<PAGE>
PREFACE TO THE LINCOLN NATIONAL FUNDS PROSPECTUSES
THE PREFACE AND DIRECTORY ARE PART OF THE PROSPECTUS FOR EACH OF THE FOLLOWING
FUNDS:
Lincoln National Growth and Income Fund, Inc. (Growth and Income)
Lincoln National Special Opportunities Fund, Inc. (Special Opportunities)
Each fund has its own Prospectus that describes the fund and its investment
objective. We refer to each of the funds as a fund and to all of the funds
together as the funds.
Each fund sells its shares only to Lincoln National Life Insurance Co. and its
affiliates (Lincoln Life). Lincoln Life holds the shares in its separate
accounts to support variable annuity contracts and variable life insurance
contracts (contracts). We refer to a separate account as a variable account.
Each variable account has its own prospectus that describes the account and the
contracts it supports. You choose the fund or funds in which a variable account
invests your contract assets. In effect, you invest indirectly in the fund(s)
that you choose under your contract.
Each fund Prospectus discusses the information about the fund that you ought to
know before choosing to invest your contract assets in one or more of the funds.
You can find information unique to each fund in that fund's Prospectus. You can
find information common to all funds in the General Prospectus Disclosure
following the individual fund Prospectuses.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or determined if these prospectuses are truthful or complete.
Any representation to the contrary is a criminal offense.
We have not authorized any dealer, salesperson, or any other person to give any
information, or to make any representation, other than what these Prospectuses
state. These Prospectuses do not offer to sell fund shares, or seek offers to
buy fund shares, where it would be unlawful.
Prospectuses dated May 1, 1999
P/D-1
<PAGE>
DIRECTORY FOR THE FUND PROSPECTUS
<TABLE>
<CAPTION>
SUBJECT PAGE
<S> <C>
- ----------------------------------------------------
PREFACE
SUMMARY DESCRIPTION OF THE FUND
Growth and Income GI-1
Special Opportunities SO-1
- ----------------------------------------------------
FEE TABLE
Growth and Income GPD-2
Special Opportunities GPD-2
- ----------------------------------------------------
INVESTMENT STRATEGIES
Growth and Income GI-1
Special Opportunities SO-1
- ----------------------------------------------------
RISKS OF INVESTMENT STRATEGIES
Growth and Income GI-2
Special Opportunities SO-2
- ----------------------------------------------------
INVESTMENT ADVISER AND PORTFOLIO MANAGER
Growth and Income GI-3
Special Opportunities SO-3
<CAPTION>
SUBJECT PAGE
- ----------------------------------------------------
<S> <C>
GENERAL PROSPECTUS DISCLOSURE --
IMPORTANT ADDITIONAL INFORMATION
Net asset value GPD-1
Management of the funds GPD-1
Purchase and redemption of fund shares GPD-2
Distributions and federal income tax
considerations GPD-3
Management discussion of fund performance GPD-3
Financial highlights GPD-4
General Information GPD-5
Preparing for year 2000 GPD-5
</TABLE>
P/D-2
<PAGE>
LINCOLN NATIONAL
GROWTH AND INCOME FUND, INC.
SUMMARY DESCRIPTION
OF THE FUND
The investment objective of the Growth and Income Fund (fund) is to maximize
long-term capital appreciation (as measured by the change in the value of fund
shares over a period of three years or longer). The fund pursues this objective
primarily by buying and holding (investing in) a diverse group of equity
securities (stocks) of large-sized U.S. companies: companies with market
capitalizations of more than $5 billion. The fund also holds some investments in
medium-sized U.S. companies, which have market capitalizations greater than $1
billion but less than $5 billion.
The fund's investment strategy is to invest in stocks of established companies
believed to:
- - be undervalued in the market relative to other companies in an industry, and
- - show growth potential significantly greater than the average expected growth
rate of companies in the same industry.
The fund's secondary investment strategy places some emphasis on providing
income (dividends and interest).
The main investment risks of choosing to invest your contract assets in the fund
are as follows:
- - the value of the fund's shares will fluctuate, and you could lose money; and
- - the value of the fund's stock investments -- and, therefore, the value of the
fund's shares -- will fluctuate in line with broad stock market indices, such
as the Standard & Poor's 500 Composite Stock Index (S&P 500).
The following information provides some indication of the risks of choosing to
invest your contract assets in the fund. The information shows:
- - changes in the fund's performance from year to year and
- - how the fund's average annual returns for one, five and ten year periods
compare with those of a broad measure of market performance.
Please note that the past performance of the fund is not necessarily an
indication of how the fund will perform in the future. Further, the returns
shown do not reflect variable contract expenses. If reflected the returns shown
would be lower.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
Year Annual Total Return
1989 20.75%
1990 0.95%
1991 30.61%
1992 1.84%
1993 13.12%
1994 1.32%
1995 38.81%
1996 18.76%
1997 30.93%
1998 20.33%
</TABLE>
During the periods shown in the above chart, the fund's highest return for a
quarter occurred in the fourth quarter of 1998 at: 22.88%.
The fund's lowest return for a quarter occurred in the third quarter of 1990 at:
(-14.91)%.
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 12/31/98)
<TABLE>
<CAPTION>
PERIOD BACK GROWTH & INCOME S&P 500*
<S> <C> <C>
- ----------------------------------------------------------------------
1 year 20.33% 28.76%
5 year 21.35% 24.15%
10 year 17.05% 19.22%
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 stocks, a widely
recognized unmanaged index of common stock prices.
INVESTMENT STRATEGIES
The investment objective of the fund is long-term capital appreciation.
The fund pursues this objective by investing in a diversified portfolio of
stocks primarily of large-sized U.S. companies (market capitalizations greater
than $5 billion), with some emphasis on medium-sized companies (market
capitalizations between $1 billion and $5 billion). (A company's market
capitalization is calculated by multiplying the total number of shares of its
common stock outstanding by the market price of the stock. As a point of
reference, as of December 31, 1998, the average market capitalization of the S&P
500, a broad based market index representative of larger, typically more
financially stable companies, was $87 billion.
GI-1
<PAGE>
The fund's management style focuses on seeking growth companies at a reasonable
price by blending:
- - a "growth" oriented management style, which seeks companies with earnings
and/or revenues that are growing faster than the industry average, and
- - a "value" oriented management style, which seeks companies within an industry
with current stock prices that do not reflect the stocks' perceived true
worth.
More specifically, the fund seeks to invest in companies believed to:
- - show growth potential that significantly exceeds the average expected growth
rate of companies in the same industry; and
- - be undervalued in the market relative to the companies' industry peers.
The companies sought typically have:
- - a long history of profit growth and dividend payment, and
- - a reputation for quality management, products and service.
The fund's selection of industries and the size of investments in each industry
will be similar to those of the S&P 500. The fund uses the following fundamental
criteria for measuring individual stock selection: price to earnings ratio,
growth of historical and forecasted earnings, and current yield. The fund seeks
to own the most attractive stocks in each industry. The fund compares its
current investments to possible new investments on an ongoing basis. The fund
replaces a current investment, if a possible new investment appears
significantly more attractive under the fund's investment criteria.
OTHER STRATEGIES
The fund may invest in money market instruments and hold a portion of its assets
in cash for liquidity purposes, as a temporary defensive strategy. The fund may
use this temporary defensive strategy when market conditions limit the fund's
ability to use its other investment strategies to identify and obtain suitable
investments. The fund, in doing so, would not be pursuing its investment
objective. The fund also may hold cash or money market instruments while seeking
appropriate investments.
The fund also uses other investment strategies, to a lesser degree, to pursue
its investment objective. The fund's SAI describes these other investment
strategies and the risks they involve.
RISKS OF INVESTMENT STRATEGIES
Investing in stocks involves the risk that the value of the stocks purchased
will fluctuate. These fluctuations could occur for a single company, an
industry, a sector of the economy, or the stock market as a whole. These
fluctuations could cause the value of the fund's stock investments -- and,
therefore, the value of the fund's shares held under your contract -- to
fluctuate, and you could lose money.
Moreover, the fund invests in medium-sized as well as large-sized companies, and
the fund's performance may be affected if stocks in one of these two groups of
companies do not perform as well as stocks in the other group. Further,
medium-sized companies, which are not as well-established as large-sized
companies, may (1) react more severely to market conditions and (2) suffer more
from economic, political and regulatory developments.
You may consider choosing the fund for investing some portion of your contract
assets if (1) you are seeking the possibility of long-term capital appreciation
with some emphasis on providing income, and (2) you are comfortable with risk
similar to that of the broad stock market.
INVESTMENT ADVISOR AND PORTFOLIO MANAGER
The fund's investment advisor is Lincoln Investment Management, Inc. (Lincoln
Investment). You can find information about Lincoln Investment in the General
Prospectus Disclosure under "Management of the funds -- Investment advisor."
Lincoln Investment is responsible for overall management of the fund's
securities investments. This includes monitoring the fund's sub-advisor, Vantage
Investment Advisors, Inc. (Vantage). Vantage's address is 630 5th Avenue, New
York, New York 10111.
Vantage is responsible for the day-to-day management of the fund's securities
investments. Vantage, founded in 1979, is a U.S. domestic equity manager with
over $9 billion in assets under management. Vantage began managing the fund in
1985. Enrique Chang, Vantage's Chief Investment Officer, and Christopher Harvey,
a Vice-President of Vantage, manage the fund.
Mr. Chang oversees the management of all of Vantage's equity portfolios and
directs Vantage's quantitative research efforts. Prior to joining Vantage, Mr.
Chang was an actuary with Prudential, Director of Quantitative
GI-2
<PAGE>
Analysis and Strategy with General Reinsurance Corporation, and Senior Vice
President and Director of Quantitative Analysis with J&W Seligman. He graduated
from Fairleigh Dickinson University, and received an MBA in finance and
quantitative analysis and an MS in statistics and operations research from New
York University.
Mr. Harvey manages portfolios, conducts investment research and assists in
equity trading for Vantage. Prior to joining Vantage, Mr. Harvey was a financial
analyst with Merrill Lynch. He graduated Bucknell University and received an MBA
from New York University.
GI-3
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
GI-4
<PAGE>
LINCOLN NATIONAL
SPECIAL OPPORTUNITIES FUND, INC.
SUMMARY DESCRIPTION OF THE FUND
The investment objective of the Special Opportunities Fund (fund) is to maximize
long-term capital appreciation (as measured by the change in the value of fund
shares over a period of three years or longer). The fund pursues this objective
primarily by buying and holding (investing in) a diverse group of equity
securities (stocks) of medium-sized U.S. companies: companies with market
capitalizations of more than $1 billion but less than $5 billion. The fund also
holds some investments in larger-sized U.S. companies, which have market
capitalizations greater than $5 billion but less than $24 billion.
The fund's investment strategy is to invest in stocks of established companies
believed to:
- - be undervalued in the market relative to other companies in an industry, and
- - show growth potential significantly greater than the average expected growth
rate of companies in the same industry.
The fund's secondary investment strategy places some emphasis on providing
income (dividends and interest).
The main investment risks of choosing to invest your contract assets in the fund
are as follows:
- - the value of the fund's shares will fluctuate, and you could lose money;
- - investing in medium-sized, less-mature and lesser-known companies involves
greater risks than those normally associated with investing in large-sized,
more-mature, well-known companies; and
- - the value of the fund's stock investments -- and, therefore, the value of the
fund's shares -- will fluctuate independently of large-company stock prices
and broad stock market indices, such as the Standard & Poor's 500 Composite
Stock Index (S&P 500).
The following information provides some indication of the risks of choosing to
invest your contract assets in the fund. The information shows:
- - changes in the fund's performance from year to year and
- - how the fund's average annual returns for one, five and ten year periods
compare with those of a broad measure of market performance.
Please note that the past performance of the fund is not necessarily an
indication of how the fund will perform in the future. Further, the returns
shown do not reflect variable contract expenses. If reflected the returns shown
would be lower.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
Year Annual Total Return
1989 32.90%
1990 -7.42%
1991 42.83%
1992 7.28%
1993 18.42%
1994 -1.00%
1995 31.86%
1996 16.51%
1997 28.15%
1998 6.79%
</TABLE>
During the periods shown in the above chart, the fund's highest return for a
quarter occurred in the first quarter of 1991 at: 27.22%.
The fund's lowest return for a quarter occurred in the third quarter of 1990 at:
(-26.67)%.
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 12/31/98)
<TABLE>
<CAPTION>
PERIOD BACK SPECIAL OPPORTUNITIES S&P 400*
<S> <C> <C>
- -------------------------------------------------------------------------
1 year 6.79% 19.11%
5 year 15.79% 23.37%
10 year 16.60% 19.29%
</TABLE>
* The S&P Midcap 400 is the Standard & Poor's Composite Index of 400 stocks, a
widely recognized unmanaged index of common stock prices of mid-sized companies.
INVESTMENT STRATEGIES
The investment objective of the fund is long-term capital appreciation.
The fund pursues this objective by investing in a diversified portfolio of
stocks primarily of medium-sized companies (market capitalizations between $1
billion and $5 billion) with some emphasis on larger-sized U.S. companies
(market capitalizations greater than $5 billion but less than $24 billion). (A
company's market capitalization is calculated by multiplying the total
SO-1
<PAGE>
number of shares of its common stock outstanding by the market price of the
stock. As a point of reference, as of December 31, 1998, the average market
capitalization of the S&P 500, a broad based market index representative of
larger, typically more financially stable companies, was $87 billion.)
The fund's management style focuses on seeking growth companies at a reasonable
price by blending:
- - a "growth" oriented management style, which seeks companies with earnings
and/or revenues that are growing faster than the industry average, and
- - a "value" oriented management style, which seeks companies within an industry
with current stock prices that do not reflect the stocks' perceived true
worth.
More specifically, the fund seeks to invest in companies believed to:
- - show growth potential that significantly exceeds the average expected growth
rate of companies in the same industry; and
- - be undervalued in the market relative to the companies' industry peers.
The companies sought typically have:
- - a long history of profit growth and dividend payment, and
- - a reputation for quality management, products and service.
The FUND seeks stocks of companies representing a wide selection of industries.
The fund normally holds 100 stocks that each represents approximately 1% of the
fund's total investments. The fund uses the following fundamental criteria for
measuring individual stock selection: price to earnings ratio, growth of
historical and forecasted earnings, and current yield. The fund seeks to own the
most attractive stocks in each industry. The fund compares its current
investments to possible new investments on an ongoing basis. The fund replaces a
current investment, if a possible new investment appears significantly more
attractive under the fund's investment criteria.
OTHER STRATEGIES
The fund may invest in money market instruments and hold a portion of its assets
in cash for liquidity purposes, as a temporary defensive strategy. The fund may
use this temporary defensive strategy when market conditions limit the fund's
ability to use its other investment strategies to identify and obtain suitable
investments. The fund, in doing so, would not be pursuing its investment
objective. The fund also may hold cash or money market instruments while seeking
appropriate investments.
The fund also uses other investment strategies, to a lesser degree, to pursue
its investment objective. The fund's SAI describes these other investment
strategies and the risks they involve.
RISKS OF INVESTMENT STRATEGIES
Investing in stocks involves the risk that the value of the stocks purchased
will fluctuate. These fluctuations could occur for a single company, an
industry, a sector of the economy, or the stock market as a whole. These
fluctuations could cause the value of the fund's stock investments -- and,
therefore, the value of the fund's shares held under your contract -- to
fluctuate, and you could lose money.
Investing in stocks of medium-sized, less mature, lesser-known companies
involves greater risks than those normally associated with large-sized, more
mature, well-known companies. Stocks of medium-sized companies, which are not as
well-established as large-sized companies, may (1) react more severely to market
conditions and (2) suffer more from economic, political and regulatory
developments. For these reasons, the fund runs a risk of increased and more
rapid fluctuations in the value of its stock investments.
Additionally, the prices of medium-sized company stocks may fluctuate
independently of larger company stock prices. Medium-sized company stocks may
decline in price as large company stock prices rise, or rise in price as large
company stock prices decline.
Therefore, you should expect that the value of the fund's shares may fluctuate
more than broad stock market indices such as the S&P 500, and may fluctuate
independently from those indices.
Finally, the fund invests in large-sized as well as medium-sized companies, and
the fund's performance may be affected if stocks in one of these two groups of
companies do not perform as well as stocks in the other group.
You may consider choosing the fund for investing some portion of your contract
assets (1) if you are seeking the possibility of maximum long-term capital
appreciation, with some emphasis on providing income, and (2) as long as you are
comfortable with the additional risks associated with investing in securities of
medium-sized, less mature, lesser-known companies.
SO-2
<PAGE>
INVESTMENT ADVISOR AND PORTFOLIO MANAGER
The fund's investment advisor is Lincoln Investment Management, Inc. (Lincoln
Investment). You can find information about Lincoln Investment in the General
Prospectus Disclosure under "Management of the funds -- Investment advisor."
Lincoln Investment is responsible for overall management of the fund's
securities investments. This includes monitoring the fund's sub-advisor, Vantage
Investment Advisors, Inc. (Vantage). Vantage's address is 630 5(th) Avenue, New
York, New York 10111.
Vantage is responsible for the day-to-day management of the fund's securities
investments. Vantage, founded in 1979, is a U.S. domestic equity manager with
over $9 billion in assets under management. Vantage began managing the fund in
1985. Enrique Chang, Vantage's Chief Investment Officer, and Yifeng Yang, a
Vice-President of Vantage, manage the fund.
Mr. Chang oversees the management of all of Vantage's equity portfolios and
directs Vantage's quantitative research efforts. Prior to joining Vantage, Mr.
Chang was an actuary with Prudential, Director of Quantitative Analysis and
Strategy with General Reinsurance Corporation, and Senior Vice President and
Director of Quantitative Analysis with J&W Seligman. He graduated from Fairleigh
Dickinson University, and received an MBA in finance and quantitative analysis
and an MS in statistics and operations research from New York University.
Mr. Yang conducts portfolio management and research for Vantage. Prior to
joining Vantage, Mr. Yang served as Director of Quantitative Research for J. &
W. Seligman and for General Reinsurance Corporation. He graduated Tsinghua
University, Beijing, and received a Ph. D. in electronic materials and device
and an M.S. in finance, investment, and banking from the University of
Wisconsin.
SO-3
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SO-4
<PAGE>
GENERAL PROSPECTUS DISCLOSURE -- IMPORTANT ADDITIONAL INFORMATION
This General Prospectus Disclosure is part of the Prospectus of:
Lincoln National Aggressive Growth Fund, Inc.
(Aggressive Growth)
Lincoln National Bond Fund, Inc. (Bond)
Lincoln National Capital Appreciation Fund, Inc.
(Capital Appreciation)
Lincoln National Equity-Income Fund, Inc.
(Equity-Income)
Lincoln National Global Asset Allocation Fund, Inc. (Global Asset Allocation)
Lincoln National Growth and Income Fund, Inc. (Growth and Income)
Lincoln National International Fund, Inc. (International)
Lincoln National Managed Fund, Inc. (Managed)
Lincoln National Money Market Fund, Inc.
(Money Market)
Lincoln National Social Awareness Fund, Inc.
(Social Awareness)
Lincoln National Special Opportunities Fund, Inc.
(Special Opportunities)
The following information applies to each fund, unless otherwise indicated.
NET ASSET VALUE
Each fund determines its net asset value per share (NAV) as of close of business
(currently 4:00 p.m., New York time) on the New York Stock Exchange (NYSE) on
each day the NYSE is open for trading. Each fund, except the Money Market Fund,
determines its nav by:
- - adding the values of all securities investments and other assets,
- - subtracting liabilities (including dividends payable), and
- - dividing by the number of shares outstanding.
NYSE's most recent announcement states that, as of the date of this prospectus,
the NYSE will be closed on New Year's Day, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. NYSE may also be closed on other days. The NYSE may modify
its holiday schedule at any time.
A fund's securities may be traded in other markets on days when the NYSE is
closed. Therefore, the fund's NAV may fluctuate on days when you do not have
access to the fund to purchase or redeem shares.
Each fund (other than for the Money Market Fund) values its securities
investments as follows:
- - equity securities, at their last sale prices on national securities exchanges
or over-the-counter, or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on exchanges or
over-the-counter;
- - debt securities, at the price established by an independent pricing service,
which is believed to reflect the fair value of these securities; and
- - equity securities, debt securities and other assets for which market
quotations are not readily available, fair value as determined in good faith
under the authority of each fund's Board of Directors.
MONEY MARKET FUND. The Money Market Fund determines its NAV by the amortized
cost method of valuation provided by SEC Rule 2a-7 under the Investment Company
Act of 1940. Under the Rule, the fund's nav must fairly reflect market value.
See the General SAI Disclosure for the methodology that a fund (other than for
the Money Market Fund) uses to value short-term investments, options, futures
and options on futures, and foreign securities.
MANAGEMENT OF THE FUNDS
Each fund's business and affairs are managed under the direction of its Board of
Directors. The Board has the power to amend the bylaws of each fund, to declare
and pay dividends, and to exercise all the powers of the fund except those
granted to the shareholders.
INVESTMENT ADVISOR. Lincoln Investment Management, Inc. (Lincoln Investment or
advisor) is the investment advisor to each fund. Its headquarters are at 200
East Berry Street, Fort Wayne, Indiana 46802.
The advisor has registered with the SEC as an investment advisor and acted as an
investment advisor to mutual Funds for over 40 years. The advisor also acts as
(1) investment advisor to Lincoln National Convertible Securities Fund, Inc. and
Lincoln National Income Fund, Inc., closed-end investment companies, and (2)
sub-adviser to two of the series of Delaware Group Adviser Funds, Inc., an
open-end series investment company.
The advisor is a wholly-owned subsidiary of Lincoln National Corp. (LNC), a
publicly-held insurance holding
GPD-1
<PAGE>
company organized under Indiana law. LNC, through its subsidiaries, provides
life insurance and annuities, property-casualty insurance, reinsurance and
financial services.
Directors, officers and employees of the advisor and each fund may engage in
personal securities transactions, subject to restrictions and procedures of the
Code of Ethics adopted by the advisor and each fund. The restrictions and
procedures include substantially all of the recommendations of the Advisory
Group of the Investment Company Institute and comply with SEC rules and
regulations.
The advisor, either directly or through a sub-advisor, provides portfolio
management and investment advice to each fund and administers each fund's other
affairs, subject to the supervision of each fund's Board of Directors.
Some of the funds using sub-advisors have names, investment objectives and
investment policies that are very similar to certain publicly available mutual
funds that are managed by these same sub-advisors. These funds will not have the
same performance as those publicly available mutual funds. Different performance
will result from many factors, including, but not limited to, different cash
flows into and out of the funds, different fees, and different sizes.
Each fund pays the advisor a monthly fee for the advisor's services. The annual
rate of the fee is based on the average daily net asset value of each fund, as
shown in the following chart:
<TABLE>
<CAPTION>
FUND ...OF AVERAGE DAILY NET ASSET VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Aggressive Growth .75 of 1% of the first $200 million; .70 of 1% of the next $200
million; .65 of 1% of the excess over $400 million
Capital Appreciation .75 of 1% of the first $500 million; .70 of 1% of the excess over
$500 million
Equity-Income .75 of 1% of the first $500 million; .70 of 1% of the excess over
$500 million
Global Asset Allocation .75 of 1% of the first $200 million; .70 of 1% of the next $200
million; and .68 of 1% of the excess over $400 million
International .90 of 1% of the first $200 million; .75 of 1% of the next $200
million; and .60 of 1% in excess over $400 million
All other funds .48 of 1% of the first $200 million; .40 of 1% of the next $200
million; and .30 of 1% in excess over $400 million
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 ADVISORY FEES
FUND 1998 RATIO OF THE ADVISOR'S COMPENSATION TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Aggressive Growth .73%
Bond .44
Capital Appreciation .75
Equity-Income .72
Global Asset Allocation .72
Growth & Income .31
International .79
Managed .36
Money Market .48
Social Awareness .34
Special Opportunities .36
</TABLE>
- --------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF FUND SHARES
Each fund sells its shares of common stock only to Lincoln Life. Lincoln Life
holds the fund shares in separate accounts (variable accounts) that support
various Lincoln Life variable annuity contracts and variable life insurance
contracts.
Each fund sells and redeems its shares, without charge, at their nav next
determined after Lincoln Life receives a purchase or redemption request.
However, each fund redeems its shares held by Lincoln Life for its own account
at the nav next determined after the fund receives the redemption request. The
value of shares redeemed may be more or less than original cost, depending on
the market value of a fund's securities investments at the time of redemption.
The fund normally pays for shares redeemed within seven days after Lincoln Life
receives the redemption request. However, a fund may suspend redemption or
postpone payment for any period when:
- - the NYSE closes for other than weekends and holidays;
GPD-2
<PAGE>
- - the SEC restricts trading on the NYSE;
- - the SEC determines that an emergency exists, so that a fund's (1) disposal of
investment securities, or (2) determination of net asset value, is not
reasonably practicable; or
- - The SEC permits, by order, for the protection of fund shareholders.
DISTRIBUTIONS AND FEDERAL INCOME TAX CONSIDERATIONS
Each fund's policy is to distribute substantially all of its net investment
income and net realized capital gains each year. A fund may distribute net
realized capital gains only once a year. Each fund pays these distributions to
Lincoln Life for the variable accounts. The variable accounts automatically
reinvest the distributions in additional fund shares at no charge.
Each fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). The
Code relieves a regulated investment company from certain Federal income tax and
excise tax, if the company distributes substantially all of its net investment
income and net realized capital gains. See the SAI for a more complete
discussion.
Each fund must meet asset diversification requirements under Section 817(h) of
the Code and the related regulation of the United States Treasury Department.
Each fund intends to comply with these diversification requirements.
The sole shareholder of the funds is Lincoln Life. Consequently, this Appendix
does not discuss the federal income tax consequences at the shareholder level.
For information concerning the federal income tax consequences to owners of
variable annuity contracts or variable life insurance contracts (contract
owners), including the failure of a fund to meet the diversification
requirements discussed above, see the Prospectus for the variable account.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Each fund's Annual Report includes the portfolio manager's discussion of the
fund's performance for the previous fiscal year and the factors affecting the
performance. Each fund will send you a free copy of its Annual Report on
request.
GPD-3
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the funds for the past 5 years, or, if shorter, the period of the
fund's operations. Certain information reflects financial results for a single
fund share. The total returns in the table represent the rate that an investor
would have earned or lost on an investment in the fund (assuming reinvestment of
all dividends and distributions). This information has been audited by Ernst &
Young LLP, independent auditors, whose report, along with each fund's financial
statements, are included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM LESS DIVIDENDS
INVESTMENT OPERATIONS FROM:
RATIO
NET OF
REALIZED RATIO NET
NET AND OF INVESTMENT NET
ASSET UNREALIZED NET EXPENSES INCOME ASSETS
VALUE NET GAIN TOTAL NET ASSET TO TO AT END
BEGINNING INVESTMENT (LOSS) FROM NET REALIZED VALUE AVERAGE AVERAGE PORTFOLIO OF
PERIOD OF INCOME ON INVESTMENT INVESTMENT GAIN ON TOTAL END OF TOTAL NET NET TURNOVER PERIOD
ENDED PERIOD (LOSS)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS DIVIDENDS PERIOD RETURN(3) ASSETS ASSETS RATE (000'S)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lincoln National Aggressive Growth Fund, Inc.
12/31/98 $16.385 0.001 (0.810) (0.809) (0.023) (2.186) (2.209) $13.367 (6.20%) 0.81% 0.01% 102.33% $335,366
12/31/97 $13.980 0.023 3.055 3.078 -- (0.673) (0.673) $16.385 23.09% 0.81% 0.16% 105.07% $342,763
12/31/96 $12.183 0.004 1.989 1.993 (0.004) (0.192) (0.196) $13.980 17.02% 0.82% 0.03% 77.51% $242,609
12/31/95 $ 9.048 0.007 3.135 3.142 (0.007) -- (0.007) $12.183 34.15% 0.94% 0.06% 85.82% $138,471
12/31/94(1) $10.000 0.019 (0.952) (0.933) (0.019) -- (0.019) $ 9.048 (9.37%) 1.11% 0.21% 100.31% $60,697
Lincoln National Bond Fund, Inc.
12/31/98 $12.861 0.662 0.494 1.156 (1.328) -- (1.328) $12.689 9.56% 0.52% 5.90% 51.33% $363,808
12/31/97 $11.766 0.785 0.310 1.095 -- -- -- $12.861 9.30% 0.53% 6.45% 56.16% $280,383
12/31/96 $12.247 0.767 (0.481) 0.286 (0.767) -- (0.767) $11.766 2.31% 0.51% 6.56% 142.19% $253,328
12/31/95 $10.941 0.803 1.306 2.109 (0.803) -- (0.803) $12.247 18.95% 0.49% 6.90% 139.61% $250,816
12/31/94 $12.693 0.741 (1.233) (0.492) (0.741) (0.519) (1.260) $10.941 (4.18%) 0.50% 6.40% 213.26% $195,010
Lincoln National Capital Appreciation Fund, Inc.
12/31/98 $17.530 (0.003) 6.127 6.124 (0.050) (1.832) (1.882) $21.772 37.96% 0.83% (0.01%) 77.99% $770,736
12/31/97 $14.504 0.050 3.510 3.560 -- (0.534) (0.534) $17.530 25.29% 0.89% 0.35% 137.07% $451,036
12/31/96 $12.916 0.135 2.051 2.186 (0.135) (0.463) (0.598) $14.504 18.02% 0.93% 0.99% 92.73% $267,242
12/31/95 $10.152 0.116 2.764 2.880 (0.116) -- (0.116) $12.916 28.69% 1.07% 1.00% 195.63% $127,936
12/31/94(1) $10.000 0.134 0.152 0.286 (0.134) -- (0.134) $10.152 2.71% 1.18% 1.33% 185.28% $52,904
Lincoln National Equity-Income Fund, Inc.
12/31/98 $20.118 0.282 2.204 2.486 (0.460) (0.429) (0.889) $21.715 12.73% 0.79% 1.40% 29.04% $991,977
12/31/97 $15.780 0.229 4.511 4.740 -- (0.402) (0.402) $20.118 30.67% 1.02% 1.46% 17.81% $811,070
12/31/96 $13.507 0.288 2.451 2.739 (0.288) (0.178) (0.466) $15.780 19.81% 1.08% 1.99% 22.17% $457,153
12/31/95 $10.335 0.275 3.218 3.493 (0.275) (0.046) (0.321) $13.507 34.74% 1.15% 2.27% 27.81% $238,771
12/31/94(1) $10.000 0.258 0.335 0.593 (0.258) -- (0.258) $10.335 5.65% 1.26% 2.48% 33.40% $78,861
Lincoln National Global Asset Allocation Fund, Inc.
12/31/98 $15.628 0.357 1.585 1.942 (0.589) (1.222) (1.811) $15.759 13.50% 0.91% 2.36% 133.84% $490,154
12/31/97 $14.226 0.383 2.205 2.588 -- (1.186) (1.186) $15.628 19.47% 0.89% 2.77% 178.40% $438,090
12/31/96 $13.391 0.392 1.522 1.914 (0.392) (0.687) (1.079) $14.226 15.04% 1.00% 2.93% 167.33% $316,051
12/31/95 $11.144 0.412 2.247 2.659 (0.412) -- (0.412) $13.391 23.95% 0.92% 3.36% 146.49% $248,772
12/31/94 $12.502 0.349 (0.702) (0.353) (0.349) (0.656) (1.005) $11.144 (1.82%) 1.06% 3.07% 134.33% $195,697
Lincoln National Growth and Income Fund, Inc.
12/31/98 $41.949 0.607 7.371 7.978 (1.164) (2.475) (3.639) $46.288 20.33% 0.35% 1.44% 33.55% $4,263,557
12/31/97 $33.110 0.649 9.331 9.980 -- (1.141) (1.141) $41.949 30.93% 0.35% 1.79% 32.09% $3,540,862
12/31/96 $29.756 0.683 4.943 5.626 (0.683) (1.589) (2.272) $33.110 18.76% 0.36% 2.23% 46.70% $2,465,224
12/31/95 $23.297 0.701 7.680 8.381 (0.701) (1.221) (1.922) $29.756 38.81% 0.35% 2.64% 51.76% $1,833,450
12/31/94 $24.693 0.668 (0.428) 0.240 (0.668) (0.968) (1.636) $23.297 1.32% 0.37% 2.85% 76.34% $1,161,324
Lincoln National International Fund, Inc.
12/31/98 $14.673 0.253 1.838 2.091 (0.189) (0.593) (0.782) $15.982 14.65% 0.93% 1.63% 123.11% $501,654
12/31/97 $14.556 0.066 0.771 0.837 -- (0.720) (0.720) $14.673 6.00% 0.93% 0.44% 77.58% $466,229
12/31/96 $13.398 0.071 1.244 1.315 (0.071) (0.086) (0.157) $14.556 9.52% 1.19% 0.51% 68.67% $440,375
12/31/95 $13.027 0.069 0.892 0.961 (0.069) (0.521) (0.590) $13.398 8.89% 1.27% 0.59% 63.15% $358,391
12/31/94 $12.642 0.033 0.385 0.418 (0.033) -- (0.033) $13.027 3.28% 1.24% 0.25% 52.78% $316,350
</TABLE>
GPD-4
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM LESS DIVIDENDS
INVESTMENT OPERATIONS FROM:
RATIO
NET OF
REALIZED RATIO NET
NET AND OF INVESTMENT NET
ASSET UNREALIZED NET EXPENSES INCOME ASSETS
VALUE NET GAIN TOTAL NET ASSET TO TO AT END
BEGINNING INVESTMENT (LOSS) FROM NET REALIZED VALUE AVERAGE AVERAGE PORTFOLIO OF
PERIOD OF INCOME ON INVESTMENT INVESTMENT GAIN ON TOTAL END OF TOTAL NET NET TURNOVER PERIOD
ENDED PERIOD (LOSS)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS DIVIDENDS PERIOD RETURN(3) ASSETS ASSETS RATE (000'S)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lincoln National Managed Fund, Inc.
12/31/98 $19.304 0.599 1.632 2.231 (1.162) (1.402) (2.564) $18.971 12.72% 0.42% 3.31% 57.36% $965,486
12/31/97 $16.266 0.661 2.811 3.472 -- (0.434) (0.434) $19.304 21.82% 0.42% 3.77% 53.40% $850,646
12/31/96 $15.895 0.628 1.291 1.919 (0.628) (0.920) (1.548) $16.266 12.05% 0.43% 4.05% 108.86% $675,740
12/31/95 $12.783 0.623 3.132 3.755 (0.623) (0.020) (0.643) $15.895 29.29% 0.43% 4.37% 112.52% $589,165
12/31/94 $14.152 0.628 (0.814) (0.186) (0.628) (0.555) (1.183) $12.783 (1.84%) 0.44% 4.45% 160.79% $442,140
</TABLE>
GPD-5
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM RATIO
NET OF
REALIZED RATIO NET
NET AND OF INVESTMENT NET
ASSET INVESTMENT OPERATIONS UNREALIZED LESS DIVIDENDS NET EXPENSES INCOME ASSETS
VALUE NET GAIN TOTAL FROM: NET ASSET TO TO AT END
BEGINNING INVESTMENT (LOSS) FROM NET REALIZED VALUE AVERAGE AVERAGE PORTFOLIO OF
PERIOD OF INCOME ON INVESTMENT INVESTMENT GAIN ON TOTAL END OF TOTAL NET NET TURNOVER PERIOD
ENDED PERIOD (LOSS)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS DIVIDENDS PERIOD RETURN(3) ASSETS ASSETS RATE (000'S)
- --------------------------------------------------------------------------------------------------------------------------------
Lincoln National Money Market Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/98 $10.000 0.497 N/A 0.497 (0.497 ) N/A (0.497) $10.000 5.10 % 0.58 % 4.97 % N/A $137,062
12/31/97 $10.000 0.501 N/A 0.501 (0.501) N/A (0.501) $10.000 5.13% 0.59% 5.01% N/A $89,227
12/31/96 $10.000 0.505 N/A 0.505 (0.505) N/A (0.505) $10.000 5.07% 0.57% 5.07% N/A $90,358
12/31/95 $10.000 0.570 N/A 0.570 (0.570) N/A (0.570) $10.000 5.67% 0.52% 5.67% N/A $75,319
12/31/94 $10.000 0.381 N/A 0.381 (0.381) N/A (0.381) $10.000 3.82% 0.52% 3.82% N/A $77,177
Lincoln National Social Awareness Fund, Inc.
12/31/98 $35.657 0.367 6.414 6.781 (0.672) (1.483) (2.155) $40.283 19.89% 0.38% 1.10% 37.55% $1,868,231
12/31/97 $27.316 0.364 9.447 9.811 -- (1.470) (1.470) $35.657 37.53% 0.41% 1.37% 34.84% $1,255,494
12/31/96 $22.590 0.389 5.748 6.137 (0.389) (1.022) (1.411) $27.316 28.94% 0.46% 1.58% 45.90% $636,595
12/31/95 $16.642 0.432 6.491 6.923 (0.432) (0.543) (0.975) $22.590 42.83% 0.50% 2.21% 54.02% $297,983
12/31/94 $17.915 0.377 (0.461) (0.084) (0.377) (0.812) (1.189) $16.642 0.19% 0.53% 2.22% 64.97% $163,514
Lincoln National Special Opportunities Fund, Inc.
12/31/98 $35.056 0.470 1.795 2.265 (0.862) (3.043) (3.905) $33.416 6.79% 0.42% 1.44% 76.27% $917,796
12/31/97 $29.423 0.477 7.293 7.770 -- (2.137) (2.137) $35.056 28.15% 0.42% 1.57% 73.74% $872,822
12/31/96 $27.383 0.548 3.867 4.415 (0.548) (1.827) (2.375) $29.423 16.51% 0.44% 2.00% 88.17% $648,592
12/31/95 $22.164 0.616 6.131 6.747 (0.616) (0.912) (1.528) $27.383 31.86% 0.45% 2.39% 90.12% $505,755
12/31/94 $24.478 0.565 (0.942) (0.377) (0.565) (1.372) (1.937) $22.164 (1.00%) 0.48% 2.49% 74.63% $318,417
</TABLE>
(1) The per share data, total return, ratios and portfolio turnover are
calculated for the period from commencement of investment activity on
January 3, 1994 through December 31, 1994. Accordingly, the total return,
ratios, and portfolio turnover have NOT been calculated on an annualized
basis.
(2) Per share information for the Capital Appreciation, Equity-Income, Global
Asset Allocation, and International funds for the year ended December 31,
1998 was based on the average shares outstanding method.
(3) Total return percentages in this table are calculated on the basis
prescribed by the Securities and Exchange Commission. These percentages are
based on the underlying mutual fund shares.
GENERAL INFORMATION
You should direct any inquiry to Lincoln National Life Insurance Co., at P.O.
Box 2340, Fort Wayne, Indiana 46801, or, call 1-800-4LINCOLN (454-6265).
Each fund will issue:
- - unaudited semiannual reports showing current investments and other
information; and
- - annual financial statements audited by the fund's independent auditors.
These Prospectuses do not contain all the information included in the
Registration Statements that the funds have filed with the SEC. You may examine
the Registration Statements, including exhibits, at the SEC in Washington, D.C.
Statements made in the Prospectuses about any variable annuity contract,
variable life insurance contract, or other document referred to in a contract,
are not necessarily complete. In each instance, we refer you to the copy of that
CONTRACT or other document filed as an exhibit to the related Registration
Statement. We qualify each statement in all respects by that reference.
The use of a fund by both annuity and life insurance variable accounts is called
mixed funding. Due to differences in redemption rates, tax treatment, or other
considerations, the interests of contract owners under the variable life
accounts may conflict with those of contract owners under the variable annuity
accounts. Violation of the federal tax laws by one variable account investing in
a fund could cause the contracts funded through another variable account to lose
their tax-deferred status, unless remedial action were taken. The Board of
Directors of each fund will monitor for any material conflicts and determine
what action, if any, the fund or a variable account should take.
A conflict could arise that requires a variable account to redeem a substantial
amount of assets from any of the funds. The redemption could disrupt orderly
portfolio management to the detriment of those contract owners still investing
in that fund. Also, that fund could determine that it has become so large that
its size materially impairs investment performance. The fund would then examine
its options.
Lincoln Life performs the dividend and transfer functions for each fund.
PREPARING FOR YEAR 2000
Many existing computer programs use only two digits in the date field to
identify the year. If left uncorrected these programs, which were designed and
developed without considering the impact of the upcoming change in the century,
could fail to operate or could produce
GPD-6
<PAGE>
erroneous results when processing dates after December 31, 1999. For example,
for a bond with a stated maturity date of July 1, 2000, a computer program could
read and store the maturity date as July 1, 1900. This problem is known by many
names, such as the "Year 2000 Problem", "Y2K", and the "Millenium Bug".
The Year 2000 Problem affects virtually all computer programs worldwide. It can
cause a computer system to suddenly stop operating. It can also result in a
computer corrupting vital company records, and the problem could go undetected
for a long time. The updating of fund-related computer systems is the
responsibility of Lincoln Life as part of its own year 2000 updating process.
Delaware Service Company Inc. (Delaware), which provides substantially all of
the accounting and valuation services for the funds, is responsible for updating
all its computer systems (including those which serve the funds) to accommodate
the year 2000. If Y2K problems with computer programs affecting the funds are
left unchecked they can cause such problems as share transfer errors; accounting
errors; improper instructions to the securities custodian of a fund; and
erroneous net asset values. In a worst-case scenario, this could result in a
material disruption of the operations of the funds, Lincoln Life and/or
Delaware.
However, these companies are wholly owned by Lincoln National Corporation (LNC),
which has had Year 2000 processes in place since 1996. LNC projects aggregate
expenditures in excess of $92 million for its Y2K efforts through the year 2000.
Both Lincoln Life and Delaware have dedicated Year 2000 teams and steering
committees that are answerable to their counterparts in LNC.
In light of the potential problems discussed above, Lincoln Life, as part of its
Year 2000 updating process, has assumed responsibility for correcting all
high-priority Information Technology (IT) systems which service the funds.
Delaware for its part is responsible for updating all its high-priority IT
systems to support these vital services. The Year 2000 effort, for both IT and
non-IT systems, is organized into four phases:
- - awareness-raising and inventory of all assets (including third-party agent and
vendor relationships)
- - assessment and high-level planning and strategy
- - remediation of affected systems and equipment; and
- - testing to verify Year 2000 readiness.
Both companies are currently on schedule to have their high-priority IT systems
(including those which support the funds) remediated and tested to demonstrate
readiness by June 30, 1999. During the third and fourth quarters of 1999,
additional testing of the environment will continue. Both companies are
currently on schedule to have their high-priority non-IT systems (elevators,
heating and ventilation, security systems, etc.) remediated and tested by
October 31, 1999.
The work on Year 2000 issues has not suffered significant delays; however, some
uncertainty remains. Specific factors that give rise to this uncertainty include
(but are certainly not limited to) a possible loss of technical resources to
perform the work; failure to identify all susceptible systems; and
non-compliance by third parties whose systems and operations impact Lincoln
Life. In a report dated February 26, 1999, entitled, INVESTIGATING THE IMPACT OF
THE YEAR 2000 TECHNOLOGY PROBLEM, S. Prt 106-10, the U.S. Senate Special
Committee on the Year 2000 Technology Problem expressed its concern that
"Financial services firms...are particularly vulnerable to...the risk that a
material customer or business partner will fail, as a result of the computer
problems, to meet its obligations".
One important source of uncertainty is the extent to which the key trading
partners of Lincoln Life and of Delaware will be successful in their own
remediation and testing efforts. Lincoln Life and Delaware have been monitoring
the progress of their trading partners; however, the efforts of these partners
are beyond our control.
Lincoln Life and Delaware expect to have completed their necessary remediation
and testing efforts prior to December 31, 1999. However, given the nature and
complexity of the problem, there can be no guarantee by either company that
there will not be significant computer problems after December 31, 1999.
GPD-7
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
GPD-8
<PAGE>
You can find additional information in each fund's Statement of Additional
Information (SAI), which is on file with the SEC. Each fund incorporates its
SAI, dated May 1, 1999, into its Prospectus. Each fund will provide a free copy
of its SAI on request.
You can find still further information about each fund's investments in the
fund's annual and semi-annual reports to shareholders. The Annual Report
discusses the market conditions and investment strategies that significantly
affected that fund's performance (except the Money Market Fund) during its last
fiscal year. Each fund will provide a free copy of its Annual and Semi-Annual
Report on request.
For an SAI or Report, either write Lincoln National Life Insurance Co., P.O. Box
2340, Fort Wayne, Indiana 46801, or call 1-800-4LINCOLN (454-6265). Also call
this number to request other information about a fund, or to make inquiries.
You can review and copy information about the funds (including the SAIs) at the
SEC's Public Reference Room in Washington, D.C. You can get information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You
can also get reports and other information about the funds on the SEC's Internet
site at http:// www.sec.gov. You can get copies of this information by writing
the SEC Public Reference Section, Washington, D.C. 20549-6009, and paying a
duplicating fee.
Fund Investment Company Act File Numbers:
<TABLE>
<S> <C> <C>
LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC.: 33-70742; 811-8090
LINCOLN NATIONAL BOND FUND, INC.: 2-80746; 811-3210
LINCOLN NATIONAL CAPITAL APPRECIATION FUND, INC.: 33-70272; 811-8074
LINCOLN NATIONAL EQUITY-INCOME FUND, INC.: 33-71158; 811-8126
LINCOLN NATIONAL GLOBAL ASSET ALLOCATION FUND, INC.: 33-13530; 811-5115
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.: 2-80741; 811-3211
LINCOLN NATIONAL INTERNATIONAL FUND, INC.: 33-38335; 811-6233
LINCOLN NATIONAL MANAGED FUND, INC.: 2-82276; 811-3683
LINCOLN NATIONAL MONEY MARKET FUND, INC.: 2-80743; 811-3212
LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC.: 33-19896; 811-5464
LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC.: 2-80731; 811-3291
</TABLE>
GPD-9
