Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example illustrates the hypothetical expenses that you would incur over the time periods indicated if you invest $10,000 in the Fund's shares. The example also assumes that the Fund provides a return of 5% a year and that operating expenses remain the same. This example reflects the net operating expenses with fee waiver and expense reimbursement for the one-year contractual period and the total operating expenses without fee waiver and expense reimbursement for the remaining time periods shown below. Your actual costs may be higher or lower than this example. This example does not reflect any variable contract expenses. If variable contract expenses were included, the expenses shown would be higher. The results apply whether or not you redeem your investment at the end of the given period.
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1 year
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3 years
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Standard Class
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$72
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$293
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Service Class
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$107
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$402
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or 'turns over' its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. Because the Fund is newly organized, the portfolio turnover rate is not yet available. The Fund intends to turn over all of its options holdings on at least an annual basis.
Principal Investment Strategies
The Fund seeks, over each Outcome Period, to provide returns that track those of the S&P 500 Price Return Index (the 'Index') up to a cap, while providing a buffer against losses. The Fund employs a defined outcome strategy, sub-advised by Milliman Financial Risk Management LLC, which seeks to produce pre-determined investment outcomes based on the performance of the Index over a one-year period ('Outcomes'), subject to the specified cap for gains and with the benefit of a buffer for losses. Due to the unique mechanics of the Fund's strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that are distinct from many other investment vehicles.
The Index is a price return index, which captures only the capital appreciation component of the issuers in the Index and not the associated dividend payments. The Fund, and therefore investors of the Fund, will not receive the benefit of such dividends. As of December 31, 2020, a significant portion of the Fund's investment exposure comprised companies in the information technology sector.
The Fund, under normal circumstances, invests at least 80% of its assets in options that reference the Index or, in an underlying fund which tracks the Index. The Fund invests approximately half of its assets in FLexible EXchange® Options ('FLEX Options') and approximately half of its assets in the LVIP SSGA S&P 500® Index Fund (the 'Underlying Fund').
The Fund's initial Outcome Period is the one-year period from August 20, 2021 to August 19, 2022. The pre-determined Outcomes sought by the Fund, which include the buffer and cap discussed below, are based upon the performance of the Index during the Outcome Period.
Buffer: The Fund seeks to provide a buffer against the first 22% of Index price decreases over each Outcome Period before the deduction of Fund expenses (the 'Buffer'), which after Fund expenses is approximately 21.3% for the Standard Class and 20.95% for the Service Class. The Fund, and therefore investors, will bear all Index losses exceeding 22%. There is no guarantee the Fund will successfully buffer against Index price decreases. The Buffer is designed to have its full effect only for investors who continually hold Fund shares for an entire Outcome Period. The Buffer is discussed in further detail below.
Cap: For each Outcome Period, Fund performance is subject to a specified upside return cap that represents the maximum percentage return the Fund can achieve during the Outcome Period before the deduction of Fund expenses (the 'Cap'). The Cap is set on the first day of an Outcome Period based on the cost of providing the Buffer and may increase or decrease from one Outcome Period to the next.
If the Index experiences gains over an Outcome Period, the strategy seeks to provide investment returns that track the performance of the Index, up to the Cap. If the Index experiences returns over an Outcome Period in excess of the Cap, the Fund will not experience those excess gains. The Cap (before Fund expenses) is reduced by the Fund's expenses. The Cap is expected to change from one Outcome Period to the next. The Cap is discussed in further detail below.
The Fund's website, lincolnfinancial.com/definedoutcomefunds, provides important Fund information on a daily basis, including information about the Cap and Buffer, current Outcome Period start and end dates, and information relating to the remaining potential Outcomes of an investment in the Fund. Investors considering purchasing shares should visit the website for the latest information.