[LOGO OF VANTAGE INVESTMENT ADVISORS]
Lincoln National
Special Opportunities Fund, Inc.
Semi-Annual Report
June 30, 2000
<PAGE>
Lincoln National Special Opportunities Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
<PAGE>
Lincoln National Special Opportunities Fund, Inc.
Managed by: [LOGO OF VANTAGE INVESTMENT ADVISORS]
For the six-month period ended June 30, 2000, the Fund returned -3.8% (net of
fees) and lagged its benchmark, the Russell Midcap(R) Value Index, return of
-0.7%.
Midcap stocks as represented by the S&P Midcap Index were higher in the first
half of 2000, but the positive returns were primarily attributable to high
priced growth stocks. Stocks had decidedly mixed results year-to-date as
uncertainty around the future direction of interest rates caused an investor
stampede to those areas that could hold up in a period of market decline. Among
midcap stocks, technology, healthcare, and utility companies were the big
winners.
In 1999, the disparity between value and growth was widest among mid-cap stocks,
with growth outperforming value by over 50%. The same is true for 2000
year-to-date as mid-cap growth stocks have outperformed mid-cap value stocks by
more than 12% year-to-date as represented by the Russell Midcap Indices. The
disparity was 30% through February, but a significant reversal in March narrowed
the chasm between these market style segments.
The Fund is disciplined and conservative with an emphasis on companies with
attractive valuations as determined by several indicators of value. This
emphasis resulted in a deeper value orientation than the index causing the
year-to-date under performance. On the positive side, the Fund's conservative
approach places more emphasis on utility companies which held up well during the
market's decline as these companies tend to be favored by investors seeking
stability in periods of uncertainty.
The Vantage Investment Team
Special Opportunities Fund 1
<PAGE>
Lincoln National
Special Opportunities Fund, Inc.
Statement of Net Assets - Unaudited
June 30, 2000
Investments:
Number Market
Common Stock: of Shares Value
----------------------------------------------------------------
Automobiles & Auto Parts: 1.2%
Litton Industries * 20,000 $ 840,000
Northrop 71,600 4,743,500
----------------------------------------------------------------
5,583,500
Automobiles & Auto Parts: 1.7%
----------------------------------------------------------------
Cooper Tire & Rubber 103,800 1,154,775
Cunnins Engine 59,700 1,626,825
Delphi Automotive Systems 107,000 1,558,188
Goodyear Tire & Rubber 41,800 836,000
Magna International-Class A 30,400 1,436,400
Navistar International * 48,800 1,515,850
----------------------------------------------------------------
8,128,038
Banking, Finance & Insurance: 17.3%
----------------------------------------------------------------
Aetna 34,400 2,208,050
Allmerica Financial 45,700 2,393,538
AmSouth Bancorporation 274,800 4,328,100
Aon 28,800 894,600
Astoria Financial 122,600 3,156,950
Bear Stearns 104,000 4,329,000
CIT Group 75,000 1,218,750
Conseco 260,000 2,535,000
Dime Bancorp 144,900 2,282,175
Edwards (A.G.) 126,600 4,937,400
Everest Reinsurance Holdings 70,800 2,327,550
Finova Group 60,600 787,800
Firstplus Financial Group * 359,500 104,255
Golden State * 194,700 3,504,600
GreenPoint Financial 160,200 3,003,750
Lehman Brothers Holdings 75,200 7,111,100
Loews Corporation 89,300 5,358,000
Old Republic International 307,000 5,065,500
Pacific Century Financial 249,300 3,646,013
Pacificare Health Systems * 26,600 1,600,988
Paine Webber Group 33,000 1,501,500
PNC Financial Group 95,800 4,490,625
Provident Financial Group 34,700 826,294
Roslyn Bancorp 100,000 1,660,938
SouthTrust 148,100 3,350,763
St. Paul 100,000 3,412,500
Summit Bancorp 29,600 728,900
Union Planters 28,000 782,250
Unionbancal 149,900 2,782,519
UnumProvident 47,300 948,956
Washington Federal 155,700 2,841,525
----------------------------------------------------------------
84,119,889
Buildings & Materials: 1.3%
----------------------------------------------------------------
Louisiana-Pacific 195,000 2,120,625
Pulte 118,600 2,564,725
USG 54,600 1,658,475
----------------------------------------------------------------
6,343,825
Business Services: 1.3%
----------------------------------------------------------------
Deluxe 167,800 3,953,788
Manpower 22,000 704,000
Tech Data * 37,300 1,624,881
----------------------------------------------------------------
6,282,669
Cable, Media & Publishing: 5.7%
----------------------------------------------------------------
AMFM * 48,000 3,312,000
Central Newspapers Class A 54,000 3,415,500
Donnelley & Sons 35,000 789,688
Dun & Bradstreet 47,300 1,353,963
Echostar Communications Class A * 20,300 672,120
Harte-Hanks 100,000 2,500,000
Knight-Ridder 106,000 5,637,875
Number Market
Cable, Media & Publishing (Cont.) of Shares Value
----------------------------------------------------------------
McGraw-Hill 65,000 $ 3,510,000
Metro-Goldwyn-Mayer * 40,000 1,045,000
New York Times 50,000 1,975,000
Reynolds & Reynolds Class A 37,300 680,725
Tribune 46,600 1,631,000
USA Networks * 41,500 897,438
----------------------------------------------------------------
27,420,309
Chemical: 2.5%
----------------------------------------------------------------
Air Products & Chemicals 38,100 1,173,956
Eastman Chemical 20,000 955,000
FMC 41,000 2,378,000
Lubrizol 107,400 2,255,400
Millenium Chemicals 39,000 663,000
Praxair 20,200 756,238
RPM/Ohio 213,200 2,158,650
Sigma-Aldrich 26,600 778,050
W.R. Grace & Company * 106,400 1,290,100
----------------------------------------------------------------
12,408,394
Computer & Technology: 6.5%
----------------------------------------------------------------
3Com * 70,600 4,068,325
Apple Computer * 102,100 5,347,488
Autodesk 20,500 711,094
Computer Associates International 14,400 737,100
Compuware * 63,900 662,963
Diebold 78,600 2,190,975
Micron Technology 104,600 9,211,338
NCR * 30,000 1,168,125
National Data 20,000 460,000
Perkinelmer 20,300 1,342,338
Quantum - DLT & Storage * 77,100 746,906
SDL * 4,600 1,311,863
Seagate Technology * 40,000 2,200,000
Symantec * 11,100 598,706
Teradyne * 8,600 632,100
----------------------------------------------------------------
31,389,321
Consumer Products: 0.2%
----------------------------------------------------------------
Service International * 147,100 468,881
ServiceMaster 62,400 709,800
----------------------------------------------------------------
1,178,681
Electronics & Electrical: 7.5%
----------------------------------------------------------------
Avnet 48,600 2,879,550
Advanced Micro Devices 50,000 3,862,500
Arrow Electronics 38,000 1,178,000
Atmel * 28,100 1,036,188
Eaton 47,500 3,182,500
FirstEnergy 268,000 6,264,500
KLA Instruments * 17,800 1,042,412
LSI Logic * 38,000 2,056,750
National Semiconductor * 63,600 3,609,300
National Service Industries 155,800 3,038,100
Rockwell International 19,500 614,250
SCI Systems * 21,500 842,531
Thomas & Betts 33,500 640,688
Vishay Intertechnology * 73,500 2,788,406
Whirlpool 76,000 3,543,500
----------------------------------------------------------------
36,579,175
Energy: 12.5%
----------------------------------------------------------------
Amerada Hess 38,200 2,358,850
Apache 78,400 4,610,900
Ashland 152,800 5,357,550
BJ Services 19,000 1,187,500
Baker Hughes 81,500 2,608,000
Burlington Resources 35,500 1,357,875
Coastal 20,300 1,235,763
Constellation Energy 138,800 4,519,675
Cooper Cameron * 11,600 765,600
Dynegy 28,700 1,960,569
Ensco International 23,600 845,175
Equitable Resources 17,300 834,725
Global Marine * 31,300 882,269
Kerr-McGee 71,200 4,196,350
Murphy Oil 80,000 4,755,000
Occidental Petroleum 250,000 5,265,625
Special Opportunities Fund 2
<PAGE>
Number Market
Energy (Cont.) of Shares Value
----------------------------------------------------------------
Questar 90,700 $ 1,757,313
Smith International * 10,900 793,656
Sunoco 70,000 2,060,625
Tosco 27,100 767,269
USX-Marathon Group 220,000 5,513,750
Ultramar Diamond Shamrock 202,300 5,019,569
Unocal 29,900 990,438
Weatherford Interntional * 24,900 991,330
----------------------------------------------------------------
60,635,376
Food, Beverage & Tobacco: 4.8%
----------------------------------------------------------------
Archer-Daniels-Midland 101,200 993,025
Ball 79,600 2,562,125
Dean Foods 85,300 2,702,944
Fortune Brands 160,000 3,690,000
Gallagher Group 69,600 1,492,050
IBP 153,800 2,374,288
Nabisco Group Holdings 110,600 2,868,688
RJ Reynolds Tobacco Holdings 70,900 1,980,769
Supervalu 243,700 4,645,531
----------------------------------------------------------------
23,309,420
Healthcare & Pharmaceuticals: 4.1%
----------------------------------------------------------------
Allergan 25,000 1,862,500
Genzyme-General Division * 17,800 1,057,987
Healthsouth * 115,300 828,718
Mallinckrodt 132,000 5,733,750
McKesson HBOC 42,300 885,655
Tent Healthcare 74,000 1,998,000
UnitedHealth Group 87,300 7,485,975
----------------------------------------------------------------
19,852,585
Hotels & Diversified Reits: 0.2%
----------------------------------------------------------------
Starwood Hotels & Resorts Worldwide 26,000 840,125
----------------------------------------------------------------
Industrial Machinery: 2.6%
----------------------------------------------------------------
Briggs & Stratton 18,300 626,775
Dover 121,300 4,920,230
Deere & Co. 17,600 651,200
ITT Industries 34,700 1,054,012
Ingersoll-Rand 29,000 1,167,250
Tecumseh Products Class A 42,800 1,634,425
Thermo Electron 40,000 842,500
Trinity Industries 92,700 1,714,950
----------------------------------------------------------------
12,611,342
Leisure, Lodging & Entertainment: 1.0%
----------------------------------------------------------------
Hasbro 150,000 2,259,375
Mandalay Resorts Group * 80,000 1,600,000
Royal Caribbean Cruises 62,000 1,147,000
----------------------------------------------------------------
5,006,375
Metals & Mining: 0.9%
----------------------------------------------------------------
Mueller Industries * 33,400 935,200
Nucor 19,700 653,794
USX-U.S. Steel Group 47,100 874,294
Worthington Industries 197,200 2,070,600
----------------------------------------------------------------
4,533,888
Multifamily Reits: 0.5%
----------------------------------------------------------------
Equity Residential Properties 50,000 2,300,000
----------------------------------------------------------------
Office/Industrial Reits: 2.2%
----------------------------------------------------------------
Equity Office Properties Trust 192,400 5,303,025
Highwoods Properties 152,400 3,657,600
Mack-Cali Realty 68,900 1,769,869
----------------------------------------------------------------
10,730,494
Packaging & Containers: 0.2%
----------------------------------------------------------------
Crown Cork & Seal 59,100 886,500
----------------------------------------------------------------
Paper & Forest Products: 1.6%
----------------------------------------------------------------
Champion International 14,900 1,059,187
Georgia-Pacific 119,700 3,142,125
Westvaco 52,100 1,292,730
Weyerhaeuser 50,000 2,150,000
----------------------------------------------------------------
7,644,042
Number Market
Retail: 3.3% of Shares Value
----------------------------------------------------------------
Federated Department Stores * 77,900 $ 2,629,125
K Mart * 342,000 2,329,875
Liz Clairborne 20,500 722,625
Limited 83,200 1,799,200
Longs Drug Stores 93,600 2,035,800
Sherwin-Williams 135,600 2,873,025
Toys R Us * 155,700 2,267,380
Zale * 40,700 1,485,550
----------------------------------------------------------------
16,142,580
Retail Strip Centers Reits: 0.7%
----------------------------------------------------------------
New Plan Excel Realty Trust 269,700 3,506,100
----------------------------------------------------------------
Telecommunications: 3.2%
----------------------------------------------------------------
Alltel 50,000 3,096,875
American Tower Class A 13,000 541,937
Comsat 34,100 841,844
Crown Castle * 22,100 806,650
Harris 42,200 1,382,050
L-3 Communications * 22,300 1,272,494
Nextlink Communications Class A * 40,800 1,547,850
Telephone & Data Systems 34,000 3,408,500
Voicestream Wireless * 14,600 1,697,934
Winstar Communications * 24,100 816,388
----------------------------------------------------------------
15,412,522
Textiles, Apparel, & Furniture: 1.2%
----------------------------------------------------------------
Johnson Controls 85,100 4,366,694
Lear * 68,400 1,368,000
----------------------------------------------------------------
5,734,694
Transportation & Shipping: 2.9%
----------------------------------------------------------------
Brunswick 90,600 1,500,562
CNF Transportation 27,100 616,525
Continental Airlines Class B * 38,000 1,786,000
Delta Air Lines 90,000 4,550,625
Galileo International 30,000 626,250
Ryder System 34,700 657,130
Southwest Airlines 16,000 303,000
Tidewater 40,000 1,440,000
UAL * 44,100 2,566,069
----------------------------------------------------------------
14,046,161
Utilities: 11.9%
----------------------------------------------------------------
Allegheny Energy 144,400 3,952,950
Ameren 177,400 5,987,250
CenturyTel 89,200 2,564,500
Citizens Communications 47,500 819,375
Conectiv 182,100 2,833,931
DTE Energy 171,000 5,226,187
Dominion Resources 160,300 6,872,862
Edison International 41,900 858,950
Entergy 200,000 5,437,500
General Public Utilities 191,200 5,174,350
Idacorp 35,600 1,148,100
Public Service Enterprise Group 172,000 5,955,500
RGS Energy Group 110,000 2,447,500
Reliant Energy 74,600 2,205,362
TXU 137,600 4,059,200
Wisconsin Energy 105,600 2,092,200
----------------------------------------------------------------
57,635,717
Common Stock: 99.0%
----------------------------------------------------------------
(Cost $514,810,005) 480,261,722
----------------------------------------------------------------
Par
Money Market Instruments: Amount
----------------------------------------------------------------
Associate Corporation of North America
6.85% 7/03/00 $3,000,000 3,000,000
----------------------------------------------------------------
Total Money Market Instruments: 0.6%
(Cost $3,000,000) 3,000,000
----------------------------------------------------------------
Total Investments: 99.6%
(Cost $517,810,005) 483,261,722
----------------------------------------------------------------
Special Opportunities Fund 3
<PAGE>
Market
Value
----------------------------------------------------------------
Other Assets Over Liabilities: 0.4% $ 1,862,149
----------------------------------------------------------------
Total Net Assets: 100.0%
(Equivalent to 21.868 per share
based on 22,184,569 shares
issued and outstanding) $485,123,871
----------------------------------------------------------------
Components of Net Assets at June 30, 2000:
----------------------------------------------------------------
Common Stock, par value $.01 per share,
50,000,000 authorized shares $ 221,846
Paid in capital in excess of par value of
shares issued 520,334,041
Undistributed net investment income 8,811,981
Accumulated net realized loss on investments (9,695,714)
Net unrealized depreciation of investments (34,548,283)
----------------------------------------------------------------
Total Net Assets $485,123,871
----------------------------------------------------------------
* Non-income producing security.
See accompanying notes to financial statements.
Special Opportunities Fund 4
<PAGE>
Lincoln National Special Opportunities Fund, Inc.
Statement of Operations - Unaudited
Six months ended June 30, 2000
Investment income:
Dividends $ 7,673,800
------------------------------------------------------------------------------
Interest 238,723
------------------------------------------------------------------------------
Total investment income 7,912,523
------------------------------------------------------------------------------
Expenses:
Management fees 1,076,869
------------------------------------------------------------------------------
Accounting fees 120,909
------------------------------------------------------------------------------
Printing and postage 54,608
------------------------------------------------------------------------------
Legal fees 17,001
------------------------------------------------------------------------------
Custody fees 14,423
------------------------------------------------------------------------------
Directors fees 2,100
------------------------------------------------------------------------------
Other 46,113
------------------------------------------------------------------------------
1,332,023
------------------------------------------------------------------------------
Less expenses paid indirectly (7,290)
------------------------------------------------------------------------------
Total expenses 1,324,733
------------------------------------------------------------------------------
Net investment income 6,587,790
------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and futures contracts:
Net realized loss on investment transactions (5,704,152)
------------------------------------------------------------------------------
Net realized gain on futures contracts 889,997
------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of
investments and futures contracts (30,316,035)
------------------------------------------------------------------------------
Net realized and unrealized loss on investments
and futures contracts (35,130,190)
------------------------------------------------------------------------------
Net decrease in net assetsresulting from operations $(28,542,400)
------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months
ended
6/30/00 Year ended
(Unaudited) 12/31/99
-------------------------------
<S> <C> <C>
Changes from operations:
Net investment income $ 6,587,790 $ 11,247,442
----------------------------------------------------------------------------------
Net realized gain on investment transactions and
futures contracts (4,814,155) 119,499,372
----------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments and futures contracts (30,316,035) (172,192,831)
----------------------------------------------------------------------------------
Net decrease in net assetsresulting from operations (28,542,400) (41,446,017)
----------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income - (9,023,251)
----------------------------------------------------------------------------------
Net realized gain on investment transactions (101,024,374) (86,192,752)
----------------------------------------------------------------------------------
Total distributions to shareholders (101,024,374) (95,216,003)
----------------------------------------------------------------------------------
Net decrease in net assets
resulting from capital share transactions (50,950,898) (115,492,827)
----------------------------------------------------------------------------------
Total decrease in net assets (180,517,672) (252,154,847)
----------------------------------------------------------------------------------
Net Assets, at beginning of period 665,641,543 917,796,390
----------------------------------------------------------------------------------
Net Assets, at end of period $485,123,871 $665,641,543
----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
Special Opportunities Fund 5
<PAGE>
Lincoln National Special Opportunities Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each period)
<TABLE>
<CAPTION>
Six months
ended
6/30/00 Year ended December 31,
(Unaudited) 1999 1998 1997 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.225 $ 33.416 $ 35.056 $ 29.423 $ 27.383 $ 22.164
Income (loss) from investment operations:
Net investment income 0.324 0.482 0.470 0.477 0.548 0.616
Net realized and unrealized gain (loss) on
investments and futures contracts (1.107) (1.779) 1.795 7.293 3.867 6.131
----------------------------------------------------------------------
Total from investment operations (0.783) (1.297) 2.265 7.770 4.415 6.747
----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income - (0.373) (0.862) - (0.548) (0.616)
Distributions from net realized gain on
investment transactions (5.574) (3.521) (3.043) (2.137) (1.827) (0.912)
----------------------------------------------------------------------
Total dividends and distributions (5.574) (3.894) (3.905) (2.137) (2.375) (1.528)
----------------------------------------------------------------------
Net asset value, end of period $ 21.868 $ 28.225 $ 33.416 $ 35.056 $ 29.423 $ 27.383
----------------------------------------------------------------------
Total Return(1) (3.83)% (4.45)% 6.79% 28.15% 16.51% 31.86%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.50%(2) 0.44% 0.42% 0.42% 0.44% 0.45%
Ratio of net investment income
to average net assets 2.47%(2) 1.46% 1.44% 1.57% 2.00% 2.39%
Portfolio Turnover 31.99% 96.49% 76.27% 73.74% 88.17% 90.12%
Net assets, end of period (000 omitted) $485,124 $665,652 $917,796 $872,822 $648,592 $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) Annualized.
See accompanying notes to financial statements.
Special Opportunities Fund 6
<PAGE>
Lincoln National Special Opportunities Fund, Inc.
Notes to Financial Statements - Unaudited
June 30, 2000
The Fund: Lincoln National Special Opportunities Fund, Inc. (the "Fund") is
registered as an open-end, non-diversified management investment company under
the Investment Company Act of 1940, as amended. The Fund's shares are sold only
to The Lincoln National Life Insurance Company and the Lincoln Life & Annuity
Company of New York (the "Companies") for allocation to their variable annuity
products and variable universal life products.
The Fund's investment objective is to maximize capital appreciation. The Fund
primarily invests in mid-size companies whose stocks have significant growth
potential. Current income is a secondary consideration.
1. Significant Accounting Policies
Investment Valuation: All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. Money market instruments having
less than 60 days to maturity are valued at amortized cost, which approximates
market value. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Directors.
Investment Transactions and Investment Income: Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis and includes
amortization of premium and discount. Realized gains or losses from investment
transactions are reported on an identified cost basis.
Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
Expenses: The custodian bank of the Fund has agreed to waive its custodial fees
when the Fund maintains a prescribed amount of cash on deposit in certain
non-interest bearing accounts. For the six months ended June 30, 2000, the
custodial fees offset arrangements amounted to $7,290.
Taxes: The Fund has complied with the special provisions of the Internal Revenue
Code for regulated investment companies. As such, the Fund is not subject to
U.S. federal income taxes to the extent that it distributes all of its taxable
income for its fiscal year.
2. Management Fees and Other Transactions With Affiliates
Lincoln Investment Management Company (the "Advisor") and its affiliates manage
the Fund's investment portfolios and maintain its accounts and records. For
these services, the Advisor receives a management fee at an annual rate of .48%
of the first $200,000,000 of the average daily net assets of the Fund, .40% of
the next $200,000,000, and .30% of the average daily net assets of the Fund in
excess of $400,000,000. The sub-advisor for the Fund, Vantage Investment
Advisors, an affiliate of the Advisor, is paid directly by the Advisor.
Delaware Service Company ("Delaware"), an affiliate of the Advisor, provides
accounting services and other administration support to the Fund. For these
services, the Fund pays Delaware a monthly fee based on average net assets,
subject to certain minimums.
If the aggregate annual expenses of the Fund, including the management fee, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses, exceed
1.50% of the average daily net assets of the Fund, the Advisor will reimburse
the Fund in the amount of such excess. No reimbursement was due for the six
months ended June 30, 2000.
Certain officers and directors of the Fund are also officers or directors of the
Companies and receive no compensation from the Fund. The compensation of
unaffiliated directors of the Fund is borne by the Fund.
Special Opportunities Fund 7
<PAGE>
Notes to Financial Statements - Unaudited - (Continued)
3. Investments
The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of investments purchased and the aggregate
proceeds from investments sold for the six months ended June 30, 2000 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized depreciation at June 30, 2000 are as
follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Depreciation
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$168,967,304 $295,418,643 $53,719,603 $(88,267,886) $(34,548,283)
</TABLE>
4. Supplemental Financial Instrument Information
Financial Futures Contracts: The Fund may purchase or sell financial futures
contracts, which are exchange traded, to hedge fluctuation risks of adverse
changes in exchange markets or interest rates. The Fund bears the market risk
that arises from changes in the value of these financial instruments. The Fund
deposits with its custodian a specified amount of cash or eligible securities
called "initial margin" or "variation margin". The Fund is subject to the market
risks of unexpected changes in the underlying markets and interest rates. There
were no open financial futures contracts at June 30, 2000.
5. Summary of Changes From Capital Share Transactions
<TABLE>
<CAPTION>
Shares Issued Upon Net Decrease
Capital Reinvestment of Capital Shares Resulting From Capital
Shares Sold Dividends Redeemed Share Transactions
-------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
June 30, 2000
(Unaudited): 237,245 $ 6,345,932 4,372,403 $101,024,374 (6,008,985) $(158,321,204) (1,399,337) $ (50,950,898)
Year ended
December 31, 1999: 1,227,943 37,679,780 3,171,453 95,216,003 (8,281,237) (248,388,610) 3,881,841 (115,492,827)
</TABLE>
6. Distributions to Shareholders
The Fund declares and distributes dividends on net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
Special Opportunities Fund 8
