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LINCOLN NATIONAL
MANAGED FUND, INC.
DESCRIPTION OF THE FUND
The Managed Fund (fund) was incorporated in Maryland in 1983. It is an open-end
diversified management investment company whose investment objective is maximum
long-term total return (capital gains plus income) consistent with prudent
investment strategy. The fund pursues its objective by investing in a portfolio
of stocks, bonds, money market instruments and securities convertible into
common stock. 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 General information in the Appendix. There
is no assurance that the objective of the fund will be achieved.
A principal risk in this kind of investing involves the allocation of assets
among the various sectors. Adverse market fluctuations could result if asset
allocation decisions by the fund's investment advisor (the advisor) are
inappropriately timed. Additionally, there are risks associated with the
different investment sectors (i.e., money market, bond market and stock
market), which the fund attempts to minimize by maintaining some balance among
these various sectors. The advisor commits the fund's assets to securities in
the various sectors based on periodic reassessment of the opportunities in the
different areas. See Investment policies and techniques.
PORTFOLIO MANAGERS
Jay Yentis, Second Vice-President, Lincoln Investment, the advisor to the fund,
is the manager of the fund's asset allocation strategy. Yentis, a Chartered
Financial Analyst, has managed this fund since January, 1993. Yentis joined
Lincoln National in 1985. He has over 20 years of experience in economic and
financial forecasting.
T. Scott Wittman, President, Vantage Global Advisors, Inc., the sub-advisor to
the fund, is the portfolio manager of the fund's equity portfolio. Vantage is a
wholly owned subsidiary of Lincoln National Corp., a publicly held insurance
holding company organized under Indiana law. Wittman, a Chartered Financial
Analyst, has managed this segment of the fund since October, 1993. He has been
with Vantage since February, 1991; before that he was managing director at TSA
Capital Management. Wittman specializes in quantitative investment analysis.
Timothy J. Policinski, Second Vice-President, Lincoln Investment, the advisor
to the fund, has been the portfolio manager for the fund's fixed income
portfolio since January 1995. Policinski has been with Lincoln National since
1978. He has been with Lincoln Investment since 1991. He holds a Masters degree
in business administration from Indiana University.
Effective January 1, 1998, Tim Policinski is no longer manager for the fixed
income segment of the fund.
The portfolio manager for the fund is David C. Fischer, Vice President, Lincoln
Investment, the advisor to the fund. Mr. Fischer is assuming responsibility for
the fixed income segment of the fund on January 1, 1998. He has been a fixed
income portfolio generalist for Lincoln Investment since 1993. From 1988-1993,
he led Lincoln Investments mortgage-backed and asset-backed trading and
portfolio management functions. Mr. Fischer holds a Master's Degree in finance
from Indiana University. He is a Chartered Financial Analyst and Certified
Public Accountant.
Effective October 1, 1997, Cozey W. Baker, Jr., is no longer managing the
short-term investment segment of the fund.
Jil Schoeff Lindholm, Short-Term Investment Manager for Lincoln Investment, the
advisor of the fund is assuming responsibility for the short-term investments
segment of the fund's portfolio on October 1, 1997. She has been a Short-Term
Investment Manager with Lincoln Investment since February 1995. She was a GIC
Sales Executive for Lincoln Life from March, 1992 through February, 1995. Ms.
Lindholm holds a Master's Degree in business administration from Indiana
University.
INVESTMENT POLICIES AND TECHNIQUES
The fund will invest in the following investment sectors:
1. Money market instruments and other debt securities with maturities
generally not exceeding one year including:
A. Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Some of these obligations are guaranteed by the U.S.
Government and some are not. See
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U.S. Government Obligations in the SAI Appendix;
B. Obligations (including certificates of deposit, bankers' acceptances and
time deposits) of any U.S. bank or other U.S. financial institution that
is a member of the Federal Reserve System, the Federal Deposit Insurance
Corp. (FDIC) or the Federal Savings and Loan Insurance Corp. (FSLIC)
[including obligations of foreign branches of these members] and of any
U.S branch of a foreign bank. These U.S. institutions or foreign banks
with U.S. branches are required to have total assets (as most recently
reported) of not less than $1 billion or the foreign currency equivalent.
Under current FDIC and FSLIC regulations, $100,000 is the maximum
insurance payable as to any one domestic certificate of deposit;
therefore, certificates of deposit purchased by the fund will not
generally be fully insured; and/or
C. Commercial paper and other corporate obligations of U.S. corporations
which either: (1) have an outstanding senior long-term debt issue rated
in the top four credit rating categories by Moody's Investors Service or
by Standard & Poor's Corp. or (2) do not have rated long-term debt
outstanding but have commercial paper rated in the top two credit rating
categories by Moody's Investors Service or by Standard and Poor's Corp.
See Bond and commercial paper ratings in the SAI Appendix.
2. Bond and other debt securities with maturities generally exceeding one
year, including:
A. Straight debt securities (other than municipal securities) which are
rated, at the time of purchase, in the top four categories by Moody's
Investors Service or by Standard and Poor's Corp. See Bond and commercial
paper ratings in the SAI Appendix;
B. Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; or marketable U.S. dollar denominated securities
(payable in U.S. dollars) of, or guaranteed by, foreign governments or
any instrumentality or political subdivision of them. See U.S. Government
obligations in the SAI Appendix; and/or
C. Straight debt securities not described in 2.A., provided such debt
securities do not exceed 15% of the fund's total assets at time of
purchase (for example, securities not rated, by major agencies; private
placements; mortgage backed securities or mortgage participation pools;
high quality dollar denominated debt securities of foreign corporations;
securities which are rated, at time of purchase, below the top four
credit rating categories by Moody's Investors Service or by Standard and
Poor's Corp.). See Bond and commercial paper ratings in the SAI Appendix.
Normally, the current value of debt securities varies inversely with changes
in prevailing interest rates. If interest rates increase after a security is
purchased, the value of the security will normally decrease. Conversely,
should prevailing interest rates decrease after a security is purchased, the
market price for that security will normally increase. Also, there is
generally a greater credit and market risk associated with higher-yielding,
lower-grade debt securities than there is with lower-yielding, higher-grade
securities.
3. Common stock and other equity securities such as preferred stock and debt
securities with conversion privileges or warrants.
The fund will continuously adjust the mix of investments among the three
investment sectors to control the level of risk during changing economic
conditions and market outlooks and to take advantage of perceived variations
in return potential produced by those environmental changes. While the fund
may change its exposure to various markets over the course of the investment
cycle, the securities purchased will be primarily for investment rather than
for short-term trading profits. However, short-term profits or losses may be
realized at times if the longer-term objectives of the fund are best served by
those transactions. No more than 75% of the fund's assets may be invested in
either the common stock sector or the bond sector. Up to 100% of the fund's
assets may be invested in the money market sector; however, it is expected
that the fund will have some exposure to the three investment sectors at all
times.
The fund does give some portfolio emphasis to securities in the fourth credit
rating category. (See paragraph 2.A.) Generally speaking, these instruments
are regarded as medium-grade instruments, and as such may bear a greater
element of risk than those rated in the top three categories. That risk can
involve increased market price volatility stemming from the sensitivity of
interest rates, concerns over creditworthiness and availability of quotations
on the secondary market. These bonds may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead
to a weakened ability of the issuer of such bonds to make principal and
interest payments than is the case with higher-grade bonds. It is anticipated
that, on average, no more than 20% of the fund's assets devoted to this sector
will be invested in securities in this category at any one time; however,
there may be times when prudent investment strategy dictates a higher or lower
percentage.
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FOREIGN INVESTMENTS
Investments in securities issued by foreign issuers involve certain risks
which are not associated with investment in U.S. securities. The fund has the
authority to invest in foreign securities, within the limits set forth
elsewhere in this Prospectus. Eurodollar deposits in foreign branches of U.S.
banks are similar to domestic deposits, but are not covered by FDIC insurance
and may be influenced by future political and economic developments and
governmental restrictions (for example, restrictions on the flow of capital
between Europe and the United States). Refer to Foreign investments in the
Appendix for a discussion of the various risks inherent in foreign investing.
PORTFOLIO TURNOVER
The fund is not restricted in policy with regard to portfolio turnover. (For
example, a rate of portfolio turnover of 100% would occur if all of the fund's
portfolio were replaced in a period of one year.) During 1996 the fund's
portfolio turnover was 108.86% and in 1995 it was 112.52%.
INVESTMENT RESTRICTIONS
The investment restrictions that follow have been adopted by the fund as
fundamental policies. See General information in the Appendix. For purposes of
the following restrictions: (1) all percentage limitations apply immediately
after the making of an investment; and (2) any subsequent change in any
applicable percentage resulting from market fluctuations does not require
elimination of any security from the portfolio.
The fund may not:
1. Invest in the securities of a single issuer, unless the following
conditions are met: At least 75% of the value of the fund's total assets
must be represented by: (a) U.S. Government obligations, cash and cash
items, (b) securities of other investment companies, and (c) securities of
issuers as to each of which, at the time the investment was made, the
fund's investment in the issuer did not exceed 5% of the fund's total
assets. (With respect to the remaining 25% of the fund's total assets, the
fund does not anticipate that any more than 15% of the fund's total assets
would be invested in the securities of a single issuer at any time, other
than those of the U.S. Government, its agencies and instrumentalities.);
2. Borrow money, except for temporary or emergency purposes and not exceeding
5% (taken at the lower cost or current value) of its total assets (not
including the amounts borrowed); and/or
3. Invest more than 5% of its total assets in securities of issuers which
(together with predecessors) have been in operation for less than three
years. This restriction shall not apply to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
4. Hold more than 10% of the outstanding voting securities of any one issuer.
Additional investment restrictions can be found in the SAI.
STRATEGIC PORTFOLIO TRANSACTIONS
Each portfolio manager for the fund has considerable discretion in the
selection of appropriate fund investments. In the exercise of that discretion,
the portfolio manager may, at any given time, invest a portion of the fund's
assets in one or more strategic portfolio transactions which we define as
derivative transactions and cash enhancement transactions.
For your convenience, in the Appendix, we have included a basic discussion of
these special financial arrangement transactions and some of the risks
associated with them. Note also that the SAI booklet for the 11 funds contains
definitions of the more commonly used derivative transactions, technical
explanations of how these transactions will be used and the limits on their
use. You should consult your financial counselor if you have specific
questions.
THE MANAGED FUND IS AUTHORIZED:
a) for derivative transactions, to: write put and covered call options and buy
put options for stock and stock indices and buy and sell options to close out
positions previously entered into (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%.); buy and sell financial futures contracts; 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.) Amounts committed to margin and paid for option premiums on
futures contracts may not exceed 5% of assets.
b) for cash enhancement transactions, to: lend portfolio securities, if such
loans of securities do not exceed 15% of the funds total assets at any one
time, and engage in repurchase transactions. Collateral will be continually
maintained at no less than 102% of the value of the loaned securities or of
the repurchase price, as applicable.
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