<PAGE>
As filed with the Securities and Exchange Commission on April 10, 2000
File No. 2-80741
811-3211
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Post-Effective Amendment No. 21 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [_]
ACT OF 1940
Amendment No. 25 [X]
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LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1300 South Clinton Street
Fort Wayne, Indiana 46802
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (219)455-2000
ELIZABETH FREDERICK, ESQ.
1300 S. Clinton St.
Fort Wayne, Indiana 46802
(Name and Address of Agent for Service)
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Copies of all communications to
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.,
Suite 825
Washington, D.C. 20036
Attention: Gary O. Cohen, Esq.
Richard Choi, Esq.
Fiscal year-end: December 31
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It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on May 1, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a) (b)
_____ on __________, 1999 pursuant to paragraph (a) (1)
_____ 75 days after filing pursuant to paragraph (a) (2)
_____ on _________ pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
[ ] This post effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.
The SAI provides more information about the fund. The fund's audited financial
statements and the report of Ernst & Young, LLP, Independent Auditors, are
incorporated by reference to the fund's 1999 Annual Report. This SAI should be
read in conjunction with the prospectus of the Growth and Income Fund dated
May 1, 2000. You may obtain a copy of the fund's Annual Report or prospectus on
request and without charge. Please write Lincoln National Life Insurance Co,
P.O. Box 2340, Fort Wayne, Indiana 46801 or call 1-800-4LINCOLN (454-6265).
The fund's SAI is not a prospectus.
CONTENTS
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SUBJECT PAGE
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Description of the Fund
Additional Investment Strategies and Risks GF-2
Strategic Portfolio Transactions GF-2
Investment Restrictions GF-3
Portfolio Transactions and Brokerage GF-4
General SAI Disclosure -- Important
Additional Information
</TABLE>
May 1, 2000
GF-1
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DESCRIPTION OF THE FUND
Lincoln National Growth and Income Fund, Inc., (fund) was incorporated in
Maryland in 1981 as Lincoln National Growth Fund, Inc. It operated under that
name until 1994, when the present name was adopted in order to more precisely
reflect the fund's classification by industry analysts. The fund is an open-end
diversified management investment company whose objective is long-term capital
appreciation. The fund's investment 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 "Investment restrictions." There can be no
assurance that the objective of the fund will be achieved. References to advisor
in this SAI include both Lincoln Investment Management, Inc. (Lincoln
Investment) and Vantage Investment Advisors, Inc.
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
The Prospectus discusses the fund's principal investment strategies used to
pursue the fund's investment objective and the risks of those strategies. The
following discussion describes other investment strategies that the fund may use
as market conditions warrant, and notes the risks associated with these other
investment strategies. (Italicized terms that are not defined herein are defined
in the fund's Prospectus.)
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 General SAI Disclosure, we have included a basic
discussion of these special financial arrangement transactions and some of the
risks associated with them. Note also that the General SAI Disclosure 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.
OPTIONS TRADING
The fund will only write and purchase options in standard contracts which may be
quoted on NASDAQ or traded on the national securities exchanges. The investment
advisor will generally write covered call options when it anticipates declines
in the market value of the portfolio securities and the premiums received may
offset to some extent the decline in the fund's net asset value. On the other
hand, writing put options may be a useful portfolio investment strategy when the
fund has cash or other reserves and it intends to purchase securities but
expects prices to increase.
Generally, the risk to the fund in writing options is that the investment
advisor's assumption about the price trend of the underlying security may prove
inaccurate. If the fund wrote a put, expecting the price of a security to
increase, and it decreased, or if the fund wrote a call, expecting the price to
decrease but it increased, the fund could suffer a loss if the premium received
in each case did not equal the difference between the exercise price and the
market price. See the General SAI Disclosure for the 11 funds for a more
complete description of put and call options and the risks involved.
LENDING OF PORTFOLIO SECURITIES
The fund may from time to time lend securities from its portfolio to brokers,
dealers and financial institutions
GF-2
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and receive collateral from the borrower, in the form of cash (which may be
invested in short-term securities), U.S. Government obligations or certificates
of deposit. Such collateral will be maintained at all times in an amount equal
to at least 102% of the current market value of the loaned securities, and will
be in the actual or constructive possession of the fund during the term of the
loan. The fund will retain the incidents of ownership of the loaned securities
and will be entitled to the interest or dividends payable on the loaned
securities. In addition, the fund will receive interest on the amount of the
loan. The loans will be terminable by the fund at any time and will not be made
to any affiliates of the fund or the advisor. The fund may pay reasonable
finder's fees to persons unaffiliated with it in connection with the arrangement
of the loans.
As with any extensions of credit, there are risks of delay in recovery and, in
some cases, even loss of rights in the collateral or the loaned securities
should the borrower of securities fail financially. However, loans of portfolio
securities will be made only to firms deemed by the advisor to be creditworthy.
REPURCHASE AGREEMENTS
The fund may make short-term investments in repurchase agreements. See the
General SAI Disclosure for the 11 funds for a description of repurchase
agreements and the risk they involve.
FUTURES CONTRACTS AND OPTIONS THEREON
Generally, the fund may buy and sell financial futures contracts (futures
contracts) and related options thereon solely for hedging purposes. The fund may
sell a futures contract or purchase a put option on that futures contract to
protect the value of the fund's portfolio in the event the investment advisor
anticipates declining security prices. Similarly, if security prices are
expected to rise, the fund may purchase a futures contract or a call option
thereon. (For certain limited purposes, the fund is also authorized to buy
futures contracts on an unleveraged basis and not as an anticipatory hedge. See
the General SAI Disclosure for the 11 funds for a more detailed explanation.)
INVESTMENT RESTRICTIONS
The fund has adopted policies and investment restrictions. The investment
restrictions may not be changed without a majority vote of its outstanding
shares, and are considered fundamental. Such majority is defined in the 1940 Act
as the vote of the lesser of (1) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy, or (2) more
than 50% of the outstanding voting securities. For purposes of the following
restrictions: (1) all percentage limitations apply 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 more than 25% of its total assets in the securities of issuers in any
one industry. For purposes of this restriction, gas, electric, water and
telephone utilities are treated as separate industries.
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);
3. Invest in the securities of any one issuer unless at least 75% of the value
of the fund's total assets is 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.
4. Purchase or sell real estate or interests therein, although it may purchase
securities of issuers which engage in real estate operations or securities
which are secured by interests in real estate.
5. Make loans except that it may lend its portfolio securities if such loans
are fully collateralized and such loans of securities do not exceed
one-third of its total assets at any one time. See "Lending of portfolio
securities." The purchase of debt securities including loan participation
certificates and the entry into repurchase agreements are not considered the
making of loans.
6. Purchase puts, calls or combinations thereof, except the fund may write and
purchase put and call options and effect closing transactions as described
under "Options trading."
7. Underwrite the securities of other issuers, except insofar as the fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of
portfolio securities.
8. Invest more than 10% of its total assets in securities (including repurchase
agreements maturing in more than seven days) which are subject to legal or
contractual restrictions upon resale or are otherwise not readily
marketable.
9. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities.
10. Make short sales of securities.
GF-3
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11. Purchase or sell commodities or commodity futures contracts, except
financial futures contracts and options thereon.
12. Purchase securities of investment companies except in connection with an
acquisition, merger, consolidation or reorganization.
13. Invest in companies for the purpose of, or with the effect of, acquiring
control.
14. Pledge its assets or assign or otherwise encumber them except to secure
borrowings effected within the limitations set forth in Restriction 2. (For
purposes of this restriction, collateral arrangements with respect to the
writing of options and collateral arrangements with respect to initial
margin for futures contracts are not deemed to be pledges of assets.)
15. Issue senior securities as defined in the 1940 Act except insofar as the
fund may be deemed to have issued a senior security by borrowing money in
accordance with the restrictions described previously. (For the purpose of
this restriction, collateral arrangements with respect to the writing of
options and initial margin deposits for futures contracts and the purchase
or sale of futures contracts are not deemed to be the issuance of a senior
security.)
16. Hold more than 10% of the outstanding voting securities of any one issuer.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The advisor is responsible for decisions to buy and sell securities for the
fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a net basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid.
The advisor currently provides investment advice to a number of other clients.
See "Investment advisor" in the General Prospectus Disclosure and "Sub-advisors"
in the General SAI Disclosure. It will be the practice of the advisor to
allocate purchase and sale transactions among the fund and others whose assets
it manages in such manner as it deems equitable. In making such allocations,
major factors to be considered are investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the fund and
other client accounts. Securities of the same issuer may be purchased, held, or
sold at the same time by the fund or other accounts or companies for which the
advisor provides investment advice (including affiliates of the advisor). On
occasions when the advisor deems the purchase or sale of a security to be in the
best interest of the fund, as well as the other clients of the advisor, the
advisor, to the extent permitted by applicable laws and regulations, may
aggregate such securities to be sold or purchased for the fund with those to be
sold or purchased for other clients in order to obtain best execution and lower
brokerage commissions, if any. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by the advisor in the manner it considers to be equitable and consistent
with its fiduciary obligations to all such clients, including the fund. In some
instances, the procedures may impact the price and size of the position
obtainable for the fund. Portfolio securities are not purchased from or sold to
the advisor or any affiliated person (as defined in the 1940 Act) of the
advisor.
In connection with effecting portfolio transactions, primary consideration will
be given to securing most favorable price and efficient execution. Within the
framework of this policy, the reasonableness of commission or other transaction
costs is a major factor in the selection of brokers and is considered together
with other relevant factors, including financial responsibility, research and
investment information and other services provided by such brokers. It is
expected that, as a result of such factors, transaction costs charged by some
brokers may be greater than the amounts other brokers might charge. The advisor
may determine in good faith that the amount of such higher transaction costs is
reasonable in relation to the value of the brokerage and research services
provided. The Board of Directors of the fund will review regularly the
reasonableness of commission and other transaction costs incurred by the fund in
the light of facts and circumstances deemed relevant from time to time, and, in
that connection, will receive reports from the advisor and published data
concerning transaction costs incurred by institutional investors generally. The
nature of the research services provided to the advisor by brokerage firms
varies from time to time but generally includes current and historical financial
data concerning particular companies and their securities; information and
analysis concerning securities markets and economic and industry matters; and
technical and statistical studies and data dealing
GF-4
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with various investment opportunities, risks and trends, all of which the
advisor regards as a useful supplement to its own internal research
capabilities. The advisor may from time to time direct trades to brokers which
have provided specific brokerage or research services for the benefit of the
advisor's clients; in addition the advisor may allocate trades among brokers
that generally provide superior brokerage and research services. During 1999,
the advisor directed transactions totaling approximately $68.8 million to these
brokers and paid commissions of approximately $60,072 in connection with these
transactions. Research services furnished by brokers are used for the benefit of
all of the advisor's clients and not solely or necessarily for the benefit of
the fund. The advisor believes that the value of research services received is
not determinable and does not significantly reduce its expenses. The fund does
not reduce its fee payable to the advisor by any amount that might be
attributable to the value of such services.
The aggregate amount of brokerage commissions paid by the fund was $1,136,246,
$2,372,490, and $1,896,648 during 1999, 1998 and 1997, respectively.
If the fund effects a closing purchase transaction with respect to an option
written by it, normally such transaction will be executed by the same
broker-dealer who executed the sale of the option. If a call written by the fund
is exercised, normally the sale of the underlying securities will be executed by
the same broker-dealer who executed the sale of the call.
The writing of options by the fund will be subject to limitations established by
each of the exchanges governing the maximum number of options in each class
which may be written by a single investor or group of investors acting in
concert, regardless of whether the options are written on the same or different
exchanges or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the fund may write may be affected by
options written by other investment advisory clients of its advisor. An exchange
may order the liquidations of positions found to be in excess of these limits,
and it may impose certain other sanctions. As of the date of this Prospectus,
these limits (which are subject to change) are 2,000 options (200,000 shares) in
each class of puts or calls.
Under the sub-advisory agreement between the advisor and the sub-advisor, the
sub-advisor may perform some, or substantially all, of the investment advisory
services required by the fund, even though the advisor remains primarily
responsible for investment decisions affecting the fund. The sub-advisor will
follow the same procedures and policies which are followed by the advisor as
described previously. The sub-advisor currently provides investment advice to a
number of other clients.
GF-5
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THIS PAGE WAS INTENTIONALLY LEFT BLANK.
GF-6
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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, 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 values its securities using 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
investment advisor to Lincoln National Convertible Securities Fund, Inc. and
Lincoln National Income Fund, Inc., closed-end investment companies.
The advisor is a wholly-owned subsidiary of Lincoln National Corp. (LNC), a
publicly-held insurance holding company organized under Indiana law. LNC,
through its subsidiaries, provides life insurance and annuities, property-
casualty insurance, reinsurance and financial services.
GPD-1
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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.
Lincoln Investment has informed the funds that it intends to merge into a newly
created series of its affiliate, Delaware Management Business Trust ("Delaware")
during the second or third quarter of 2000. Delaware is registered with the SEC
as an investment adviser and, like Lincoln Investment, is a wholly owned
subsidiary of Lincoln National Investments, Inc., and ultimately of Lincoln
National Corporation. The address of Delaware is 2005 Market Street,
Philadelphia, PA 19103. Lincoln Investment does not expect the merger to result
in any change in the level of advisory services that it currently provides to
the funds, although there may be some changes in, and additions to, personnel.
Lincoln Investment has concluded that the proposed merger would not result in an
"assignment" of its investment advisory agreements with the funds, or of its
sub-advisory agreements with the sub-advisors, that would require shareholder
approval under the Investment Company Act of 1940, as amended. The proposed
merger is subject to review by the funds' boards 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:
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<CAPTION>
FUND ...OF AVERAGE DAILY NET ASSET VALUE
<S> <C>
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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>
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<TABLE>
<CAPTION>
1999 ADVISORY FEES*
FUND 1999 RATIO OF THE ADVISOR'S COMPENSATION TO AVERAGE NET ASSETS
<S> <C>
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Aggressive Growth .73%
Bond .45
Capital Appreciation .72
Equity-Income .72
Global Asset Allocation .72
Growth and Income .31
International .77
Managed .36
Money Market .48
Social Awareness .33
Special Opportunities .37
</TABLE>
* The sub-advisor to the funds, where applicable, is paid out of the fees paid
to the advisor.
- --------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF FUND SHARES
Each fund sells its shares of common stock to Lincoln Life and Lincoln Life &
Annuity Company of New York. Lincoln Life and Lincoln Life & Annuity Company of
New York hold the fund shares in separate accounts (variable accounts) that
support various Lincoln Life and Lincoln Life & Annuity Company of New York
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 and
GPD-2
<PAGE>
Lincoln Life & Annuity Company of New York receives a purchase or redemption
request. However, each fund redeems its shares held by Lincoln Life and Lincoln
Life & Annuity Company of New York 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
and Lincoln Life & Annuity Company of New York 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;
- - 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.
Since the only shareholders of the funds are Lincoln Life and Lincoln Life &
Annuity Company of New York, 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.
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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 INVESTMENT OPERATIONS LESS DIVIDENDS FROM:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIO
NET NET REALIZED OF
ASSET AND NET EXPENSES
VALUE NET UNREALIZED NET ASSET TO
BEGINNING INVESTMENT GAIN (LOSS) TOTAL FROM NET REALIZED VALUE AVERAGE
OF INCOME ON INVESTMENT INVESTMENT GAIN ON TOTAL END OF TOTAL NET
PERIOD ENDED PERIOD (LOSS)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS DIVIDENDS PERIOD RETURN(1) ASSETS
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lincoln National Aggressive Growth Fund, Inc.
12/31/99 $13.367 (0.060) 5.732 5.672 (0.001) -- (0.001) $19.038 42.43% 0.87%
12/31/98 $16.385 0.001 (0.810) (0.809) (0.023) (2.186) (2.209) $13.367 (6.20%) 0.81%
12/31/97 $13.980 0.023 3.055 3.078 -- (0.673) (0.673) $16.385 23.09% 0.81%
12/31/96 $12.183 0.004 1.989 1.993 (0.004) (0.192) (0.196) $13.980 17.02% 0.82%
12/31/95 $ 9.048 0.007 3.135 3.142 (0.007) -- (0.007) $12.183 34.15% 0.94%
Lincoln National Bond Fund, Inc.
12/31/99 $12.689 0.772 (1.180) (0.408) (0.845) -- (0.845) $11.436 (3.27%) 0.53%
12/31/98 $12.861 0.662 0.494 1.156 (1.328) -- (1.328) $12.689 9.56% 0.52%
12/31/97 $11.766 0.785 0.310 1.095 -- -- -- $12.861 9.30% 0.53%
12/31/96 $12.247 0.767 (0.481) 0.286 (0.767) -- (0.767) $11.766 2.31% 0.51%
12/31/95 $10.941 0.803 1.306 2.109 (0.803) -- (0.803) $12.247 18.95% 0.49%
Lincoln National Capital Appreciation Fund, Inc.
12/31/99 $21.772 0.007 9.839 9.846 -- (0.152) (0.152) $31.466 45.46% 0.78%
12/31/98 $17.530 (0.003) 6.127 6.124 (0.050) (1.832) (1.882) $21.772 37.96% 0.83%
12/31/97 $14.504 0.050 3.510 3.560 -- (0.534) (0.534) $17.530 25.29% 0.89%
12/31/96 $12.916 0.135 2.051 2.186 (0.135) (0.463) (0.598) $14.504 18.02% 0.93%
12/31/95 $10.152 0.116 2.764 2.880 (0.116) -- (0.116) $12.916 28.69% 1.07%
Lincoln National Equity-Income Fund, Inc.
12/31/99 $21.715 0.189 1.204 1.393 (0.171) (0.890) (1.061) $22.047 6.27% 0.79%
12/31/98 $20.118 0.282 2.204 2.486 (0.460) (0.429) (0.889) $21.715 12.73% 0.79%
12/31/97 $15.780 0.229 4.511 4.740 -- (0.402) (0.402) $20.118 30.67% 1.02%
12/31/96 $13.507 0.288 2.451 2.739 (0.288) (0.178) (0.466) $15.780 19.81% 1.08%
12/31/95 $10.335 0.275 3.218 3.493 (0.275) (0.046) (0.321) $13.507 34.74% 1.15%
Lincoln National Global Asset Allocation Fund, Inc.
12/31/99 $15.759 0.323 1.409 1.732 (0.266) (0.432) (0.698) $16.793 11.36% 0.91%
12/31/98 $15.628 0.357 1.585 1.942 (0.589) (1.222) (1.811) $15.759 13.50% 0.91%
12/31/97 $14.226 0.383 2.205 2.588 -- (1.186) (1.186) $15.628 19.47% 0.89%
12/31/96 $13.391 0.392 1.522 1.914 (0.392) (0.687) (1.079) $14.226 15.04% 1.00%
12/31/95 $11.144 0.412 2.247 2.659 (0.412) -- (0.412) $13.391 23.95% 0.92%
Lincoln National Growth and Income Fund, Inc.
12/31/99 $46.288 0.509 7.356 7.865 (0.497) (1.946) (2.443) $51.710 17.55% 0.36%
12/31/98 $41.949 0.607 7.371 7.978 (1.164) (2.475) (3.639) $46.288 20.33% 0.35%
12/31/97 $33.110 0.649 9.331 9.980 -- (1.141) (1.141) $41.949 30.93% 0.35%
12/31/96 $29.756 0.683 4.943 5.626 (0.683) (1.589) (2.272) $33.110 18.76% 0.36%
12/31/95 $23.297 0.701 7.680 8.381 (0.701) (1.221) (1.922) $29.756 38.81% 0.35%
Lincoln National International Fund, Inc.
12/31/99 $15.982 0.294 2.182 2.476 (0.529) (3.555) (4.084) $14.374 17.75% 0.92%
12/31/98 $14.673 0.253 1.838 2.091 (0.189) (0.593) (0.782) $15.982 14.65% 0.93%
12/31/97 $14.556 0.066 0.771 0.837 -- (0.720) (0.720) $14.673 6.00% 0.93%
12/31/96 $13.398 0.071 1.244 1.315 (0.071) (0.086) (0.157) $14.556 9.52% 1.19%
12/31/95 $13.027 0.069 0.892 0.961 (0.069) (0.521) (0.590) $13.398 8.89% 1.27%
Lincoln National Managed Fund, Inc.
12/31/99 $18.971 0.622 0.767 1.389 (0.552) (0.898) (1.450) $18.910 7.75% 0.42%
12/31/98 $19.304 0.599 1.632 2.231 (1.162) (1.402) (2.564) $18.971 12.72% 0.42%
12/31/97 $16.266 0.661 2.811 3.472 -- (0.434) (0.434) $19.304 21.82% 0.42%
12/31/96 $15.895 0.628 1.291 1.919 (0.628) (0.920) (1.548) $16.266 12.05% 0.43%
12/31/95 $12.783 0.623 3.132 3.755 (0.623) (0.020) (0.643) $15.895 29.29% 0.43%
<CAPTION>
<S> <C> <C> <C>
RATIO
OF NET
INVESTMENT
INCOME
TO NET ASSETS
AVERAGE PORTFOLIO AT END OF
NET TURNOVER PERIOD
PERIOD ENDED ASSETS RATE (000'S)
Lincoln National
12/31/99 (0.48%) 208.50% $ 448,193
12/31/98 0.01% 102.33% $ 335,366
12/31/97 0.16% 105.07% $ 342,763
12/31/96 0.03% 77.51% $ 242,609
12/31/95 0.06% 85.82% $ 138,471
Lincoln National
12/31/99 6.02% 39.11% $ 330,923
12/31/98 5.90% 51.33% $ 363,808
12/31/97 6.45% 56.16% $ 280,383
12/31/96 6.56% 142.19% $ 253,328
12/31/95 6.90% 139.61% $ 250,816
Lincoln National
12/31/99 0.03% 59.68% $1,913,076
12/31/98 (0.01%) 77.99% $ 770,736
12/31/97 0.35% 137.07% $ 451,036
12/31/96 0.99% 92.73% $ 267,242
12/31/95 1.00% 195.63% $ 127,936
Lincoln National
12/31/99 0.86% 191.21% $ 990,758
12/31/98 1.40% 29.04% $ 991,977
12/31/97 1.46% 17.81% $ 811,070
12/31/96 1.99% 22.17% $ 457,153
12/31/95 2.27% 27.81% $ 238,771
Lincoln National
12/31/99 2.05% 134.31% $ 490,804
12/31/98 2.36% 133.84% $ 490,154
12/31/97 2.77% 178.40% $ 438,090
12/31/96 2.93% 167.33% $ 316,051
12/31/95 3.36% 146.49% $ 248,772
Lincoln National
12/31/99 1.05% 15.91% $4,709,687
12/31/98 1.44% 33.55% $4,263,557
12/31/97 1.79% 32.09% $3,540,862
12/31/96 2.23% 46.70% $2,465,224
12/31/95 2.64% 51.76% $1,833,450
Lincoln National
12/31/99 2.05% 11.51% $ 526,317
12/31/98 1.63% 123.11% $ 501,654
12/31/97 0.44% 77.58% $ 466,229
12/31/96 0.51% 68.67% $ 440,375
12/31/95 0.59% 63.15% $ 358,391
Lincoln National
12/31/99 3.25% 44.79% $ 927,572
12/31/98 3.31% 57.36% $ 965,486
12/31/97 3.77% 53.40% $ 850,646
12/31/96 4.05% 108.86% $ 675,740
12/31/95 4.37% 112.52% $ 589,165
</TABLE>
GPD-4
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DIVIDENDS FROM:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIO
NET NET REALIZED OF
ASSET AND NET EXPENSES
VALUE NET UNREALIZED NET ASSET TO
BEGINNING INVESTMENT GAIN (LOSS) TOTAL FROM NET REALIZED VALUE AVERAGE
OF INCOME ON INVESTMENT INVESTMENT GAIN ON TOTAL END OF TOTAL NET
PERIOD ENDED PERIOD (LOSS)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS DIVIDENDS PERIOD RETURN(1) ASSETS
<CAPTION>
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lincoln National Money Market Fund, Inc.
12/31/99 $10.000 0.468 N/A 0.468 (0.468) N/A (0.468) $10.000 4.62% 0.59%
12/31/98 $10.000 0.497 N/A 0.497 (0.497) N/A (0.497) $10.000 5.10% 0.58%
12/31/97 $10.000 0.501 N/A 0.501 (0.501) N/A (0.501) $10.000 5.13% 0.59%
12/31/96 $10.000 0.505 N/A 0.505 (0.505) N/A (0.505) $10.000 5.07% 0.57%
12/31/95 $10.000 0.570 N/A 0.570 (0.570) N/A (0.570) $10.000 5.67% 0.52%
Lincoln National Social Awareness Fund, Inc.
12/31/99 $40.283 0.319 5.649 5.968 (0.296) (1.663) (1.959) $42.292 15.44% 0.38%
12/31/98 $35.657 0.367 6.414 6.781 (0.672) (1.483) (2.155) $40.283 19.89% 0.38%
12/31/97 $27.316 0.364 9.447 9.811 -- (1.470) (1.470) $35.657 37.53% 0.41%
12/31/96 $22.590 0.389 5.748 6.137 (0.389) (1.022) (1.411) $27.316 28.94% 0.46%
12/31/95 $16.642 0.432 6.491 6.923 (0.432) (0.543) (0.975) $22.590 42.83% 0.50%
Lincoln National Special Opportunities Fund, Inc.
12/31/99 $33.416 0.482 (1.779) (1.297) (0.373) (3.521) (3.894) $28.225 (4.45%) 0.44%
12/31/98 $35.056 0.470 1.795 2.265 (0.862) (3.043) (3.905) $33.416 6.79% 0.42%
12/31/97 $29.423 0.477 7.293 7.770 -- (2.137) (2.137) $35.056 28.15% 0.42%
12/31/96 $27.383 0.548 3.867 4.415 (0.548) (1.827) (2.375) $29.423 16.51% 0.44%
12/31/95 $22.164 0.616 6.131 6.747 (0.616) (0.912) (1.528) $27.383 31.86% 0.45%
<CAPTION>
<S> <C> <C> <C>
RATIO
OF NET
INVESTMENT
INCOME
TO NET ASSETS
AVERAGE PORTFOLIO AT END OF
NET TURNOVER PERIOD
PERIOD ENDED ASSETS RATE (000'S)
Lincoln National
12/31/99 4.68% N/A $ 234,676
12/31/98 4.97% N/A $ 137,062
12/31/97 5.01% N/A $ 89,227
12/31/96 5.07% N/A $ 90,358
12/31/95 5.67% N/A $ 75,319
Lincoln National
12/31/99 0.79% 23.77% $1,946,179
12/31/98 1.10% 37.55% $1,868,231
12/31/97 1.37% 34.84% $1,255,494
12/31/96 1.58% 45.90% $ 636,595
12/31/95 2.21% 54.02% $ 297,983
Lincoln National
12/31/99 1.46% 96.49% $ 665,652
12/31/98 1.44% 76.27% $ 917,796
12/31/97 1.57% 73.74% $ 872,822
12/31/96 2.00% 88.17% $ 648,592
12/31/95 2.39% 90.12% $ 505,755
</TABLE>
(1) 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. The total return percentages in
the table are NOT calculated on the same basis as the performance
percentages in the letter at the front of this booklet (those percentages
are based upon the change in unit value).
(2) Per share information for the years ended December 31, 1999 and 1998 were
based on the average shares outstanding method for Capital Appreciation,
Equity-Income, Global Asset Allocation and International.
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.
GPD-5
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
GPD-6
<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, 2000, 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-7
<PAGE>
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.
The Fund is one of the Lincoln National Funds (Funds) that 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 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 the contract.
The Prospectus discusses the information about the fund that you ought to know
before choosing to invest your contract assets in the fund. You can find
information common to all Lincoln National Funds in the General Prospectus
Disclosure following the fund Prospectus.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or determined if this Prospectus is 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 this Prospectus
states. This Prospectus does not offer to sell fund shares, or seek offers to
buy fund shares, where it would be unlawful.
CONTENTS
<TABLE>
<CAPTION>
SUBJECT PAGE
<S> <C>
- ---------------------------------------------------
Summary description of the Fund GI-2
Investment Strategies GI-2
Risk of investment Strategies GI-3
Investment Advisor and Portfolio Manager GI-3
General Prospectus Disclosure -- Important
Additional Information
</TABLE>
Prospectus
May 1, 2000
GI-1
<PAGE>
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(%)
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%
1999 17.55%
</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 12/31/99)
<TABLE>
<CAPTION>
PERIOD BACK GROWTH AND INCOME S&P 500* RUSSELL 1000***
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
1 year 17.55% 21.14% 20.91%
5 year 25.01% 28.66% 28.05%
10 year 16.73% 18.25% 18.13%
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 stocks, a widely
recognized unmanaged index of common stock prices.
*** The Russell 1000 Index measures the performance of the 1,000 largest
companies in the Russell 3000 Index. Russell 3000 companies consist of the 3,000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market.
The fund invests predominantly in large-sized companies. Accordingly, the funds
performance can be compared to the performance of the Russell 1000 Index.
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, 1999, the
GI-2
<PAGE>
average market capitalization of the S&P 500, a broad based market index
representative of larger, typically more financially stable companies, was $146
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'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, including its
plans to merge into a newly created series of its affiliate, Delaware Management
Business Trust, 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 405 Lexington Avenue,
34th Floor, New York, NY 10174.
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 Vice-President of
Vantage, has managed the fund since November, 1997.
GI-3
<PAGE>
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 Director of Quantitative Analysis and Strategy with General
Reinsurance Corporation from October, 1993 to March, 1997, and Senior Vice
President and Director of Quantitative Analysis with J&W Seligman from April,
1997 to November, 1997. 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-4
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
GI-5
<PAGE>
GENERAL SAI DISCLOSURE
(Note: this is uniform information for the 11 Funds. See each Fund's SAI for
information specific to that Fund.)
THIS GENERAL SAI DISCLOSURE CONSTITUTES PART OF THE SAIS 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), AND LINCOLN
NATIONAL SPECIAL OPPORTUNITIES FUND, INC. (SPECIAL OPPORTUNITIES). UNLESS
OTHERWISE INDICATED, THE FOLLOWING INFORMATION APPLIES TO EACH FUND.
INVESTMENT ADVISOR AND SUB-ADVISOR
Lincoln Investment Management, Inc. (Lincoln Investment or advisor) is the
investment advisor to the funds and is headquartered at 200 E. Berry Street,
Fort Wayne, Indiana 46802. Lincoln Investment is a subsidiary of Lincoln
National Investments, Inc., which is a wholly-owned subsidiary of Lincoln
National Corp. (LNC), a publicly-held insurance holding company organized under
Indiana law. Through its subsidiaries, LNC provides, on a national basis,
insurance and financial services. Lincoln Investment is registered with the
Securities and Exchange Commission (SEC) as an investment advisor and has acted
as an investment advisor to mutual funds for over 40 years. The advisor also
acts as investment advisor to Lincoln National Income Fund, Inc. (a closed-end
investment company whose investment objective is to provide a high level of
current income from interest on fixed-income securities) and Lincoln National
Convertible Securities Fund, Inc. (a closed-end investment company whose
investment objective is a high level of total return on its assets through a
combination of capital appreciation and current income) and to other clients,
and also acts as sub-adviser to two of the series of Delaware Group Adviser
Funds, Inc. (the Corporate Income Fund and the Federal Bond Fund of that retail
mutual fund complex).
Under an Advisory Agreement with each fund, the advisor provides portfolio
management and investment advice to the funds and administers its other affairs,
subject to the supervision of the fund's Board of Directors. The advisor, at its
expense, will provide office space to the funds and all necessary office
facilities, equipment and personnel and will make its officers and employees
available to the funds as appropriate. In addition, the advisor will pay all
expenses incurred by it or by the funds in connection with the management of
each fund's assets or the administration of its affairs, other than those
assumed by the funds, as described in the General Prospectus Disclosure. Lincoln
Life has paid the organizational expenses of all the funds. The rates of
compensation to the advisor is set forth in the General Prospectus Disclosure to
the Prospectus.
<TABLE>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth Fund $ 2,417,737 $ 2,476,022 $2,109,952
Bond Fund 1,552,439 1,421,361 1,221,295
Capital Appreciation Fund 9,051,341 4,265,160 2,940,632
Equity-Income Fund 7,394,087 6,639,317 6,053,404
Global Asset Allocation Fund 3,493,557 3,320,142 2,808,358
Growth and Income Fund 13,910,486 12,112,568 9,714,765
International Fund 3,998,445 3,837,594 3,741,563
Managed Fund 3,376,216 3,283,079 2,873,786
Money Market Fund 859,855 517,294 451,243
Social Awareness Fund 6,167,750 5,287,914 3,355,544
Special Opportunities Fund 2,868,328 3,248,791 2,824,015
</TABLE>
A-1
<PAGE>
During the last three years, the advisor received the amounts, as mentioned
above, for investment advisory services. If total expenses of the
funds(excluding taxes, interest, portfolio brokerage commissions and fees, and
expenses of an extraordinary and non-recurring nature, but including the
investment advisory fee) exceed 1 1/2% per annum of the average daily net assets
of each fund (2% for the International Fund), the advisor will pay such excess
by offsetting it against the advisory fee. If such offset is insufficient to
cover the excess, any balance remaining will be paid directly by the advisor to
each fund.
SUB-ADVISORS. As advisor, Lincoln Investment is primarily responsible for
investment decisions affecting each of the funds. However, Lincoln Investment
has entered into sub-advisory agreements with several professional investment
management firms. These firms provide some or substantially all of the
investment advisory services required by a number of the funds, including
day-to-day investment management of those funds' portfolios. Each sub-advisor
makes investment decisions for its respective fund in accordance with that
fund's investment objectives and places orders on behalf of that fund to effect
those decisions. See the following tables for more information about the
sub-advisors and their fees:
<TABLE>
ANNUAL FEE RATE BASED ON
FUND SUB-ADVISOR AVERAGE DAILY NET ASSET VALUE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggressive Growth Putnam Currently .50 of 1% of the first $150 million .35 of 1% of
One Post Office Square the excess over $150 million; upon shareholder approval
Boston, MA 02109 fees will be .50 of 1% of the first $250 million, .45 of 1%
of the excess over $250 million
Capital Appreciation Janus .55 of 1% of the first $100 million .50 of 1% of the next
100 Fillmore Street $400 million; and .45 of 1% of the excess over
Denver, CO 80206 $500 million
Equity-Income Fidelity Trust .48 of 1%
82 Devonshire Street
Boston, MA 02108
Global Asset Allocation Putnam The greater of (a) $40,000; or (b) .47 of 1% of the first
One Post Office Square $200 million; .42 of 1% of the next $200 million; and .40
Boston, MA 02109 of 1% of any excess over $400 million
International Delaware International Advisers .50 of 1% of the first $200 million; .40 of 1% of the next
Ltd. $200 million; and .35 of 1% of any excess over
80 Cheapside, $400 million
London, England
EC2V 6EE
</TABLE>
<TABLE>
ANNUAL FEE RATE BASED ON MARKET
VALUE OF SECURITIES HELD IN THE
PORTFOLIO OF EACH RESPECTIVE CLIENT
FUND AT THE CLOSE OF BUSINESS ON THE
FUND SUB-ADVISOR LAST TRADING DAY OF EACH CALENDAR QUARTER
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth and Income Vantage .20 of 1%
405 Lexington Avenue, 34th
floor
New York, NY 10174
Managed Vantage .20 of 1%
(stock portfolio only)
Social Awareness Vantage .20 of 1%
Special Opportunities Vantage .20 of 1%
</TABLE>
A-2
<PAGE>
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus, most of which it acquired in 1984. KCSI is a
publicly traded holding company whose primary subsidiaries are engaged in
transportation, information processing and financial services. Thomas H. Bailey,
President and Chairman of the Board of Janus, owns approximately 12% of its
voting stock and, by agreement with KCSI, selects a majority of Janus' Board.
FMR Corp., organized in 1972, is the ultimate parent company of Fidelity Trust.
The voting common stock of FMR Corp. is divided into two classes. Class B is
held predominantly by members of the Edward C. Johnson 3d family and is entitled
to 49% of the vote on any matter acted upon by the voting common stock. Class A
is held predominately by non-Johnson family member employees of FMR Corp. and
its affiliates and is entitled to 51% of the vote on any such matter. The
Johnson family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be voted in
accordance with the majority vote of Class B shares. Under the 1940 Act, control
of a company is presumed where one individual or group of individuals owns more
than 25% of the voting stock of that company. Therefore, through their ownership
of voting common stock and the execution of the shareholders' voting agreement,
members of the Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
Putnam is a majority-owned subsidiary of Marsh & McLennan Companies, a
diversified firm offering insurance and reinsurance broking, consulting, and
investment management services. Putnam, however, operates independently of its
parent.
During the last three years each sub-advisor received the following amounts for
investment sub-advisory services. Lincoln Investment, not the fund, pays all
sub-advisory fees owed.
<TABLE>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth Fund 1,637,988 $1,450,345 $1,229,800
Bond Fund N/A N/A N/A
Capital Appreciation Fund 5,545,764 2,840,385 2,072,388
Equity-Income Fund 5,268,247 5,248,803 4,781,931
Global Asset Allocation Fund 2,296,989 2,000,284 1,724,369
Growth and Income Fund 9,501,504 7,502,197 6,155,225
International Fund 2,200,556 1,233,752 1,503,294
Managed Fund 1,269,452 1,116,901 974,080
Money Market Fund N/A N/A N/A
Social Awareness Fund 4,013,362 2,992,902 1,901,560
Special Opportunities Fund 1,706,577 1,775,700 1,519,961
</TABLE>
- --------------------------------------------------------------------------------
SERVICE MARKS. The service mark for the funds and the name Lincoln National have
been adopted by the funds with the permission of LNC, and their continued use is
subject to the right of LNC to withdraw this permission in the event the advisor
should not be the investment advisor of the funds.
In the Prospectus and sales literature, the name Fidelity Investments will be
used with the Equity-Income Fund, Janus with the Capital Appreciation Fund and
Putnam with the Aggressive Growth and Global Asset Allocation Funds. The
continued use of these names is subject to the right of the respective
sub-advisor to withdraw its permission in the event it ceases to be the
sub-advisor to the particular fund it advises.
A-3
<PAGE>
DIRECTORS AND OFFICERS
The directors and executive officers of each fund, their business addresses,
positions with fund, age and their principal occupations during the past five
years are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
* KELLY D. CLEVENGER Vice President, Lincoln National Life Insurance Co.
Chairman of the Board,
President and Director, age 47
1300 S. Clinton Street
Fort Wayne, IN 46802
- ----------------------------------------------------------------------------------------------------------
JOHN B. BORSCH, JR. Retired, formerly Director of Northwestern University
Director, age 66
1776 Sherwood Road
Des Plaines, IL 60016
- ----------------------------------------------------------------------------------------------------------
NANCY L. FRISBY, CPA Vice President/Chief Financial Officer, Desoto Memorial
Director, age 58 Hospital
127 Sinclair Street, S.W., Formerly Chief Financial Officer, Bascom Palmer Eye
Port Charlotte, FL 33952 Institute, University of Miami School of Medicine
- ----------------------------------------------------------------------------------------------------------
* BARBARA S. KOWALCZYK Senior Vice President and Director, Corporate Planning and
Director, age 48 Development, Lincoln National Management Corporation;
Centre Square, West Tower Director, Lincoln Life and Annuity Company of New York
1500 Market St., Suite 3900 (formerly Executive Vice President, Lincoln Investment
Philadelphia, PA 19102-2112 Management, Inc.)
- ----------------------------------------------------------------------------------------------------------
KENNETH G. STELLA President, Indiana Hospital and Health Association
Director, age 56
One America Square
Indianapolis, IN 46282
- ----------------------------------------------------------------------------------------------------------
JANET C. CHRZAN Vice President and Treasurer, Lincoln National Corp.
Treasurer, age 51 (formerly Vice President and General Auditor)
Centre Square, West Tower
1500 Market St., Suite 3900
Philadelphia, PA 19102-2112
- ----------------------------------------------------------------------------------------------------------
CYNTHIA A. ROSE Assistant Vice President, Lincoln National Life Insurance
Secretary, age 45 Co.
1300 South Clinton Street Secretary and Assistant Vice President (eff. 1/1/99)
Fort Wayne, IN 46802
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Interested persons of the funds, as defined in the 1940 Act.
A-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM FUND
NAME OF PERSON, FROM EACH FUND* AND FUND COMPLEX
POSITION
- ----------------------------------------------------------------------------------------------------------------------------
JOHN B. BORSCH, JR. $18,105
Director $1,646
- ----------------------------------------------------------------------------------------------------------------------------
NANCY L. FRISBY 18,226
Director 1,657
- ----------------------------------------------------------------------------------------------------------------------------
KENNETH G. STELLA 16,874
Director 1,534
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Directors fees of $350 per meeting, plus expenses to attend the meetings, are
paid by each fund to each director who is not an interested person of the funds.
CODE OF ETHICS
The funds permit "Access Persons" as defined by Rule 17j-1 under the 1940 Act to
engage in personal securities transactions, subject to the terms of the Code of
Ethics that has been adopted by each fund's Board of Directors. Access Persons
are required to follow the guidelines established by a fund's Codes of Ethics in
connection with all personal securities transactions and are subject to certain
prohibitions on personal trading. Each fund's advisor and sub-advisor, pursuant
to Rule 17j-1 and other applicable laws and pursuant to the terms of each fund's
Code of Ethics, must adopt and enforce their own Codes of Ethics appropriate to
their operations. Each fund's Board of Directors is required to review and
approve the Codes of Ethics for the fund's advisor and sub-advisor.
FUND EXPENSES
Expenses other than investment advisory fees specifically assumed by each fund
include: compensation and expenses of Directors of the fund who are not
interested persons of the fund as defined in the 1940 Act; registration, filing,
printing, and other fees in connection with filings with regulatory authorities,
including the costs of printing and mailing updated Prospectuses and SAIs
provided to current contract owners; fees and expenses of independent auditors;
the expenses of printing and mailing proxy statements and shareholder reports;
custodian and transfer agent charges; brokerage commissions and securities and
options transaction costs incurred by the fund; taxes and corporate fees; fees
for accounting, valuation and related services; legal fees incurred in
connection with the affairs of the fund (other than legal services provided by
personnel of the advisor or its affiliated companies); the fees of any trade
association of which the fund is a member; and expenses of shareholder and
Director meetings.
DESCRIPTION OF SHARES
The authorized capital stock of each fund consists of shares of common stock,
$0.01 par value. Fund shares will be owned by Lincoln Life and will be held by
it in the variable accounts. As principal shareholder of each fund, Lincoln Life
may be deemed to be a control person as that term is defined under the 1940 Act.
However, as stated in the Prospectuses for the variable accounts, Lincoln Life
provides to contract owners of the variable accounts the right to direct the
voting of fund shares at shareholder meetings, to the extent provided by law.
Lincoln Life will vote for or against any proposition, or will abstain from
voting, any fund shares attributable to a contract for which no timely voting
instructions are received, and any fund shares held by Lincoln Life for its own
account, in proportion to the voting instructions that it received with respect
to all contracts participating in that fund. However, if the 1940 Act or any
regulation under it should change, and as a result Lincoln Life determines it is
permitted to vote fund shares in its own right, it may elect to do so.
All the shares of each fund are of the same class with equal rights and
privileges. Each full share is entitled to one vote and each fractional share is
entitled to a proportionate fractional vote, on all matters subjected to a vote
of the shareholder. All shares, full and fractional, participate proportionately
in any dividends and capital gains distributions and, in the event of
liquidation, in that fund's net assets remaining after satisfaction of
outstanding liabilities.
When issued, each share is fully-paid and non-assessable and the shareholder has
no preemptive or conversion rights. Fund shares have non-cumulative voting
A-5
<PAGE>
rights, which means that holders of more than 50% of the shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
In that event the holders of the remaining shares so voting will not be able to
elect any directors. Shares may be redeemed as set forth under Sale and
redemption of shares.
The Bylaws of the funds allow them, in proper cases, to dispense with their
annual meetings of the shareholder. Generally, this may be done as long as:
(1) a majority of the Directors then in office have at some point been elected
by the shareholder and, if any vacancy is filled by vote of the Board of
Directors, then immediately after filling the vacancy at least two thirds of the
Directors shall have been elected by the shareholder; (2) there is no change in
the independent auditor of the funds; (3) there is no material change to the
investment advisory and/or sub-advisory agreements and/or fundamental policies;
and (4) a shareholder vote is not required with respect to a distribution
agreement. In adopting this procedure for dispensing with annual meetings that
are a formality, the Directors of the funds have undertaken to comply with the
requirements of Section 16(c) of the 1940 Act. That Section protects contract
owners by providing a procedure by which they may require management to convene
a meeting of the shareholder to vote on removal of one or more Directors. The
Directors also have agreed to facilitate communication among contract owners for
the purpose of calling those meetings. Further information about these
procedures is available from fund management.
STRATEGIC PORTFOLIO TRANSACTIONS-ADDITIONAL INFORMATION
Because of their different investment objectives and portfolio management
philosophies many of the funds engage to varying degrees in strategic portfolio
transactions, in order to preserve or enhance the value of their assets. These
can be generally identified as either derivative transactions or cash
enhancement transactions. Derivative transactions are recognized by the
investment community as an acceptable way to seek to increase the fund's overall
value (or, depending on the condition of the securities markets, at least to
slow its decrease). Cash enhancement transactions are designed to make some
extra money for the fund when it has excess cash, or to help the fund obtain
some cash for temporary purposes when needed. See the Prospectus for each fund
for a listing of the kinds of transactions in which each fund may engage.
1. DERIVATIVE TRANSACTIONS
A. Introduction
A derivative transaction is a financial agreement the value of which is
dependent upon the values of one or more underlying assets or upon the
values of one or more indices of asset values. The following types are
currently in fairly common use in the investment community, although not
every fund will use all of them:
1. Equity contracts: stock options and indexed options; equity swaps;
stock index futures and options on futures; swaptions;
2. Interest rate contracts: interest rate futures and options on them;
forward rate agreements (FRAs); interest rate swaps and their
related transactions (e.g., caps, floors, collars and corridors);
and/or
3. Currency derivative contracts: currency forward contracts; currency
options; currency futures; currency swaps; cross-currency interest
rate swaps.
SIMPLIFIED DEFINITIONS FOR THESE TRANSACTIONS ARE PROVIDED AT THE END OF THIS
GENERAL SAI DISCLOSURE.
Although they may be structured in complex combinations, derivative transactions
in which the funds engage generally fall into two broad categories: options
contracts or forward contracts. The combined forms are constantly evolving. In
fact, variations on the types listed previously may come into use after the date
of these SAIs. Therefore, where a particular fund discloses the intent of that
fund to engage in any of the types listed, that fund hereby reserves the right
to engage in related variations on those transactions.
The funds intend to engage in derivative transactions only defensively, unless a
fund's Prospectus or SAI states otherwise. Examples of this defensive use might
be: to hedge against a perceived decrease in a fund's asset value; to control
transaction costs associated with market timing (e.g., by using futures on an
unleveraged basis); and to lock in returns, spreads, or currency exchange rates
in anticipation of future cash market transactions.
There is no discussion here of asset-backed or mortgage-backed securities, or
securities such as collateralized mortgage obligations, structured notes,
inverse floaters, principal-only or interest-only securities, etc. For a
description of these securities see the Prospectus or SAI for the funds that are
authorized to engage in this kind of trading.
B. Risk factors commonly associated with derivative transactions.
There are certain risks associated with derivatives, and some derivatives
involve more of these risks than others. We briefly describe the
A-6
<PAGE>
most common ones here; however, this is not an exhaustive list. Consult
your financial counselor if you have additional questions.
CREDIT RISK is the possibility that a counterparty to a transaction will
fail to perform according to the terms and conditions of the transaction,
causing the holder of the claim to suffer a loss.
CROSS-CURRENCY SETTLEMENT RISK (or Herstatt risk) is related to the
settlement of foreign exchange contracts. It arises when one of the
counterparties to a contract pays out one currency prior to receiving
payment of the other. Herstatt risk arises because the hours of operation
of domestic interbank fund transfer systems often do not overlap due to
time zone differences. In the interval between the time one counterparty
has received payment in one indicated currency and the time the other
counterparty(ies) receive payment in the others, those awaiting payment
are exposed to credit risk and market risk.
LEGAL RISK is the chance that a derivative transaction, which involves
highly complex financial arrangements, will be unenforceable in
particular jurisdictions or against a financially troubled entity; or
will be subject to regulation from unanticipated sources.
MARKET LIQUIDITY RISK is the risk that a fund will be unable to control
its losses if a liquid secondary market for a financial instrument does
not exist. It is often considered as the risk that a (negotiable or
assignable) financial instrument cannot be sold quickly and at a price
close to its fundamental value.
MARKET RISK is the risk of a change in the price of a financial
instrument, which may depend on the price of an underlying asset.
OPERATING RISK is the potential of unexpected loss from inadequate
internal controls or procedures; human error; system (including data
processing system) failure; or employee dishonesty.
SETTLEMENT RISK between two counterparties is the possibility that a
counterparty to whom a firm has made a delivery of assets or money
defaults before the amounts due or assets have been received; or the risk
that technical difficulties interrupt delivery or settlement even if the
counterparties are able to perform. In the latter case, payment is likely
to be delayed but recoverable.
SYSTEMIC RISK is the uncertainty that a disruption (at a firm, in a
market segment, to a settlement system, etc.) might cause widespread
difficulties at other firms, in other market segments, or in the
financial system as a whole.
SPECIAL NOTE FOR OPTIONS AND FUTURES TRANSACTIONS: Gains and losses on
options and futures transactions depend on the portfolio manager's
ability to correctly predict the direction of stock prices and interest
rates, and other economic factors. Options and futures trading may fail
as hedging techniques in cases where the price movements of the
securities underlying the options and futures do not follow the price
movements of the portfolio securities subject to the hedge. The loss from
investing in futures transactions is potentially unlimited.
SOME OF THESE RISKS MAY BE PRESENT IN EACH TYPE OF TRANSACTION, WHILE
OTHERS MAY PERTAIN ONLY TO CERTAIN ONES. These risks are discussed here
only briefly. Before you invest in a particular fund, please consult your
financial counselor if you have questions about the risks associated with
that fund's use of derivatives.
C. Varying usage of derivative transactions
Subject to the terms of the Prospectus and SAI for each fund, that fund's
portfolio manager decides which types of derivative transactions to
employ, at which times and under what circumstances. For a description of
the limits, risk factors and circumstances under which derivative
transactions will be used by each fund, refer to the SAI booklet.
D. Increased government scrutiny
Derivative transactions are coming under increased scrutiny by Congress
and industry regulators (such as the SEC and the Office of the
Comptroller of the Currency), and by self-regulatory agencies (such as
the NASD). Should legislation or regulatory initiatives be enacted
resulting in additional restrictive requirements for derivative
transactions, Lincoln Life and the funds reserve the right to make all
necessary changes in the contracts and the Registration Statements for
the funds, respectively, to comply with those requirements.
2. CASH ENHANCEMENT TRANSACTIONS
Cash enhancement transactions also involve certain risks to the fund. They are
discussed more fully in the SAI.
A. Lending of portfolio securities
A-7
<PAGE>
Any fund authorized to do so may make secured loans of its portfolio
securities in order to realize additional income. The loans are limited
to a maximum of a stipulated amount of the fund's total assets. As a
matter of policy, securities loans are made to broker/dealers under
agreements requiring that the loans be continuously secured by collateral
in cash or short-term debt obligations at least equal at all times to
102% of the value of the securities lent.
The borrower pays the fund an amount equal to any dividends or interest
received on securities lent. The fund retains all or a portion of the
interest received on securities lent. The fund also retains all or a
portion of the interest received on investment of the cash collateral, or
receives a fee from the borrower.
With respect to the loaned securities, voting rights or rights to consent
pass to the borrower. However, the fund retains the right to call in the
loans and have the loaned securities returned at any time with reasonable
notice. This is important when issuers of the securities ask holders of
those securities--including the fund--to vote or consent on matters which
could materially affect the holders' investment. The fund may also call
in the loaned securities in order to sell them. None of the fund's
portfolio securities will be loaned to Lincoln Investment, to any
sub-advisor, or to any of their respective affiliates. The fund may pay
reasonable finder's fees to persons unaffiliated with it in connection
with the arrangement of the loans.
B. Repurchase (Repo) and reverse repurchase (Reverse Repo) transactions
1. REPOS. From time to time, the funds may enter into Repo
transactions. In a typical Repo transaction, the fund involved buys
U.S. Government or other money market securities from a financial
institution (such as a bank, broker, or savings and loan
association). At the same time, as part of the arrangement, the fund
obtains an agreement from the seller to repurchase those same
securities from the fund at a specified price on a fixed future
date.
The repurchase date is normally not more than seven days from the
date of purchase. Repurchase agreements maturing in more than seven
days will be considered illiquid and subject to the fund's
restriction on illiquid securities.
2. REVERSE REPOS. A fund may also be authorized to enter into Reverse
Repo transactions. This simply means the fund is on the reverse side
of a Repo transaction. That is, the fund is the Seller of some of
its portfolio securities, subject to buying them back at a set price
and date.
Authorized funds will engage in Reverse Repos for temporary purposes,
such as for obtaining cash to fund redemptions; or for the purpose of
increasing the income of the fund by investing the cash proceeds at a
higher rate than the cost of the agreement. Entering into a reverse
repo transaction is considered to be the borrowing of money by the
fund. Funds authorized to engage in Repos as buyers are not
necessarily authorized to do Reverse Repos.
RISKS OF OPTIONS AND FINANCIAL FUTURES TRADING
This discussion relates to all funds except the International Fund and the Money
Market Fund. (Note: The SAIs for Aggressive Growth, Capital Appreciation,
Equity-Income and Global Asset Allocation Funds provide additional disclosures
concerning the types and risks of the strategic portfolio transactions in which
they may engage.)
OPTIONS TRADING
The fund may purchase or write (sell) options on financial instruments as a
means of achieving additional return or hedging the value of the fund's
portfolio. The fund may not purchase or write put or covered call options in an
aggregate cost exceeding 30% of the value of its total assets. The fund would
invest in options in standard contracts which may be quoted on NASDAQ, or on
national securities exchanges. Currently options are traded on numerous
securities and indices including, without limitation, the Standard and
Poor's 100 Index (S&P 100), the Standard and Poor's 500 Index (S&P 500), and the
NYSE Beta Index.
Put and call options are generally short-term contracts with durations of nine
months or less. The investment advisor will generally write covered call options
when it anticipates declines in the market value of the portfolio securities and
the premiums received may offset to some extent the decline in the fund's net
asset value. On the other hand, writing put options may be a useful portfolio
investment strategy when the fund has cash or other reserves and it intends to
purchase securities but expects prices to increase.
A-8
<PAGE>
Generally, the risk to the fund in writing options is that the investment
advisor's assumption about the price trend of the underlying security may prove
inaccurate. If the fund wrote a put, expecting the price of a security to
increase, and it decreases, or if the fund wrote a call, expecting the price to
decrease but it increased, the fund could suffer a loss if the premium received
in each case did not equal the difference between the exercise price and the
market price.
As with the writer of a call, a put writer generally hopes to realize premium
income. The risk position of the fund as a put writer is similar to that of a
covered call writer which owns the underlying securities. Like the covered call
writer (who must bear the risk of the position in the underlying security), the
fund as a put writer stands to incur a loss if and to the extent the price of
the underlying security falls below the exercise price plus premium.
Principal factors affecting the market value of a put or call option include
supply and demand, interest rates, the current market price and price volatility
of the underlying security and the time remaining until the expiration date. In
addition, there is no assurance that the fund will be able to effect a closing
transaction at a favorable price. If the fund cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk on the security. If a
substantial number of covered options written by the fund are exercised, the
fund's rate of portfolio turnover could exceed historic levels. This could
result in higher transaction costs, including brokerage commissions. The fund
will pay brokerage commissions in connection with the writing and purchasing of
options to close out previously written options. Such brokerage commissions are
normally higher than those applicable to purchases and sales of portfolio
securities.
FUTURES CONTRACTS AND OPTIONS THEREON
The fund may buy and sell financial futures contracts (futures contracts) and
related options thereon solely for hedging purposes. The fund may sell a futures
contract or purchase a put option on that futures contract to protect the value
of the fund's portfolio in the event the investment advisor anticipates
declining security prices. Similarly, if security prices are expected to rise,
the fund may purchase a futures contract or a call option thereon.
The fund may purchase and sell financial futures contracts (futures contracts)
as a hedge against fluctuations in the value of securities which are held in the
fund's portfolio or which the fund intends to purchase. The fund will engage in
such transactions consistent with the fund's investment objective. For certain
limited purposes, the fund may also be authorized to buy futures contracts on an
unleveraged basis and not as an anticipatory hedge. Currently, futures contracts
are available on Treasury bills, notes, and bonds as well as interest-rate and
stock market indexes.
The Bond, Growth and Income, Managed, Social Awareness, and Special
Opportunities funds may only purchase futures and related options thereon for
hedging purposes. The Aggressive Growth, Capital Appreciation, Equity-Income,
and Global Asset Allocation funds may purchase futures and related options for
both hedging and non-hedging purposes, but subject to the limits described in
each fund's SAI. The funds will not purchase or sell futures contracts or
related options if immediately thereafter more than 1/3 of its net assets would
be hedged.
There are a number of risks associated with futures hedging. Changes in the
price of a futures contract generally parallel but do not necessarily equal
changes in the prices of the securities being hedged. The risk of imperfect
correlation increases as the composition of the fund's securities portfolio
diverges from the securities that are the subject of the futures contract.
Because the change in the price of the futures contract may be more or less than
the change in the prices of the underlying securities, even a correct forecast
of price changes may not result in a successful hedging transaction. Another
risk is that the investment advisor could be incorrect in its expectation as to
the direction or extent of various market trends or the time period within which
the trends are to take place.
The fund intends to purchase and sell futures contracts only on exchanges where
there appears to be a market in such futures sufficiently active to accommodate
the volume of its trading activity. This investment policy does not apply to the
Capital Appreciation, Global Asset Allocation, and Equity-Income funds. There
can be no assurance that a liquid market will always exist for any particular
contract at any particular time. Accordingly, there can be no assurance that it
will always be possible to close a futures position when such closing is desired
and, in the event of adverse price movements, the fund would continue to be
required to make daily cash payments of variation margin. However, in the event
futures contracts have been sold to hedge portfolio securities, such securities
will not be sold until the offsetting futures contracts can be executed.
Similarly, in the event futures have been bought to hedge anticipated securities
purchases, such purchases will not be executed until the offsetting futures
contracts can be sold.
Successful use of futures contracts by the fund is also subject to the ability
of the investment advisor to predict correctly movements in the direction of
interest rates and other factors affecting markets for securities.
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For example, if the fund has hedged against the possibility of an increase in
interest rates that would adversely affect the price of securities in its
portfolio and prices of such securities increase instead, the fund will lose
part or all of the benefit of the increased value of its securities because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the fund has insufficient cash to meet daily variation margin
requirements, it may have to sell securities to meet such requirements. Such
sale of securities may be, but will not necessarily be, at increased prices that
reflect the rising market. The fund may have to sell securities at a time when
it is disadvantageous to do so. Where futures are purchased to hedge against a
possible increase in the price of securities before the fund is able to invest
its cash in an orderly fashion, it is possible that the market may decline
instead; if the fund then concludes not to invest in securities at that time
because of concern as to possible further market decline or for other reasons,
the fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the securities purchased.
The selling of futures contracts by the fund and use of related transactions in
options on futures contracts are subject to position limits, which are affected
by the activities of the investment advisor.
The hours of trading of futures contracts may not conform to the hours during
which the fund may trade securities. To the extent that the futures markets
close before the securities markets, significant price and rate movements can
take place in the securities markets that cannot be reflected in the futures
markets.
The fund's successful use of futures contracts and options thereon depends upon
the ability of its investment advisor to predict movements in the securities
markets and other factors affecting markets for securities and upon the degree
of correlation between the prices of the futures contracts and the prices of the
securities being hedged. As a result, even a correct forecast of price changes
may not result in a successful hedging transaction. Although futures contracts
and options thereon may limit the fund's exposure to loss, they may also limit
the fund's potential for capital gains. For example, if the fund has hedged
against the possibility of decrease in prices which would adversely affect the
price of securities in its portfolio and prices of such securities increase
instead, the fund will lose part or all of the benefit of the increased value of
its securities because it will have offsetting losses in its futures positions.
Although the fund will enter into futures contracts only where there appears to
be a liquid market, there can be no assurance that such liquidity will always
exist.
LENDING OF PORTFOLIO SECURITIES
The funds may from time to time lend securities from their portfolios to
brokers, dealers and financial institutions and receive collateral from the
borrower, in the form of cash (which may be invested in short-term securities),
U.S. Government obligations or certificates of deposit. Such collateral will be
maintained at all times in an amount equal to at least 102% of the current
market value of the loaned securities, and will be in the actual or constructive
possession of the particular fund during the term of the loan. The fund will
maintain the incidents of ownership of the loaned securities and will continue
to be entitled to the interest or dividends payable on the loaned securities. In
addition, the fund will receive interest on the amount of the loan. The loans
will be terminable by the fund at any time and will not be made to any
affiliates of the fund or the advisor. The fund may pay reasonable finder's fees
to persons unaffiliated with it in connection with the arrangement of the loans.
As with any extensions of credit, there are risks of delay in recovery and, in
some cases, even loss of rights in the collateral or the loaned securities
should the borrower of securities fail financially. However, loans of portfolio
securities will be made to firms deemed by the advisor to be creditworthy.
RISKS OF REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
The funds may make short-term investments in repurchase agreements. The
difference between the purchase price to the fund and the resale price to the
seller represents the interest earned by the fund which is unrelated to the
coupon rate or maturity of the purchased security. If the seller defaults, the
fund may incur a loss if the value of the collateral securing the repurchase
agreement declines, or the fund may incur disposition costs in connection with
liquidating the collateral. If bankruptcy proceedings are commenced with respect
to the seller, realization upon the collateral by the fund may be delayed or
limited and a loss may be incurred if the collateral securing the repurchase
agreement declines in value during the bankruptcy proceedings. The Board of
Directors of the funds or its delegate will evaluate the creditworthiness of all
entities, including banks and broker-dealers, with which they propose to enter
into repurchase agreements. These transactions will be fully collateralized; and
the collateral for each
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transaction will be in the actual or constructive possession of the particular
fund during the terms of the transaction, as provided in the agreement.
Similarly, the fund will enter into reverse repurchase agreements only with
parties that the advisor or sub-advisor deems creditworthy. While a reverse
repurchase agreement is outstanding, the funds will maintain cash and
appropriate liquid assets in a segregated custodial account to cover its
obligation under the agreement.
FOREIGN INVESTMENTS
There are certain risks involved in investing in foreign securities, including
those resulting from fluctuations in currency exchange rates; devaluation of
currencies; political or economic developments including the possible imposition
of currency exchange blockages, bars preventing the removal of assets, or other
foreign governmental laws or restrictions; reduced availability of public
information concerning issuers; and the fact that foreign companies are not
generally subject to uniform accounting, auditing, and financial reporting
standards or to other regulatory practices and requirements comparable to those
applicable to domestic companies. With respect to certain foreign countries,
there is also the possibility of expropriation, nationalization, confiscatory
taxation, and limitations on the use or removal of cash or other assets of a
fund, including the withholding of interest payments or dividends. These risks
may be particularly great in so-called developing or undeveloped countries,
sometimes referred to as Emerging Markets.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the NYSE. Accordingly, a fund's foreign investments may be less
liquid and their prices may be more volatile than comparable investments in
securities of U.S. companies. Moreover, the settlement periods for foreign
securities, which are often longer than those for securities of U.S. issuers,
may affect portfolio liquidity. The funds will incur costs in converting foreign
currencies into U.S. dollars. Custody charges are generally higher for foreign
securities. In buying and selling securities on foreign exchanges, a fund
normally pays fixed commissions that are generally higher than the negotiated
commissions charged in the U.S. In addition, there is generally less
governmental supervision and regulation of securities exchanges, brokers and
issuers in foreign countries than in the U.S. There may be difficulty in
enforcing legal rights outside the U.S. For example, in the event of default on
any foreign debt obligations, it may be more difficult or impossible for the
fund to obtain or to enforce a judgment against the issuers of these securities.
The advisor or sub-advisor will take all these factors into consideration in
managing a fund's foreign investments.
The share price of a fund that invests in foreign securities will reflect the
movements of both the prices of the portfolio securities and the currencies in
which those securities are denominated. Depending on the extent of a fund's
investments abroad, changes in a fund's share price may have a low correlation
with movements in the U.S. markets. Because most of the foreign securities in
which the fund invests will be denominated in foreign currencies, or otherwise
will have values that depend on the performance of foreign currencies relative
to the U.S. dollar, the relative strength of the U.S. dollar may be an important
factor in the performance of the fund.
FOREIGN CURRENCIES
When an advisor or sub-advisor believes that a currency in which a portfolio
security or securities is denominated or exposed may suffer a decline against
the U.S. dollar, it may hedge that risk by entering into a forward contract to
sell an amount of foreign currency approximating the value of some or all of the
portfolio securities denominated in or exposed to that foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and a fund may hold various foreign currencies,
the value of the net assets of that fund as measured in U.S. dollars will be
affected favorably or unfavorably by changes in exchange rates. Generally,
currency exchange transactions will be conducted on a spot (i.e., cash) basis at
the spot rate prevailing in the currency exchange market. The cost of currency
exchange transactions will generally be the difference between the bid and offer
spot rate of the currency being purchased or sold. Some foreign currency values
may be volatile, and there is the possibility of government controls on currency
exchange or governmental intervention in currency markets which could adversely
affect the fund.
Investors should be aware that exchange rate movements can be significant and
can endure for long periods of time. In order to protect against uncertainty in
the level of future foreign currency exchange rates, a fund's advisor or
sub-advisor may attempt to manage exchange rate risk through active currency
management, including the use of certain foreign currency hedging transactions.
For example, it may hedge some or all of its investments denominated in a
foreign currency against a decline in the value of that currency relative to the
U.S. dollar by entering into contracts to exchange that currency for U.S.
dollars (not exceeding the value of the fund's assets denominated in or exposed
to that currency), or by participating in options or futures contracts with
respect to that currency. If the advisor or sub-advisor believes that a
particular currency may
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decline relative to the U.S. dollar, the fund may also enter into contracts to
sell that currency (up to the value of the fund's assets denominated in or
exposed to that currency) in exchange for another currency that the advisor or
sub-advisor expects to remain stable or to appreciate relative to the U.S.
dollar. This technique is known as currency cross-hedging. Refer to the
Prospectus for each fund to determine which funds may engage in these
transactions.
These strategies are intended to minimize the effect of currency appreciation as
well as depreciation, but do not protect against a decline in the underlying
value of the hedged security. In addition, these strategies may reduce or
eliminate the opportunity to profit from increases in the value of the original
currency and may adversely impact the fund's performance if the advisor or
sub-advisor's projection of future exchange rates is inaccurate. See Strategic
portfolio transactions.
VALUATION OF PORTFOLIO SECURITIES
SHORT-TERM INVESTMENTS. For funds (other than the Money Market Fund) that own
short-term investments which mature in less than 60 days, these instruments are
valued at amortized cost. Such securities acquired with a remaining maturity of
61 days or more are valued at their fair value until the sixty-first day prior
to maturity; thereafter, their cost for valuation purposes is deemed to be their
fair value on such sixty-first day.
OPTIONS TRADING. For those funds engaging in options trading, fund investments
underlying call options will be valued as described previously. Options are
valued at the last sale price or, if there has been no sale that day, at the
mean of the last bid and asked price on the principal exchange where the option
is traded, as of the close of trading on the NYSE. The fund's net asset value
will be increased or decreased by the difference between the premiums received
on writing options and the cost of liquidating those positions measured by the
closing price of those options on the exchange where traded.
FUTURES CONTRACTS AND OPTIONS THEREON. For those funds buying and selling
futures contracts and related options thereon, the futures contracts and options
are valued at their daily settlement price.
FOREIGN SECURITIES. For funds investing in foreign securities, the value of a
foreign portfolio security held by a fund is determined based upon its closing
price or upon the mean of the closing bid and asked prices on the foreign
exchange or market on which it is traded and in the currency of that market, as
of the close of the appropriate exchange. As of the close of business on the
NYSE, that fund's portfolio securities which are quoted in foreign currencies
are converted into their U.S. dollar equivalents at the prevailing market rates,
as computed by the custodian of the fund's assets.
However, trading on foreign exchanges may take place on dates or at times of day
when the NYSE is not open; conversely, overseas trading may not take place on
dates or at times of day when the NYSE is open. Any of these circumstances could
affect the net asset value of fund shares on days when the investor has no
access to the fund. There are more detailed explanations of these circumstances
in the SAI for the various funds. See the General Prospectus Disclosure for the
funds for information about how to obtain a copy of the SAI booklet for the
11 funds.
CUSTODIAN
All securities, cash and other similar assets of the Bond, Growth and Income,
Managed, Money Market, Social Awareness and Special Opportunities funds are
currently held in custody by The Chase Manhattan Bank, N.A., 4 Chase MetroTech
Center, Brooklyn, NY 11245. Chase Manhattan agreed to act as custodian for each
fund pursuant to a Custodian Agreement dated March 30, 1998.
All securities, cash and other similar assets of the Aggressive Growth, Capital
Appreciation, Equity-Income, Global Asset Allocation and International Funds are
held in custody by State Street Bank and Trust Co., 225 Franklin Street, Boston,
Massachusetts 02110. State Street agreed to act as custodian for these funds
pursuant to Custodian Contracts effective July 21, 1987 for the Global Asset
Allocation fund, April 29, 1991 for the International fund, and December 6, 1993
for the other three funds.
Under these Agreements, the respective custodians shall (1) receive and disburse
money; (2) receive and hold securities; (3) transfer, exchange, or deliver
securities; (4) present for payment coupons and other income items, collect
interest and cash dividends received, hold stock dividends, etc.; (5) cause
escrow and deposit receipts to be executed; (6) register securities; and
(7) deliver to the funds proxies, proxy statements, etc.
INDEPENDENT AUDITORS
Each fund's Board of Directors has engaged Ernst & Young LLP, Two Commerce
Square, Suite 4000, 2001 Market Street, Philadelphia, PA 19103, to be the
independent auditors for the fund. In addition to the audit of the 1999
financial statements of the funds, other services provided include review and
consultation connected with filings of annual reports and registration
statements with the Securities and Exchange Commission (SEC); consultation on
financial accounting and
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reporting matters; and meetings with the Audit Committee.
FINANCIAL STATEMENTS
The audited financial statements and the reports of Ernst & Young LLP,
Independent Auditors, for the funds are incorporated by reference to each fund's
1999 Annual Report. We will provide a copy of each fund's Annual Report on
request and without charge. Either write Lincoln National Life Insurance Co.,
P.O. Box 2340, Fort Wayne, Indiana 46801 or call: 1-800-4LINCOLN (452-6265).
BOND AND COMMERCIAL PAPER RATINGS
Certain of the funds' investment policies and restrictions include references to
bond and commercial paper ratings. The following is a discussion of the rating
categories of Moody's Investors Service, Inc. and Standard & Poor's Corp.
MOODY'S INVESTORS SERVICE, INC.
Aaa -- Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
STANDARD & POOR'S CORP.
AAA -- This is the highest rating assigned by Standard & Poor's Corp. to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest than for
bonds in the A category and higher.
BB-B-CCC-CC -- Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
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MOODY'S INVESTORS SERVICE, INC.
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime 1 -- Highest Quality;
Prime 2 -- Higher Quality;
Prime 3 -- High Quality.
(The funds will not invest in commercial paper rated Prime 3).
STANDARD & POOR'S CORP.
A Standard & Poor's Corp. commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The fund will invest in commercial paper rated in the A Categories, as
follows:
A -- Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2, and 3 to indicate the relative degree of safety. (The
funds will not invest in commercial paper rated A-3).
A -- 1 this designation indicates that the degree of safety regarding timely
payment is very strong.
A -- 2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not overwhelming as for issues
designated A-1.
U.S. GOVERNMENT OBLIGATIONS
Securities issued or guaranteed as to principal and interest by the U.S.
Government include a variety of Treasury securities, which differ only in their
interest rates, maturities and times of issuance. Treasury bills have a maturity
of one year or less. Treasury notes have maturities of two to ten years and
Treasury bonds generally have a maturity of greater than ten years.
Various agencies of the U.S. Government issue obligations. Some of these
securities are supported by the full faith and credit of the U.S. Treasury (for
example those issued by Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration and The
Tennessee Valley Authority).
Obligations of instrumentalities of the U.S. Government are supported by the
right of the issuer to borrow from the Treasury (for example, those issued by
Federal Farm Credit Banks, Federal Home Loan Bank, Federal Home Loan Mortgage
Corp., Federal Intermediate Credit Banks, Federal Land Bank and the U.S. Postal
Service). Obligations supported by the credit of the instrumentality include
securities issued by government-sponsored corporations whose stock is publicly
held (for example, the Federal National Mortgage Association, and the Student
Loan Marketing Association). There is no guarantee that the government will
support these types of securities, and therefore they may involve more risk than
other government obligations.
TAXES
Each fund intends to qualify and has elected to be taxed as a regulated
investment company under certain provisions of the Internal Revenue Code of
1986, as amended (the Code). If a fund qualifies as a regulated investment
company and complies with the provisions of the Code relieving regulated
investment companies which distribute substantially all of their net income
(both net ordinary income and net capital gain) from federal income tax, it will
be relieved from such tax on the part of its net ordinary income and net
realized capital gain which it distributes to its shareholders. To qualify for
treatment as a regulated investment company, each fund must, among other things,
derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities or foreign currencies (subject to the
authority of the Secretary of the Treasury to exclude foreign currency gains
which are not directly related to the fund's principal business of investing in
stock or securities or options and futures with respect to such stock or
securities), or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its investing in such
stocks, securities, or currencies.
The federal tax laws impose a 4% nondeductible excise tax on each regulated
investment company with respect to an amount, if any, by which such company does
not meet distribution requirements specified in such tax laws, unless certain
exceptions apply. Each fund intends to comply with such distribution
requirements or qualify under one or more exceptions, and thus does not expect
to incur the 4% nondeductible excise tax.
Since the sole shareholder of each fund will be Lincoln Life, no discussion is
stated herein as to the federal income tax consequences at the shareholder
level.
The discussion of federal income tax considerations in the Prospectus, in
conjunction with the foregoing, is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations currently in effect
as interpreted by the Courts and the Internal Revenue Service (IRS). These
interpretations can be changed at any time. The above discussion covers only
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federal tax considerations with respect to the fund. State and local taxes vary.
DERIVATIVE TRANSACTIONS-DEFINITIONS
The SAI for each fund and this uniform Appendix discuss the type of derivative
transactions in which the funds may engage and the risks typically associated
with many derivative transactions. Here are some definitions for the derivatives
listed in the Appendix:
OPTION. A contract which gives the fund the right, but not the obligation, to
buy or sell specified securities at a fixed price before or at a designated
future date. If the contract allows the fund to buy securities, it is a call
option; if to sell, it is a put option. It is common practice in options trading
to terminate an outstanding option contract by entering into an offsetting
transaction known as a closing transaction; as a result of which the fund would
either pay out or receive a cash settlement. This is discussed below.
CURRENCY OPTION. Discussed later.
FIXED INCOME OPTION. One based on a fixed-income security, such as a corporate
or government bond.
INDEX OPTION. One based on the value of an index which measures the fluctuating
value of a basket of pre-selected securities.
STOCK (EQUITY) OPTION. One based on the shares of stock of a particular company.
OPTION ON A FUTURES CONTRACT. Discussed later.
SWAP. A financial transaction in which the fund and another party agree to
exchange streams of payments at periodic intervals under a predetermined set of
occurrences related to the price level, performance or value of one or more
underlying securities, and pegged to a reference amount known as the notional
amount. A swap is normally used to change the market risk associated with a loan
or bond borrowing from one interest rate base (fixed term or floating rate) or
currency of one denomination to another.
EQUITY SWAP. One which allows the fund to exchange the rate of return (or some
portion of the rate) on its portfolio stocks (an individual share, a basket or
index) for the rate of return on another equity or non-equity investment.
INTEREST RATE SWAP. One in which the fund and another party exchange different
types of interest payment streams, pegged to an underlying notional principal
amount. The three main types of interest rate swaps are coupon swaps (fixed rate
to floating rate in the same currency); basis swaps (one floating rate index to
another floating rate index in the same currency); and cross-currency interest
rate swaps (fixed rate in one currency to floating rate in another).
RELATED TRANSACTIONS TO INTEREST RATE SWAPS:
a. Cap. A contract for which the buyer pays a fee, or premium, to obtain
protection against a rise in a particular interest rate above a certain
level. For example, an interest rate cap may cover a specified principal
amount of a loan over a designated time period, such as a calendar quarter.
If the covered interest rate rises above the rate ceiling, the seller of the
rate cap pays the purchaser an amount of money equal to the average rate
differential times the principal amount times one-quarter.
b. Floor. A contract in which the seller agrees to pay to the purchaser, in
return for the payment of a premium, the difference between current interest
rates and an agreed (strike) rate times the notional amount, should interest
rates fall below the agreed level (the floor). A floor contract has the
effect of a string of interest rate guarantees.
c. Collar. An arrangement to simultaneously purchase a cap and sell a floor, in
order to maintain interest rates within a defined range. The premium income
from the sale of the floor reduces or offsets the cost of buying the cap.
d. Corridor. An agreement to buy a cap at one interest rate and sell a cap at a
higher rate.
SWAPTION. An option to enter into, extend, or cancel a swap.
FUTURES CONTRACT. A contract which commits the fund to buy or sell a specified
amount of a financial instrument at a fixed price on a fixed date in the future.
Futures contracts are normally traded on an exchange and their terms are
standardized, which makes it easier to buy and sell them.
INTEREST RATE FUTURES (AND OPTIONS ON THEM). Futures contracts pegged to U.S.
and foreign fixed-income securities, debt indices and reference rates.
STOCK INDEX FUTURES. Futures contracts based on an index of pre-selected stocks,
with prices based on a composite of the changes to the prices of the individual
securities in the index (e.g., S&P 500).
OPTION ON A FUTURES CONTRACT. An option taken on a futures position.
FORWARD CONTRACT. An over-the-counter, individually-tailored futures contract.
FORWARD RATE AGREEMENT (FRA). A contract in which the fund and another party
agree on the interest rate to be paid on a notional deposit of specified
maturity at a specific future time. Normally, no exchange of principal
A-15
<PAGE>
is involved; the difference between the contracted rate and the prevailing rate
is settled in cash.
CURRENCY CONTRACT. A contract entered into for the purpose of reducing or
eliminating an anticipated rise or drop in currency exchange rates over time.
CURRENCY FUTURES. Futures contracts on foreign currencies. Used to hedge the
purchase or sale of foreign securities.
CURRENCY OPTION. An option taken on foreign currency.
CURRENCY SWAP. A swap involving the exchange of cash flows and principal in one
currency for those in another, with an agreement to reverse the principal swap
at a future date.
CROSS-CURRENCY INTEREST RATE SWAP. A swap involving the exchange of streams of
interest rate payments (but not necessarily principal payments) in different
currencies and often on different interest bases (e.g., fixed Deutsche Mark
against floating dollar, but also fixed Deutsche Mark against fixed dollar).
FORWARD CURRENCY CONTRACT. A contract to lock in a currency exchange rate at a
future date, to eliminate risk of currency fluctuation when the time comes to
convert from one currency to another.
A-16
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
A-17
<PAGE>
PART C - OTHER INFORMATION
Item 23. Exhibits:
(a)1. - Articles of Incorporation*
2. - Articles Supplementary (Filed with Post-Effective Amendment
No. 17 to this Registration Statement)
(b) - By-Laws*
(c) - Certificate*
(d)1. - Advisory Agreement between Lincoln Investment Management
Inc. and Lincoln National Growth and Income Fund, Inc.*
2. - Sub-Advisory Agreement between Lincoln Investment Management
Inc. and Modern Portfolio Theory Associates (now known as
Vantage Global Advisors, Inc, d/b/a Vantage Investment
Advisors) dated April 30, 1988.*
(e)1. N/A
2. - Specimen Agents Contract (Filed with Post-Effective
Amendment No. 17 to this Registration Statement)
(f) - N/A
(9) - Custody Agreement*
(h)1. - Fund Participation Agreement
2. - Trade Name Agreement*
3. - Services Agreement between Delaware Management Holdings,
Inc., Delaware Service Company, Inc., Lincoln National
Growth and Income Fund, Inc. and Lincoln National
Life Insurance Company.
(i) - Opinion of Counsel*
(j) - Consent of Ernst & Young LLP, Independent Auditors
(k) - N/A
(l) - Investment Letter*
(m) - N/A
(n) - N/A
(p) - Code of Ethics
1. - Lincoln National Growth & Income Fund, Inc.
2. - Lincoln Investment Management, Inc.
3. - Vantage Investment Advisors
(q)1. - Power of Attorney, Kenneth G. Stella is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(q)2. - Power of Attorney, John B. Borsch, Jr. is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(q)3. - Power of Attorney, Barbara S. Kowalczyk is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(q)4. - Power of Attorney, Nancy L. Frisby is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(q)5. - Power of Attorney, Eric C. Jones is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(q)6. - Power of Attorney, Janet C. Shrzan is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(q)7. - Power of Attorney, Kelly D. Clevenger is incorporated by
reference to Post-Effective Amendment No. 20 filed on April
16, 1999.
(r) - Org Chart
(s) - Memorandum Concerning Books and Records
* Filed with Post-effective Amendment No. 18 to this registration statement
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
See "Management of the Fund", "Purchase of Securities Being Offered", and
"Description of Shares" in the Prospectus forming Part A of this Registration
Statement and "Investment Adviser and Sub-Adviser" in the Statement of
Additional Information forming Part B of this Registration Statement. As of the
date of this Post-Effective Amendment, The Lincoln National Life Insurance
Company (Lincoln Life), for its Variable Annuity Account C and its Flexible
Premium Variable Life Accounts D, G, and K is the sole shareholder in the Fund.
No persons are controlled by the Registrant. A diagram of all persons under
common control with the Registrant is filed as Exhibit 15(a) to the Form N-4
Registrant Statement filed by Lincoln National Variable Annuity Account C (File
No. 33-25990), and is incorporated by reference into this Registration
Statement.
Item 25. Indemnification
Reference is made to Article X of Registrant's bylaws (filed as Exhibit (b)
to this Registration Statement); in the indemnification provision of the Fund
Participation Agreement between Registrant and Lincoln National Life
Insurance Co. (filed as Exhibit h(1) to the Registration Statement filed with
Post-Effective Amendment No. 20), and Section 2-418 of the Maryland General
Corporation Law.
Item 26. Business and Other Connections of Investment Adviser
Information pertaining to any business and other connections of Registrant's
investment adviser, Lincoln Investment, is hereby incorporated by reference from
the section captioned "Management of the Fund" in the Prospectus forming Part A
of this Registration Statement, the section captioned "Investment Adviser and
Sub-Adviser" in the Statement of Additional Information forming Part B of this
Registration Statement, and Item 7 of Part II of Lincoln Investment's Form ADV
filed separately with the Commission (File No. 801-5098). Information pertaining
to any business and other connections of Registrant's sub-investment adviser,
Vantage Global Advisors, Inc. ("Vantage") is incorporated by reference from the
section of the Prospectus captioned "Management of the Fund," the section of the
Statement of Additional Information captioned "Investment Adviser and Sub-
Adviser," and Item 7 of Part II of Vantage's Form ADV filed separately with the
Commission (File No. 801-15202).
The other businesses, professions, vocations, and employment of a substantial
nature, during the past two years, of the directors and officers of Lincoln
Investment and Vantage are hereby incorporated by reference, respectively, from
Schedules A and D of Lincoln Investment's Form ADV and from Schedules A and D of
Vantage's Form ADV.
As of March 23, 2000, the officers and/or directors of the Investment
Adviser held the following positions:
(a)
<PAGE>
<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS
INVESTMENT PROFESSION, VOCATION OR
NAME ADVISER EMPLOYMENT; ADDRESS
- ------------------------ --------------------- ---------------------------------------------------------
<S> <C> <C>
David A. Berry Senior Vice President Vice President, Lincoln National Income Fund, Inc. and
and Director Lincoln National Convertible Securities Fund, Inc.,
Vice President, Lincoln National Life Insurance Company,
Second Vice President, Lincoln Life & Annuity Company
of New York, 200 East Berry Street, Fort Wayne, Indiana
46802
Dennis A. Blume Vice President Director, Vantage Global Advisors, Inc.,
200 East Berry Street
Fort Wayne, Indiana 46802
Steven R. Brody Vice President President and Director, Lincoln National Realty
and Director Corporation; Vice President, The Lincoln National Life
Insurance Company, 200 East Berry Street, Fort Wayne,
Indiana 46802
Philip C. Byrde Vice President Vice President, Lincoln National Life Insurance Company
and Second Vice President, Lincoln Life & Annuity Company
of New York, 200 East Berry Street
Fort Wayne, Indiana 46802
J. Michael Keefer Vice President 200 East Berry Street
General Counsel and Fort Wayne, Indiana 46802
Assistant Secretary,
And Director
Mark Laurent Second Vice President 200 East Berry Street, Fort Wayne, Indiana 46802
H. Thomas McMeekin President and President and Director, Lincoln National Convertible
Director Securities Fund, Inc., Lincoln National Income Fund,
Inc.; Executive Vice President and Chief Investment
Officer, Lincoln National Corporation; Director,
Delaware Management Holdings, Inc., Lincoln National
Realty Corporation, Lynch & Mayer, Inc., Vantage Global
Advisors; Executive Vice President and Chief Investment
Officer, Fixed-Income Delaware Management Company, and
Director of Lincoln National Investments, Inc. (Formerly
Lincoln National Investment Companies, Inc.), Lincoln
National Life Insurance Company, 200 East Berry Street,
Fort Wayne, Indiana 46802 Other Substantial Business
Jil Schoeff-Lindholm Assistant Vice 200 East Berry Street, Fort Wayne, Indiana 46802
President
David C. Patch Vice President 200 East Berry Street
Fort Wayne, Indiana 46802
Dennis E. Westrick Second Vice President 200 East Berry Street, Fort Wayne, Indiana 46802
and Assistant Treasurer
Luke Girard Vice President 200 East Berry Street
Fort Wayne, Indiana 46802
David J. Miller Vice President 200 East Berry Street
Fort Wayne, Indiana 46802
Luke Girard Vice President 200 East Berry Street
Fort Wayne, Indiana 46802
Howard R. Lodge Vice President 200 East Berry Street
Fort Wayne, Indiana 46802
</TABLE>
<PAGE>
(b) The Sub-advisor:
As of March 30, 2000, the officers and/or directors of the sub-adviser
held the following positions:
VANTAGE INVESTMENT ADVISORS, INC.
405 Lexington Avenue, 34th Floor
New York, NY 10174
OFFICERS
--------
Roger Sayler President and Chief Executive Officer
Perry D. Keck Senior Vice President
Enrique Chang Senior Vice President
Kevin S. Lee Vice President
Florence P. Leong Vice President
Evelyn M. Poy Vice President
Ti Feng Yang Vice President
Pamela L. Friedman Vice President
Chris P. Harvey Vice President
Christopher J. Rowe Vice President
Dennis M. Fox Assistant Vice President
Ruth Liu Assistant Vice President
BOARD OF DIRECTORS
------------------
Bruce D. Barton
Dennis A. Blume
H. Thomas McMeekin
Roger Sayler
Item 27. Principal Underwriters
Not applicable.
Item 28. Location of Accounts and Records
See Exhibit (s).
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act and duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Wayne, and State of Indiana,
on the 10th day of April 2000.
LINCOLN NATIONAL
GROWTH AND INCOME FUND, INC.
By /s/ Kelly D. Clevenger
----------------------------
Kelly D. Clevenger
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on April 10, 2000, by
the following persons in the capacities indicated.
Signature Title Date
- ---------- ----- ----
/s/ Kelly D. Clevenger Chairman of the Board April 10, 2000
- ---------------------------- President and Director
Kelly D. Clevenger (Principal Executive Officer)
* Director April 10, 2000
- ----------------------------
John B. Borsch, Jr.
* Director April 10, 2000
- ----------------------------
Barbara S. Kowalczyk
* Director April 10, 2000
- ----------------------------
Nancy L. Frisby
* Director April 10, 2000
- ----------------------------
Kenneth G. Stella
* Chief Accounting Officer April 10, 2000
- ---------------------------- (Principal Accounting
Eric C. Jones Officer)
* Vice President and April 10, 2000
- ---------------------------- Treasurer (Principal
Janet C. Chrzan Financial Officer)
*By /s/ Steven M. Kluever pursuant to Power of Attorney filed with
----------------------- Post-Effective Amendment No. 20 filed on
April 16, 1999
Steven M. Kluever
<PAGE>
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement") is made as of August 15, 1996, by
and among Delaware Management Holdings, Inc., a Delaware corporation
("Holdings"), Delaware Service Company, Inc., a Delaware corporation and a
wholly owned subsidiary of Holdings ("Delaware"), Lincoln National Life
Insurance Company, an Indiana insurance corporation ("Lincoln Life"), and each
of the investment companies listed in EXHIBIT A hereto, each a Maryland
corporation (together with any other investment company designated in accordance
with Section 5.1, the "Funds," or individually, a "Fund").
The parties hereto, in consideration of the mutual covenants hereinafter
expressed, agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms shall have the respective
meanings set forth in this Section 1.1 for all purposes of this Agreement except
where the application of such definitions is limited by reference in this
Section 1.1 to a specific Article of this Agreement (such definitions to be
equally applicable to both the singular and plural forms of the terms herein
defined):
"Acceptance Test" means a test, reasonably acceptable to Lincoln Life,
Delaware and the Funds, of the performance of the Value Calculation Services for
the Accounts included in the respective Phases, to be conducted in accordance
with Article 4.
"Accounting Services" means the services listed in the Cutover Schedule
with respect to the Accounts.
"Accounts" means the Funds and the Separate Accounts, collectively.
"Affiliate" means, with respect to any entity, any other entity
controlling, controlled by or under common control with such entity.
"Business Day" means a day on which the New York Stock Exchange is open for
trading.
"Calculation Losses" means any losses suffered by a Contractowner, Third
Party Administrator, Fund or Separate Account directly caused by an error in a
Net Asset Value or Unit Value, or by the delivery to Lincoln Life or any Fund of
a Net Asset Value or Unit Value after the applicable deadline provided for in
Section 2.1; provided, however, that such losses shall not
<PAGE>
include any consequential damages.
"Contractowner" means the present or former owner of an insurance or
annuity contract supported by a Separate Account, or any beneficiary or
annuitant thereof.
"Cutover Date," with respect to any Phase, means the date, which shall be a
Business Day, on which Delaware actually commences providing the Accounting
Services with respect to such Phase in accordance with Section 4.2. The planned
Cutover Date for each Phase is set forth in the Cutover Schedule.
"Cutover Schedule" means SCHEDULE 1.1(a) hereto, which sets forth the
accounting services to be rendered pursuant to this Agreement and the planned
Cutover Dates, as such Schedule may be amended from time to time pursuant to
Section 16.1.
"Delaware" has the meaning set forth in the preamble to this Agreement.
"Delaware Affiliate" means Holdings and any entity that is directly or
indirectly controlled by Holdings.
"Fee Schedule" means SCHEDULE 6.1 hereto, as such Schedule may be amended
from time to time pursuant to Section 16.1.
"Fund" has the meaning set forth in the preamble to this Agreement.
"Holdings" has the meaning set forth in the preamble to this Agreement.
"Lincoln Affiliate" means any Affiliate of Lincoln Life other than a
Delaware Affiliate.
"Lincoln Life" has the meaning set forth in the preamble to this Agreement.
"Net Asset Value" means the daily net asset value per share of the
respective Funds for each Business Day, all determined in accordance with the
terms of the Cutover Schedule and with any applicable prospectus or regulatory
requirement.
"Phase" means a set of Accounts comprising the Phase I Accounts, the Phase
II Accounts or the Phase III Accounts.
"Phase I Account" means an Account designated as such on the Cutover
Schedule.
"Phase II Account" means an Account designated as such on the Cutover
Schedule.
"Phase III Account" means an Account designated as such on the Cutover
Schedule.
<PAGE>
"Renewal Term" means each successive one-year term occurring after the
expiration of the initial term of this Agreement as described in Section 11.1.
"Separate Account" means a separate account of Lincoln Life identified as
such on the Cutover Schedule, and any additional separate account or sub-account
of Lincoln Life or any Lincoln Affiliate (or of any other person if Lincoln Life
or any Lincoln Affiliate has administrative responsibilities with respect to
such separate account or sub-account pursuant to any reinsurance agreement or
otherwise) designated in accordance with Section 5.1.
"Test Period" means, with respect to each Phase, a period of time prior to
the Cutover Date for such Phase, commencing on the date specified by Delaware
pursuant to Section 4.1 and having a duration of three weeks or such longer
period as may be determined pursuant to Section 4.1.
"Third Party Administrator" means an administrator of insurance or annuity
contracts acting on behalf of Contractowners.
"Unit Value" means the daily unit value per unit of the respective Separate
Accounts or sub-accounts thereof for each Business Day, all determined in
accordance with the terms of the Cutover Schedule and with any applicable
prospectus or regulatory requirement.
"Value Calculation Services" means those Accounting Services consisting of
or incidental to the calculation and communication of Unit Values and Net Asset
Values in accordance with the terms of this Agreement.
ARTICLE 2
SCOPE OF SERVICES; CUTOVER
Section 2.1 SCOPE OF SERVICES. Delaware shall provide the Accounting
Services to each of the Funds and to Lincoln Life with respect to each of the
Separate Accounts, all in accordance with the terms of this Agreement. Without
limiting the generality of the foregoing, from and after the Cutover Date for
each respective Phase, Delaware, no later than 6:00 p.m. (New York City time) on
each Business Day, shall in accordance with the terms of this Agreement provide
to Lincoln Life and to the Funds the Value Calculation Services for each of the
Accounts included in such Phase. In the event of any error in the Value
Calculation Services, the parties hereto will follow the procedures set forth in
SCHEDULE 2.1, without prejudice to any other rights described in this Agreement.
<PAGE>
Section 2.2 CUTOVER SCHEDULE. Delaware, Lincoln Life and the Funds shall
use their respective best efforts to cause the Cutover Date to occur no later
than (a) August 15, 1996, with respect to the Phase I Accounts, (b) October 31,
1996, with respect to the Phase II Accounts and (c) January 1, 1997 with respect
to the Phase III Accounts.
ARTICLE 3
LINCOLN LIFE'S SUPPORT OBLIGATIONS
Section 3.1 PROVISION OF DATA. Lincoln Life shall use its best efforts to
provide or cause to be provided to Delaware the data identified in SCHEDULE 3.1
during the periods and in accordance with the procedures identified in such
Schedule, it being understood that Delaware shall not be responsible for any
Calculation Losses or other claims, suits, hearings, actions, damages,
liabilities, fines, penalties, costs, losses or expenses, including reasonable
attorney's fees, which any party may sustain or incur, directly or indirectly,
in each case to the extent caused by or arising from Lincoln Life's failure to
provide such data in accordance with such SCHEDULE 3.1.
Section 3.2 DATA TO BE PROVIDED BY THIRD PARTIES. With respect to each of
the mutual funds identified in SCHEDULE 3.2 as an available investment of one or
more of the Separate Accounts (other than mutual funds managed by Lincoln Life
or Delaware or their respective Affiliates) and each third party service
provider identified in such Schedule, Lincoln Life shall direct each of the
managers of such funds or such service provider, as the case may be, to provide
or cause to be provided to Delaware the data identified in SCHEDULE 3.2 in
accordance with the procedures and time deadlines identified in such Schedule.
Section 3.3 INFORMATION FOR PERIODS PRIOR TO CUTOVER DATE. Lincoln Life
will provide appropriate financial and other information with respect to the
Accounts to Delaware, and will cooperate with Delaware, in connection with the
preparation of data for 1996 annual reports to Contractowner and other elements
of the Accounting Services that relate to periods prior to the Cutover Dates for
the respective Accounts. In addition, Lincoln Life will provide to Delaware
appropriate financial and other information regarding the Accounts for periods
prior to 1996 to the extent relevant to the performance of the Accounting
Services for 1996 and subsequent periods.
ARTICLE 4
ACCEPTANCE TEST; CUTOVER DATE
<PAGE>
Section 4.1 ACCEPTANCE TESTING. Delaware shall notify Lincoln Life of the
date, which shall be a Business Day, on which the Value Calculation Services for
each respective Phase will be ready for the commencement of the Acceptance Test
for such Phase. During the Test Period for each Phase, Delaware, Lincoln Life
and the Funds shall cooperate in performing the Acceptance Test for such Phase,
and Delaware and Lincoln Life, respectively, shall use its best efforts to
remedy any failure in the performance of the Value Calculation Services caused
by such party. In the event that, during the Test Period with respect to any
Phase, performance of the Value Calculation Services is suspended for such Phase
in order to effect such remedy or for any other reason, the Test Period for such
Phase shall be extended by the number of days of such suspension. Further, if at
the date that would otherwise be the end of the Test Period for any Phase
Delaware is not performing the Value Calculation Services with respect to such
Phase to the reasonable satisfaction of Lincoln Life, and Lincoln Life shall so
notify Delaware, the Test Period shall be extended until the date on which
Lincoln Life notifies Delaware that the Value Calculation Services are being
performed to the reasonable satisfaction of Lincoln Life. All references in this
Section 4.1 to the performance of the Value Calculation Services shall refer to
the performance thereof in a test mode.
Section 4.2 CUTOVER DATE. With respect to each Phase, upon the termination
of the Test Period, Lincoln Life, the Funds and Delaware shall execute a written
acknowledgment in the form of EXHIBIT B hereto confirming such termination and
specifying the Cutover Date, which shall be the Business Day immediately
following the date of such termination unless Lincoln Life, the Funds and
Delaware shall agree upon a different date.
ARTICLE 5
NEW ACCOUNTS; NEW INVESTMENT MANAGERS
Section 5.1 ADDITIONAL ACCOUNTS. Lincoln Life may from time to time
designate (i) one or more additional investment companies or separate accounts
to constitute Funds or Separate Accounts, as the case may be, for all purposes
of this Agreement, or (ii) one or more newly established sub-accounts of any
Separate Account. Such designation shall be:
(a) subject to Delaware's consent, which shall not be unreasonably
withheld; provided, that such consent shall be considered to be
unreasonably withheld if Delaware does not make reasonable
efforts to accept such new investment companies, separate
accounts and sub-accounts, which efforts shall include, but not
be limited to, reasonable consideration of the expansion of
Delaware's infrastructure to handle such new investment
<PAGE>
companies, separate accounts and sub-accounts; and
(b) evidenced by a writing executed by Lincoln Life, Delaware and,
if applicable, each such investment company, setting forth the
name of such investment company, separate account or new
sub-account, the applicable rate under the Fee Schedule that
shall apply to the Accounting Services for such investment
company, separate account or new sub-account, the effective
date of the designation thereof as a Fund, Separate Account or
new sub-account, and any other matters the parties wish to
include.
Notwithstanding clause (b) of the preceding sentence, if Delaware's performance
of the Accounting Services for such additional Funds, Separate Accounts, or
sub-accounts of such Separate Accounts would, in Delaware's reasonable opinion,
result in higher costs than the costs Delaware incurs for providing the
Accounting Services to the current Accounts, then the affected parties hereto
shall negotiate in good faith an addendum to the Fee Schedule for such
additional Funds, Separate Accounts and sub-accounts and Delaware shall not be
deemed to have unreasonably withheld its consent under clause (b) of this
Section 5.1 until such addendum has been agreed to. Except as otherwise
specified in such writing, from and after such effective date, Delaware shall
provide to such Fund, or to Lincoln Life with respect to a Separate Account or
new sub-account, the same Accounting Services as are specified in the Cutover
Schedule with respect to the other Funds, Separate Accounts or sub-account of a
Separate Account, as the case may be.
Section 5.2 NEW INVESTMENT MANAGERS. If new investment managers are added
to provide investment advisory services to any of the Accounts, and Delaware's
performance of the Accounting Services is, as a result thereof, significantly
more costly to Delaware, the affected parties shall negotiate in good faith an
addendum to the Fee Schedule for such Accounts.
ARTICLE 6
FEES
Section 6.1 ACCRUAL OF FEES. From and after the Cutover Date with respect
to each Phase, Lincoln Life shall pay fees for the Accounting Services for each
of the Separate Accounts included in such Phase, and each Fund included in such
Phase shall pay fees for the Accounting Services for such Fund, in each case at
the respective rates per annum determined in accordance with the Fee Schedule.
Fees accrued pursuant to this Section 6.1 shall be payable in arrears on a
monthly basis.
Section 6.2 PAYMENT OF FEES BY LINCOLN LIFE. Delaware shall submit to
Lincoln Life an invoice for each month for all of
<PAGE>
the fees payable pursuant to Section 6.1 with respect to each of the Separate
Accounts, which invoice shall be itemized to show the portion of such fees
allocable to each of the Separate Accounts in accordance with the Fee Schedule.
Subject to the terms of this Agreement, invoices for such fees shall be payable
within 30 days of receipt.
Section 6.3 PAYMENT OF FEES BY THE FUNDS. Delaware shall submit to each
Fund, with a copy to Lincoln Life, an invoice for each month for all of the fees
payable pursuant to Section 6.1 with respect to such Fund. Subject to the terms
of this Agreement, invoices for such fees shall be payable within 30 days of
receipt.
ARTICLE 7
STANDARD OF CARE; INDEMNIFICATION
Section 7.1 STANDARD OF CARE. Delaware shall provide the Accounting
Services with a level of care equal to or greater than the level of care at
which it performs similar functions for mutual funds that are sponsored or
managed by any Delaware Affiliate, and in any event, Delaware shall always
exercise reasonable care in performing the Accounting Services.
Section 7.2 INDEMNIFICATION
(a) INDEMNIFICATION BY LINCOLN LIFE. Lincoln Life shall indemnify, defend
and hold harmless Delaware and any Delaware Affiliate, and the directors,
officers and employees of the foregoing (each individually, a "Delaware
Indemnified Party"), against any and all claims, suits, hearings, actions,
damages, liabilities, fines, penalties, costs, losses or expenses, including
reasonable attorney's fees, which any Delaware Indemnified Party may sustain or
incur, directly or indirectly, in each case to the extent caused by or arising
from (i) the negligence, recklessness or intentional misconduct of Lincoln Life
or any Lincoln Affiliate, or any director, officer or employee thereof, in the
performance of this Agreement; or (ii) the failure of Lincoln Life to comply
with the terms of this Agreement.
<PAGE>
(b) INDEMNIFICATION BY DELAWARE. Subject to Section 3.1, Delaware shall
indemnify, defend and hold harmless Lincoln Life, the Lincoln Affiliates and the
Funds, and the directors, officers and employees of the foregoing (each
individually, a "Lincoln Indemnified Party") against any and all claims, suits,
hearings, actions, damages, liabilities, fines, penalties, costs, losses
(including but not limited to (a) Calculation Losses reimbursed by Lincoln Life
and (b) any market fluctuation losses incurred by Lincoln Life in effecting such
reimbursement) or expenses, including reasonable attorney's fees, which any
Lincoln Indemnified Party may sustain or incur, directly or indirectly, in each
case to the extent caused by or arising from (i) the negligence, recklessness or
intentional misconduct of Delaware or any Delaware Affiliate, or any director,
officer or employee thereof, in the performance of this Agreement; or (ii) the
failure of Delaware to comply with the terms of this Agreement.
(c) PROCEDURES. Subject to the provisions of Section 7.2(d), promptly
after receipt by a Delaware Indemnified Party or a Lincoln Indemnified Party
(each, an "Indemnified Party") of notice of the commencement of any action,
proceeding, investigation or claim by any Contractowner or other third party (a
"Proceeding"), the Indemnified Party shall, if a claim in respect thereof is to
be made pursuant to this Section 7.2 against another party to this Agreement
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof; but the failure so to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability under this Section 7.2,
except to the extent that such failure to notify actually prejudices the
Indemnifying Party. In case any such Proceeding shall be brought against an
Indemnified Party, the Indemnifying Party shall be entitled to participate in
and to assume the defense thereof, with counsel satisfactory to the Indemnified
Party, and after notice from the Indemnifying Party to the Indemnified Party of
the Indemnifying Party's election to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if, in the reasonable judgment of the Indemnified Party, it is
advisable for the Indemnified Party to be represented by separate counsel other
than counsel for the Indemnifying Party, the Indemnified Party shall have the
right to employ a single counsel to represent the Indemnified Party, in which
event the reasonable fees and expenses of such separate single counsel shall be
borne by the Indemnifying Party, and (ii) in the case of any Proceeding brought
by any governmental authority, the Indemnifying Party shall have the right to
participate in, but not to assume the defense of, such Proceeding. The
Indemnifying Party shall not be obligated under any settlement agreement
relating to any Proceeding under this Section 7.2 to which it has not consented
in writing, which consent shall not be unreasonably withheld.
<PAGE>
(d) PRESERVING RIGHTS WITH RESPECT TO CALCULATION LOSSES. Notwithstanding
Section 7.2(c), Lincoln Life may in its sole discretion elect to reimburse a
Contractowner, Third Party Administrator, Separate Account or Fund for
Calculation Losses out of Lincoln Life's own funds and such reimbursement shall
have no effect on the respective indemnification obligations of the parties
pursuant to Section 7.2(a) and (b).
(e) OVERPAYMENTS. The parties agree that there may be circumstances in
which it would not be commercially reasonable for Lincoln Life and the Funds to
seek reimbursement from one or more Contractowners of overpayments made them,
taking into account relevant factors such as industry practice; the amount of
such overpayments; the number of Contractowners overpaid; the cost of seeking
reimbursement; and the implications for customer relations of seeking
reimbursement. In the event of any overpayment to a Contractowner for which
Lincoln Life or any Fund intends to seek indemnification from Delaware pursuant
to Section 7.2(b) without seeking reimbursement from the Contractowner, the
parties shall negotiate in good faith as to what effect, if any, the
determination not to seek such reimbursement should have under the circumstances
on the rights of Lincoln Life or the Funds to indemnification for the amounts
overpaid.
ARTICLE 8
INSURANCE COVERAGE
Section 8.1 INSURANCE. Delaware and Holdings shall maintain insurance
coverage at a level at least equal to the insurance coverage held by each of
them at the time this Agreement becomes effective.
ARTICLE 9
FORCE MAJEURE AND DISASTER RECOVERY PLAN
Section 9.1 FORCE MAJEURE; DISASTER RECOVERY PLAN. No party shall be
liable to any other party for any damages caused by delays beyond its reasonable
control, including, without limitation, those delays occasioned by fire, strike,
labor dispute, acts of the other party, acts of any common carrier, pricing
service, corporate action service, or telephone network, acts of the power
supply company or its networks, restrictions by civil or military authorities,
acts of nature, or unforeseen transportation failures. In the event of any such
delay, the hindered party shall promptly notify the other parties and, upon the
giving of such notice, the period of time for performance of obligations
hereunder affected by such delays will be extended by the same number of days as
the delay. Notwithstanding the foregoing, Delaware shall maintain and implement
a customary disaster recovery plan and such plan shall be reasonably acceptable
to Lincoln Life and the Funds. This Article 9 shall not excuse any failure to
perform, or extend the time for performance of, any
<PAGE>
obligation of Delaware under this Agreement to the extent that such failure or
delay would have been avoided by compliance with such disaster recovery plan, or
by the use of reasonable, readily available alternatives.
ARTICLE 10
EFFECTIVENESS
Section 10.1 EFFECTIVENESS.
(a) This Agreement shall become effective upon the later of:
(i) the date first set forth above; or
(ii) the date as of which Lincoln Life has complied with the
requirements of the Indiana insurance holding company
laws at Section 27-1-23-4 of the Indiana Code.
(b) Lincoln Life shall diligently and reasonably pursue the
satisfaction of the requirements of the Indiana insurance
holding company laws at Section 27-1-23-4 of the Indiana Code.
ARTICLE 11
TERM AND TERMINATION
Section 11.1 TERM. The initial term of this Agreement shall end on the
fourth anniversary of the Cutover Date of Phase III, and this Agreement shall be
automatically renewed for subsequent Renewal Terms thereafter unless sooner
terminated under Section 11.2.
Section 11.2 TERMINATION. Subject to the procedures set forth in
Article 12 and to Section 11.3, this Agreement may be terminated as follows:
(a) by Lincoln Life, Delaware, or any Fund, in each case upon
notice to each of the other parties at least 180 days prior to
the expiration of the initial term or any Renewal Term, with
such termination to become effective upon such expiration; and
(b) by Lincoln Life, Delaware or any Fund upon 30 days notice to
each of the other parties, for any material breach of this
Agreement unless such breach is cured within such notice
period.
For the purpose of this Section 11.2(b) only, a "material breach" shall include,
but not be limited to, the failure by Delaware to
<PAGE>
provide Accounting Services hereunder of a quality reasonably determined by
Lincoln Life or any Fund to be consistent with a superior level of service in
the industry.
Section 11.3 EFFECT OF TERMINATION BY A FUND. In the event one or more
Funds shall terminate this Agreement, this Agreement shall nonetheless continue
in full force and effect between and among those parties who have not terminated
this Agreement.
ARTICLE 12
PROCEDURES UPON TERMINATION
Section 12.1 OBLIGATIONS UPON TERMINATION. Upon termination of this
Agreement by any party under Article 11, each party shall be obligated to
cooperate with each other party to provide for the transfer of all
responsibilities, duties and obligations of this Agreement as may be necessary
to ensure the orderly, undisrupted business of each party. Such cooperation
shall include, but not be limited to, returning all papers, documents, materials
or equipment to the party owning such materials. In the event that this
Agreement is terminated by Lincoln Life or any Fund under Section 11.2(b),
Lincoln Life and the Funds shall have the right to require Delaware to continue
performing all or any part of its responsibilities, duties and obligations under
this Agreement until the earlier of (a) 210 days following the date notice of
such termination was given, or (b) the date that is 30 days after notice from
Lincoln Life or the Funds that Delaware shall cease such performance. For this
purpose, (a) the terms of this Agreement (including without limitation the
obligation of Lincoln Life and the Funds to pay Delaware's fees under Article 6,
and the obligation of Delaware to continue to exercise the standard of care
required under Section 7.1 shall remain in effect with respect to the period in
which Delaware is obligated to continue such performance, and (b) if any portion
of Delaware's responsibilities, duties and obligations during such period are
not so extended as required by Lincoln Life, the parties shall mutually agree in
good faith on a reduction of fees which reflects the termination of such
responsibilities, duties and obligations.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other parties as follows:
Section 13.1 ORGANIZATION AND AUTHORITY. Such party is duly organized,
validly existing and in good standing as a corporation under the laws of the
state indicated on the first page of this Agreement, with the requisite
authority and power, in conformity with applicable laws, rules and regulations,
to execute and deliver this Agreement and to perform its obligations
<PAGE>
hereunder. Such party has taken all necessary action to authorize such
execution, delivery and performance.
Section 13.2 NO CONFLICT WITH LAWS. The execution, delivery and
performance of this Agreement by such party do not conflict with or violate any
laws applicable to such party, any provision of its constituent documents, any
order or judgment of any court or governmental agency applicable to it or any of
its assets or any contractual restriction binding on it or its assets.
Section 13.3 OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of such party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to the enforcement of creditors' rights generally and
subject to principles of equity.
ARTICLE 14
PARENT GUARANTY
Section 14.1 PARENT GUARANTY. Holdings hereby unconditionally guarantees
the full and punctual performance of the covenants, agreements and obligations
of Delaware under this Agreement, including but not limited to the payment when
due of all amounts that may from time to time be payable by Delaware pursuant to
Section 7.2(b) (the "Guaranteed Obligations").
Section 14.2 GUARANTY UNCONDITIONAL. The obligations of Holdings hereunder
shall be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released or discharged by:
(a) any extension, settlement, compromise, waiver or release in
respect of any obligation of Delaware under this Agreement;
(b) any modification or amendment of or supplement to this
Agreement;
(c) any change in the corporate existence, structure or ownership
of Delaware, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Delaware or its assets; or
(d) any other act or omission to act or delay of any kind by
Delaware, Lincoln Life, any Fund or any other person which would, but for
the provisions of this paragraph (d), constitute a legal or equitable
discharge of Holding's obligations hereunder;
provided, however, that in the event of any extension, settle-
<PAGE>
ment, compromise, waiver or release of any obligation of Delaware under this
Agreement, or any modification or amendment of or supplement to this Agreement,
the guaranty provided for in this Article 14 shall apply to the obligations of
Delaware as so extended, settled, compromised, waived, released, modified,
amended or supplemented.
Section 14.3 DISCHARGE ONLY UPON PAYMENT OR PERFORMANCE IN FULL;
REINSTATEMENT IN CERTAIN CIRCUMSTANCES. Holding's obligations hereunder shall
remain in full force and effect until the Guaranteed Obligations shall have been
paid or performed in full. If at any time any payment of Guaranteed Obligations
by Delaware under this Agreement is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of Delaware or
otherwise, Holding's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
Section 14.4 WAIVER BY HOLDINGS. Holdings irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any person
against Delaware or any other person.
Section 14.5 SUBROGATION. Upon making any payment with respect to Delaware
hereunder, Holdings shall be subrogated to the rights of the payee against
Delaware with respect to such payment; provided that Holdings shall not enforce
payment by way of subrogation until all Guaranteed Obligations have been paid or
performed in full.
ARTICLE 15
DISPUTE RESOLUTION
Before commencing litigation of any dispute arising out of or relating to
this Agreement, the parties shall attempt in good faith to resolve the dispute
by the following means:
Section 15.1 NEGOTIATION. The parties shall in good faith attempt to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy. A
party may give the other parties written notice of any dispute not resolved in
the normal course of business. Within 20 days after delivery of that notice,
executives of the affected parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the matter has
not been resolved within 60 days of the disputing party's notice, or if the
parties fail to meet within 20 days, either party may initiate mediation of the
controversy or claim as provided in Section 15.2. If a negotiator intends to be
accompanied at a
<PAGE>
meeting by an attorney, the other negotiator shall be given at least 3 Business
Days' notice of that intention and may also be accompanied by an attorney.
Section 15.2 MEDIATION. If the dispute has not been resolved by
negotiation as provided in Section 15.1, the parties shall endeavor for an
additional period of 60 days to settle the dispute by mediation under the
then-current Center for Public Resources (CPR) Model Procedure for Mediation of
Business Disputes. The neutral third party will be selected from the CPR Panel
of Neutrals. If the parties encounter difficulty in agreeing on a neutral, they
will seek the assistance of CPR in the selection process.
Section 15.3 CONFIDENTIALITY. All activities under this Article 15 are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
ARTICLE 16
MISCELLANEOUS
Section 16.1 AMENDMENT. This Agreement, including any Exhibits or
Schedules, may be amended, modified or supplemented only in writing signed by
Delaware, Lincoln Life and any Fund affected thereby. This Agreement shall be
binding upon all successors, assigns or transferees of the parties to this
Agreement.
Section 16.2 ASSIGNMENT. This Agreement and the rights, duties and
obligations of the parties hereto shall not be assignable by any party, except
assignment to successors in the case of mergers, sales of all or substantially
all of the assets of such party or transfer of ownership by reorganization or
similar restructuring to a successor in interest to the business of such party,
without the prior written consent of the other parties, and any purported
assignment in the absence of such consent shall be void.
Section 16.3 NOTICES. All notices given or submitted pursuant to this
Agreement shall be made in writing and shall be deemed given when (a) deposited
with the United States Postal Service, postage prepaid, registered or certified
mail, return receipt requested; (b) deposited with a nationally recognized
overnight mail delivery service; (c) sent by facsimile with electronic
confirmation of delivery or with a copy sent by mail as described in (a) or (b)
above; or (d) delivered in person; all to the last address of record of each
party being notified.
<PAGE>
Any notice under this Agreement to Lincoln Life shall be given to:
ATTN: O. Douglas Worthington
Vice President and Controller
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46801
Phone: (219) 455-3669
Facsimile: (219) 455-1939
Any notice under this Agreement to Delaware or Holdings shall be given to:
ATTN: Michael J. Bishof
Vice President and Treasurer
Delaware Management Company
1818 Market Street; 7th Floor
Philadelphia, PA 19103
Phone: (215) 255-2852
Facsimile: (215) 255-1645
With a copy to:
Richard J. Flannery
Managing Director, Corporate
& Tax Affairs
Delaware Management Company
2005 Market Street
Philadelphia, PA 19103
Phone: (215) 255-1244
Facsimile: (215) 255-2822
Any notice under this Agreement to any Fund shall be given to:
ATTN: Kelly D. Clevenger
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46801
Phone: (219) 455-5119
Facsimile: (219) 455-1773
Any party may, by means of written notice in compliance with this
Section 16.3, change the address or the identity of the person to whom any
notice, or copy thereof, is to be sent.
Section 16.4 SEVERABILITY. If any provision of this Agreement, as applied
to any party or to any circumstances, shall
<PAGE>
be found by a court of competent jurisdiction to be void, invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of any such provision in any other circumstances, or
the validity or enforceability of this Agreement; provided, however, that
nothing in this Section 16.4 shall adversely affect the fundamental benefits
received by the parties under this Agreement.
Section 16.5 WAIVER. A waiver by any party of any of the terms and
conditions of this Agreement in any one instance shall not be deemed or
construed to be waiver of any such term or condition for the future, or of any
subsequent breach thereof, nor shall it be deemed a waiver of performance of any
other obligation hereunder. No waiver of any provision of this Agreement shall
be valid unless agreed to in writing by the party or parties against whom such
waiver is sought to be enforced.
Section 16.6 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter of this
Agreement and supersedes all prior and collateral agreements, understandings,
statements and negotiations of the parties.
Section 16.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without giving
effect to the conflict of law provisions thereof.
Section 16.8 SECTION AND PARAGRAPH HEADINGS. The titles of the sections
and paragraphs of this Agreement are for convenience only and shall not in any
way affect the interpretation of any provision or condition of this Agreement.
Section 16.9 COUNTERPARTS. This Agreement may be executed in counterparts
which, taken together, shall constitute the whole of the Agreement as between
the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
LINCOLN LIFE:
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: /s/ O. Douglas Worthington
--------------------------
O. Douglas Worthington
Title: Vice President and
Controller
Date:
--------------------------
HOLDINGS:
DELAWARE MANAGEMENT HOLDINGS, INC.
By: /s/ David K. Downes
--------------------
Title: Executive Vice President &
Chief Operating Officer
Date: August 15, 1996
DELAWARE:
DELAWARE SERVICE COMPANY, INC.
By: /s/ Michael P. Bishof
----------------------
Title: Vice President & Treasurer
Date: August 15, 1996
<PAGE>
FUNDS:
LINCOLN NATIONAL AGGRESSIVE GROWTH
FUND, INC.
LINCOLN NATIONAL BOND FUND, INC.
LINCOLN NATIONAL CAPITAL APPRECIATION
FUND, INC.
LINCOLN NATIONAL EQUITY-INCOME
FUND, INC.
LINCOLN NATIONAL GLOBAL ASSET ALLOCATION
FUND, INC.
LINCOLN NATIONAL GROWTH AND INCOME
FUND, INC.
LINCOLN NATIONAL INTERNATIONAL FUND,
INC.
LINCOLN NATIONAL MANAGED FUND, INC.
LINCOLN NATIONAL MONEY MARKET FUND, INC.
LINCOLN NATIONAL SOCIAL AWARENESS FUND,
INC.
LINCOLN NATIONAL SPECIAL OPPORTUNITIES
FUND, INC.
By: /s/ Kelly D. Clevenger
-----------------------
Kelly D. Clevenger
In his capacity as President of
each of the above-named Funds.
<PAGE>
EXHIBIT A
---------------------------------------
INVESTMENT COMPANIES
<PAGE>
EXHIBIT A
INVESTMENT COMPANIES
Lincoln National Aggressive Growth Fund, Inc.
Lincoln National Bond Fund, Inc.
Lincoln National Capital Appreciation Fund, Inc.
Lincoln National Equity-Income Fund, Inc.
Lincoln National Global Asset Allocation Fund, Inc.
Lincoln National Growth and Income Fund, Inc.
Lincoln National International Fund, Inc.
Lincoln National Managed Fund, Inc.
Lincoln National Money Market Fund, Inc.
Lincoln National Social Awareness Fund, Inc.
Lincoln National Special Opportunities Fund, Inc.
<PAGE>
EXHIBIT B
FORM OF WRITTEN ACKNOWLEDGEMENT OF CUTOVER DATE
<PAGE>
EXHIBIT B
FORM OF ACKNOWLEDGMENT OF CUTOVER DATE
This acknowledgement is executed pursuant Section 4.2 of that certain
Services Agreement (the "Agreement") dated as of July __, 1996 by and among
Delaware Management Holdings, Inc., Delaware Service Company, Inc., Lincoln
National Life Insurance Company, Lincoln National Aggressive Growth Fund, Inc.,
Lincoln National Bond Fund, Inc., Lincoln National Capital Appreciation Fund,
Inc., Lincoln National Equity-Income Fund, Inc., Lincoln National Global Asset
Allocation Fund, Inc., Lincoln National Growth and Income Fund, Inc., Lincoln
National International Fund, Inc., Lincoln National Managed Fund, Inc., Lincoln
National Money Market Fund, Inc., Lincoln National Social Awareness Fund, Inc.,
and Lincoln National Special Opportunities Fund, Inc. Capitalized terms used
herein have the same meaning as in the Agreement.
Each of the parties signing this acknowledgment below hereby agrees
that the Test Period for Phase __ terminated on ________________ __, 1996. The
Cutover Date for providing the Accounting Service for Phase __ is
_________________ __, 1996.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------------
Title:
---------------------------------
Date:
---------------------------------
DELAWARE SERVICE COMPANY, INC.
By:
---------------------------------------
Title:
---------------------------------
Date:
---------------------------------
<PAGE>
[EACH FUND]
By:
---------------------------------------
Title:
---------------------------------
Date:
---------------------------------
<PAGE>
SCHEDULE 1.1 (a)
CUTOVER SCHEDULE
<PAGE>
CUTOVER SCHEDULE
PHASE I (8/15/96 SCHEDULED CUTOVER DATE):
The following services will begin at the Cutover Date for Phase I and will
subsequently be provided by Delaware for the duration of the Service Agreement.
The Funds for which these services will be provided are as follows:
- Lincoln National Growth and Income Fund, Inc.
- Lincoln National Bond Fund, Inc.
- Lincoln National Money Market Fund, Inc.
- Lincoln National Managed Fund, Inc.
- Lincoln National Social Awareness Fund, Inc.
- Lincoln National Special Opportunities Fund, Inc.
DAILY NET ASSET VALUE CALCULATION SERVICES:
- Maintain Portfolio History
- Record portfolio purchases and sales
- Record corporate actions and capital changes
- Accrue interest, dividends and expenses
- Maintain income history for securities
- Determine distributions to shareholders
- Record and reconcile shareholder activity
- Book subscription, liquidations and dividend reinvestments
- Record settlements of shareholder activity
- Reconcile fund shares outstanding to transfer agent
- Value portfolios (Calculate the NAV for each fund portfolio)
- Verify Delaware's internal controls - pricing securities and
portfolios
- Disseminate NAVs and dividends to interested parties (Lincoln Life,
ICI, Morningstar, Lipper, etc.) as mutually agreed upon by
Lincoln Life & Delaware
- Resolve daily pricing &/or custody discrepancies
FINANCIAL REPORTING SERVICES:
- Commencing 12/31/96 prepare the following information for use in
the semi-annual and annual reports for shareholders:
- Prepare Statement of Net Assets, Statement of Operations and
Changes in Net Assets
- Work with external auditors on footnotes to the financial
statements,
- Workpapers for annual audit,
1
<PAGE>
- Cooperate with external auditors, Lincoln Life Marketing &
printer
- Required ICI reporting as mutually agreed upon by Lincoln Life and
Delaware
- Prepare Statistical reports as necessary (daily, monthly, quarterly
and annual reports for Lipper, Morningstar, and other third
party reporting agencies and survey companies) as mutually
agreed upon by Lincoln Life and Delaware
2
<PAGE>
PHASE I (8/15/96 SCHEDULED CUTOVER DATE CONTINUED):
- Commencing 1/1/97, provide financial information for use in SEC
reporting (ie. NSAR, Prospectus, SAI, 24F2s, etc. . .)
- Provide financial information to support schedule "D"
OTHER SERVICES:
- Calculate monthly SEC yields & fund level performance
- Prepare information for tax returns and ancillary schedules and
submit to Lincoln Corporate Tax Department:
- 1120 RIC and any other required forms
- Year-end excise tax distributions
- Calculate and provide information for Subchapter M &
Section 4982 of Internal Revenue Code compliance
- Provide tax return workpapers to Lincoln Life for review purposes
- Perform the following special tax reporting functions
- Prepare income by state, exempt income and qualified
distributions
- Prepare financial information for expense & budget functions
- Maintain detailed records pertaining to expense accruals and
payments
- Adjust fund records to reflect accrual adjustments
- Prepare reports which are mutually agreed upon by Lincoln Life and
Delaware for Board of Director meetings & Senior Management
(as they pertain to these 6 Funds)
- Cooperate with custodians in all custody relationships
- Facilitate security settlements
- Perform required foreign security accounting functions
- Perform daily cash reconciliations for each Fund provided that the
bank(s) &/or third party mutual fund complex(s) send the
necessary information to perform such reconciliations
- Perform weekly asset reconciliations for each fund providing the
bank(s) &/or third party mutual fund complex(s) send the
necessary information to perform such reconciliations
- Support business relationships with Lincoln business partners (ie.
advisors, custodians, banks, third party administrators,
etc.)
- Provide portfolio holdings and security valuation reports
- Prepare cash forecasts and reconciliations as mutually
agreed upon by Lincoln Life and Delaware
- Assist in security settlements
- Resolve cash discrepancies
- Other reasonable requests as mutually agreed upon by Lincoln
Life and Delaware
- Disseminate reconciliation data to interested parties for daily
balancing needs as mutually agreed upon by Lincoln Life and
3
<PAGE>
Delaware
- Provide process control data as mutually agreed upon by Lincoln
Life and Delaware
4
<PAGE>
PHASE I (8/15/96 SCHEDULED CUTOVER DATE CONTINUED):
COMPLIANCE TESTING SERVICES:
- Perform the following Registered Investment Company tests as
required to maintain the tax qualified status of the Funds
and provide schedules of the results. These tests are to be
performed regularly as mutually agreed upon by Lincoln Life
and Delaware:
- Monthly 30% Gross Income Test (according to IRS regulations)
- Annual 90% Gross Income Test (according to IRS regulations)
- Monthly, prepare the IRS Industry Diversification Test (50%
& 25%)
- Annual 90% Distribution Test
- Provide monthly notification of derivative securities held in each
portfolio based upon a definition of "derivative" which is
mutually agreed upon by Lincoln Life and Delaware
THE FOLLOWING SERVICES WILL BEGIN AT THE CUTOVER DATE FOR PHASE I AND WILL
SUBSEQUENTLY BE PROVIDED BY DELAWARE FOR THE DURATION OF THE SERVICES AGREEMENT,
THE SEPARATE ACCOUNT SUB-ACCOUNTS FOR WHICH THESE SERVICES WILL BE PROVIDED ARE
AS FOLLOWS:
- - Separate Account C LN Growth & Income Fund
- - Separate Account C LN Bond Fund
- - Separate Account C LN Social Awareness Fund
- - Separate Account C LN Special Opportunities Fund
- - Separate Account C LN Managed Fund
- - Separate Account C LN Money Market Fund
- - Separate Account C LN Global Asset Allocation Fund
- - Separate Account C LN International Fund
- - Separate Account C LN Aggressive Growth Fund
- - Separate Account C LN Capital Appreciation Fund
- - Separate Account C LN Equity Income Fund
- - Separate Account C LN Delaware Equity Income Fund
- - Separate Account C LN Delaware Emerging Growth Fund
- - Separate Account C LN Delaware Global Bond Fund
- - Separate Account K LN Growth & Income Fund
- - Separate Account K LN Bond Fund
- - Separate Account K LN Social Awareness Fund
- - Separate Account K LN Special Opportunities Fund
- - Separate Account K LN Managed Fund
5
<PAGE>
- - Separate Account K LN Money Market Fund
- - Separate Account K LN Global Asset Allocation Fund
- - Separate Account K LN International Fund
- - Separate Account K LN Aggressive Growth Fund
- - Separate Account K LN Capital Appreciation Fund
- - Separate Account K LN Equity Income Fund
- - Separate Account K LN Delaware Equity Income Fund
- - Separate Account K LN Delaware Emerging Growth Fund
- - Separate Account K LN Delaware Global Bond Fund
6
<PAGE>
PHASE I (8/15/96 SCHEDULED CUTOVER DATE CONTINUED):
- - Separate Account D LN Growth & Income Fund
- - Separate Account D LN Bond Fund
- - Separate Account D LN Special Opportunities Fund
- - Separate Account D LN Managed Fund
- - Separate Account D LN Money Market Fund
- -
- - Separate Account G LN Growth & Income Fund
- - Separate Account G LN Special Opportunities Fund
- - Separate Account 60 Global Bond Fund Net 1 UV
- - Separate Account 60 Global Bond Fund Net 2 UV
- - Separate Account 60 Global Bond Fund Net 3 UV
- - Separate Account 60 Global Bond Fund Gross 1 UV
- - Separate Account 60 Global Bond Fund Gross 2 UV
- - Separate Account 61 Decatur Total Return Fund Net 1 UV
- - Separate Account 61 Decatur Total Return Fund Net 2 UV
- - Separate Account 61 Decatur Total Return Fund Net 3 UV
- - Separate Account 61 Decatur Total Return Fund Gross 1 UV
- - Separate Account 61 Decatur Total Return Fund Gross 2 UV
DAILY UNIT VALUE CALCULATIONS:
- Maintain Portfolio History
- Accrue dividends and expenses to each Sub-Account
- Maintain gain/loss history for each Sub-Account
- Maintain record of holdings for each Sub-Account
- Record and reconcile shareholder activity
- Book subscription, liquidations and dividend reinvestments
to each Sub-Account
- Record settlements of shareholder activity
- Reconcile Sub-Account units outstanding to Lincoln Life
administrative systems
- Establish controls for daily pricing of units outstanding of
each Sub-Account
- Calculate the Unit Value for each Lincoln Life Separate Account
Sub-Account.
- Disseminate daily Unit Values to interested parties (ie. Lipper,
Morningstar, etc. . .) as mutually agreed upon by Lincoln
Life and Delaware
- Resolve daily pricing and/or custody discrepancies
7
<PAGE>
- Accept NAVs from State Street Bank for purposes of calculating unit
values of pertinent Separate Account Sub-Accounts
FINANCIAL REPORTING:
- Provide Lincoln Life with an automated transmission of Separate
Account Sub-Account financial data into the Lincoln Life
General Ledger.
- Provide other ancillary schedules as mutually agreed upon by
Lincoln Life and Delaware
8
<PAGE>
PHASE I (8/15/96 SCHEDULED CUTOVER DATE CONTINUED):
OTHER SERVICES:
- Support business relationships with Lincoln business partners (ie.
advisors, custodians, banks, Third Party Administrators,
etc. . .)
- Provide portfolio holdings and security valuation reports
- Prepare cash forecasts and reconciliations as mutually
agreed upon by Lincoln Life and Delaware
- Assist in security settlements
- Resolve cash discrepancies
- Other reasonable requests as mutually agreed upon by Lincoln
Life and Delaware
- Provide financial information to support schedule "D"
- Disseminate reconciliation data to interested parties for daily
balancing needs as mutually agreed upon by Lincoln Life and
Delaware
- Provide process control data as mutually agreed upon by Lincoln
Life and Delaware
- Perform daily cash reconciliations for each Separate Account
(provided that the bank(s) &/or third party mutual fund
complex(s) send the necessary information to perform such
reconciliations)
- Perform weekly asset reconciliations for each Separate Account
provided that the bank(s) &/or third party mutual fund
complex(s) send the necessary information to perform such
reconciliations
PHASE II (10/31/96 SCHEDULED CUTOVER DATE):
THE FOLLOWING SERVICES WILL BEGIN IN THIS CUTOVER DATE FOR PHASE II AND WILL
SUBSEQUENTLY BE PROVIDED BY DELAWARE FOR THE DURATION OF THE SERVICES AGREEMENT.
THE SEPARATE ACCOUNTS FOR WHICH THESE SERVICES WILL BE PROVIDED ARE A, 3, 11,
12, 14, 17, 20, 21, 22, 23, 24, 25, 26, 27, 28, 30, 32:
DAILY UNIT VALUE CALCULATION SERVICES:
- Maintain Portfolio History
- Record portfolio purchases and sales
- Record corporate actions and capital changes
- Accrue interest, dividends and expenses
- Maintain income history for securities
- Record and reconcile shareholder activity
- Book subscription, liquidations and dividend reinvestments
9
<PAGE>
- Record settlements of shareholder activity
- Reconcile fund shares outstanding to transfer agent
- Value portfolios (Calculate the Unit Value for each Separate
Account portfolio)
- Verify Delaware's internal controls - pricing securities and
portfolios
10
<PAGE>
PHASE II (10/31/96 SCHEDULED CUTOVER DATE CONTINUED):
- Disseminate Unit Values to interested parties (Lincoln Life,
etc. . .) as mutually agreed upon by Lincoln Life and
Delaware
- Resolve daily pricing &/or custody discrepancies
FINANCIAL REPORTING SERVICES:
- Coordinate audit activities with external auditors
- Prepare statistical reports as mutually agreed upon by Lincoln Life
and Delaware
- Provide Lincoln with additional financial data as mutually agreed
upon by Lincoln Life and Delaware
- Provide Lincoln Life with an automated general ledger feed of
pertinent financial information (ie. revenue, cash flow,
etc. . . )
OTHER SERVICES:
- Cooperate with custodians in all custody relationships
- Facilitate security settlements
- Perform required foreign security accounting functions
- Perform daily cash reconciliations for each Separate Account
provided that the bank(s) &/or third party mutual fund
complex(s) send the necessary information to perform such
reconciliations
- Perform weekly cash reconciliations for each Separate Account
provided that the bank(s) &/or third party mutual fund
complex(s) send the necessary information to perform such
reconciliations
- Support business relationships with Lincoln business partners (ie.
advisors, custodians, banks, third party administrators,
etc. . .)
- Provide portfolio holdings and security valuation reports
- Prepare cash forecasts and reconciliations as mutually
agreed upon by Lincoln Life and Delaware
- Assist in security settlements
- Resolve cash discrepancies
- Other reasonable requests as mutually agreed upon by Lincoln
Life and Delaware
- Provide financial information to support schedule "D"
- Disseminate reconciliation data to interested parties for daily
balancing needs as mutually agreed upon by Lincoln Life and
Delaware
- Provide process control data as mutually agreed upon by Lincoln
11
<PAGE>
Life and Delaware
COMPLIANCE TESTING SERVICES:
- Provide monthly notification of derivative securities held in each
portfolio based upon a definition of "derivative" which is
mutually agreed upon by Lincoln Life and Delaware
12
<PAGE>
PHASE II (10/31/96 SCHEDULED CUTOVER DATE CONTINUED):
THE FOLLOWING SERVICES WILL BEGIN AT THE CUTOVER DATE FOR PHASE II AND WILL
SUBSEQUENTLY BE PROVIDED BY DELAWARE FOR THE DURATION OF THE SERVICES AGREEMENT.
THE SEPARATE ACCOUNT SUB-ACCOUNTS FOR WHICH THESE SERVICES WILL BE PROVIDED ARE
AS FOLLOWS:
- Separate Account A Traditional Annuities Gross 1 UV
- Separate Account A Traditional Annuities Terminal Funding UV
- Separate Account 3 Core Equity Fund Gross 1 UV
- Separate Account 11 Core Equity Account Net 1 UV
- Separate Account 11 Core Equity Account Net 2 UV
- Separate Account 11 Core Equity Account Net 3 UV
- Separate Account 11 Core Equity Account Gross 1 UV
- Separate Account 11 Core Equity Account Gross 2 UV
- Separate Account 11 Core Equity Account Balanced UV
- Separate Account 12 Govt. Corp Bond Account Net 1 UV
- Separate Account 12 Govt. Corp Bond Account Net 2 UV
- Separate Account 12 Govt. Corp Bond Account Net 3 UV
- Separate Account 12 Govt. Corp Bond Account Gross 1 UV
- Separate Account 12 Govt. Corp Bond Account Gross 2 UV
- Separate Account 12 Govt. Corp Bond Account Balanced UV
- Separate Account 14 Short Term Account Net 1 UV
- Separate Account 14 Short Term Account Net 2 UV
- Separate Account 14 Short Term Account Net 3 UV
- Separate Account 14 Short Term Account Gross 1 UV
- Separate Account 14 Short Term Account Gross 2 UV
- Separate Account 14 Short Term Account Balanced UV
- Separate Account 17 Medium Cap. Equity Account Net 1 UV
- Separate Account 17 Medium Cap. Equity Account Net 2 UV
- Separate Account 17 Medium Cap. Equity Account Net 3 UV
- Separate Account 17 Medium Cap. Equity Account Gross 1 UV
- Separate Account 17 Medium Cap. Equity Account Gross 2 UV
- Separate Account 17 Medium Cap. Equity Account Balanced UV
- Separate Account 20 High Yield Bond Account Net 1 UV
- Separate Account 20 High Yield Bond Account Net 2 UV
- Separate Account 20 High Yield Bond Account Net 3 UV
- Separate Account 20 High Yield Bond Account Gross 1 UV
- Separate Account 20 High Yield Bond Account Gross 2 UV
- Separate Account 20 High Yield Bond Account Balanced UV
- Separate Account 21 Balanced Account Net 1 UV
13
<PAGE>
- Separate Account 21 Balanced Account Net 2 UV
- Separate Account 21 Balanced Account Net 3 UV
- Separate Account 21 Balanced Account Gross 1 UV
- Separate Account 21 Balanced Account Gross 2 UV
PHASE II (10/31/96 SCHEDULED CUTOVER DATE CONTINUED):
- Separate Account 22 International Account Net 1 UV
- Separate Account 22 International Account Net 2 UV
- Separate Account 22 International Account Net 3 UV
- Separate Account 22 International Account Gross 1 UV
- Separate Account 22 International Account Gross 2 UV
- Separate Account 22 International Account Balanced UV
- Separate Account 23 Large Cap. Equity Account Net 1 UV
- Separate Account 23 Large Cap. Equity Account Net 2 UV
- Separate Account 23 Large Cap. Equity Account Net 3 UV
- Separate Account 23 Large Cap. Equity Account Gross 1 UV
- Separate Account 23 Large Cap. Equity Account Gross 2 UV
- Separate Account 23 Large Cap. Equity Account Balanced UV
- Separate Account 24 Small Cap. Equity Account Net 1 UV
- Separate Account 24 Small Cap. Equity Account Net 2 UV
- Separate Account 24 Small Cap. Equity Account Net 3 UV
- Separate Account 24 Small Cap. Equity Account Gross 1 UV
- Separate Account 24 Small Cap. Equity Account Gross 2 UV
- Separate Account 24 Small Cap. Equity Account Balanced UV
- Separate Account 25 Long Term Bond Gross 1G UV
- Separate Account 26 Govt. Bond Account Net 1 UV
- Separate Account 26 Govt. Bond Account Net 2 UV
- Separate Account 26 Govt. Bond Account Net 3 UV
- Separate Account 26 Govt. Bond Account Gross 1 UV
- Separate Account 26 Govt. Bond Account Gross 2 UV
- Separate Account 27 Stable Value Account Net 2 UV
- Separate Account 27 Stable Value Account Net 3 UV
- Separate Account 27 Stable Value Account Gross 2 UV
- Separate Account 28 Value Equity Account Net 1 UV
- Separate Account 28 Value Equity Account Net 2 UV
- Separate Account 28 Value Equity Account Net 3 UV
- Separate Account 28 Value Equity Account Gross 1 UV
- Separate Account 28 Value Equity Account Gross 2 UV
- Separate Account 28 Value Equity Account Balanced UV
- Separate Account 30 Conservative Balanced Account Net 1 UV
- Separate Account 30 Conservative Balanced Account Net 2 UV
- Separate Account 30 Conservative Balanced Account Net 3 UV
14
<PAGE>
- Separate Account 30 Conservative Balanced Account Gross 1 UV
- Separate Account 30 Conservative Balanced Account Gross 2 UV
- Separate Account 32 Aggressive Balanced Account Net 1 UV
- Separate Account 32 Aggressive Balanced Account Net 2 UV
- Separate Account 32 Aggressive Balanced Account Net 3 UV
- Separate Account 32 Aggressive Balanced Account Gross 1 UV
- Separate Account 32 Aggressive Balanced Account Gross 2 UV
15
<PAGE>
PHASE II (10/31/96 SCHEDULED CUTOVER DATE CONTINUED):
- Separate Account 41 Fidelity Asset Manager Net 2 UV
- Separate Account 41 Fidelity Asset Manager Net 3 UV
- Separate Account 41 Fidelity Asset Manager Gross 2 UV
- Separate Account 42 Janus Capital Appreciation Net 2 UV
- Separate Account 42 Janus Capital Appreciation Net 3 UV
- Separate Account 42 Janus Capital Appreciation Gross 2 UV
- Separate Account 43 Fidelity Contra Net 2 UV
- Separate Account 43 Fidelity Contra Net 3 UV
- Separate Account 43 Fidelity Contra Gross 2 UV
- Separate Account 44 Strong Discovery Net 2 UV
- Separate Account 44 Strong Discovery Net 3 UV
- Separate Account 44 Strong Discovery Gross 2 UV
- Separate Account 45 T-Rowe Price International Net 2 UV
- Separate Account 45 T-Rowe Price International Net 3 UV
- Separate Account 45 T-Rowe Price International Gross 2 UV
- Separate Account F AVIS Cash Management Fund
- Separate Account F AVIS Growth Series Fund
- Separate Account F AVIS Growth Income Fund
- Separate Account F AVIS High Yield Bond Fund
- Separate Account F AVIS Govt. AAA Securities Fund
- Separate Account F AVIS International Fund
- Separate Account F AVIS Asset Allocation Fund
- Separate Account F AVIS Bond Fund
- Separate Account J AVIS Cash Management Fund
- Separate Account J AVIS Growth Series Fund
- Separate Account J AVIS Growth Income Fund
- Separate Account J AVIS High Yield Bond Fund
- Separate Account J AVIS Govt. AAA Securities Fund
- Separate Account J AVIS International Fund
- Separate Account J AVIS Asset Allocation Fund
- Separate Account J AVIS Bond Fund
- Separate Account G AVIS Cash Management Fund
- Separate Account G AVIS Growth Series Fund
- Separate Account G AVIS Growth Income Fund
- Separate Account G AVIS High Yield Bond Fund
- Separate Account G AVIS Govt. AAA Securities Fund
- Separate Account G AVIS International Fund
- Separate Account G AVIS Asset Allocation Fund
- Separate Account G AVIS Bond Fund
16
<PAGE>
PHASE II (10/31/96 SCHEDULED CUTOVER DATE CONTINUED):
- Separate Account E AVIS Cash Management Fund
- Separate Account E AVIS Growth Series Fund
- Separate Account E AVIS Growth Income Fund
- Separate Account E AVIS High Yield Bond Fund
- Separate Account E AVIS Govt. AAA Securities Fund
- Separate Account E AVIS International Fund
- Separate Account E AVIS Asset Allocation Fund
- Separate Account E AVIS Bond Fund
- Separate Account H AVIS Cash Management Fund
- Separate Account H AVIS Growth Series Fund
- Separate Account H AVIS Growth Income Fund
- Separate Account H AVIS High Yield Bond Fund
- Separate Account H AVIS Govt. AAA Securities Fund
- Separate Account H AVIS International Fund
- Separate Account H AVIS Asset Allocation Fund
- Separate Account H AVIS Bond Fund
- Separate Account 50 AVIS Cash Management Fund
- Separate Account 50 AVIS Growth Series Fund
- Separate Account 50 AVIS Growth Income Fund
- Separate Account 50 AVIS High Yield Bond Fund
- Separate Account 50 AVIS Govt. AAA Securities Fund
- Separate Account 50 AVIS International Fund
- Separate Account 50 AVIS Asset Allocation Fund
- Separate Account 50 AVIS Bond Fund
- Separate Account 51 AVIS Cash Management Fund
- Separate Account 51 AVIS Growth Series Fund
- Separate Account 51 AVIS Growth Income Fund
- Separate Account 51 AVIS High Yield Bond Fund
- Separate Account 51 AVIS Govt. AAA Securities Fund
- Separate Account 51 AVIS International Fund
- Separate Account 51 AVIS Asset Allocation Fund
- Separate Account 51 AVIS Bond Fund
- Separate Account 52 AVIS Cash Management Fund
- Separate Account 52 AVIS Growth Series Fund
- Separate Account 52 AVIS Growth Income Fund
- Separate Account 52 AVIS High Yield Bond Fund
- Separate Account 52 AVIS Govt. AAA Securities Fund
- Separate Account 52 AVIS International Fund
- Separate Account 52 AVIS Asset Allocation Fund
- Separate Account 52 AVIS Bond Fund
DAILY UNIT VALUE CALCULATIONS:
17
<PAGE>
- Maintain Portfolio History
- Accrue dividends and expenses to each Sub-Account
- Maintain gain/loss history for each Sub-Account
- Maintain record of holdings for each Sub-Account
PHASE II (10/31/96 SCHEDULED CUTOVER DATE CONTINUED):
- Record and reconcile shareholder activity
- Book subscription, liquidations and dividend reinvestments
to each Sub-Account
- Record settlements of shareholder activity
- Reconcile Sub-Account units outstanding to Lincoln Life
administrative systems
- Establish controls for daily pricing of units outstanding
of each Sub-Account
- Calculate the Unit Value for each Lincoln National
Separate Account Sub-Account.
- Disseminate daily Unit Values to interested parties
(ie. Lipper, Morningstar, etc. . .) as mutually agreed upon
by Lincoln Life and Delaware
- Resolve daily pricing and/or custody discrepancies
- Accept NAVs from applicable managers, advisors and
subadvisors for purposes of calculating Unit Values of
pertinent Separate Account Sub-Accounts
FINANCIAL REPORTING:
- Provide Lincoln with an automated transmission of
Separate Account Sub-Account financial data into the Lincoln
Life General Ledger.
- Provide other ancillary schedules as mutually agreed
upon by Lincoln Life and Delaware
OTHER SERVICES:
- Support business relationships with Lincoln business
partners (ie. advisors, custodians, banks, third party
administrators, etc. . .)
- Provide portfolio holdings and security valuation reports
- Prepare cash forecasts and reconciliations as mutually
agreed upon by Lincoln Life and Delaware
- Assist in security settlements
- Resolve cash discrepancies
- Other reasonable requests as mutually agreed upon by Lincoln
Life and Delaware
- Provide financial information to support schedule "D"
- Disseminate reconciliation data to interested parties
for daily balancing needs as mutually agreed upon by Lincoln
Life and Delaware
- Provide process control data as a mutually agreed
upon by Lincoln Life and Delaware
- Perform daily cash reconciliations for each Separate
Account provided that the bank(s) &/or third party mutual
18
<PAGE>
fund complex(s) send the necessary information to perform
such reconciliations
- Perform weekly asset reconciliations for each
Separate Account provided that the bank(s) &/or mutual
fund complex(s) send the necessary information to perform
such reconciliations
19
<PAGE>
PHASE III (1/1/97 SCHEDULED CUTOVER DATE):
THE FOLLOWING SERVICES WILL BEGIN AT THIS CUTOVER DATE FOR
PHASE III AND WILL SUBSEQUENTLY BE PROVIDED BY DELAWARE FOR THE
DURATION OF THE SERVICES AGREEMENT. THE FUNDS FOR WHICH THESE
SERVICES WILL BE PROVIDED ARE AS FOLLOWS:
- Lincoln National Global Asset Allocation Fund Inc.,
- Lincoln National International Fund Inc.,
- Lincoln National Capital Appreciation Fund Inc.,
- Lincoln National Equity Income Fund Inc.,
- Lincoln National Aggressive Growth Fund Inc.
DAILY NET ASSET VALUE CALCULATION SERVICES:
- Maintain Portfolio History
- Record portfolio purchases and sales
- Record corporate actions and capital changes
- Accrue interest, dividends and expenses
- Maintain income history for securities
- Determine distributions to shareholders
- Record and reconcile shareholder activity
- Book subscription, liquidations and dividend reinvestments
- Record settlements of shareholder activity
- Reconcile fund shares outstanding to transfer agent
- Value portfolios (Calculate the NAV for each Fund
portfolio)
- Verify Delaware's internal controls - pricing securities and
portfolios
- Disseminate NAVs and dividends to interested parties
(Lincoln Life, ICI, Morningstar, Lipper, etc.) as mutually
agreed upon by Lincoln Life & Delaware
- Resolve daily pricing &/or custody discrepancies
FINANCIAL REPORTING SERVICES:
- Commencing 6/30/97, prepare the following information
for use in the semi-annual and annual reports for
shareholders:
- Prepare Statement of Net Assets, Statement of Operations
and Changes in Net Assets
- Work with external auditors on footnotes to the financial
statements,
- Workpapers for annual audit,
- Cooperate with external auditors, Lincoln Life Marketing &
printer
- Required ICI reporting as mutually agreed upon by
Lincoln Life and Delaware
- Prepare Statistical reports as necessary (daily,
monthly, quarterly and annual reports for Lipper,
Morningstar, and other third party reporting agencies and
20
<PAGE>
survey companies) as mutually agreed upon by Lincoln Life
and Delaware
- Commencing 1/1/97, provide financial information for
use in SEC reporting (ie. NSAR, Prospectus, SAI, 24F2s,
etc. . .)
- Provide financial information to support schedule "D"
21
<PAGE>
PHASE III (1/1/97 SCHEDULED CUTOVER DATE CONTINUED):
OTHER SERVICES:
- Calculate monthly SEC yields & fund level performance
- Prepare information for tax returns and ancillary
schedules and submit to Corporate Tax Department:
- 1120 RIC and any other required forms
- Year-end excise tax distributions
- Calculate and provide information for Subchapter M &
Section 4982 of Internal Revenue Code compliance
- Provide tax return workpapers to Lincoln Life for
review purposes
- Perform the following special tax reporting functions
- Prepare income by state, exempt income and qualified
distributions
- Prepare financial information for expense & budget
functions
- Maintain detailed records pertaining to expense accruals and
payments
- Adjust fund records to reflect accrual adjustment
- Prepare reports which are mutually agreed upon by
Lincoln Life and Delaware for Board of Director meetings &
Senior Management (as they pertain to these 5 Funds)
- Cooperate with custodians in all custody
relationships
- Facilitate security settlements
- Perform required foreign security accounting
functions
- Perform daily cash reconciliations for each Fund
provided that the bank(s) &/or third party mutual fund
complex(s) send the necessary information to perform such
reconciliations
- Perform weekly asset reconciliations for each fund
providing the bank(s) &/or third party mutual fund
complex(s) send the necessary information to perform such
reconciliations
- Support business relationships with Lincoln business
partners (ie. advisors, custodians, banks, third part
administrators, etc. .)
- Provide portfolio holdings and security valuation reports
- Prepare cash forecasts and reconciliations as mutually
agreed upon by Lincoln Life and Delaware
- Assist in security settlements
- Resolve cash discrepancies
- Other reasonable requests as mutually agreed upon by Lincoln
Life and Delaware
- Disseminate reconciliation data to interested parties
for daily balancing needs as mutually agreed upon by Lincoln
Life and Delaware
- Provide process control data as mutually agreed upon
by Lincoln Life and Delaware
22
<PAGE>
PHASE III (1/1/97 SCHEDULED CUTOVER DATE CONTINUED):
COMPLIANCE TESTING SERVICES:
- Perform the following Registered Investment Company
tests as required to maintain the tax qualified status of
the funds and provide schedules of the results. These test
will be performed regularly as mutually agreed upon by
Lincoln Life and Delaware.
- Monthly 30% Gross Income Test (according to IRS regulations)
- Annual 90% Gross Income Test (according to IRS regulations)
- Monthly, prepare the IRS Industry Diversification Test
(50% & 25%)
- Annual 90% Distribution Test
- Provide monthly notification of derivative securities
held in each portfolio based upon a definition of
"derivative" which is mutually agreed upon by Lincoln Life
and Delaware
NOTE: DELAWARE WILL NOT PROVIDE LEGAL ASSISTANCE, COMPLIANCE
MONITORING OR TAX WORK OTHER THAN WHAT IS SPECIFIED ABOVE.
DELAWARE WILL NOT SIGN THE TAX RETURNS.
23
<PAGE>
SCHEDULE 2.1
PROCEDURES FOR CORRECTING ERRORS
The following charts set forth certain procedures to be followed in the
event of errors in the calculation of the Net Asset Values and Unit Values.
There are two separate charts: Chart I outlines the procedures to be followed in
the event that the error is greater than, or equal to, .5% of the Fund's Net
Asset Value or Separate Account's Unit Value; Chart II outlines the procedure in
the event that the error is less than .5%. Each of the Charts assumes that the
error in the Unit Value or Net Asset Value is at least $.01. If the error is
less than $.01, no action will be taken.
The procedures set forth in these Charts are designed to be consistent
with informal positions taken by the Securities and Exchange Commission (the
"SEC") with respect to errors in the calculation of net asset values or unit
values. The parties to the Services Agreement shall negotiate in good faith to
amend this Schedule 2.1 as appropriate in the event that (a) the SEC modifies,
amends or supplements such positions, or issues any other regulatory guidance
with respect to net asset values, unit values, or both, or (b) a Unit Value
changes to a degree that alternative error correction procedures should be
considered.
<TABLE>
<CAPTION>
CHART I
ERROR GREATER THAN OR EQUAL TO .5%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value Net Asset Value
or or
Type of Transaction Unit Value Understated Unit Value Overstated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Make Fund or Separate
Subscription Account Whole (1) Reprocess (2)
- --------------------------------------------------------------------------------------------------------------------------
Make Fund or Separate
Redemption Reprocess (3) Account Whole (1)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
(1) Alternatively, at Lincoln Life's or the relevant Fund's discretion, all
shareholder transactions can be reprocessed. At the Fund level, the
shareholder would be the Lincoln Life Separate Account. At the Separate
Account level, the shareholder would be the Contractowner.
(2) Reprocessing would occur for all transactions where the shareholder
effect is greater than $10.00.
(3) Reprocessing would occur for all transactions where the shareholder
effect is greater than $10.00. Lincoln Life or the relevant Fund, at its
respective discretion, would reimburse the shareholder.
24
<PAGE>
CHART II
ERROR LESS THAN .5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value Net Asset Value
or or
Type of Transaction Unit Value Understated Unit Value Overstated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Make Fund or Separate
Subscription Account Whole (1) No Action (2)
- --------------------------------------------------------------------------------------------------------------------------
Make Fund or Separate
Redemption No Action (3) Account Whole (1)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
(1) Alternatively, at Lincoln Life's or the relevant Fund's discretion, the
shareholder transactions can be reprocessed. At the Fund level, the
shareholder would be the Lincoln Life Separate Account. At the Separate
Account level, the shareholder would be the Contractowner.
(2) Alternatively, Lincoln Life or the relevant Fund could determine to
reprocess the transactions.
(3) Alternatively, Lincoln Life or the relevant Fund could determine to
reprocess transactions and reimburse the shareholders.
- 26 -
<PAGE>
SCHEDULE 3.1
DATA PROVIDED BY LINCOLN LIFE
- 27 -
<PAGE>
DATA PROVIDED BY LINCOLN LIFE
THE FOLLOWING INFORMATION REPRESENTS DATA WHICH WILL BE PROVIDED BY LINCOLN LIFE
TO DELAWARE FOR THE PURPOSE OF ENABLEING DELAWARE TO PERFORM THE ACCOUNTING
SERVICES PURSUANT TO THE SERIVCES AGREEMENT.
1) BY 9:00 AM NEW YORK TIME EACH BUSINESS DAY, LINCOLN LIFE WILL PROVIDE
DELAWARE WITH TRADE ACTIVITY (BY SUB-ACCOUNT - E.G. SEPARATE
ACCOUNT C GROWTH FUND TRADES) FOR THE PURPOSE OF ADDING THIS
INFORMATION TO THE OUTSTANDING ASSETS OF EACH SUB-ACCOUNT.
THIS DAILY TRADE ACTIVITY WILL INCLUDE A NET PURCHASE OR REDEMPTION
AMOUNT BY SUB-ACCOUNT, THE NET NUMBER OF UNITS PURCHASED BY
SUB-ACCOUNT BY LINCOLN LIFE CLIENTS THE PRECEDING BUSINESS DAY OR
DAYS AND FUND SHARE PURCHASES AND SALES IN DOLLARS AND SHARE
AMOUNTS.
2. BY 9:00 AM NEW YORK TIME EACH BUSINESS DAY, LINCOLN LIFE WILL PROVIDE
DELAWARE WITH THE NUMBER OF OUTSTANDING UNITS WITHIN EACH
SUB-ACCOUNT FOR PURPOSES OF BALANCING TO THE NUMBER OF UNITS USED
IN THE DAILY UNIT VALUE CALCULATION AND THE NUMBER OF OUTSTANDING
SHARES WITHIN EACH FUND.
NOTE: IN THE EVENT THAT LINCOLN LIFE IDENTIFIES ERRONEOUS DATA IN THEIR DAILY
TRANSMISSION OF TRADE ACTIVITY WHILE PERFORMING THEIR BALANCING ROUTINE
SUBSEQUENT TO THE TRANSMISSION, LINCOLN LIFE WILL INFORM DELAWARE OF
THE ERRONEOUS INFORMATION VIA TELEPHONE.
- 28 -
<PAGE>
SCHEDULE 3.2
UNAFFILIATED MUTUAL FUNDS
AND
SERVICE PROVIDERS
- 29 -
<PAGE>
DATA PROVIDED BY UNAFFILIATED MUTUAL FUNDS AND SERVICE PROVIDERS
The following information represents data which will be provided by third
parties to Delaware pursuant to section 3.2 of the Services Agreement.
1) Each evening of a business day, all applicable Fund managers, advisors
and subadvisors will provide to Delaware (via fax), the daily net
asset values of such funds no later than 6:00 pm New York Time.
(See note below)
2) Each evening of a business day, Delaware will obtain the daily New Asset
Values of such of its own funds as are underlying investments in
Lincoln Life's Separate Accounts in a timely fashion to meet
Lincoln Life's delivery timeliness specified in this Services
Agreement.
3) Delaware will accept data from and work with Lincoln Life business
partners in relationship accepted in the industry as a normal
working relationship. These types of relationships would include
cooperating with custodians, portfolio managers, etc. for the
purpose of conducting daily business transactions.
Note: In the event that Delaware does not receive timely NAVs or trade
information from Fund managers, advisors or subadvisors which causes
Delaware to be incapable of calculating a Unit Value using mutually
agreed upon processing procedures, or causes Delaware to estimate a
Unit Value, then Delaware and Lincoln Life must mutually agree upon the
processing activities to take place on that particular valuation date.
- 30 -
<PAGE>
SCHEDULE 6.1
FEE SCHEDULE
- 31 -
<PAGE>
SERVICES FEE SCHEDULE
THE FOLLOWING SCHEDULE OUTLINES THE FEES CHARGED TO THE VARIOUS FUNDS AND
SEPARATE ACCOUNTS FOR SERVICES RENDERED BY DELAWARE PURSUANT TO THE SERVICES
AGREEMENT AND THE ACCOMPANYING CUTOVER SCHEDULE. FOLLOWING THE FEE SCHEDULE AT
THE TOP OF EACH OF THE FOLLOWING PAGES THERE WILL BE AN ILLUSTRATION OF HOW THE
FEES ARE TO BE APPLIED TO EACH OF THE FUNDS AND SEPARATE ACCOUNTS. THE ACCOUNT
ASSET BASE TO WHICH THE FEES ARE APPLIED WILL CHANGE FROM DAY TO DAY, THUS THE
ASSET FEES WILL BE CALCULATED USING DAILY AVERAGE NET ASSETS AND PRORATED
MONTHLY (THE FOREGOING DOES NOT APPLY, HOWEVER, TO "FUND OF FUNDS" FEES, WHICH
ARE NOT ASSET-BASED).
- 32 -
<PAGE>
LINCOLN LIFE MULTI-FUNDS MUTUAL FUNDS
<TABLE>
<CAPTION>
Mutual Fund FIRST CLASS OF EACH ADD 100MM TO > 500MM & > 750 MM & > 1 BILLION
Schedule SHARE MINIMUM SH CLASS 500 MM < 750MM < 1 BILLION
<S> <C> <C> <C> <C> <C> <C> <C>
(EF) EQUITY FUND 65,000.00 2,200.00 0.0375% 0.035% 0.030% 0.020%
(FX) FIXED INCOME FUND 65,000.00 2,200.00 0.0375% 0.035% 0.030% 0.020%
(IF) INTERNATIONAL FUND 87,000.00 2,200.00 0.0600% 0.060% 0.060% 0.050%
(MM) MONEY MARKET FUND 65,000.00 2,200.00 0.0375% 0.035% 0.030% 0.020%
<CAPTION>
Fund Asset Based Per Class Total Basis Point
Assets Fee Fee Fee Effect
<S> <C> <C> <C> <C> <C> <C>
(EQ) - Aggressive Growth $154,616,934 85,481 0 $85,481 0.0553%
(FX) Bond Fund $266,680,575 127,505 0 127,505 0.0478%
(EQ) - Capital Appreciation $151,716,031 84,394 0 84,394 0.0556%
(EQ) - Equity Income $281,782,031 133,168 0 133,168 0.0473%
(EQ) Growth Fund $2,021,137,764 581,728 0 581,728 0.0288%
(IF) - International Fund $374,321,155 251,593 0 251,593 0.0672%
(EQ) Managed Fund $627,188,004 259,516 0 259,516 0.0414%
(MM) Money Market $80,389,568 65,000 0 65,000 0.0809%
(IF) - Global Asset Allocation $265,441,845 186,265 0 186,265 0.0702%
(EQ) Social Awareness Fund $345,607,966 157,103 0 157,103 0.0455%
- 33 -
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(EQ) Special Opportunities $542,260,936 229,791 0 229,791 0.0424%
Total Funds $5,111,142,809 $2,161,544 $0 $2,161,544 0.0423%
</TABLE>
- 34 -
<PAGE>
LINCOLN LIFE NUMBERED SEPARATE ACCOUNT SCHEDULE
<TABLE>
<CAPTION>
Separate Account FIRST CLASS OF EACH ADD 100MM TO > 500MM & > 750 MM & > 1 BILLION
Schedule SHARE MINIMUM SH CLASS 500 MM < 750MM < 1 BILLION
<S> <C> <C> <C> <C> <C> <C> <C>
(EF) EQUITY FUND 33,000.00 2,200.00 0.0175% 0.0150% 0.0125% 0.0100%
(FX) FIXED INCOME FUND 33,000.00 2,200.00 0.0175% 0.0150% 0.0125% 0.0100%
(IF) INTERNATIONAL FUND 33,000.00 2,200.00 0.0475% 0.0450% 0.0400% 0.0350%
(MM) MONEY MARKET FUND 33,000.00 2,200.00 0.0125% 0.0125% 0.0125% 0.0100%
(FOF) FUND OF FUNDS 6,750.00 0.00 0.0000% 0.0000% 0.0000% 0.0100%
<CAPTION>
Asset Class Total Average
Account Name Account Assets Fees Fees Fees BP Charge
<S> <C> <C> <C> <C> <C> <C>
(EF) S/A 3 $389,025 33,000 0 $33,000 8.4827%
(EF) S/A 11 $474,450,174 98,529 11,000 109,528 0.0231%
(FX) S/A 12 $416,068,954 88,312 11,000 99,312 0.0239%
(MM) S/A 14 $156,276,681 40,035 11,000 51,035 0.0327%
(EF) S/A 17 $364,026,813 79,205 11,000 90,205 0.0248%
(FX) S/A 20 $46,993,349 33,000 11,000 44,000 0.0936%
(IF) S/A 22 $173,298,316 91,649 11,000 102,649 0.0592%
(EF) S/A 23 $433,690,920 91,396 11,000 102,396 0.0236%
(EF) S/A 24 $113,151,449 35,302 11,000 46,302 0.0409%
(EF) S/A 25 $16,793,121 33,000 2,200 35,200 0.2096%
(FX) S/A/26 $29,937,204 33,000 11,000 44,000 0.1470%
(FX) S/A 27 $10,050,477 33,000 4,400 37,400 0.3721%
(EF) S/A 28 $55,899,985 33,000 11,000 44,000 0.0787%
(EF) V/A Fund A $107,782,578 34,362 2,200 36,562 0.0339%
Total Separate $2,398,810,045 $756,798 $118,800 $875,589 0.0365%
Account Fees
</TABLE>
- -------------
Fund of
Funds
- -------------
- 35 -
<PAGE>
- -------------
<TABLE>
<CAPTION>
# of Accts Per Account
Account Name Needed Charge Total
<S> <C> <C> <C> <C>
(FOF) S/A 21 5 $6,750 $33,750
(FOF) S/A 30 5 $6,750 $33,750
(FOF) S/A 32 5 $6,750 $33,750
(FOF) Fund of Funds S/A C 14 $6,750 $94,500
(FOF) Fund of Funds S/A D 5 $6,750 $33,750
(FOF) Fund of Funds S/A E 8 $6,750 $54,000
(FOF) Fund of Funds S/A F 8 $6,750 $54,000
(FOF) Fund of Funds S/A G 10 $6,750 $67,500
(FOF) Fund of Funds S/A H 8 $6,750 $54,000
(FOF) Fund of Funds S/A J 8 $6,750 $54,000
(FOF) Fund of Funds S/A K 14 $6,750 $94,500
(FOF) Fund of Funds S/A 41 3 $6,750 $20,250
(FOF) Fund of Funds S/A 42 3 $6,750 $20,250
(FOF) Fund of Funds S/A 43 3 $6,750 $20,250
(FOF) Fund of Funds S/A 44 3 $6,750 $20,250
(FOF) Fund of Funds S/A 45 3 $6,750 $20,250
(FOF) Fund of Funds S/A 60 8 $6,750 $54,000
(FOF) Fund of Funds S/A 61 8 $6,750 $54,000
(FOF) Fund of Funds S/A 62 8 $6,750 $54,000
(FOF) Fund of Funds S/A 60 6 $6,750 $40,500
(FOF) Fund of Funds S/A 61 6 $6,750 $40,500
141 $141,750 $951,750
</TABLE>
- 36 -
<PAGE>
S/As Fund of Funds Fee Schedule:
ACCOUNT REFERENCE:
Registered: S/As C, D, E, F, G, H, H-NY, J, K, L, L-NY, M, N, Q, R,
S, T, Unum, 1st Unum, CG VA I, CG VA II, Cigna VA I, CG VL I,
CG VL II, Aetna Acct. B.
Non-Registered: S/As 21, 30, 32, 33, 34, 35, 36, 37, 38, 42, 45, 50,
51, 52, 53, 60, 61.
Delaware Services Corporation charges Lincoln National Life $2
million per year for up to 1800 unit value calculations.
NON-REGISTERED S/As (holding securities traded on the Exchange) Fee
Schedule:
S/As A, 3, 11, 12, 14, 17, 20, 22, 23, 24, 25, 26, 28.
Delaware Services Corporation charges Lincoln National Life $800,000
per year for accounting services associated with the aforementioned
S/As.
- 37 -
<PAGE>
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
(FORMER TITLE: "AGREEMENT TO PURCHASE SHARES")
BETWEEN
THE LINCOLN NATIONAL LIFE INSURANCE CO.
AND
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.
THIS AGREEMENT, made and entered into this 1st day of July, 1998,
by and between Lincoln National Growth and Income Fund, Inc. a corporation
organized under the laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE
INSURANCE CO., an Indiana insurance corporation (the "Company"), on its own
behalf and on behalf of each separate account of the Company named in Schedule 1
to this Agreement as in effect at the time this Agreement is executed and such
other separate accounts that may be added to Schedule 1 from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"; collectively, the "Accounts").
WHEREAS, the Fund is engaged in business as an open-end
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts (collectively referred to as
"Variable Insurance Products," the owners of such products being referred to as
"Product owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange
Commission (the "SEC") and the SEC has declared effective a registration
statement (referred to herein as the "Fund Registration Statement" and the
prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act,
referred to herein as the "Fund Prospectus") on Form N-lA to register itself as
an open-end management investment company (File No. 811-3212) under the
Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund shares
(File No. 2-80743) under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Company has filed a registration statement with the
SEC to register under the 1933 Act (unless exempt therefrom) certain variable
annuity contracts and/or variable life insurance policies described in Schedule
2 to this Agreement as in effect at the time this Agreement is executed and such
other variable annuity contracts and variable life insurance policies which may
be added to Schedule 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 being referred to as the "Contracts Registration
Statement" and the prospectus for each such class or classes being referred to
herein as the "Contracts Prospectus," and the owners of the such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly
authorized by the Company on the date set forth on Schedule 1, sets aside and
invests assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each
Account with the SEC as a unit investment trust under the 1940 Act before any
Contracts are issued by that Account; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Fund is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value; and
WHEREAS, pursuant to Articles of Merger approved by the Company
in 1988, the Company succeeded to all the legal rights and responsibilities of
Lincoln National Pension Insurance Company, the signatory to the original
Agreement to Purchase Shares, which this Agreement amends and restates.
NOW, THEREFORE, in consideration of their mutual promises, the
Company and the Fund agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares which
the Company orders on behalf of the Account, executing such orders on a daily
basis in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the
Company on behalf of the Account at the then applicable net asset value per
share on Business Days as defined in Section 1.4 of this Agreement, and the Fund
shall use its best efforts to calculate AND DELIVER such net asset value by 7:00
p.m., E.S.T., on each such Business Day. Notwithstanding any other provision in
this Agreement to the contrary, the Board of Directors of the Fund (the "Fund
Board") may suspend or terminate the offering of shares, if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Fund Board acting in good faith and in light of its
fiduciary duties under Federal and any applicable state laws, suspension or
termination is necessary and in the best interests of the shareholders (it being
understood that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any
full or fractional shares of the Fund held by the Account or the Company,
executing such requests at the net asset value on a daily basis (LL will expect
same day redemption wires unless unusual circumstances evolve which cause the
Fund to have to redeem securities) in accordance with Section 1.4 of this
Agreement, the applicable provisions of the 1940 Act and the then currently
effective Fund Prospectus. Notwithstanding the foregoing, the Fund may delay
redemption of Fund shares to the
2
<PAGE>
extent permitted by the 1940 Act, any rules, regulations or orders thereunder,
or the then currently effective Fund Prospectus.
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the
Company shall be the agent of the Fund for the limited
purpose of receiving redemption and purchase requests from
the Account (but not from the general account of the
Company), and receipt on any Business Day by the Company as
such limited agent of the Fund prior to the time prescribed
in the current Fund Prospectus (which as of the date of
execution of this Agreement is 4 p.m., E.S.T.) shall
constitute receipt by the Fund on that same Business Day,
provided that the Fund receives notice of such redemption or
purchase request by 9:00 a.m., E.S.T. on the next following
Business Day. For purposes of this Agreement, "Business Day"
shall mean any day on which the New York Stock exchange is
open for trading.
(b) The Company shall pay for the shares on the same
day that it places an order with the Fund to purchase those
Fund shares for an Account. Payment for Fund shares will be
made by the Account or the Company in Federal Funds
transmitted to the Fund by wire to be received by 11:00
a.m., E.S.T. on the day the Fund is properly notified of the
purchase order for shares. The Fund will confirm receipt of
each trade and these confirmations will be received by the
Company via Fax or Email by 3:00 p.m. E.S.T. If Federal
Funds are not received on time, such funds will be invested,
and shares purchased thereby will be issued, as soon as
practicable.
(c) Payment for shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the
Company by wire on the same day the Fund is notified of the
redemption order of shares, except that the Fund reserves
the right to delay payment of redemption proceeds, but in no
event may such payment be delayed longer than the period
permitted under Section 22(e) of the 1940 Act. The Fund
shall not bear any responsibility whatsoever for the proper
disbursement or crediting of redemption proceeds if
securities must be redeemed; the Company alone shall be
responsible for such action.
1.5. Issuance and transfer of Fund shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably
practicable to the Company of any income dividends or capital gain distributions
payable on any shares. The Company, on its behalf and on behalf of the Account,
hereby elects to receive all such dividends and distributions as are payable on
any shares in the form of additional shares of that Fund. The Company reserves
the right, on its behalf and on behalf of the Account, to revoke this election
and to receive all such dividends in cash. The Fund shall notify the Company of
the number of shares so issued as payment of such dividends and distributions.
3
<PAGE>
1.7. The Fund shall use its best efforts to make the net asset
value per share available to the Company by 7:00 p.m., E.S.T. each Business Day,
and in any event, as soon as reasonably practicable after the net asset value
per share is calculated, and shall calculate such net asset value in accordance
with the then currently effective Fund Prospectus. The Fund shall not be liable
for any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund.
1.8. (a) The Company may withdraw the Account's investment
in the Fund only: (i) as necessary to facilitate Contract
owner requests; (ii) upon a determination by a majority of
the Fund Board, or a majority of disinterested Fund Board
members, that an irreconcilable material conflict exists
among the interests of (x) any Product Owners or (y) the
interests of the Participating Insurance Companies investing
in the Fund; (iii) upon requisite vote of the Contractowners
having an interest in the Fund to substitute the shares of
another investment company for shares in accordance with the
terms of the Contracts; (iv) as required by state and/or
federal laws or regulations or judicial or other legal
precedent of general application; or (v) at the Company's
sole discretion, pursuant to an order of the SEC under
Section 26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the
Fund shares may be sold to other insurance companies
(subject to Section 1.9 hereof) and the cash value of the
Contracts may be invested in other investment companies.
(c) The Company shall not, without prior notice to the
Fund (unless otherwise required by applicable law), take any
action to operate the Accounts as management investment
companies under the 1940 Act.
1.9. The Fund agrees that Fund shares will be sold only to
Participating Insurance Companies and their separate accounts. The Fund will not
sell Fund shares to any insurance company or separate account unless an
agreement complying with Article VII of this Agreement is in effect to govern
such sales. No Fund shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts
are registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and
4
<PAGE>
validly existing under applicable law and that it has legally and validly
authorized each Account as a separate account under Section 27-1-5-1 of the
Indiana Insurance Code, and has registered or, prior to the issuance of any
Contracts, will register each Account (unless exempt therefrom) as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
separate account for its Contracts, and that it will maintain such registrations
for so long as any Contracts issued under them are outstanding.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for so long as the Fund shares
are sold. The Fund further represents and warrants that it is a corporation duly
organized and in good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). The Fund further represents and warrants
that it will make every effort to continue to qualify and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Fund represents and warrants that it will comply with
Section 817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies,
fees and expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of
the current Fund
5
<PAGE>
Prospectus as the Company may reasonably request. If requested by the Company in
lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund and the Fund
shall provide such Statement free of charge to the Company and to any
outstanding or prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the
Company a camera-ready copy of the Fund's shareholder
reports and other communications to shareholders (except
proxy material), in each case in a form suitable for
printing, as determined by the Company. The Fund shall be
responsible for the costs of printing and distributing these
materials to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish to the Fund, prior to its use,
each piece of sales literature or other promotional material in which the Fund
is named. No such material shall be used, except with the prior written
permission of the Fund. The Fund agrees to respond to any request for approval
on a prompt and timely basis. Failure of the Fund to respond within 10 days of
the request by the Company shall relieve the Company of the obligation to obtain
the prior written permission of the Fund.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund, except with the prior written permission of the Fund. The Fund agrees
to respond to any request for permission on a prompt and timely basis. If the
Fund does not respond within 10 days of a request by the Company, then the
Company shall be relieved of the obligation to obtain the prior written
permission of the Fund.
3.6. The Fund shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account
or the Contracts other than the information or representations contained in the
Contracts Registration Statement or Contracts Prospectus, as such Registration
Statement and Prospectus may be amended or supplemented from time to time, or in
published reports of the Account which are in the public domain or approved in
writing by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved in writing by the Company,
except with the prior written permission of the
6
<PAGE>
Company. The Company agrees to respond to any request for permission on a prompt
and timely basis. If the Company fails to respond within 10 days of a request by
the Fund, then the Fund is relieved of the obligation to obtain the prior
written permission of the Company.
3.7. The Fund will provide to the Company at least one complete
copy of all Fund Registration Statements, Fund Prospectuses, Statements of
Additional Information, annual and semi-annual reports and other reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments or supplements to
any of the above, that relate to the Fund or Fund shares, within 20 days after
the filing of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete
copy of all Contracts Registration Statements, Contracts Prospectuses,
Statements of Additional Information, Annual and Semi-annual Reports, sales
literature and other promotional materials, and all amendments or supplements to
any of the above, that relate to the Contracts, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, statements of additional
information, reports, proxy statements, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, computer net site, signs or billboards, motion pictures or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, in print or
electronically, including brochures, circulars, research reports, market
letters, form letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
Statements of Additional Information, shareholder reports and proxy materials,
and any other material constituting sales literature or advertising under NASD
rules, the 1940 Act or the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the requirements of Article
VII, the Fund shall solicit voting instructions from Contract owners;
7
<PAGE>
4.2 Subject to applicable law and the requirements of Article
VII, the Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely
fashion from such Contract owners;
(b) vote Fund shares attributable to Contract owners
for which no instructions have been received in the same
proportion as Fund shares of such Series for which
instructions have been received in timely fashion; and
(c) vote Fund shares held by the Company on its own
behalf or on behalf of the Account that are not attributable
to Contract owners in the same proportion as Fund shares of
such Series for which instructions have been received in
timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this
Agreement (including expenses expressly assumed by the Fund pursuant to this
Agreement) shall be paid by the Fund to the extent permitted by law. Except as
may otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing
Fund Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
The Company is responsible for the cost of printing and
distributing Fund prospectuses and SAIs for new sales; and Account Prospectuses
and SAIs for existing Contractowners. The Company shall have the final decision
on choice of printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section
817(h) of the
8
<PAGE>
Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration
Statements under the 1933 Act and the Account's Registration Statement under the
1940 Act from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by applicable law. The
Company shall register and qualify the Contracts for sale to the extent required
by applicable securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under
the 1933 Act and the 1940 Act from time to time as required in order to effect
for so long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
6.4. The Company shall be responsible for assuring that any
prospectus offering a Contract that is a life insurance contract where it is
reasonably possible that such Contract would be deemed a "modified endowment
contract," as that term is defined in Section 7702A of the Code, will describe
the circumstances under which a Contract could be treated as a modified
endowment contract (or policy).
6.5. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of
Directors, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which
the Fund must comply, the Company shall arrange with the
Fund to amend Schedule 3, pursuant to the requirements of
Article XI.
(b) Should the Fund become aware of any restrictions
which may be appropriate for inclusion in Schedule 3, the
Company shall be informed immediately of the substance of
those restrictions.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of
the Fund (the "Board") any potential or existing conflicts between the interests
of Product Owners of all separate accounts investing in the Fund, and to assist
the Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested
Board Members, determines that a material irreconcilable conflict exists, the
Board shall give prompt notice to all
9
<PAGE>
Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to
the Company and a reasonable opportunity for the Company to
appear before it and present its case, determines that the
Company is responsible for said conflict, and if the Company
agrees with that determination, the Company shall, at its
sole cost and expense, take whatever steps are necessary to
remedy the material irreconcilable conflict. These steps
could include: (i) withdrawing the assets allocable to some
or all of the affected Accounts from the Fund and
reinvesting such assets in a different investment vehicle,
or submitting the question of whether such segregation
should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets
of any particular group (i.e., variable annuity
Contractowners, variable life insurance policyowners, or
variable Contractowners of one or more Participating
Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the
option of making such a change; and (ii) establishing a new
registered mutual fund or management separate account; or
(iii) taking such other action as is necessary to remedy or
eliminate the material irreconcilable conflict.
(b) If the Company disagrees with the Board's
determination, the Company shall file a written protest with
the Board, reserving its right to dispute the determination
as between just the Company and the Fund and to seek
reimbursement from the Fund for the reasonable costs and
expenses of resolving the conflict . After reserving that
right the Company, although disagreeing with the Board that
it (the Company) was responsible for the conflict, shall
take the necessary steps, under protest, to remedy the
conflict, substantially in accordance with paragraph (a)
just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45
days after the Board's determination the Company elects to
press the dispute, it shall so notify the Board in writing.
The parties shall then attempt to resolve the matter
amicably through negotiation by individuals from each party
who are authorized to settle the matter. If the matter has
not been amicably resolved within 60 days from the date of
the Company's notice of its intent to press the dispute,
then before either party shall undertake to litigate the
dispute it shall be submitted to non-binding arbitration
conducted expeditiously in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes, by a sole
arbitrator; PROVIDED, HOWEVER, that if one party has
requested the other party to seek an amicable resolution and
the other party has failed to participate, the requesting
party may initiate arbitration before expiration of the
60-day period set out just above.
If within 45 days of the commencement of the process to
select an arbitrator the parties cannot agree upon the
arbitrator, then he or she will be selected from the CPR
Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place
of arbitration shall be Fort Wayne, Indiana. The Arbitrator
is not empowered to award damages in excess of
10
<PAGE>
compensatory damages.
(d) If the Board shall determine that the Fund or
another was responsible for the conflict, then the Board
shall notify the Company immediately of that determination.
The Fund shall assure the Company that it (the Fund) or that
other Participating Insurance Company as applicable, shall,
at its sole cost and expense, take whatever steps are
necessary to eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall
constitute a waiver of any right of action which the Company
may have against other Participating Insurance Companies for
reimbursement of all or part of the costs and expenses of
resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) the Account's investment in
the Fund, if the Fund so elects.
7.4. For purposes of this Article, a majority of the
disinterested members of the Board shall determine whether or not any proposed
action adequately remedies any irreconcilable conflict. However, in no event
will the Fund be required to establish a new funding medium for any variable
contract, nor will the Company be required to establish a new funding medium for
any Contract, if in either case an offer to do so has been declined by a vote of
a majority of affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Fund and each person who controls or is
associated with the Fund (other than another Participating Insurance Company)
within the meaning of such terms under the federal securities laws and any
officer, trustee, director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Company in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Contracts Registration Statement, Contracts
Prospectus, sales literature or other promotional material
for the Contracts or the Contracts themselves (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made; provided that this obligation to indemnify shall
not apply if such
11
<PAGE>
statement or omission or such alleged statement or alleged
omission was made in reliance upon and in conformity with
information furnished in writing to the Company by the Fund
(or a person authorized in writing to do so on behalf of the
Fund) for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact by or on
behalf of the Company (other than statements or
representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other
promotional material of the Fund not supplied by the Company
or persons under its control) or wrongful conduct of the
Company or persons under its control with respect to the
sale or distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
Registration Statement, Fund Prospectus or sales literature
or other promotional material of the Fund or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made, if such statement or omission was made in
reliance upon and in conformity with information furnished
to the Fund by or on behalf of the Company; or
(d) arise as a result of any failure by the Company to
provide the services and furnish the materials or to make
any payments under the terms of this Agreement; or
(e) arise out of any material breach by the Company of
this Agreement, including but not limited to any failure to
transmit a request for redemption or purchase of Fund shares
on a timely basis in accordance with the procedures set
forth in Article I; or
(f) arise as a result of the Company's providing the
Fund with inaccurate information, which causes the Fund to
calculate its Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify
and hold harmless the Company and each person who controls or is associated with
the Company within the meaning of such terms under the federal securities laws
and any officer, director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several (including any
12
<PAGE>
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Fund Registration Statement, Fund
Prospectus (or any amendment or supplement thereto) or sales
literature or other promotional material of the Fund, or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made; provided that this obligation to indemnify shall
not apply if such statement or omission or alleged statement
or alleged omission was made in reliance upon and in
conformity with information furnished in writing by the
Company to the Fund for use in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement
thereto) or sales literature for the Fund or otherwise for
use in connection with the sale of the Contracts or Fund
shares; or
(b) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact made by the
Fund (other than statements or representations contained in
the Fund Registration Statement, Fund Prospectus or sales
literature or other promotional material of the Fund not
supplied by the Distributor or the Fund or persons under
their control) or wrongful conduct of the Fund or persons
under its control with respect to the sale or distribution
of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contract's
Registration Statement, Contracts Prospectus or sales
literature or other promotional material for the Contracts
(or any amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made
in reliance upon information furnished in writing by the
Fund to the Company (or a person authorized in writing to do
so on behalf of the Fund); or
(d) arise as a result of any failure by the Fund to
provide the services and furnish the materials under the
terms of this Agreement (including, but not by way of
limitation, a failure, whether unintentional or in good
faith or otherwise: (i) to comply with the diversification
requirements specified in Sections 2.4 and 6.1 in Article VI
of this Agreement; and (ii) to provide the Company with
accurate information sufficient for it to calculate its
accumulation and/or annuity unit values
13
<PAGE>
in timely fashion as required by law and by the Contracts
Prospectuses); or
(e) arise out of any material breach by the Fund of
this Agreement.
This indemnification will be in addition to any liability which the Fund may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party
entitled to indemnification ("indemnified party") under this Article VIII of
notice of the commencement of any action, if a claim in respect thereof is to be
made by the indemnified party against any person obligated to provide
indemnification under this Article VIII ("indemnifying party"), such indemnified
party will notify the indemnifying party in writing of the commencement thereof
as soon as practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this Article
VIII, except to the extent that the omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of the failure to give such notice. The indemnifying party, upon the
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those
14
<PAGE>
statutes, rules and regulations as the SEC may grant, and the terms hereof shall
be limited, interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance
written notice to the other parties; or
(b) at the option of the Company if shares of the Fund
are not available to meet the requirements of the Contracts
as determined by the Company. Prompt notice of the election
to terminate for such cause shall be furnished by the
Company. Termination shall be effective ten days after the
giving of notice by the Company; or
(c) at the option of the Fund upon institution of
formal proceedings against the Company by the NASD, the SEC,
the insurance commission of any state or any other
regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the
operation of the Account, the administration of the
Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of
formal proceedings against the Fund, the investment advisor
or any sub- investment advisor, by the NASD, the SEC, or any
state securities or insurance commission or any other
regulatory body; or
(e) upon requisite vote of the Contract owners having
an interest in the Fund (unless otherwise required by
applicable law) and written approval of the Company, to
substitute the shares of another investment company for the
corresponding shares of the Fund in accordance with the
terms of the Contracts; or
(f) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance
with applicable Federal and/or state law; or
(g) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority
of disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of (i) any
Product owners or (ii) the interests of the Participating
Insurance Companies investing in the Fund; or
(h) at the option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M
of the Code, or under any
15
<PAGE>
successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Fund
may fail to so qualify; or
(i) at the option of the Company if the Fund fails to
meet the diversification requirements specified in Section
817(h) of the Code and any regulations thereunder; or
(j) at the option of the Fund if the Contracts cease
to qualify as annuity contracts or life insurance policies,
as applicable, under the Code, or if the Fund reasonably
believes that the Contracts may fail to so qualify; or
(k) at the option of the Fund if the Fund shall
determine, in its sole judgment exercised in good faith,
that either (1) the Company shall have suffered a material
adverse change in its business or financial condition; or
(2) the Company shall have been the subject of material
adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund; or
(l) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith,
that: (1) the Fund shall have suffered a material adverse
change in its business or financial condition; or (2) the
Fund shall have been the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(m) automatically upon the assignment of this
Agreement (including, without limitation, any transfer of
the Contracts or the Accounts to another insurance company
pursuant to an assumption reinsurance agreement) unless the
non-assigning party consents thereto or unless this
Agreement is assigned to an affiliate of the Company or the
Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section
10.1, no termination of this Agreement shall be effective unless and until the
party terminating this Agreement gives prior written notice to the other party
of its intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon
the provisions of Article VII or the provisions of Section
10.1(a) of this Agreement, such prior written notice shall
be given in advance of the effective date of termination as
required by such provisions; and
(b) in the event that any termination is based upon
the provisions of Section 10.1(c) or 10.1(d) of this
Agreement, such prior written notice shall be given at least
ninety (90) days before the effective date of termination,
or sooner if required by law or regulation.
10.3. EFFECT OF TERMINATION
16
<PAGE>
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund will,
at the option of the Company, continue to make available
additional Fund shares for so long after the termination of
this Agreement as the Company desires, pursuant to the terms
and conditions of this Agreement as provided in paragraph
(b) below, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if
the Company so elects to make additional Fund shares
available, the owners of the Existing Contracts or the
Company, whichever shall have legal authority to do so,
shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the
Existing Contracts.
(b) If Fund shares continue to be made available after
such termination, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter
either the Fund or the Company may terminate the Agreement,
as so continued pursuant to this Section 10.3, upon prior
written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if
given by the Fund, need not be for more than six months.
(c) The parties agree that this Section 10.3 shall not
apply to any termination made pursuant to Article VII, and
the effect of such Article VII termination shall be governed
by the provisions set forth or incorporated by reference
therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts
and to add new classes of variable annuity contracts and variable life insurance
policies to be issued by the Company through new or existing Separate Accounts
investing in the Fund. The provisions of this Agreement shall be equally
applicable to each such separate account and each such class of contracts or
policies, unless the context otherwise requires. Any such amendment must be
signed by the parties and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Lincoln National Growth and Income Fund, Inc.
17
<PAGE>
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or trust action, as applicable,
by such party, and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with its
terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its
effective date, hereby supersedes any and all prior agreements to purchase
shares between Lincoln Life and the Fund.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.
Signature:
------------------------------------------
Name: Kelly D. Clevenger
-----------------------------------------------
Title: President
----------------------------------------------
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Signature:
------------------------------------------
Name: Stephen H. Lewis
-----------------------------------------------
Title: Senior Vice President, Lincoln National Life
Insurance Company
----------------------------------------------
19
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated July 1,
1998, by and among The Lincoln National Life Insurance Company and Lincoln
National Growth & Income, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered each
Account with the SEC (unless exempt therefrom) as a unit investment trust under
the 1940 Act before any Contracts are issued by that Account; and"
Page 5, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the
Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c)
that the Company will require of every person distributing the
Contracts that the Contracts be offered and sold in compliance
in all material respects with all applicable Federal and state
laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under
applicable law and that it has legally and validly authorized
each Account as a separate account under Section 27-1-5-1 of
the Indiana Insurance Code, and has registered or, prior to
the issuance of any Contracts, will register each Account
(unless exempt therefrom) as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a
separate account for its Contracts, and that it will maintain
such registrations for so long as any Contracts issued under
them are outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL GROWTH & INCOME
FUND, INC.
Date: By:
------------------- -----------------------------------
Name: Kelly D. Clevenger
---------------------------------
Title: President
---------------------------------
LINCOLN NATIONAL LIFE INSURANCE
COMPANY
Date: By:
------------------- -----------------------------------
Name: Stephen H. Lewis
---------------------------------
Title: Senior Vice President
--------------------------------
91945/1YY107!.DOC
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this Post-
Effective Amendment No. 21 to the Registration Statement (Form N-1A) (No. 2-
80741) of Lincoln National Growth and Income Fund, Inc. of our report dated
February 4, 2000, included in the 1999 Annual Report to shareholders.
Philadelphia, Pennsylvania
April 6, 2000
<PAGE>
Code of Ethics
Lincoln National Variable Annuity Fund A
Lincoln National Aggressive Growth Fund, Inc.
Lincoln National Bond Fund, Inc.
Lincoln National Capital Appreciation Fund, Inc.
Lincoln National Equity-Income Fund, Inc.
Lincoln National Global Asset Allocation Fund, Inc.
Lincoln National Growth and Income Fund, Inc.
Lincoln National International Fund, Inc.
Lincoln National Managed Fund, Inc.
Lincoln National Money Market Fund, Inc.
Lincoln National Social Awareness Fund, Inc.
Lincoln National Special Opportunities Fund, Inc.
----------------------------------------
Section 1 - Statement of General Fiduciary Principles
This Code of Ethics (the "Code") is adopted to prescribe standards and
procedures which are designed to prevent conduct which is in contravention of
Section 17(j)-1 of the Investment Company Act of 1940 [15 U.S.C.
80q-17(j)-1] (the "1940 Act").
The Code is applicable to all Access Persons (as defined below). The
fundamental standard of this code is that, at all times, Access persons
should place the interests of the corporation's Separate Account's
shareholders/unitholders first. No action should be taken by an Access Person
which is inconsistent with this obligation. An Access Person must abide by
both the spirit and the letter of the Code in order to avoid even the
appearance of impropriety, as well as potential conflict situations. Any and
all personal securities transactions must be conducted in a manner consistent
with the Code so as to avoid any actual or potential conflict of interest or
any abuse of a position of trust and responsibility. It is imperative that
Access Persons avoid any situation that might compromise or call into
question their exercise of judgment that is fully independent and that places
primary importance on their fiduciary duty to shareholders.
Section 2 - Definitions
(a) "Corporation" means Lincoln National Variable Annuity Fund A,
Lincoln National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc.,
Lincoln National Capital Appreciation Fund, Inc., Lincoln National Equity-Income
Fund, Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln
National Growth and Income Fund, Inc., Lincoln National International Fund,
Inc., Lincoln National Managed Fund, Inc., Lincoln National Money Market Fund,
Inc., Lincoln National Social Awareness Fund, Inc., Lincoln National Special
Opportunities Fund, Inc.
(b) "Access Person" means (1) any employee, director or officer of
the Corporation; and (2) any Advisory Person (defined below); and (3) any
natural person in a control relationship to the Corporation or to the Adviser
who obtains information concerning current recommendations made to the
Corporation with regard to security transactions.
<PAGE>
(c) "Advisory Person" means any officer, director or employee of the
Corporation who in connection with his or her regular functions or duties,
makes any recommendation, participates in the determination of which
recommendation should be made or whose principal function or duties relate to
the determination of which recommendation shall be made to any registered
investment company with respect to the purchase or sale of securities for the
Corporation, or who, in connection with his or her duties, obtains any
information concerning securities recommendations being made by any such
investment adviser to any registered investment company.
(d) "Director" means each member of the board of Directors of the
Corporation.
(e) "Independent Director" means each Corporation director who is not
an "interested person" of the investment company under the provisions of Section
2 (a)(19) of the 1940 Act.
(f) A security is "to be considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
(g) "Beneficial ownership" shall be interpreted in the same manner as
it would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p] and the rules
and regulations thereunder, except that the determination of direct and indirect
beneficial ownership shall apply to all securities which an Access Person has or
acquires.
(h) "Compliance Officer" means the officer so designated by the
Corporation, to review the personal securities transactions of Access Persons,
and to make related decisions and offer advice regarding such personal
securities transactions.
(i) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.
(j) "Purchase or sale of a security" and "security transaction"
includes, inter alia, the writing of an option to purchase or sell a security.
(k) "Security" shall have the meaning set forth in Section 2(a)(36) of
the 1940 Act except that it shall not include securities issued by the
government of the United States, banker's acceptances, bank certificates of
deposit, commercial paper, shares of registered open-end investment companies or
short term debt securities. The term "security" includes any option right
related to a security.
(l) "Security held or to be acquired" by the Corporation means any
security as defined above which, within the most recent 15 days, (i) is or has
been held by the Corporation, or (ii) is being or has been considered by the
Corporation or the Adviser for purchase by the Corporation.
<PAGE>
Section 3 - Exempt Transactions
The prohibitions of Section 4 of the Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access
person has no direct or indirect influence or control;
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Corporation;
(c) Purchases or sales which are non-volitional on the part of either
the Access Person or the Corporation;
(d) Purchases which are part of an automatic dividend reinvestment
plan;
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired;
(f) Purchases or sales which are only remotely potentially harmful to
the Corporation because they would be very unlikely to affect a highly
institutional market, or because they clearly are not related economically to
the securities held or to be acquired or sold by the Corporation.
Section 4 - Prohibitions
(a) No Access Person shall purchase or sell, directly or indirectly,
any security in which he or she has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership and which to his or her actual
knowledge at the time of such purchase or sale:
(1) Is currently being considered for purchase or sale by the
Corporation; or
(2) Is currently being purchased or sold by the Corporation.
(b) No Advisory Person may invest in or acquire any securities in an
initial public offering.
(c) No Advisory Person may invest in a private placement without first
obtaining approval from the Compliance Officer or Law Division appropriate
under the circumstances.
(d) No Access Person may make personal use of information available
only by reason of his or her position until after the Corporation has acted upon
it and, in addition, each investment opportunity which comes to the attention of
any such Access Person and which is appropriate for consideration by the
Corporation must first be made available to the Corporation before the Access
Person may take personal advantage of such investment opportunity.
(e) No Advisory Person may receive any gift or other thing of more
than de minimis value from any person or entity that does business with or on
behalf of the Corporation/Separate Account.
<PAGE>
(f) No Advisory Person may serve as a director on the board of a
publicly traded company without first obtaining approval from the Compliance
Officer or Law Division.
(g) For a period of three trading days before and after the
Corporation's trade, no Access Person shall trade in a security which is or has
been traded by the Corporation.
Section 5 - Reporting
Except as provided below under "Exceptions," each Access Person shall
report not later than ten (10) days after the end of a calendar quarter, each
transaction during such calendar quarter in any security in which such Access
Person has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership in the security. Such transactions may involve any of the
following:
(a) A security in which the Access Person, the Access Person's spouse
or minor children, or any relative residing in the Access Person's home, has any
direct or indirect beneficial interest in himself or herself, including by
reason of being the settlor of a revocable trust.
(b) A security in which the Access person, or the Access Person's
spouse or minor children may, by reason of any agreement or understanding, vest
or revest any beneficial interest in himself or herself, including by reason of
being the settlor of a revocable trust.
(c) A security whose purchase or sale was or may be controlled or
influenced by the Access person, including securities for the account of a trust
of which the Access Person is a trustee.
In addition, all Access Persons shall preclear personal securities
transactions with the Compliance Officer. After preclearance has been granted,
the Compliance Officer shall monitor such precleared personal securities
transactions in accordance with Section 5 - Form of Reporting below.
EXCEPTIONS
(a) No report is required of security transactions of any account over
which the Access Person does not have any direct or indirect influence or
control.
(b) Independent Directors who would be required to make a report solely
by reason of being a director are required only to report those security
transactions where such director knew or, in the ordinary course of fulfilling
his or her official duties as a director of the Corporation, should have known
that during the 15-day period immediately preceding or after the date of the
transaction in a security by the director, such security is or was purchased or
sold by or on behalf of the Corporation or such purchase or sale is or was
considered by the Corporation or the Adviser. No director shall be presumed to
know such matters solely by reason of his or her being a director or serving on
any committee of the Board of Directors.
<PAGE>
Form of Report
Each report shall be made to the Compliance Officer no later than 10
days after the end of the calendar quarter in which the transaction occurred.
The report shall contain the following information:
(a) The date of the transaction, the title and the number of shares,
and the principal amount of each security involved;
(b) the nature of the transaction (i.e., purchase, sale or other
acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through whom the
transaction was effected.
Any report submitted to comply with the requirements of this Section 5
may contain a statement that the report shall not be construed as an admission
by the person making such report that he or she has any direct or indirect
beneficial ownership in the security to which the report relates.
Every Advisory Person shall disclose all personal securities holdings
upon the commencement of a relationship between such Advisory Person and the
Corporation and/or the Adviser.
All Access Persons shall certify annually that they have read and
complied with the Code.
Until further notice, all reports filed with the Compliance Officer
shall be mailed to: Jerry C. Danielson, AVP and Chief Compliance Officer,
Internal Audit, P.O. Box 1110, 1300 South Clinton Street, Fort Wayne, IN
46801.
Use of the Form
The filed report will be reviewed by the Compliance Officer of the
Corporation and of the Adviser. It will be confidential and subject only to
disclosure to the SEC staff as required by law pursuant to a periodic,
special or other examination. The reports of persons other than independent
directors may be disclosed to there senior officers of the Corporation or the
Adviser or to legal counsel as deemed necessary for compliance purposes and
to otherwise administer the Code. Reports of independent directors will be
subject to disclosure only to the person with whom they are filed, the SEC
staff as required by law, independent directors of the Corporation involved,
relevant committees composed of such directors, and the Corporation's legal
counsel (if such directors or such committees shall determine to consult
counsel in respect to any such report).
<PAGE>
Section 6 - Sanctions
Upon discovering a violation of the Code, the Corporation, the Adviser, or
the Board of Directors, whichever is most appropriate under the circumstances,
may impose such sanctions as it deems appropriate, including, inter alia,
censure, suspension or termination of employment. All material violations of the
code and any sanctions imposed with respect hereto shall be reported
periodically, as necessary, to the Board of Directors of the Corporation.
Until further notice, certificates of compliance with the Code may be
forwarded to the Securities Compliance Unit, Lincoln National Corporation.
<PAGE>
CERTIFICATE OF REVIEW AND COMPLIANCE WITH CODE OF ETHICS
I hereby acknowledge receipt and review of the Code of Ethics for any
or all of the following: Lincoln National Variable Annuity Fund A, Lincoln
National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln National Special Opportunities
Fund, Inc. I understand its provisions and its applicability to me. I have
complied with both the letter and the spirit of the Code, and I will continue to
do so during the upcoming year. I understand that if I have any questions
regarding the Code and its application, I shall direct these questions to Jerry
Danielson, Chief Compliance Officer at (219) 455-3984.
Signed:_______________________ Date:_______________________
Position:_____________________
Company:______________________
CONSENT TO RELEASE
REPORTS OF PERSONAL TRANSACTIONS
To:_______________________________
I am reporting my personal securities transactions to Jerry Danielson,
Chief Compliance Officer, under the Code of Ethics for Lincoln National Variable
Annuity Fund A, Lincoln National Aggressive Growth Fund, Inc., Lincoln National
Bond Fund, Inc., Lincoln National Capital Appreciation Fund, Inc., Lincoln
National Equity-Income Fund, Inc., Lincoln National Global Asset Allocation
Fund, Inc., Lincoln National Growth and Income Fund, Inc., Lincoln National
International Fund, Inc., Lincoln National Managed Fund, Inc., Lincoln National
Money Market Fund, Inc., Lincoln National Social Awareness Fund, Inc., Lincoln
National Special Opportunities Fund, Inc.
I consent to having copies of all reports which I file made available so long as
I am an Access Person with respect to any or all of the above companies.
Signed:_______________________ Date:_______________________
<PAGE>
CERTIFICATE OF REVIEW AND COMPLIANCE WITH CODE OF ETHICS
I hereby acknowledge receipt and review of the Code of Ethics for any
or all of the following: Lincoln National Variable Annuity Fund A, Lincoln
National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln National Special Opportunities
Fund, Inc. I understand its provisions and its applicability to me. I have
complied with both the letter and the spirit of the Code, and I will continue to
do so during the upcoming year. I understand that if I have any questions
regarding the Code and its application, I shall direct these questions to Regina
Rohrbacher, Compliance Director at (219) 455-7407.
Signature: /s/ John B. Borsch, Jr
---------------------------------------
Name: John B. Borsch, Jr
--------------------------------------------
(Please print name)
Title: Director
-------------------------------------------
Date: 11/1/99
-------------------------------------------
PLEASE RETURN TO:
Gina Rohrbacher
Assistant Vice President
Compliance Director
Lincoln Investment Management, 2R-13
200 East Berry Street
Fort Wayne, IN 46802
<PAGE>
CERTIFICATE OF REVIEW AND COMPLIANCE WITH CODE OF ETHICS
I hereby acknowledge receipt and review of the Code of Ethics for any
or all of the following: Lincoln National Variable Annuity Fund A, Lincoln
National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln National Special Opportunities
Fund, Inc. I understand its provisions and its applicability to me. I have
complied with both the letter and the spirit of the Code, and I will continue to
do so during the upcoming year. I understand that if I have any questions
regarding the Code and its application, I shall direct these questions to Regina
Rohrbacher, Compliance Director at (219) 455-7407.
Signature: /s/ Kelly D. Clevenger
---------------------------------------
Name: Kelly D. Clevenger
--------------------------------------------
(Please print name)
Title: President
-------------------------------------------
Date: 10/29/99
-------------------------------------------
PLEASE RETURN TO:
Gina Rohrbacher
Assistant Vice President
Compliance Director
Lincoln Investment Management, 2R-13
200 East Berry Street
Fort Wayne, IN 46802
<PAGE>
CERTIFICATE OF REVIEW AND COMPLIANCE WITH CODE OF ETHICS
I hereby acknowledge receipt and review of the Code of Ethics for any
or all of the following: Lincoln National Variable Annuity Fund A, Lincoln
National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln National Special Opportunities
Fund, Inc. I understand its provisions and its applicability to me. I have
complied with both the letter and the spirit of the Code, and I will continue to
do so during the upcoming year. I understand that if I have any questions
regarding the Code and its application, I shall direct these questions to Regina
Rohrbacher, Compliance Director at (219) 455-7407.
Signature: /s/ Nancy L. Frisby
---------------------------------------
Name: Nancy L. Frisby
--------------------------------------------
(Please print name)
Title: Director
-------------------------------------------
Date: 11/1/99
-------------------------------------------
PLEASE RETURN TO:
Gina Rohrbacher
Assistant Vice President
Compliance Director
Lincoln Investment Management, 2R-13
200 East Berry Street
Fort Wayne, IN 46802
<PAGE>
CERTIFICATE OF REVIEW AND COMPLIANCE WITH CODE OF ETHICS
I hereby acknowledge receipt and review of the Code of Ethics for any
or all of the following: Lincoln National Variable Annuity Fund A, Lincoln
National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln National Special Opportunities
Fund, Inc. I understand its provisions and its applicability to me. I have
complied with both the letter and the spirit of the Code, and I will continue to
do so during the upcoming year. I understand that if I have any questions
regarding the Code and its application, I shall direct these questions to Regina
Rohrbacher, Compliance Director at (219) 455-7407.
Signature: /s/ Barbara S Kowalczyk
---------------------------------------
Name: Barbara S Kowalczyk
--------------------------------------------
(Please print name)
Title: Sr VP
-------------------------------------------
Date: Nov 1, 1999
-------------------------------------------
PLEASE RETURN TO:
Gina Rohrbacher
Assistant Vice President
Compliance Director
Lincoln Investment Management, 2R-13
200 East Berry Street
Fort Wayne, IN 46802
<PAGE>
CERTIFICATE OF REVIEW AND COMPLIANCE WITH CODE OF ETHICS
I hereby acknowledge receipt and review of the Code of Ethics for any
or all of the following: Lincoln National Variable Annuity Fund A, Lincoln
National Aggressive Growth Fund, Inc., Lincoln National Bond Fund, Inc., Lincoln
National Capital Appreciation Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund, Inc., Lincoln National
Growth and Income Fund, Inc., Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln National Special Opportunities
Fund, Inc. I understand its provisions and its applicability to me. I have
complied with both the letter and the spirit of the Code, and I will continue to
do so during the upcoming year. I understand that if I have any questions
regarding the Code and its application, I shall direct these questions to Regina
Rohrbacher, Compliance Director at (219) 455-7407.
Signature: /s/ Kenneth G. Stella
---------------------------------------
Name: Kenneth G. Stella
--------------------------------------------
(Please print name)
Title:
-------------------------------------------
Date: 11/1/99
-------------------------------------------
PLEASE RETURN TO:
Gina Rohrbacher
Assistant Vice President
Compliance Director
Lincoln Investment Management, 2R-13
200 East Berry Street
Fort Wayne, IN 46802
<PAGE>
CODE OF ETHICS
FOR
LINCOLN INVESTMENT MANAGEMENT, INC.
- --------------------------------------------------------------------------------
I. INTRODUCTION
IT IS THE DUTY OF ALL EMPLOYEES TO CONDUCT THEMSELVES WITH INTEGRITY, IN
ACCORDANCE WITH THE CODE OF ETHICS, AND AT ALL TIMES TO PLACE THE INTERESTS
OF THE SHAREHOLDERS AND CLIENTS FIRST. IN THE INTEREST OF THIS CREDO, ALL
PERSONAL SECURITIES TRANSACTIONS WILL BE CONDUCTED CONSISTENT WITH THE CODE
OF ETHICS AND IN SUCH A MANNER AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICT
OF INTEREST OR ANY ABUSE OF AN INDIVIDUAL'S POSITION OF TRUST AND
RESPONSIBILITY. THE FUNDAMENTAL STANDARD OF THIS CODE IS THAT PERSONNEL
SHOULD NOT TAKE ANY INAPPROPRIATE ADVANTAGE OF THEIR POSITIONS.
The Securities and Exchange Commission (SEC) has adopted Rule 17j-1 under
the Investment Company Act of 1940. This Rule makes it unlawful for certain
persons, including any investment adviser or principal underwriter to a
registered investment company, in connection with the purchase or sale by
such persons of a security held or to be acquired(1) by a registered
investment company:
- to employ any device, scheme or artifice to defraud;
- to make any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light
of the circumstances in which they are made, not misleading;
- to engage in any act, practice or course of business that operates or
would operate as a fraud or deceit; or
- to engage in any manipulative practice.
- -----------------
(1) A security is deemed to be "held or to be acquired" if within the most
recent fifteen days it (i) is or has been held by the registered investment
company or (ii) is being or has been considered by the registered
investment company or its investment adviser for purchase by the registered
investment company.
Page 1
<PAGE>
The Rule also requires that every registered investment company and each
investment adviser or principal underwriter for such investment company
shall adopt a written code of ethics containing provisions reasonably
necessary to prevent persons from engaging in acts in violation of the
above standard and shall use reasonable diligence and institute procedures
reasonably necessary to prevent violations of the code.
Accordingly, the Board of Directors of Lincoln Investment Management, Inc.
("LIM") has adopted the following Code of Ethics to be effective for its
directors, officers, and, where applicable, employees on and after March 1,
1998, thereby replacing all previous Codes of Ethics. This Code of Ethics
does not replace, but is intended to supplement, the POLICY STATEMENT ON
CONFLICTS OF INTEREST adopted by the Board of Directors of Lincoln National
Corporation ("LNC").
II. DEFINITIONS
A. "ACCESS PERSON" of a Fund or Adviser includes each of its directors,
officers, Investment Personnel and Advisory Persons.
B. "ADVISER" means Lincoln Investment Management, Inc.
C. "ADVISORY PERSON" of a Fund or Adviser means (i) any employee
(including employees of companies in a control relationship with a
Fund or Adviser) who, in connection with his or her regular functions
or duties, makes, participates in, or obtains information regarding
the purchase or sale of a security, or whose functions relate to the
making of any recommendations with respect to such purchases and
sales; and (ii) any natural person in a control relationship with a
Fund or Adviser who obtains information concerning recommendations
with regard to the purchase or sale of a security.
For purposes of this definition, "Advisory Person" when used with
reference to Lincoln Investment Management, Inc. shall be deemed to
include employees of the Treasurer's Department and Law Division of
Lincoln National Corporation who otherwise satisfy this definition.
D. "BENEFICIAL OWNERSHIP" means, among other things, the powers to (i)
vote or control the voting of securities; (ii) transfer securities or
control their transfer; (iii) receive income from securities or
control the disposition of the income; or (iv) receive or control the
disposition of the proceeds through a liquidation.
Generally speaking, a person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has
or shares a direct or indirect pecuniary interest in a security, is a
"beneficial owner" of the security.
Page 2
<PAGE>
For example, an Access Person will generally be considered the
beneficial owner of securities held in the name of a spouse, minor
children, or a person not in the immediate family if the person is a
relative sharing the same home or if, by reason of a contract,
understanding, relationship, agreement, or other arrangement, the
Access Person obtains benefits substantially equivalent to ownership.
E. "COMPLIANCE COMMITTEE" of LIM consists of Tom McMeekin, President;
JoAnn Becker, Senior Vice President; Steven R. Brody, Senior Vice
President; Ann Warner, Vice President; J. Michael Keefer, Vice
President and General Counsel of LIM; and Gina Rohrbacher, Compliance
Officer.
The Compliance Committee, with advice from the Law Division, will
identify all Access Persons, Advisory Persons and Investment
Personnel.
F. "CONTROL" means investment discretion in whole or in part of an
account regardless of beneficial ownership to include any controlling
influence over the management or policies of an account and/or
investment company, unless the power is solely the result of an
official position with the company.
G. "CONSIDERED FOR PURCHASE OR SALE" or "BEING PURCHASED OR SOLD" occurs
when (i) a recommendation to purchase or sell a security has been made
and communicated, or (ii) with respect to the person making a
recommendation, the person first seriously considers making such a
recommendation.
H. "FUND" and "FUNDS" means the following entities listed on Exhibit A,
and any other registered investment companies as to which LIM is the
adviser or sub-adviser from time to time.
I. "INVESTMENT PERSONNEL" means portfolio managers, securities analysts
and traders, and those personnel who provide information and advice to
a portfolio manager or who help execute the portfolio manager's
decisions. All Investment Personnel are also considered Advisory
Persons for purposes of this Code of Ethics.
J. "PERSONAL SECURITIES TRANSACTION REPORT" is the SEC required quarterly
report listing all personal securities transactions subject to the
Code in which the Access Person or member(s) of his or her immediate
family has, or by reason of such transaction acquires, any direct or
indirect beneficial interest.
K. "SECURITY" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, a certificate of interest or participation
in any profit-sharing agreement, collateral trust certificate,
preorganization certificate or subscription, transferable share, an
investment contract, voting-trust certificate, certificate of deposit
for a security, fractional undivided interest in oil, gas or other
mineral rights, any put, call, straddle, option, or privilege on any
security (including a certificate of deposit) or on any group or index
of securities
Page 3
<PAGE>
(including any interest therein or based on the value thereof), or any
put, call, straddle, option, or privilege entered into on a national
securities exchange relation to foreign currency, or, in general, any
interest or participation in, temporary or interim certificate for,
receipt for, guarantees of, or warrant or right to subscribe to or
purchase, any of the foregoing.
For purposes of the Code of Ethics, the following shall not be
considered a Security:
1. U.S. Government Securities
2. Bank Certificate of Deposits
3. Bankers Acceptances
4. Commercial Paper
5. Mutual Funds (shares of open-end registered investment companies)
6. Securities issued or guaranteed by a U.S. Governmental Agency
7. Stock index options and futures contract
8. Nonfinancial Commodities
9. Foreign Currencies
10. Unit Investment Trusts
11. Variable Annuities
12. Receipt of securities as a gift or inheritance. Future
transactions would be subject to the Code of Ethics.
13. IRAs through open-end registered investment companies
L. "WINDOW PERIOD" means a 30-day period commencing on the third trading
day after the release of LNC's: (i) annual financial results; (ii)
Annual Report to shareholders; and (iii) quarterly earnings reports.
III. PROHIBITED TRANSACTIONS
A. The following restrictions apply to all ACCESS PERSONS. Any violation
of any of these restrictions can be expected to result in serious
sanctions, up to and including dismissal of the person or persons
involved.
1. No Access Person of a Fund or Adviser shall engage in any act,
practice or course of conduct which would violate the provisions
of Rule 17j-1.
2. No Access Person of a Fund or Adviser shall purchase or sell,
directly or indirectly, any security in which he or she has, or
by reason of the transaction acquires, any direct or indirect
beneficial ownership and which to his or her actual knowledge at
the time of the purchase or sale (a) is being considered for
purchase or sale by a Fund or any other client of an Adviser; or
(b) is being purchased or sold by a Fund or any other client of
an Adviser, whether pursuant to a program of trading or
otherwise.
Page 4
<PAGE>
3. No Access Person of a Fund or Adviser shall recommend any
security transaction without first having disclosed his or her
interest, if any, in the transaction or the issuer of the
security, including without limitation:
(a) his or her direct or indirect beneficial ownership of any
securities of the issuer;
(b) any contemplated transaction by the Access Person in such
securities;
(c) any position or other affiliation with the issuer or its
affiliates; and
(d) any present or proposed business relationship between the
issuer or its affiliates and the Access Person or any party
in which the Access Person has a significant interest.
4. No Access Person making any such recommendation may purchase or
sell the security which is the subject of the recommendation
until after he or she has been informed that the Funds and any
other clients of the Adviser considering the recommendation have
deferred or rejected the recommendation. If the recommendation is
approved for a Fund or other clients of the Adviser, the Access
Person must adhere to all trading restrictions outlined in the
Code of Ethics.
5. No Access Person of a Fund or Adviser may reveal to any other
person (except in normal course of his or her duties on behalf of
a Fund or Adviser) any information regarding securities
transactions by a Fund or any other clients of the Adviser or the
consideration of any such securities transactions.
6. No Access Person shall use actual knowledge of a Fund or other
clients' transactions to profit by the market effect of such
transaction. Any pattern of transactions involving parallel
transactions (client buy/Access Person buys or both selling the
same security) or involving opposite transactions (buy/sell or
sell/buy) will be analyzed to determine if there are grounds to
believe that the Code of Ethics has been violated.
7. Each Access Person's personal transactions must be PRE-CLEARED by
using LIM's Trading Compliance System prior to entering any
orders for personal transactions with a registered broker/dealer.
Pre-clearance is only valid on the day the security is cleared.
If the order is not executed the day it is pre-cleared, the
security must be pre-cleared again the following day prior to
placing a personal transaction.
Page 5
<PAGE>
8. No Access Person may execute a buy or sell order for a personal
account in which he or she has beneficial ownership or control
until the NEXT TRADING DAY following the execution of a
Fund/client trade in that same security.
9. All Access Persons are prohibited from receiving anything of more
than a DE MINIMIS value (not to exceed $100) from any person or
entity that does business with or on behalf of any Fund or
client. Things of value may include, but not be limited to,
travel expenses, special deals or incentives.
10. All Access Persons require PRIOR written approval from the
President of LIM, with advice from the Law Division, before they
may serve on the board of directors of any company in which a
Fund or other client of the Adviser has an investment.
B. The following ADDITIONAL restrictions apply to all INVESTMENT
PERSONNEL. Any violations of any of these requirements can be expected
to result in serious sanctions, up to and including dismissal of the
person or persons involved.
1. All Investment Personnel are prohibited from purchasing any
initial public offering for their personal account.
2. All Investment Personnel are prohibited from purchasing any
private placement without express PRIOR written consent by the
Compliance Committee. All private placement holdings are subject
to disclosure to the Compliance Officer. Investment Personnel who
are the beneficial owners of a private placement must receive
permission from the Compliance Committee prior to any
participation by any such person in the consideration of an
investment in the same issuer.
3. No Investment Personnel may execute a buy or sell order for a
personal account for which he or she has beneficial ownership
within SEVEN CALENDAR DAYS BEFORE OR AFTER a Fund or other client
he or she manages trades in that security.
IV. EXEMPT TRANSACTIONS
The following transactions are EXEMPT from the prohibitions of Section
III.
A. Securities transactions in which the Access Person has no direct or
indirect influence or control or over which the Access Person has
granted full discretion to another;
B. Securities transactions which are not eligible for participation in by
the Funds or any other clients of the Adviser;
Page 6
<PAGE>
C. Securities transactions which are non-volitional on the part of the
Access Person, the Funds, or any other clients of the Adviser;
D. Securities transactions in the form of stock dividends, dividend
reinvestment, stock splits, mergers, consolidation or other similar
corporate reorganizations or distributions generally applicable to all
holders of the same class of securities;
E. Any acquisition of securities through the exercise of rights issued by
an issuer pro rata to all holders of a class of its securities (to the
extent such rights were acquired from the issuer), and sales of the
rights so acquired;
F. Securities transactions through systematic investment and qualified
retirement plans (e.g., 401(k)).
G. Securities transactions specifically approved by the Compliance
Committee, with advice from the Law Division and the Compliance
Officer, and deemed appropriate because of unusual or unforeseen
circumstances.
V. TRANSACTIONS IN LNC STOCK
Transactions in LNC stock are governed by the restrictions on insider
trading adopted from time to time by Lincoln National Corporation. The
following is a summary of the restrictions on trading in LNC stock:
A. LNC Stock and Stock Options
1. Transaction does not need to be pre-cleared.
2. Report all transactions on quarterly Personal Securities
Transaction Report.
3. Transaction must be during the Window Period for officers.
4. Transaction is subject to insider trading restrictions.
B. EMPLOYEE STOCK PURCHASE PLAN through Smith Barney
1. Transaction does not need to be pre-cleared.
2. Transaction does not need to be reported on quarterly Personal
Securities Transaction Report.
3. Changes to payroll deduction must be within Window Period for
officers.
4. Transaction is subject to insider trading restrictions.
Page 7
<PAGE>
C. DIVIDEND REINVESTMENT AND CASH INVESTMENT PLAN through LNC
1. Transaction does not need to be pre-cleared.
2. Report transaction on the quarterly Personal Securities
Transactions Report.
3. Additional purchases made through the cash investment portion of
the Plan must be made during the Window Period for officers.
4. Transactions subject to insider trading restrictions.
D. LNC 401(k) Plan
1. Transaction does not need to be pre-cleared.
2. Transaction does not need to be reported on the quarterly
Personal Securities Transaction Report.
3. Transaction must be during the Window Period for officers.
4. Transactions are subject to insider trading restrictions.
VI. REQUIRED DISCLOSURES AND REPORTS
The following disclosures and reports are required to be made by all Access
Persons.
A. All Access Persons must disclose brokerage relationships at the time
of their employment and at the time of opening any new account.
B. All Access Persons MUST direct their brokers to supply to the
Compliance Officer, on a timely basis, duplicate copies of all
confirmations for all securities accounts.
C. The Personal Securities Transaction Report of all transactions subject
to this Code must be filed with the Compliance Officer no later than
TEN (10) DAYS after the end of each calendar quarter. The Report must
include all securities transactions which each Access Person has, or
by reason of such transaction acquires, any direct or indirect
beneficial ownership.
The Report must be dated, signed and contain the following
information:
1. the date of the transaction
2. the name of the security and its cusip number
3. the number of shares or the principal amount of each security
involved
4. the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition)
5. the price at which the transaction was effected
6. the name of the broker, dealer or bank effecting the transaction.
THE PERSONAL SECURITIES TRANSACTION REPORT IS REQUIRED EVEN IF THE
ACCESS PERSON HAS NO PERSONAL SECURITIES TRANSACTIONS DURING THE
QUARTER.
Page 8
<PAGE>
The manager and department head of an Access Person will be notified
if such person's quarterly Personal Securities Transaction Report is
late. If the Personal Securities Transaction Report is late for ANY
FOLLOWING QUARTERS, the Access Person and his/her manager will receive
a notice stating that the Access Person is in violation of the Code of
Ethics and this violation should be considered unsatisfactory
performance during the next performance review. Violation of the Code
of Ethics can result in serious sanctions by LIM, including possible
termination of employment.
An outside director of a Fund is required to file such reports only if
the director, at the time of the transactions, knew or, in the
ordinary course of fulfilling his or her official duties as director,
should have known that during the 15-day period immediately preceding
or after the date of the transaction the same security was purchased
or sold by the Fund or was being considered for purchase or sale by
the Fund or its Adviser. (However, no director shall be presumed to
know of such matters solely by reason of being a director or serving
on a committee of the Board).
D. If any security involved in a personal transaction is purchased
or sold by a Fund or other client within fifteen days of the
personal transaction, the Compliance Officer will request and the
Access Person must provide additional information relating to the
circumstances surrounding the personal transaction.
E. All Access Persons must certify annually that they have read and
complied with this Code of Ethics and all disclosure and
reporting requirements contained herein.
VII. SUPERVISORY
A. Any question as to whether an employee is an Access Person or
Investment Personnel, or other questions concerning the Code of
Ethics or transactions in personal accounts, should be directed
to the Compliance Officer.
B. The Compliance Officer shall promptly report to the President of
LIM and the Compliance Committee any apparent violations of the
requirements contained in this Code of Ethics. The reports will
be reviewed and a determination will be made whether or not the
Code of Ethics has been violated and what sanctions, if any,
should be imposed.
VIII. CONFIDENTIALITY
All information and reports from any Access Person shall be kept in
strict confidence, subject only to disclosure as required by law or to
the Compliance Committee as deemed necessary for compliance purposes.
Page 9
<PAGE>
Dated: July, 1998
------------------------------------------------
EXHIBIT A
------------------------------------------------
s:\comprpts\coe\codeethi.doc
- --------------------------------------------------------------------------------
Lincoln National Convertible Securities Fund, Inc.
Lincoln National Income Fund, Inc.
Variable Annuity Fund A
Multi-Fund Variable Annuity
- Lincoln National Social Awareness Fund, Inc.
- Lincoln National Money Market Fund, Inc.
- Lincoln National Managed Fund, Inc.
- Lincoln National Growth Income Fund, Inc.
- Lincoln National Bond Fund, Inc.
- Lincoln National Special Opportunity Fund, Inc.
- Lincoln National Capital Appreciation Fund, Inc.
- Lincoln National Aggressive Growth Fund, Inc.
- Lincoln National International Fund, Inc.
- Lincoln National Global Asset Allocation Fund, Inc.
- Lincoln National Equity Income Fund, Inc.
- Any funds which may be added to the Lincoln family of funds
Page 10
<PAGE>
------------------------
CODE OF ETHICS
------------------------
LINCOLN NATIONAL INVESTMENT COMPANIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTRODUCTION
IT IS THE DUTY OF ALL EMPLOYEES TO CONDUCT THEMSELVES WITH INTEGRITY, IN
ACCORDANCE WITH THE CODE OF ETHICS, AND AT ALL TIMES TO PLACE THE INTERESTS
OF THE SHAREHOLDERS AND CLIENTS FIRST. IN THE INTEREST OF THIS CREDO, ALL
PERSONAL SECURITIES TRANSACTIONS WILL BE CONDUCTED CONSISTENT WITH THE CODE
OF ETHICS AND IN SUCH A MANNER AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICT
OF INTEREST OR ANY ABUSE OF AN INDIVIDUAL'S POSITION OF TRUST AND
RESPONSIBILITY. THE FUNDAMENTAL STANDARD OF THIS CODE IS THAT PERSONNEL
SHOULD NOT TAKE ANY INAPPROPRIATE ADVANTAGE OF THEIR POSITIONS.
The Securities and Exchange Commission (SEC) has adopted Rule 17j-1 under the
Investment Company Act of 1940. This Rule makes it unlawful for certain
persons, including any investment adviser or principal underwriter to a
registered investment company ("Fund"), in connection with the purchase or
sale by such person or a security held or to be acquired(1) by the Fund:
(a) to employ any device, scheme or artifice to defraud the Fund;
(b) to make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances in which they are made, not misleading;
(c) to engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Fund; or
(d) to engage in any manipulative practice with respect to the Fund.
- -----------------------
(1) A security is deemed to be "held or to be acquired" if within the most
recent fifteen days it (i) is or has been held by the Fund or (ii) is being
or has been considered by the Fund or its investment adviser for purchase
by the Fund.
<PAGE>
The Rule also requires that every registered investment company and each
investment adviser or principal underwriter for such investment company
shall adopt a written code of ethics containing provisions reasonably
necessary to prevent persons from engaging in acts in violation of the above
standard and shall use reasonable diligence and institute procedures
reasonably necessary to prevent violations of the Code.
Accordingly, the boards of directors or managers, as appropriate, of Lincoln
Investment Management, Inc. ("LIM"), Delaware Companies ("Delaware"), Lynch &
Mayer, Inc. ("L&M"), Vantage Global Advisors, Inc. ("VGA"), and each of the
entities listed on Exhibit A have adopted the following Code of Ethics to be
effective for their directors, officers, and, where applicable, employees on
and after January 1, 1996, thereby replacing all previous Codes of Ethics
adopted by those companies. This Code of Ethics does not replace, but is
intended to supplement, the Policy Statement on Conflicts of Interest adopted
by the board of directors of LIM, Delaware, L&M and VGA.
DEFINITIONS
1. "FUND" and "FUNDS" means the entities listed on Exhibit A, as amended from
time to time.
2. "ADVISER" and "ADVISERS" means LIM, Delaware, L&M and VGA.
3. "ACCESS PERSON" of a Fund or Adviser includes each of its directors,
officers, investment personnel and advisory persons.
4. "ADVISORY PERSON" of a Fund or Adviser means (i) any employee (including
employees of companies in a control relationship with a Fund or Adviser)
who, in connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of a security, or whose functions relate to the making of any
recommendations with respect to such purchases and sales; and (ii) any
natural person in a control relationship with a Fund or Adviser who obtains
information concerning recommendations with regard to the purchase or sale
of a security.
For purposes of this definition, "Advisory Person" when used with reference
to Lincoln Investment Management, Inc. shall be deemed to include employees
of the Treasurer's Department and Law Division of Lincoln National
Corporation who otherwise satisfy this definition. At Lincoln Investments,
Advisory and Access Persons are the same.
<PAGE>
(5) "INVESTMENT PERSONNEL" means portfolio managers, securities analyst and
traders, and those personnel who provide information and advice to a
portfolio manager or who help execute the portfolio manager's decisions.
The Compliance Committee, with advice of the Law Division, will identify
all Access Persons, Advisory Persons and Investment Personnel. The current
members of the Compliance Committee are listed in Exhibit B.
(6) "CONTROL" shall mean investment discretion in whole or in part of an
account regardless of beneficial ownership to include any controlling
influence over the management or policies of an account and/or investment
company, unless the power is solely the result of an official position
with the company.
(7) "SECURITY" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas or other mineral rights, any put, call,
straddle, option, or privilege on any security (including a certificate of
deposit) or on any group or index of securities (including any interest
therein or based on the value thereof), or any put, call, straddle, option,
or privilege entered into on a national securities exchange relation to
foreign currency, or, in general, any interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to or purchase, any of the foregoing.
However, "SECURITY" does not mean U.S. Government securities, bankers
acceptances, bank certificates of deposits, commercial paper, and shares of
registered open-end registered investment companies.
A security is being "considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security
has been made and communicated and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
<PAGE>
(8) "BENEFICIAL OWNERSHIP" means, among other things, the power to (a) vote
or control the voting of securities; (b) transfer securities or control
their transfer; (c) receive income from securities or control the
disposition of the income; or (d) receive or control the disposition of
the proceeds in a liquidation.
Generally speaking, a person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or
shares a direct or indirect pecuniary interest in a security, is a
"beneficial owner" of the security.
For example, an Access Person will generally be considered the beneficial
owner of securities held in the name of a spouse, minor children, or a
person not in the immediate family if the person is a relative sharing the
same home or if, by reason of a contract, understanding, relationship,
agreement, or other arrangement, the Access Person obtains benefits
substantially equivalent to ownership.
PERSONAL TRANSACTIONS IN SECURITIES
The following restrictions apply to all Access Persons.
(1) No Access Person of a Fund or Adviser shall engage in any act, practice
or course of conduct which would violate the provisions of Rule 17j-1.
(2) No Access Person of a Fund or Adviser shall purchase or sell, directly or
indirectly, any security in which he or she has, or by reason of the
transaction acquires, any direct or indirect beneficial ownership and which
to his or her actual knowledge at the time of the purchase or sale (a) is
being considered for purchase or sale by a fund or any other client of an
Adviser; or (b) is being purchased or sold by a fund or any other client of
an Adviser, whether pursuant to a program of trading or otherwise.
(3) No Access Person of a Fund or Adviser shall recommend any security
transaction without first having disclosed his or her interest, if any, in
the transaction or the issuer of the security, including without limitation:
(a) his or her direct or indirect beneficial ownership of any securities
of the issuer;
<PAGE>
(b) any contemplated transaction by the Access Person in such securities;
(c) any position or other affiliation with the issuer or its affiliates;
and
(d) any present or proposed business relationship between the issuer or
its affiliates and the Access Person or any party in which the Access
Person has a significant interest.
(4) No Access Person making any such recommendation may purchase or sell the
security which is the subject of the recommendation until after he or she
has been informed that the Funds and any other clients of the Advisers
considering the recommendation have deferred or rejected the
recommendation. If the recommendation is approved for a Fund or other
client of the Advisers, the Access Person must adhere to all trading
restrictions outlined in the Code of Ethics.
(5) No Access Person of a Fund or Adviser shall reveal to any other person
(except in normal course of his or her duties on behalf of a Fund or
Adviser) any information regarding securities transactions by a fund or
any other clients of the Advisers or the consideration of any such
securities transactions.
(6) The prohibitions of (2) and (3) above shall not apply to:
(a) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(b) purchases or sales of securities which are not eligible for purchase
or sale by the Funds or any other clients of the Advisers;
(c) transactions in securities which are non-volitional on the part of
the Access Person, the Funds, or any other clients of the Advisers;
(d) purchases which are part of an automatic dividend reinvestment plan;
<PAGE>
(e) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities (to the extent
such rights were acquired from the issuer), and sales of the rights
so acquired;
(f) purchases and sales specifically approved by the Compliance
Committee, with the advice of the Law Division and the Compliance
Officer, and deemed appropriate because of unusual or unforeseen
circumstances.
(g) purchases and sales of Lincoln National Corporation securities
see (h) below.
(h) In the event an Access Person of a Fund or Adviser has a question or
concern about the applicability of this Code of Ethics to a personal
securities transaction, the concern should be discussed with the
Compliance Officer. Transactions in Lincoln National Corporation
securities shall continue to be subject to insider trading restrictions
published from time to time by Lincoln National Corporation to its
insiders and by the federal securities laws.
(7) Each Access Person's personal transactions must be PRECLEARED by the
Compliance Officer using the Personal Transaction Preclearance Form. The
form must be submitted to the Compliance Officer prior to entering any
orders for personal transactions. Preclearance is only valid for one day.
If the order is not executed the same day, the preclearance form must be
resubmitted. Regardless of preclearance, all transactions remain subject to
the provisions of (6) above.
(8) No Access Person may execute a buy or sell order for an account in which
he or she has beneficial ownership or control until the NEXT TRADING DAY
following the execution of a Fund/client trade in that same security.
Violation of this requirement can be expected to result in serious
sanctions, up to and including dismissal of the person or persons involved.
<PAGE>
(9) All Access Persons are prohibited from receiving anything of more than a
DE MINIMIS value from any person or entity that does business with or on
behalf of any Fund or client. Things of value may include, but not be
limited to, travel expenses, special deals or incentives.
(10) All Access Persons require PRIOR written approval from the President of
LIM, with advice of the Law Division, before they may serve on the board
of directors of any company in which we have an investment.
INVESTMENT PERSONNEL
The following ADDITIONAL restrictions apply to all Investment Personnel.
(1) All Investment Personnel are prohibited from purchasing any initial
public offering for their personal account.
(2) All Investment Personnel are prohibited from purchasing any private
placement without express PRIOR written consent by the Compliance
Committee. All private placement holdings are subject to disclosure to
the Compliance Committee. Any Investment Person who is the beneficial
owner of a private placement must receive permission from the Compliance
Committee prior to any participation by such person in the company's
consideration of an investment in the same issuer.
(3) No Investment Personnel may execute a buy or sell order for an account
for which he/she has beneficial ownership within SEVEN CALENDAR DAYS
BEFORE OR AFTER an investment company or separate account that the/she
manages trades in that security.
Violations of this requirement can be expected to result in serious
sanctions, up to and including dismissal of the person or persons involved.
REQUIRED REPORTS
The following reports are required to be made by all Access Persons.
(1) All Access Persons must disclose brokerage relationships at employment
and at the time of opening any new account.
(2) All Access Persons will direct their brokers to supply to the Compliance
Officer, on a timely basis, duplicate copies of all confirmations for all
securities accounts.
<PAGE>
(3) Each quarter, no later than the tenth day after the end of the
calendar quarter, each Access Person will submit to the Compliance
Officer a personal transaction summary showing all transactions in
securities which such person has or acquires any direct or indirect
beneficial ownership. The Compliance Officer shall review all reports.
Every report will contain the following information:
(a) the date of the transaction, the name and the number of shares
and the principal amount of every security involved;
(b) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(c) the price at which the transaction was effected;
(d) the name of the broker, dealer or bank effecting the transaction.
An outside director of a Fund is required to file such reports only if
the director, at the time of the transactions, knew or, in the
ordinary course of fulfilling his or her duties as director, should
have known that during the 15-day period immediately preceding or
after the date of the transaction the same security was purchase or
sold by the Fund or was being considered for purchase or sale by the
Fund or its Adviser. (However, no director shall be presumed to know
of such matters solely by reason of being a director or serving on a
committee of the board).
(4) All Access Persons must disclose all personal securities holdings on
commencement of employment and annually thereafter.
(5) If any security involved in a personal transaction is purchased or
sold by an investment company or client within fifteen days of the
personal transaction, the Compliance Officer will request and the
Access Person will provide additional information relating to the
circumstances surrounding the personal transaction.
(6) All Access Persons will certify annually that they have read and
complied with this Code of Ethics and all disclosure and reporting,
requirements contained therein.
<PAGE>
SUPERVISORY PROCEDURES
The Compliance Officer shall promptly report to the President, Lincoln
Investments and the Compliance Committee any apparent violations of the
prohibitions or reporting requirements contained in this Code of Ethics. The
reports will be reviewed and a determination will be made whether or not the
Code of Ethics has been violated and shall determine what sanctions, if any,
should be imposed.
CONFIDENTIALITY
All reports will be kept confidential, subject only to disclosure as required
by law and to officers of the Funds or Advisers or their respective counsel
as deemed necessary for compliance purposes and in order to administer this
Code of Ethics.
Dated: May 1, 1996
<PAGE>
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EXHIBIT A
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Lincoln National Convertible Securities Fund, Inc.
Lincoln National Income Fund, Inc.
Variable Annuity Fund A
Multi-Fund Variable Annuity
- Lincoln National Social Awareness Fund, Inc.
- Lincoln National Money Market Fund, Inc.
- Lincoln National Managed Fund, Inc.
- Lincoln National Growth Income Fund, Inc.
- Lincoln National Bond Fund, Inc.
- Lincoln National Special Opportunity Fund, Inc.
- Lincoln National Capital Appreciation Fund, Inc.
- Lincoln National Aggressive Growth Fund, Inc.
- Lincoln National International Fund, Inc.
- Lincoln National Global Asset Allocation Fund, Inc.
- Lincoln National Equity Income Fund, Inc.
Lincoln Advisor Funds
- Lincoln Growth and Income Portfolio
- Lincoln Enterprise Portfolio
- Lincoln U.S. Growth Portfolio
- Lincoln World Growth Portfolio
- Lincoln New Pacific Portfolio
- Lincoln Government Income Portfolio
- Lincoln Corporate Income Portfolio
- Lincoln Tax-Free Income Portfolio
- Lincoln Cashfund Portfolio
<PAGE>
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EXHIBIT B
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COMPLIANCE COMMITTEE
- H. Thomas McMeekin, President
- Dennis Blume, Senior Vice President
- Steven R. Brody, Senior Vice President
- Ann Warner, Senior Vice President
- Harold McElraft, Vice President
- J. Michael Keefer, Vice President & Associate General Counsel
- Gina Rohrbacher, Compliance Officer
<PAGE>
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EMPLOYEE TRADING/INVESTING POLICIES AND PROCEDURES
------------------------------------------------------------
LINCOLN INVESTMENT MANAGEMENT, INC.
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INTRODUCTION
PURPOSE
This Policy Statement sets forth certain rules regarding the activities of
Lincoln Investments' employees and provides them with direction as to their
handling of information and their engaging in personal securities
transactions. Because compliance with this Policy Statement is not a guaranty
against violations of any securities law, if you have any question about any
action you are contemplating taking, you should discuss your concern with
your supervisor, the Compliance Officer, or the Law Division.
STATUTORY BACKGROUND
To supplement existing federal law on insider trading, Congress enacted the
Insider Trading and Securities Fraud Enforcement Act of 1988 ("ITSFEA").
ITSFEA makes controlling persons, particularly investment advisory and
broker/dealer firms, liable for civil penalties on the basis of insider
trading violations committed by their employees. Thus, Lincoln Investments is
required to take steps to ensure the compliance with ITSFEA by its employees.
These policies and procedures ("Policy Statement"), which amend and restate
Lincoln Investments' current Employee Trading/Investing Policies and
Procedures, are one of the steps which Lincoln Investments has adopted to
comply with ITSFEA.
COMPLEMENTS OTHER POLICIES
The requirement and prohibitions of this policy are to be considered as an
addition to both the LINCOLN NATIONAL CORPORATION POLICY STATEMENT ON
CONFLICTS OF INTEREST AND IMPROPER USE OF CORPORATE ASSETS (the "Conflicts
Policy") and the Lincoln Investments' CODE OF ETHICS. First, the Conflicts
Policy, which applies to all Lincoln National employees, prohibits any
director, officer, or employee from disclosing or using for his or her
personal advantage or profit non-public information acquired by reason of his
or her relationship with the company. The Conflicts Policy statement is
distributed annually and employees must attest to compliance with the policy
statement.
<PAGE>
Second, the Lincoln Investments' Code of Ethics deems certain individuals to
be "Access Persons" and such Access Persons are required to:
(a) disclose any personal interest one may have in a transaction or security
prior to making a buy-sell-hold recommendation on the transaction or
security; and
(b) adhere to all trading restrictions and reporting requirements of the Code
of Ethics.
DEFINITIONS
Understanding the following definitions is critical to an understanding of
the prohibitions and regulation of this area of the law and of this Policy
Statement.
ACCESS PERSON
"Access Person" of a Fund or Adviser includes each of its directors,
officers, investment personnel and advisory persons.
INSIDER
The concept of "insider" is broad. It includes officers, directors, and
employees. In addition, a person can be a "temporary insider" if he or she
enters into a special confidential relationship in the conduct of a company's
affairs and as a result is given access to information. A temporary insider
could include, for example, an investment analyst reviewing a possible
investment in a company who receives material, non-public information about
the company.
MATERIAL INFORMATION
"Material Information" generally is defined as information for which there is
a substantially likelihood that a reasonable investor would consider it
important in making his or her investment decisions, or information that is
reasonably certain to have a substantial effect on the price of a company's
securities. Information that officers, directors, and employees should
consider material includes, but is not limited to: divided changes, earnings
estimates, changes in previously released earnings, estimates, significant
merger or acquisition proposals or agreements, major litigation, liquidation
problems, and extraordinary management developments.
NON-PUBLIC INFORMATION
Information is non-public until it has been effectively communicated to the
marketplace. For example, information found in publicly available reports
filed with the SEC, or appearing in DOW JONES, REUTERS ECONOMIC SERVICES, THE
WALL STREET JOURNAL, or other publications of general circulation would be
considered effectively communicated to the marketplace.
<PAGE>
TRADING RESTRICTIONS
PROHIBITED TRANSACTIONS
(1) NO ACCESS PERSON OF LINCOLN INVESTMENTS NOR ANY OTHER LINCOLN INVESTMENTS
EMPLOYEE WHILE IN POSSESSION OF MATERIAL, NON-PUBLIC INFORMATION RESPECTING
AN ISSUER SHALL PURCHASE, SELL, RECOMMEND OR DIRECT THE PURCHASE OR SALE OF
THAT ISSUER'S PUBLICLY TRADED SECURITIES FOR LINCOLN INVESTMENT'S ACCOUNT,
THE ACCOUNT OF AN AFFILIATE, OR THE ACCOUNT OF ANY THIRD PARTY.
For example, you learn from the President of XYZ Company that the management
of XYZ Company is seeking financing to take XYZ Company private in a
leveraged buy-out. XYZ Company's publicly traded stock should not be
purchased or sold until the proposed buy-out has been publicly disclosed.
(2) NO ACCESS PERSON OF LINCOLN INVESTMENTS SHALL UTILIZE OR TAKE ADVANTAGE OF
MATERIAL, NON-PUBLIC INFORMATION TO PURCHASE, SELL, RECOMMEND OR DIRECT THE
PURCHASE OR SALE OF A SECURITY FOR HIS OR HER OWN ACCOUNT, FOR ANY ACCOUNT
OVER WHICH HE OR SHE HAS A DIRECT OR INDIRECT BENEFICIAL INTEREST (INCLUDING
AN ACCOUNT HELD BY OR FOR ANY FAMILY MEMBER) OR FOR ANY OTHER ACCOUNT OVER
WHICH THE ACCESS PERSON HAS DISCRETIONARY INVESTMENT AUTHORITY OR POWER OF
ATTORNEY.
For example, in the course of your duties as a Lincoln Investments employee,
you learn from the President of XYZ Company that XYZ Company is having
continued liquidity problems, is delinquent in its mortgage payments to
Lincoln, and will be classified as a problem borrower. While there has been
occasional speculation regarding XYZ Company's liquidity problems in the
press and a WSJ columnist recently suggested that readers sell XYZ Company's
securities, the specific information known to you has not been publicly
disclosed. You should NOT buy or sell XYZ Company's securities for your own
account or any other account over which you have discretionary authority.
(3) NO ACCESS PERSON OF LINCOLN INVESTMENTS SHALL DISCLOSE MATERIAL, NON-PUBLIC
INFORMATION TO ANY OTHER PERSON UNLESS SUCH DISCLOSURE IS AUTHORIZED BY THE
COMPLIANCE COMMITTEE.
(4) WITH RESPECT TO ANY SECURITIES (EITHER DEBT OR EQUITY) ISSUED BY A COMPANY
WHICH IS IN BANKRUPTCY OR IS OTHERWISE INSOLVENT OR IS CONSIDERED TO BE A
TROUBLED INVESTMENT BY LINCOLN INVESTMENTS, THE FOLLOWING RULES APPLY. IF
LINCOLN IS SERVING ON
<PAGE>
THE CREDITORS COMMITTEE OR SIMILAR BODY, NO ACCESS PERSON OF LINCOLN
INVESTMENTS SHALL PURCHASE, SELL, RECOMMEND OR DIRECT THE PURCHASE OR SALE
OF THAT COMPANY'S SECURITIES FOR (a) LINCOLN INVESTMENTS' ACCOUNT, THE
ACCOUNT OF AN AFFILIATE, OR THE ACCOUNT OF ANY THIRD PARTY, OR (b) FOR HIS
OR HER OWN ACCOUNT, FOR ANY ACCOUNT OVER WHICH HE OR SHE HAS A DIRECT OR
INDIRECT BENEFICIAL INTEREST (INCLUDING AN ACCOUNT HELD BY OR FOR ANY FAMILY
MEMBER) OR FOR ANY OTHER ACCOUNT OVER WHICH THE EMPLOYEE HAS DISCRETIONARY
INVESTMENT AUTHORITY OR POWER OF ATTORNEY. IF LINCOLN IS NOT SERVING ON THE
CREDITORS COMMITTEE OR SIMILAR BODY, AN ACCESS PERSON OF LINCOLN INVESTMENTS
SHALL NOT WITHOUT FIRST OBTAINING THE COMPLIANCE COMMITTEE'S PRIOR WRITTEN
CONSENT PURCHASE, SELL, RECOMMEND OR DIRECT THE PURCHASE OR SALE OF THAT
COMPANY'S SECURITIES FOR (a) LINCOLN INVESTMENTS ACCOUNT, THE ACCOUNT OF AN
AFFILIATE, OR THE ACCOUNT OF ANY THIRD PARTY, OR (b) FOR HIS OR HER OWN
ACCOUNT, FOR ANY ACCOUNT OVER WHICH HE OR SHE HAS A DIRECT OR INDIRECT
BENEFICIAL INTEREST (INCLUDING AN ACCOUNT HELD BY OR FOR ANY FAMILY MEMBER)
OR FOR ANY OTHER ACCOUNT OVER WHICH THE EMPLOYEE HAS DISCRETIONARY
INVESTMENT AUTHORITY OR POWER OF ATTORNEY.
(5) ANY ACCESS PERSON OF LINCOLN INVESTMENTS WHO IS AWARE OF ANY BREACH OF THESE
POLICIES AND PROCEDURES SHALL BRING SUCH BREACH TO THE ATTENTION OF THE
COMPLIANCE OFFICER.
REPORTING REQUIREMENTS
CODE OF ETHICS
In accordance with Lincoln Investments' Code of Ethics, each Access Person
must have all trades pre-cleared, disclose all personal holdings, and forward
all confirmation statements to the Compliance Officer. In addition, all
Access Persons must complete the quarterly Personal Security Transaction
Report WHETHER OR NOT THERE HAS BEEN ACTIVITY DURING THE QUARTER. If evidence
of improper trading or other violations of these policies is found, the
matter will be referred to the Compliance Committee for follow-up. Persons
who have not complied with this requirement shall be subject to appropriate
disciplinary or corrective measures, potentially including dismissal.
ANNUAL POLICY REVIEW AND ACKNOWLEDGEMENT
Each year, Access Persons of Lincoln Investments will receive a copy of this
Policy Statement, as currently amended, and will acknowledge receipt of this
Policy Statement and understanding of its contents. The Access Persons of
Lincoln Investments will certify that they have complied with the
requirements of the Policy Statement during the prior year or describe any
non-compliance.
<PAGE>
COMPLIANCE COMMITTEE
The Lincoln Investments Compliance Committee has been created in order, among
other things, to provide oversight and guidance in this area. Its current
members are H. Thomas McMeekin (President), Steven R. Brody (Senior Vice
President), Dennis Blume (Senior Vice President), Ann L. Warner (Senior Vice
President), Harold McElraft (Vice President),Gina Rohrbacher (Compliance
Officer) and J. Michael Keefer (Vice President and Associate General
Counsel.) EXHIBIT A sets forth a description of the duties of the Compliance
Committee.
INFORMATION SECURITY
ADOPTION OF PROCEDURES TO CONTROL ACCESS TO FILES
There are in place policies and procedures sufficient to restrict access to
files which may contain material, non-public information to those who have a
need to know. Such procedures include a locked room to store the files and a
file check-out system. It is the duty of the Compliance Officer to verify
that these procedures are in place and enforced.
MAINTENANCE OF CONFIDENTIALITY OF INFORMATION RECEIVED
It is the responsibility of each employee to secure all copies of material,
non-public information, which may require either locking the information in
the cabinets or desks at the employee's work station, or having it locked in
the limited access file room. Additionally, each employee shall take steps to
ensure that any documents on a PC are restricted to appropriate individuals.
COPIES
It is imperative that the employee restrict the amount of copies made of any
material, non-public information, and if copies are made, that the employee
keep a record of to whom such copies are distributed.
DESTRUCTION OF FILES
At the conclusion of any transactions, or upon the termination of any
potential transaction, it is the employee's responsibility to ensure proper
disposal of all material, non-public information. Some confidentiality
agreements will require that the information be returned to the entity which
generated it, and others will require that such information by destroyed. If
the information is to be destroyed, the employee must take the appropriate
steps to verify that proper destruction has taken place.
COMMON AREAS
Employees should be sensitive to the use of fax machines, copy machines,
office discussions, material left in conference rooms, etc. These are all
potential areas where the confidentiality of material, non-public information
could be breached.
<PAGE>
NOTIFICATION OF COMPLIANCE OFFICER
Any information which may be considered material, non-public information
should be brought to the Compliance Officer's attention. Please refer to
EXHIBIT B attached hereto for the proper procedure to be followed in
connection with such information.
PENALTIES
The criminal and civil penalties for trading on or communicating material,
non-public information are severe, both for individuals involved in such
unlawful conduct and their employers. In addition, any violation of this
Policy Statement can be expected to result in serious sanctions by Lincoln
Investments, including dismissal of the persons involved.
Dated: May 1, 1996
<PAGE>
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EXHIBIT A
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COMPLIANCE COMMITTEE DUTIES
A. RECORD OF INFORMATION FLOW
PERSONAL INFORMATION RECORD
The Compliance Officer shall keep a record of any conversation held or
information received regarding:
(1) any breaches or exceptions to the procedures to prevent the flow of
information between the private placement and mezzanine personnel and
portfolio management personnel;
(2) any question raised by any Lincoln Investments employees as to whether
or not information they have is or may be material, non-public
information; and
(3) any question by such employees as to whether or not they should trade
in a particular security for a portfolio or on their personal behalf.
Such record shall include the date, individuals from whom the information was
received or with whom it was discussed, the information discussed or
received, and the recommended action, if any.
COMPLIANCE COMMITTEE MINUTES
The Compliance Committee shall keep minutes of each of its regular and
special meetings. Regular meetings shall be held semi-annually on such date
and such time as the Compliance Committee shall agree. Regular meetings may be
waived or special meetings may be called as the Compliance Officer deems
necessary or appropriate. With respect to any aspect of the meeting which
discusses any material, non-public information received or discussed, such
minutes shall reflect the information, from whom received, and the recommended
action. The Compliance Officer will document the meetings and will keep the
minutes in a secure place.
<PAGE>
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EXHIBIT A
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B. TRAINING AND OVERSIGHT RESPONSIBILITIES
NEW EMPLOYEES
The Compliance Officer shall meet with each new Lincoln Investments' employee
as soon as possible after their arrival. The purpose of this meeting shall be
to explain the procedures and to provide them with a copy of this Policy
Statement.
REVIEW OF CONTINUING TRAINING AND POLICY OVERSIGHT
It shall be the responsibility of the Compliance Committee to review the
adequacy of the training and oversight of Lincoln Investment's employees in
connection with this Policy Statement and the Federal securities laws.
ANNUAL POLICY REVIEW AND ACKNOWLEDGMENT
The Compliance Officer shall be responsible for the annual distribution of
this Policy Statement, as currently amended, to all Access Persons and for
collecting from each Access Person a certificate of compliance.
C. INFORMATION SECURITY
PROCEDURES TO CONTROL ACCESS TO FILES
The Compliance Committee shall review for adequacy the policies and
procedures restricting access to files which may contain material, non-public
information. The Compliance Officer shall also verify that these procedures
are in place and enforced.
<PAGE>
-------------------
EXHIBIT B
-------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. INSIDE INFORMATION PROCEDURE
Any employee in receipt of any non-public information which the employee
believes could be material should take the following steps:
SECURE INFORMATION RECEIVED
The employee should take all necessary and appropriate steps to make sure
that the information received is kept confidential. If in written form, the
writing should be secured in a locked place, and if it has been placed on a
PC, the file should be restricted.
INFORM THE COMPLIANCE OFFICER
The employee should notify the Compliance Officer of information received
other than in the ordinary course of business. Such employee should not
communicate the information to anyone other than the Compliance Officer. The
employee should reduce the information to writing (if it is not already in
writing), and provide a copy of such writing to the Compliance Officer.
TAKE NO ACTION WITH RESPECT TO SUCH INFORMATION
The employee should cease trading in the affected security for the account of
the company or for his or her own account. The employee should, after
communicating the information to the Compliance Officer, await further
instructions from the Compliance Officer regarding the handling of the
information.
<PAGE>
-------------------
EXHIBIT C
-------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POLICY STATEMENT ON COMMUNICATIONS WITH FIDUCIARIES
1. From time to time, directors, officers, or employees ("access persons")
of Lincoln Investment Management, Inc. ("Lincoln Investments") may be in
the possession of material, undisclosed information about unaffiliated
businesses. Each such access person is prohibited from communicating
this information to other access persons of Lincoln Investments or to
access persons of entities affiliated with Lincoln Investments
("Advisers"), any of whom are fiduciaries (as that term is defined in
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and from using that information in the event the access
person possessing the information is also a fiduciary.
2. This Policy Statement is intended to assist access persons in avoiding
situations in which there exists the potential for misuse of material
undisclosed information. Thus, the following guidelines are established
for all access persons of Lincoln Investments.
a. a portfolio manager of a fiduciary account and any other access
persons whose duties include the making of investment decisions or
recommendations with respect to that account should not access
business files maintained by Lincoln Investments or the Advisers
that may reasonably be expected to contain material undisclosed
information with respect to such businesses;
b. a portfolio manager of a fiduciary account and any other access
persons whose duties include the making of investment decisions or
recommendations with respect to that account should not attend
private meetings between other access persons of Lincoln Investments
or access persons of the Advisers, and representatives of businesses
in which the account has invested, during which meetings material
undisclosed information with respect to such businesses is reasonably
expected to be discussed; and
c. a portfolio manager of a fiduciary account and other access persons
whose duties include the making of investment decisions or
recommendations with respect to that account should not attend a
meeting, or portion of a meeting, of any committee of Lincoln
Investments or an Adviser during which meeting of meeting material
undisclosed information with respect to a business in which the
account has invested is reasonably expected to be discussed.
3. For purposes of this Policy Statement, the term "fiduciary account"
means a separately identifiable account the assets of which constitute
plan assets for purposes of certain provisions of Title I of ERISA such
that the manager of the account is subject to the fiduciary
responsibility rules of ERISA.
<PAGE>
PC Docs 12752 3/8/99
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with
the exception of, Delaware Distributors, L.P and Founders CBO, L.P.
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Management Corporation |
| | 100% - Pennsylvania - Management Company |
|
|--| City Financial Partners Ltd. |
| | 100% - England/Wales - Distribution of life|
| | assurance & pension products |
|
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| |
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| |
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| | | Financial Investment Services, Inc. |
| |--| (fka Financial Services Department, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| | | Financial Investments, Inc. |
| |--| (fka Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| |
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| |
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| |
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
|
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
|
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (fka Lincoln Financial Group, Inc.) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Lincoln Financial Advisors Corporation |
| | | (fka LNC Equity Sales Corporation) |
| | | 100% - Indiana - Broker-Dealer |
| |
| | |Corporate agencies: Lincoln Life and Annuity Distributors, |
| | | Inc. ("LLAD")has subsidiaries of which LLAD owns from |
| | | 80%-100% of the common stock (see Attachment #1). These |
| | | subsidiaries serve as the corporate agency offices for the |
| | | marketing and servicing of products of The Lincoln National |
| | | Life Insurance Company. Each subsidiary's assets are less |
| | | than 1% of the total assets of the ultimate controlling |
| | | person. |
| |
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
|
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
|
|
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
|
|
|--| Lincoln National Intermediaries, Inc. |
| | 100% - Indiana - Reinsurance Intermediary |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |--| Delaware International Advisers Ltd.|
| | | | | 81.1% - England - Investment Advisor |
| | |
| | |--| Delaware Management Trust Company |
| | | | 100% - Pennsylvania - Trust Service|
| | | |
| | | |__| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Mktg & Admin Services|
| | | | |
| | | | |--| Delaware International Advisers, Ltd.|
| | | | | 18.9% - England - Investment Advisor |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Holding Company |
| | | | | | ________________________________________
| | | | | |--|Delaware Management Business Trust |
| | | | | | |100% - Delaware - Investment Advisor |
| | | | | | |consists of: |
| | | | | | |Delaware Management Company Series |
| | | | | | | and Delaware Investment Advisers
Series |
| | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-MutualFund Distrib. |
| | | | | | |& Broker/Dealer |
| | | | | | |1%Equity-Delaware Capital |
| | | | |Management, Inc. |
| | | | |1% Equity-Delaware Distributors, |
| | | | |Inc.(G.P) |
| | | | | |
| | | | | |--| Founders Holdings, Inc. |
| | | | | | | 100% - Delaware - General
| | | | | | | Partner |
| | | | | |
| | | | | |--| Founders CBO, L.P. |
| | | | | | |1%-Delaware-Investment |
| | | | | | | Partnership |
| | | | | | |99% held by outside |
| | | | | | |investors |
| | | | | |
| | | | | |--|Founders CBO Corporation|
| | | | |100%-Delaware-Co-Issuer |
| | | | |with Founders CBO |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Distributors, Inc.
| | | | | | | 100% - Delaware - General Partner |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-Mutual Fund Distributor & |
| | | | | | |Broker/Dealer |
| | | | | |1% Equity-Delaware Capital |
| | | | | |Management, Inc. |
| | | | | |1% Equity-Delaware Distributors, Inc.|
| | | | | |(G.P) |
| | | | | |
| | | | |--| Delaware Capital Management, Inc. |
| | | | | |(fka Delaware Investment Counselors, Inc.)|
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & |
Broker/Dealer |
| | | | | | |1% Equity-Delaware Capital
| | | | | | | Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, |
| | | | | | | Inc. |
| | | | |--| Delaware Service Company, Inc. |
| | | | |100%-Delaware-Shareholder Services & |
| | | | |Transfer Agent |
| | | | | |
| | | | |__| Retirement Financial Services, Inc. |
| | | | | |(fka Delaware Investment & Retirement
| | | | | | Services,Inc.) |
| | | | | | 100% - Delaware - Registered Transfer
| | | | | | Agent & I/A |
| | |
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | |
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | |
| | | | Vantage Global Advisors, Inc. |
| | |--| (fka Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| | | Lincoln Investment Management, Inc. |
| |--| (fka Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| |--|AnnuityNet, Inc. |
| | | 100% - Indiana - Distribution of annuity products|
| | |
| | |--| AnnuityNet Insurance Agency, Inc. |
| | | | 100% - Indiana - Insurance Agency |
| |
| |--|Lincoln National Insurance Associates, Inc.|
| | | (fka Cigna Associates, Inc.) |
| | | 100% - Connecticut - Insurance Agency |
| | |
| | |--|Lincoln National Insurance Associates of Alabama, Inc. |
| | | | 100% - Alabama - Insurance Agency |
| | |
| | | | Lincoln National Insurance Associates of Massachusetts,|
| | | | Inc. (fka Cigna Associates of Massachusetts, Inc.) |
| | |--| 100% - Massachusetts - Insurance Agency |
| |
| |--|Sagemark Consulting, Inc. |
| | | (fka Cigna Financial Advisors, Inc.) |
| | | 100% - Connecticut - Broker Dealer |
| |
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Life & Annuity Company of New York |
| | | 100% - New York |
| |
| |--| Lincoln National Aggressive Growth Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Bond Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Capital Appreciation Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Equity-Income Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| | | Lincoln National Global Asset Allocation Fund, Inc. |
| |--| (fka Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (fka Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Re, S.A. |
| | | 1% Argentina - General Business Corp |
| | | (Remaining 99% owned by Lincoln National |
| | | Reassurance Company) |
| |
| |--| Lincoln National International Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Managed Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Money Market Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Social Awareness Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Special Opportunities Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| |
| |--| Lincoln Re, S.A. |
| | | 99% Argentina - General Business Corp |
| | | (Remaining 1% owned by Lincoln National Health|
| | | & Casualty Insurance Company) |
| |
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
|
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
|
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
|
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Reinsurance Company Limited |
| | (fka Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| |
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
|
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
|
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Allied Westminster & Company Limited |
| | | (fka One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| |
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| |
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| |
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| |
| |--| Lincoln Financial Advisers Limited |
| | | (fka: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln ISA Management Limited |
| | | | (fka Lincoln Unit Trust Management Limited; |
| | | | Laurentian Unit Trust Management Limited) |
| | | | 100% - England/Wales - Unit Trust Management |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln Milldon Limited |
| | | |(fka: Laurentian Milldon Limited) |
| | | | 100% - England/Wales - Sales Company |
| | |
| | |--| Laurtrust Limited |
| | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | |
| | |--| Lincoln Management Services Limited |
| | | |(fka: Laurentian Management Services Limited) |
| | | | 100% - England/Wales - Management Services |
| | | |
| | | |--|Laurit Limited |
| | | | |100% - England/Wales - Data Processing Systems |
| |
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund (Dormat) |
| |
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services (Dormat) |
| | |
| | |--| UK Mortgage Securities Limited |
| | | | 100% - England/Wales - Inactive |
| |
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| |
| |--|Lincoln Assurance Limited |
| | | 100% ** - England/Wales - Life Assurance |
| | | |
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | |
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | |
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | |
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment
| | | | |(Inactive) |
| | | |
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | |
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | |
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension |
| | | | | Fund (Inactive) |
| | | |
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| | |
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | |
| |--| LIV Limited (fka Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | |
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| |
| |--| Lincoln Independent Limited |
| | |(fka: Laurentian Independent Financial Planning Ltd.) |
| | | 100% - England/Wales - Independent Financial Adviser |
| | |
| |--| Lincoln Investment Management Limited |
| | |(fka: Laurentian Fund Management Ltd.) |
| | | 100% - England/Wales - Investment Management |
| |
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| |
| |--| Niloda Limited |
| | | 100% - England/Wales - Investment Company |
| |
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| |
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| |
| |--| Lincoln Independent (Jersey) Limited |
| | | (fka Lincoln National (Jersey) Limited) |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln National(Guernsey) Limited |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln SBP Trustee Limited |
| | | 100% - England/Wales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
| | Linsco Reinsurance Company |
|--| (fka Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
|
|
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| |
| | | Solutions Holdings, Inc. |
| |--| 100% - Delaware - General Business Corporation |
| | |
| | |--|Solutions Reinsurance Limited |
| | | | 100% - Bermuda - Class III Insurance Co|
|
| | Seguros Serfin Lincoln, S.A. |
|--| 49% - Mexico - Insurance |
|
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
|
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
Footnotes:
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
<PAGE>
ATTACHMENT #1
LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport,
LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(fka: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (fka: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (fka: Resources/Financial, Inc.
(Albuquerque, NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act ast Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (fka Laurentian
Financial Group PLC); Lincoln Milldon Limited (fka Laurentian Milldon
Limited); Lincoln Management Services Limited (fka Laurentian Management
Services Limited).
FEBRUARY 1997
a. Removal of Lincoln National Financial Group of Philadelphia, Inc. which was
dissolved effective February 25, 1997.
MARCH 1997
a. Removal of Lincoln Financial Services, Inc. which was dissolved effective
March 4, 1997.
APRIL 1997
a. Acquisition of Dougherty Financial Group, Inc. on April 30, 1997. Company
then changed its name to Delvoy, Inc. The acquisition included the mutual
fund group of companies as part of the Voyager acquisition. The following
companies all then were moved under the newly formed holding company,
Delvoy, Inc. effective April 30, 1997: Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
b. Acquisition of Voyager Fund Managers, Inc. and Voyager Fund Distributors,
Inc. on April 30, 1997; merger is scheduled for May 31, 1997 for Voyager
Fund Managers, Inc. into Delaware Management Company, Inc. and Voyager Fund
Distributors, Inc. is to merge into Delaware Distributors, L.P.
c. Removal of Aseguradora InverLincoln, S.A. Compania de Seguros y Reaseguros,
Grupo Financiero InverMexico. Stock was sold to Grupo Financiero
InverMexico effective April 18, 1997.
MAY 1997
a. Name change of The Richard Leahy Corporation to Lincoln National Financial
Institutions Group, Inc. effective May 6, 1997.
b. Voyager Fund Managers, Inc. merged into Delaware Management Company, Inc.
effective May 30, 1997 at 10:00 p.m. with Delaware Management Company, Inc.
surviving.
c. On May 31, 1997 at 2:00 a.m., Voyager Fund Distributors, Inc. merged into a
newly formed company Voyager Fund Distributors (Delaware), Inc.,
incorporated as a Delaware corporation on May 23, 1997. Voyager Fund
Distributors (Delaware), Inc. then merged into Delaware Distributors, L.P.
effective May 31, 1997 at 2:01 a.m. Delaware Distributors, L.P. survived.
JUNE 1997
a. Removal of Lincoln National Sales Corporation of Maryland -- company
dissolved June 13, 1997.
b. Addition of Lincoln Funds Corporation, incorporated as a Delaware
corporation on June 10, 1997 at 2:00 p.m.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Southwest Financial Group, Inc. -- company's term of
existence expired July 18, 1998.
<PAGE>
BOOKS AND RECORDS
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC.
RULES UNDER SECTION 31 OF THE INVESTMENT COMPANY ACT OF 1940
Records to Be Maintained by Registered Investment Companies, Certain
Majority-Owned Subsidiaries Thereof, and Other Persons Having Transactions with
Registered Investment Companies.
Reg. 270.31a-1. (a) Every registered investment company, and every
underwriter,broker, dealer, or investment advisor which is a majority-owned
subsidiary of such a company, shall maintain and keep current the accounts,
books, and other documents relating to its business which constitute the record
forming the basis for financial statements required to be filed pursuant to
Section 30 of the Investment Company Act of 1940 and of the auditor's
certificates relating thereto.
<TABLE>
<CAPTION>
<S><C>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Annual Reports Finance Eric Jones Permanently, the first two
To Shareholders years in an easily accessible
place
Semi-Annual Finance Eric Jones Permanently, the first two
Reports years in an easily accessible
place
Form N-SAR Finance Eric Jones Permanently, the first two
years in an easily accessible
place
(b) Every registered investment company shall maintain and keep current the
following books, accounts, and other documents:
TYPE OF RECORD
(1) Journals (or other records of original entry) containing an itemized daily
record in detail of all purchases and sales of securities (including sales and
redemptions of its own securities), all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash and all other debits and
credits. Such records shall show for each such transaction the name and quantity
of securities, the unit and aggregate purchase or sale price, commission paid,
the market on which effected, the trade date, the settlement date, and the name
of the person through or from whom purchased or received or to whom sold or
delivered.
PURCHASES AND SALES JOURNALS
Daily reports Delaware Fund Accounting Permanently, the first two
of securities years in an easily accessible
transactions place
PORTFOLIO SECURITIES
Equity Delaware Fund Accounting Permanently, the first two
Notifications years in an easily accessible
place
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
RECEIPTS AND DELIVERIES OF SECURITIES (SHARES)
Not Applicable.
PORTFOLIO SECURITIES
Debit and Delaware Fund Accounting Permanently, the first two
Credit Advices years in an easily accessible
from Bankers place
Trust Company
(Bank statement)
RECEIPTS AND DISBURSEMENTS OF CASH AND OTHER DEBITS AND CREDITS
Investment Delaware Fund Accounting Permanently, the first two
Journal years in an easily accessible
place
Daily Journals Delaware Fund Accounting Permanently, the first two
years in an easily accessible
place
(2) General and auxiliary ledgers (or other record) reflecting all asset,
liability, reserve, capital, income and expense accounts, including:
(i) Separate ledger accounts (or other records) reflecting the following:
(a) Securities in transfer;
(b) Securities in physical possession;
(c) Securities borrowed and securities loaned;
(d) Monies borrowed and monies loaned (together with a record of the collateral therefore and
substitutions in such collateral);
(e) Dividends and interest received;
(f) Dividends receivable and interest accrued.
Instructions. (a) and (b) shall be stated in terms of securities quantities only; (c) and (d) shall be stated in dollar
amounts and securities quantities as appropriate; (e) and (f) shall be stated in dollar amounts only.
GENERAL LEDGER
General Ledger Delaware Fund Accounting Permanently, the first two
years in an easily accessible
place
SECURITIES IN TRANSFER
Bank Advices Delaware Fund Accounting Permanently, the first two
years in an easily accessible
place
Notification Treasurers- Ken Hobson Permanently, the first two
of Securities Sec. Custody years in an easily accessible
Transactions. place
(Original
records main-
tained by
custodian bank.)
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
SECURITIES IN PHYSICAL POSSESSION
Securities Treasurers- Ken Hobson Permanently, the first two
Ledger Sec. Custody years in an easily accessible
(Portfolio place
report
available on
request from
Bankers Trust
Company-Keeper
of original
records).
Monthly Securities Nate Wagley Permanently, the first two
Portfolio Compliance years in an easily accessible
Listings place
SECURITIES BORROWED AND LOANED
AOS file Treasurers- Ken Hobson Permanently, the first two
Sec. Custody years in an easily accessible
place
MONIES BORROWED AND LOANED
Not Applicable.
DIVIDENDS AND INTEREST RECEIVED
Interest File Delaware Fund Accounting Permanently, the first two
Accrual years in an easily accessible
Activity place
Journal
Dividend Master Delaware Fund Accounting Permanently, the first two
File Display . years in an easily accessible
place
DIVIDENDS RECEIVABLE AND INTEREST ACCRUED
Investment Delaware Fund Accounting Permanently, the first two
Journal years in an easily accessible
place
Dividend Master Delaware Fund Accounting Permanently, the first two
File Display years in an easily accessible
place
Interest File Delaware Fund Accounting Permanently, the first two
Accrual years in an easily accessible
Activity place
Journal
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
(ii) Separate ledger accounts (or other records) for each portfolio security,
showing (as of trade dates), (a) the quantity and unit and aggregate price for
each purchase, sale, receipt, and delivery of securities and commodities for
such accounts, and (b) all other debits and credits for such accounts.
Securities positions and money balances in such ledger accounts (or other
records) shall be brought forward periodically but not less frequently than at
the end of fiscal quarters. Any portfolio security, the salability of which is
conditioned, shall be so noted. A memorandum record shall be available setting
forth, with respect to each portfolio security accounts, the amount and
declaration, ex-dividend, and payment dates of each dividend declared thereon.
LEDGER ACCOUNT FOR EACH PORTFOLIO SECURITY
Inventory Delaware Fund Accounting Permanently, the first two
(on line) years in an easily accessible
place
(iii) Separate ledger accounts (or other records) for each broker-dealer, bank
or other person with or through which transactions in portfolio securities are
affected, showing each purchase or sale of securities with or through such
persons, including details as to the date of the purchase or sale, the quantity
and unit and aggregate prices of such securities, and the commissions or other
compensation paid to such persons. Purchases or sales effected during the same
day at the same price may be aggregated.
Broker-Dealer Delaware Fund Accounting Permanently, the first two
Ledger years in an easily accessible
place
(iv) Separate ledger accounts (or other records), which may be maintained by a
transfer agent or registrar, showing for each shareholder of record of the
investment company the number of shares of capital stock of the company held. in
respect of share accumulation accounts (arising from periodic investment plans,
dividend reinvestment plans, deposit of issued shares by the owner thereof,
etc.), details shall be available as to the dates and number of shares of each
accumulation, and except with respect to already issued shares deposited by the
owner thereof, prices of each such accumulation.
SHAREHOLDER ACCOUNTS
Maintained by Finance Eric Jones Permanently, the first two
LNL years in an easily accessible
place
(3) A securities record or ledger reflecting separately for each portfolio
security as of trade date all "long" and "short" positions carried by the
investment company for its own account and showing the location of all
securities long and the off-setting position to all securities short. The record
called for by this paragraph shall not be required in circumstances under which
all portfolio securities are maintained by a bank or banks or a member or
members of a national securities exchange as custodian under a custody agreement
or as agent for such custodian.
SECURITIES POSITION RECORD
Maintained by Chase Mutual Funds Division Permanently, the fist two
Custodian of years in an easily accessible
Securities place
(4) Corporate charters, certificates of incorporation or trust agreements, and
bylaws, and minute books of stockholders' and directors' or trustees' meetings;
and minute books of directors' or trustees' committee and advisory board or
advisory committee meetings.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
CORPORATE DOCUMENTS
Corporate Secretary Cindy Rose Permanently, the first two
charter, cer- years in an easily accessible
tificate of place
incorporation.
Bylaws and Secretary Cindy Rose Permanently, the first two
minute books. years in an easily accessible
place
(5) A record of each brokerage order given by or in behalf of the investment
company for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such record shall include the name of the broker, the
terms and conditions of the order and of any modification or cancellation
thereof, the time of entry or cancellation, the price at which executed, and the
time of receipt of report of execution. The record shall indicate the name of
the person who placed the order in behalf of the investment company.
Sales Order or VGA Mutual Funds Division Six years, the first two
Purchase Order years in an easily accessible
place
Confirmations VGA Mutual Funds Division Six years, the first two
years in an easily accessible
place
Notification Investment Pat Roller Six years, the first two
Form (From AOS Admin. years in an easily accessible
Trading System) place
(6) A record of all other portfolio purchase or sales showing details comparable to those prescribed in paragraph 5 above.
SHORT-TERM INVESTMENTS
Notification Investment Pat Roller Six years, the first two
Form (From AOS Admin. years in an easily accessible
S-T System) place
Bank Advice and LIM Ann Warner Six years, the first two
Issuer years in an easily accessible
Confirmation place
(7) A record of all puts, calls, spreads, straddles, and other options in which
the investment company has any direct or indirect interest or which the
investment company has granted or guaranteed; and a record of any contractual
commitments to purchase, sell, receive or deliver securities or other property
(but not including open orders placed with broker-dealers for the purchase or
sale of securities, which may be cancelled by the company on notices without
penalty or cost of any kind); containing at least an identification of the
security, the number of units involved, the option price, the date of maturity,
the date of issuance, and the person to whom issued.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
RECORD OF PUTS, CALLS, SPREADS, ETC.
Orders Delaware Fund Accounting Six years, the first two
years in an easily accessible
place
(8) A record of the proof of money balances in all ledger accounts (except
shareholder accounts), in the form of trial balances. Such trial balances shall
be prepared currently at least once a month.
TRIAL BALANCE
General Ledger Delaware Fund Accounting Permanently, the first two
years in an easily accessible
place
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio securities
to named brokers or dealers and the division of brokerage commissions or other
compensation on such purchase and sale orders among named persons were made
during such quarter. The record shall indicate the consideration given to (a)
sales of shares of the investment company by brokers or dealers, (b) the
supplying of services or benefits by brokers or dealers to the investment
company, its investment advisor or principal underwriter or any persons
affiliated therewith, and (c) any other considerations other than the technical
qualifications of the brokers and the dealers as such. The record shall show the
nature of their services or benefits made available, and shall describe in
detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sales orders and such
division of brokerage commissions or other compensation. The record shall also
include the identifies of the person responsible for the determination of such
allocation and such division of brokerage commissions or other compensation.
Brokerage LIM Gina Rohrbacher Six years, the first two
Allocation years in an easily accessible
Report place
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph are
applicable to the extent they are not met by compliance with the requirements of
paragraph 4 of this Rule 31a1(b).
Trading VGA Mutual Funds Division Six years, the first two
Authorization years in an easily accessible
place
Advisory Law Division Products and Distribution, Six years, the first two
Agreements LNL Law Division years in an easily accessible
place
(11) Files of all advisory material received from the investment advisor, any
advisory board or advisory committee, or any other persons from whom the
investment company accepts investment advice publications distributed generally.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Issuer Folders VGA Mutual Funds Division Six years, the first two
years in an easily accessible
place
(12) The term "other records" as used in the expressions "journals (or other
records of original entry)" and "ledger accounts (or other records)" shall be
construed to include, where appropriate, copies of voucher checks,
confirmations, or similar documents which reflect the information required by
the applicable rule or rules in appropriate sequence and in permanent form,
including similar records developed by the use of automatic data processing
systems.
Correspondence Product Admin. Nancy Alford Six years, the first two
Product Mgt. years in an easily accessible
place
Pricing Sheets Delaware Fund Accounting Permanently, the first two
years in an easily accessible
place
Bank State- Delaware Fund Accounting Six years, the first two
ments, years in an easily accessible
Cancelled place
Checks and
Cash Recon-
ciliations
</TABLE>
March 24, 2000
