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Growth and
Income
LINCOLN NATIONAL
GROWTH AND INCOME FUND, INC.
DESCRIPTION OF THE FUND
The Growth and Income Fund (fund) was incorporated in Maryland in 1981. It is
an open-end diversified management investment company whose objective is long-
term capital appreciation. The fund pursues its objective by investing in a
portfolio of common stock and securities convertible into common stock. The
fund's objective and policies are fundamental and cannot be changed without the
affirmative vote of a majority of the outstanding voting securities of the
fund. See General information in the Appendix. There is no assurance that the
objective of the fund will be achieved.
This fund invests in common stocks of established companies with the objective
of maximizing long-term capital appreciation, while giving some emphasis to
income. The primary risk is that associated with common stock investing is that
the shares will fluctuate in value with the common stock market. Because the
policy of this fund is to emphasize investment in established companies, it is
expected that the volatility will be in line with the broad stock market
indices such as the Standard & Poor's 500 Index (S&P 500). See Investment
policies and techniques.
The fund's tax and accounting year end is November 30. For consistency in
reporting results to shareholders, and for consistency in reporting among all
funds, the fiscal year end for the fund is December 31.
PORTFOLIO MANAGER
The primary portfolio manager for the fund is T. Scott Wittman, President,
Vantage Global Advisors, Inc., the sub-advisor to the fund. Vantage is a wholly
owned subsidiary of Lincoln National Corp., a publicly held insurance holding
company organized under Indiana law. Wittman, a Chartered Financial Analyst,
has managed the fund since October, 1993. He has been with Vantage since
February, 1991; previously he was a managing director at TSA Capital
Management. Wittman specializes in quantitative investment analysis.
Effective October 1, 1997, Cozey W. Baker, Jr., is no longer managing the
short-term investment segment of the fund.
Jil Schoeff Lindholm, Short-Term Investment Manager for Lincoln Investment, the
advisor of the fund is assuming responsibility for the short-term investments
segment of the fund's portfolio on October 1, 1997. She has been a Short-Term
Investment Manager with Lincoln Investment since February 1995. She was a GIC
Sales Executive for Lincoln Life from March, 1992 through February, 1995. Ms.
Lindholm holds a Master's Degree in business administration from Indiana
University.
INVESTMENT POLICIES AND TECHNIQUES
The fund will invest in a portfolio of common stock and securities convertible
into common stock. The advisor believes that, in seeking to attain capital
appreciation, it is important to attempt to minimize losses.
When conditions dictate a defensive strategy or until the proceeds from the
sale of the fund's shares have been invested or when cash is otherwise
available, the fund may invest in money market instruments, including
commercial paper of domestic corporations, certificates of deposit, bankers'
acceptances and other obligations of domestic banks, and obligations issued or
guaranteed by the U.S. Government, its instrumentalities, or its agencies. When
cash is available only for a few days, it may be invested by the fund in
repurchase agreements, as indicated below, until it may otherwise be invested
or used for payment of obligations of the fund.
FOREIGN INVESTMENTS
Currently, this fund is not authorized for investment in foreign securities.
PORTFOLIO TURNOVER
The fund does not expect its portfolio turnover rate to exceed 100%. (A rate of
portfolio turnover of 100% would occur if all of the fund's portfolio were
replaced in a period of one year.) To the extent that the fund engages in
short-term trading in attempting to achieve its objectives, it may increase the
turnover rate and incur larger brokerage commissions and other expenses than
might otherwise be the case. During 1996 the fund's portfolio turnover was
46.70% and in 1995 it was 51.76%.
INVESTMENT RESTRICTIONS
The investment restrictions have been adopted by the fund as fundamental
policies. See General information in the Appendix. For purposes of the
following restrictions: (1) all percentage limitations apply
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Growth and
Income
immediately after the making of an investment; and (2) any subsequent change
in any applicable percentage resulting from market fluctuations does not
require elimination of any security from the portfolio.
The fund may not:
1. Invest in the securities of a single issuer, unless the following
conditions are met: At least 75% of the value of the fund's total assets
must be represented by: (a) U.S. Government obligations, cash and cash
items, (b) securities of other investment companies, and (c) securities of
issuers as to each of which, at the time the investment was made, the
fund's investment in the issuer did not exceed 5% of the fund's total
assets. The fund does not anticipate that any more than 15% of the fund's
total assets would be invested in the securities of a single issuer at any
time, other than those of the U.S. Government, its agencies and
instrumentalities;
2. Borrow money, except for temporary or emergency purposes and not exceeding
5% (taken at the lower of cost or current value) of its total assets (not
including the amounts borrowed); and/or
3. Invest more than 5% of its total assets in securities of issuers which
(together with predecessors) have been in operation for less than three
years. This restriction shall not apply to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
4. Hold more than 10% of the outstanding voting securities of any one issuer.
Additional investment restrictions can be found in the SAI.
STRATEGIC PORTFOLIO TRANSACTIONS
The portfolio manager for the fund has considerable discretion in the
selection of appropriate fund investments. In the exercise of that discretion,
the portfolio manager may, at any given time, invest a portion of the fund's
assets in one or more strategic portfolio transactions which we define as
derivative transactions and cash enhancement transactions.
For your convenience, in the Appendix, we have included a basic discussion of
these special financial arrangement transactions and some of the risks
associated with them. Note also that the SAI booklet for the 11 funds contains
definitions of the more commonly used derivative transactions, technical
explanations of how these transactions will be used and the limits on their
use. You should consult your financial counselor if you have specific
questions.
THE GROWTH AND INCOME FUND IS AUTHORIZED:
a) for derivative transactions, to: sell put and covered options and buy put
options for stock and stock indices and buy and sell options to close out
positions previously entered into; buy and sell financial futures contracts;
and put and call options on those contracts. (For certain limited purposes,
the fund may also buy financial futures contracts on an unleveraged basis and
not as an anticipatory hedge. See the SAI.)
The fund will not invest in futures contracts and options thereon if
immediately thereafter the amount committed to margins plus the amount paid
for option premiums exceeds 5% of the fund's total assets. In addition, the
fund will not hedge more than one-third of its net assets. (The aggregate cost
of premiums for all outstanding options shall not exceed 30% of the fund's
total assets, although the ultimate loss to the fund from options could be
substantially greater than 30%.) The fund will only write and purchase options
in standard contracts which may be quoted on NASDAQ or traded on the national
securities exchanges.
b) for cash enhancement transactions, to: lend portfolio securities, if such
loans of securities do not exceed one-third of the fund's total assets at any
one time, and engage in repurchase transactions. Collateral will be
continually maintained at no less than 102% of the value of the loaned
securities or of the repurchase price, as applicable.
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