dimensional takes advantage of the ways markets are right. They have developed their own tools to help identify sources of the most attractive investment return opportunities. Risk and return are related Academic research seeks to uncover the risks worth taking and the risks that are not. Dimensional funds are coordinated by distinct risk and return models that have been tested in both academic labs and actual portfolios. Structure determines performance Dimensional believes that diversification is the most essential tool available to investors. Instead of relying on speculation or commercial indexes to structure its investment strategies, Dimensional uses academic research to structure and diversify their portfolios. 12

13 LVIP Dimensional U.S. Equity Fund Investment objective: long-term capital appreciation This fund operates under a fund of funds structure, investing in underlying Dimensional funds which, in turn, invest in a broad and diverse group of equity securities (stocks) of U.S. companies. Although classified as Large Cap Blend, this fund places a greater emphasis on small capitalization and value stocks relative to the market in general. LVIP Dimensional U.S. Equity Fund Allocation breakdown as of March 7, 2012 Inception date: 4/29/11 Asset class: U.S. Large Blend LVIP Dimensional Non-U.S. Equity Fund Investment objective: long-term capital appreciation This fund operates under a fund of funds structure, investing in underlying Dimensional funds which, in turn, invest in a broad and diverse group of foreign equity securities (stocks) of non-u.s. companies in developed and developing markets. Although classified as Large Cap Blend, this fund places a greater emphasis on small capitalization and value stocks relative to the market in general. LVIP Dimensional Non-U.S. Equity Fund Allocation breakdown as of March 7, 2012 Inception date: 4/29/11 Asset class: International Large Blend 20% DFA U.S. Core Equity 1 30% DFA U.S. Large Company 8% DFA U.S. Small Cap 5% DFA U.S. Small Cap Value 5% DFA U.S. Micro Cap 10% VA U.S. Targeted Value 15% VA U.S. Large Value 5% DFA Real Estate Securities 2% LVIP Money Market 25% DFA International Core Equity 25% DFA Large Cap International Portfolio 10% DFA Emerging Markets Core Equity 10% DFA International Vector Equity 8% VA International Small 10% VA International Value 5% DFA International Small Cap Value 5% DFA International Real Estate Securities 2% LVIP Money Market About Dimensional Dimensional Fund Advisors is a global institutional asset management firm owned primarily by employees and directors. The firm s broadly diversified mutual funds are engineered and managed to precisely target dimensions of risk and capture their expected returns. As of December 2011, Dimensional had $213.7 billion in assets under management. The firm has offices in Austin, London, Santa Monica, Sydney and Vancouver. The LVIP Dimensional Funds are funds of funds, which invest primarily in other funds rather than in individual securities. Funds of this nature may be more expensive than other investment options. They are asset allocation funds; asset allocation does not ensure a profit or protect against loss. 13

14 LVIP Vanguard Funds Designed to give you access to one of the newest and most popular investment vehicles, the LVIP Vanguard exchange-traded funds (ETFs) offer Vanguard s at-cost management and indexing expertise in a series of well-diversified ETFs. If you re looking for a way to invest in domestic and international large-cap stocks, you may benefit from the fund of funds structure of the LVIP Vanguard ETF Funds. LVIP Vanguard Domestic Equity ETF Fund Investment objective: long-term capital appreciation This fund operates under a fund of funds structure, investing in underlying Vanguard ETF (Exchange Traded Funds) mutual funds which, in turn, invest in a broad and diverse group of equity securities (stocks) of U.S. companies. LVIP Vanguard Domestic Equity ETF Fund Allocation breakdown as of March 7, 2012 Inception date: 4/29/11 Asset class: U.S. Large Blend LVIP Vanguard International Equity ETF Fund Investment objective: long-term capital appreciation This fund operates under a fund of funds structure, investing in underlying Vanguard ETF (Exchange Traded Funds) mutual funds which, in turn, invest in a broad and diverse group of foreign equity securities (stocks) of foreign companies in developed and emerging markets. LVIP Vanguard International Equity ETF Fund Allocation breakdown as of March 7, 2012 Inception date: 4/29/11 Asset class: International Large Blend 27% Vanguard Total Stock Market ETF 15% Vanguard Mega Cap 300 Growth ETF 20% Vanguard Mega Cap 300 Value ETF 10% Vanguard Dividend Appreciation ETF 4% Vanguard Mid-Cap Growth ETF 6% Vanguard Mid-Cap Value ETF 3% Vanguard Small Cap Growth ETF 5% Vanguard Small Cap Value ETF 5% Vanguard REIT ETF 3% Vanguard VA Small Company Growth 2% LVIP Money Market 15% Vanguard FTSE All-World ex-us ETF 17% Vanguard Pacific Stock ETF 8% Vanguard European ETF 10% Vanguard Emerging Markets Stock ETF 15% Vanguard FTSE All-Wld ex-us SmCp Idx ETF 20% Vanguard Europe Pacific ETF 5% Vanguard Global ex-u.s. Real Estate ETF 8% Vanguard VA International 2% LVIP Money Market Holdings listed above represent the holdings of the entire portfolio as of March 7, The LVIP Vanguard ETF Funds are funds of funds, which invest primarily in other funds rather than in individual securities. Funds of this nature may be more expensive than other investment options. They are asset allocation funds; asset allocation does not ensure a profit or protect against loss. About Vanguard Corporate headquarters: Valley Forge, Pennsylvania Founded: May 1, 1975 First fund: Wellington Fund (inception date: July 1, 1929) Offices: Charlotte, Scottsdale, Valley Forge, London, Paris, Amsterdam, Zurich, Tokyo, Singapore, Sydney, Brisbane, Melbourne and Perth Total assets: Approximately $1.6 trillion in U.S. mutual funds (as of February 2012) 14

15 LVIP Dimensional/Vanguard Total Bond Fund The only investment option of its kind, the LVIP Total Bond Fund employs a unique allocation strategy combining variable and retail funds with ETFs. The underlying ETF holdings help track indices and provide investment exposure through a diversified approach. LVIP Dimensional/Vanguard Total Bond Fund Investment objective: total return consistent with the preservation of capital This fund operates under a fund of funds structure, investing in a combination of underlying funds from Dimensional Fund Advisors and Vanguard ETF mutual funds which, in turn, invest in primarily U.S. and foreign debt obligations (fixed income securities). LVIP Dimensional/Vanguard Total Bond Fund Allocation breakdown as of March 7, 2012 Inception date: 4/29/11 Asset class: Fixed Income (Intermediate duration, High quality) 27% Vanguard Total Bond Market ETF 12% Vanguard Mortgage-Backed Securities ETF 6% Vanguard Long-Term Bond ETF 4% Vanguard Short-term Corporate Bond ETF 13% DFA VA Short-Term Fixed 10% DFA Two-Year Global Fixed 10% DFA Inflation-Protected Securities 6% DFA VA Global Bond 10% DFA Intermediate-Term Extended Quality 2% LVIP Money Market Vanguard and Vanguard ETFs are trademarks of The Vanguard Group, Inc. What are ETFs? Exchange-traded funds (ETFs) are funds of securities designed to track the performance of certain market indices, such as the S&P 500, or particular market sectors or industries, such as Utilities or Technology. ETFs are structured like conventional mutual funds but are priced and traded throughout the day like individual stocks. 15

16 HELPING PEOPLE FACE THE FUTURE WITH CONFIDENCE At Lincoln Financial Group, we ve spent more than 100 years living up to the character of our namesake: integrity, honesty, and the belief in a better tomorrow. We provide advice and solutions to help people save for tomorrow, secure and maximize their income, protect themselves and their loved ones, and prepare for the unexpected. INCOME LIFE RETIREMENT GROUP BENEFITS Not a deposit Not FDIC-insured Not insured by any federal government agency Not guaranteed by any bank or savings association May go down in value 2012 Lincoln National Corporation Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations. LCN ECG 4/12 Z02 Order code: VU-INVST-BRC002 This material was prepared to support the promotion and marketing of investment and insurance products. Lincoln Financial Group affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Please consult your own independent advisor as to any tax, accounting, or legal statements made herein. Lincoln variable life insurance policies are issued on policy forms LN696, LN697, LN698, LN699 and respective state variations by The Lincoln National Life Insurance Company, Fort Wayne, IN, and are distributed by Lincoln Financial Distributors, Inc., a broker/dealer. The Lincoln National Life Insurance Company does not do business in the state of New York, nor is it authorized to do so. In New York, variable life insurance policies are issued on policy forms LN696, LN697, LN698, and LN699 by Lincoln Life & Annuity Company of New York, Syracuse, NY, and are distributed by Lincoln Financial Distributors, Inc., a broker/dealer. All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer and/or insurance agency selling the policy, or any affiliates of those entities other than the issuing company affiliates, and none makes any representations or guarantees regarding the claims-paying ability of the issuer. THE LVIP PROTECTED PROFILE FUNDS ARE NOT GUARANTEED OR INSURED BY LINCOLN OR ANY OTHER INSURANCE COMPANY OR OTHER ENTITY. THE PROTECTION STRATEGY USED BY THESE FUNDS IS SEPARATE AND DISTINCT FROM ANY ANNUITY OR INSURANCE CONTRACT RIDERS OR FEATURES. Lincoln variable universal life insurance is sold by prospectus. Carefully consider the investment objectives, risks, and charges and expenses of the policy and its underlying investment options. This and other important information can be found in the prospectus for the variable universal life policy and the prospectus for the underlying investment options. Prospectuses are available upon request and should be read carefully before investing or sending money. For a current prospectus, please call or go to Policy values will fluctuate and are subject to market risk and to possible loss of principal. Products and features are subject to state availability. Limitations and exclusions may apply. Lincoln Investment Advisors Corporation (LIAC) serves as the investment adviser to the LVIP Protected Profile Funds. LIAC is the subsidiary of The Lincoln National Life Insurance Company responsible for analyzing and reviewing the investment options within Lincoln variable products and providing recommendations regarding these options to Lincoln senior management.