<PAGE>
As filed with the Securities and Exchange Commission on April 17, 1998
- -------------------------------------------------------------------------------
File No. 2-82276
--------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 17
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 17
-----------------------------
LINCOLN NATIONAL MANAGED 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
JACK D. HUNTER, ESQ.
200 E. Berry Street
Fort Wayne, Indiana 46802
(Name and Address of Agent for Service)
--------------------------------------
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.
Bruce Rosenblum, Esq.
--------------------------------------
Fiscal year-end: December 31
--------------------------------------
--------------------------------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
x on May 1, 1998 pursuant to paragraph (b)
---
___ 60 days after filing pursuant to paragraph (a) (1)
___ on _________ pursuant to paragraph (a) (1)
___ 75 days after filing pursuant to paragraph (a) (2)
___ on _________ pursuant to paragraph (a) (2) of Rule 485.
<PAGE>
LINCOLN NATIONAL MANAGED FUND, INC.
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 17 AND
AMENDMENT NO. 17
to
Registration on Form N-1A
This amendment consists of the following papers and documents:
Facing Sheet
Contents sheet
Cross-reference sheet
Part A -
Prospectus
Part B -
Statement of Additional Information
Part C -
Items 24 through 32
Signatures
Exhibit Index
Exhibits
<PAGE>
Exhibit Index
LINCOLN NATIONAL MANAGED FUND, INC.
CROSS REFERENCE SHEET
[as required by Rule 481(a)]
<TABLE>
<CAPTION>
Item Number - Part A Location in Prospectus
- ---------------------- -----------------------
<S> <C>
1. Cover Page Preface
2. Synopsis Not Applicable
3. Condensed Financial
Information Preface
4. General Description of Description of the Fund; Investment
Registrant Policies and Techniques; Investment
Restrictions; Strategic Portfolio
Transactions (Prospectus and
Appendix)
5. Management of the Fund Description of the Fund; Investment
Policies and Techniques; Management
of the funds (Appendix)
5A. Management's Discussion Management Discussion of Fund
of Fund Performance Performance (Appendix)
6. Capital Stock and Other Description of Shares; Sales and
Securities Redemption of Shares; General
Securities Information;
Distribution and Federal Income Tax Considerations (All in
Appendix)
7. Purchase of Securities Net Asset Value; Purchase of
Being Offered Securities Being Offered; Sale and
Redemption of Shares (All in Appendix)
8. Redemption or Repurchase Sale and Redemption of Shares
(Appendix)
</TABLE>
<PAGE>
9. Legal Proceedings Not Applicable
<TABLE>
<CAPTION>
Location in Statement of
Item Number - Part B Additional Information
- -------------------- ------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives Investment Restrictions; Investment
and Policies Policies and Techniques (continued)
(Appendix); Strategic Portfolio
Transactions (Appendix)
14. Management of the Directors and Officers (Appendix)
Fund
15. Control Persons and See "Management of the Funds" and
Principal "Description of Shares" in the
Prospectus Appendix
16. Investment Advisory Investment Advisor and Sub-Advisor;
and Other Services Custodian; Independent Auditors (All in
Appendix)
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Not Applicable
Other Securities
19. Purchase, Redemption Purchase of Securities Being Offered;
and Pricing of Sale and Redemption of Shares; and
Securities Being Offered Net Asset Value; all in the Prospectus
Appendix
20. Tax Status Taxes
21. Underwriters Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
22. Calculation of Not Applicable (See the SAI for the
Performance Data Variable Annuity Account on Form
N-4.)
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
PREFACE TO THE MULTI FUND-REGISTERED TRADEMARK- PROSPECTUSES
THE PREFACE AND DIRECTORY ARE PART OF THE PROSPECTUS FOR EACH OF THE FOLLOWING
FUNDS:
Lincoln National Aggressive Growth Fund, Inc. (AG)
Lincoln National Bond Fund, Inc. (B)
Lincoln National Capital Appreciation Fund, Inc. (CA)
Lincoln National Equity-Income Fund, Inc. (E-I)
Lincoln National Global Asset Allocation Fund, Inc. (GAA)
Lincoln National Growth and Income Fund, Inc. (GI)
Lincoln National International Fund, Inc. (I)
Lincoln National Managed Fund, Inc. (M)
Lincoln National Money Market Fund, Inc. (MM)
Lincoln National Social Awareness Fund, Inc. (SA)
Lincoln National Special Opportunities Fund, Inc. (SO)
Shares of all the FUNDS are sold to Lincoln National Life Insurance Co. (LINCOLN
LIFE) for allocation to its Variable Annuity Account C (THE VARIABLE ANNUITY
ACCOUNT [VAA]) to fund VARIABLE ANNUITY CONTRACTS and for allocation to its
Variable Life Account K to fund variable life insurance contracts.
To fund its variable life contracts, Variable Life Account D buys shares of the
Bond, Growth and Income, Managed, Money Market and Special Opportunities Funds.
To fund its variable life contracts, Variable Life Account G buys shares of the
Growth and Income and Special Opportunities Funds.
Each of these Variable Life and Annuity Accounts may be referred to as a
VARIABLE ACCOUNT. For each FUND listed above, see Description of the fund in its
Prospectus for a statement of that FUND'S investment objective. Each of these
FUNDS is referred to individually as a FUND; collectively, as the FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (SEC) NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THESE PROSPECTUSES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
These Prospectuses set forth concisely the information about each FUND that you
ought to know before investing. Please read and keep this Prospectus booklet for
future reference.
A separate STATEMENT OF ADDITIONAL INFORMATION (SAI) for each FUND has been
filed with the SEC. By this reference, each SAI, dated May 1, 1998, is
incorporated into the Prospectus of the FUND with which it is registered. A free
copy will be provided upon request. Either write Lincoln National Life Insurance
Co., P.O. Box 2340, Fort Wayne, Indiana 46801 or call 1-800-4LINCOLN (454-6265).
The Financial Highlights table of each FUND contains per-share data calculated
on the basis of a share outstanding throughout the period, together with
financial ratios and other supplemental data. The Financial Highlights table is
incorporated by reference to the FUND'S 1997 Annual Report. A copy of the Annual
Report will be provided 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 (454-6265).
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THESE
PROSPECTUSES, IN CONNECTION WITH THE OFFERS CONTAINED IN THEM. IF ANY ARE GIVEN
OR MADE, THE INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUND(S) IN QUESTION. THESE PROSPECTUSES DO NOT CONSTITUTE
OFFERS BY THE FUNDS TO SELL, OR SOLICITATIONS OF ANY OFFERS TO BUY, ANY OF THE
SECURITIES OFFERED BY THEM IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL FOR THE FUNDS TO MAKE THOSE OFFERS.
Prospectuses dated May 1, 1998
27
<PAGE>
DIRECTORY FOR THE FUND PROSPECTUSES
<TABLE>
<CAPTION>
SUBJECT PAGE
<S> <C>
- --------------------------------------------------------
PREFACE 27
DESCRIPTION OF THE FUND
Aggressive Growth Fund 29
Bond Fund 35
Capital Appreciation Fund 39
Equity-Income Fund 43
Global Asset Allocation Fund 47
Growth and Income Fund 53
International Fund 55
Managed Fund 59
Money Market Fund 63
Social Awareness Fund 65
Special Opportunities Fund 69
- --------------------------------------------------------
INVESTMENT POLICIES AND TECHNIQUES
Aggressive Growth Fund 29
Bond Fund 35
Capital Appreciation Fund 39
Equity-Income Fund 43
Global Asset Allocation Fund 47
Growth and Income Fund 53
International Fund 55
Managed Fund 59
Money Market Fund 63
Social Awareness Fund 65
Special Opportunities Fund 69
- --------------------------------------------------------
INVESTMENT RESTRICTIONS
Aggressive Growth Fund 32
Bond Fund 37
Capital Appreciation Fund 41
Equity-Income Fund 45
Global Asset Allocation Fund 50
Growth and Income Fund 53
International Fund 57
Managed Fund 61
Money Market Fund 64
Social Awareness Fund 66
Special Opportunities Fund 70
<CAPTION>
SUBJECT PAGE
- --------------------------------------------------------
<S> <C>
STRATEGIC PORTFOLIO TRANSACTIONS
Aggressive Growth Fund 32
Bond Fund 37
Capital Appreciation Fund 42
Equity-Income Fund 46
Global Asset Allocation Fund 50
Growth and Income Fund 54
International Fund 58
Managed Fund 61
Money Market Fund 64
Social Awareness Fund 66
Special Opportunities Fund 71
- --------------------------------------------------------
APPENDIX -- CONTAINS IMPORTANT INFORMATION
FOR ALL FUNDS
Net asset value 73
Management of the funds 73
Purchase of securities being offered 75
Sale and redemption of shares 76
Distributions and federal income tax
considerations 76
Management discussion of fund performance 76
Description of shares 76
Strategic portfolio transactions --
additional information 77
Foreign investments 79
General information 80
Statement of Additional Information
Table of contents -- 11 underlying funds 83
</TABLE>
28
<PAGE>
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 Investment Advisors, 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.
David C. Fischer, Vice President Lincoln Investment, the advisor to the fund,
has been the portfolio manager for the FUNDS fixed-income portfolio since
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.
Jill Schoeff Lindholm, Short-Term Investment Manager for LINCOLN INVESTMENT, the
ADVISOR of the FUND, manages the short-term investments segment of the fund's
portfolio. 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 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
58
<PAGE>
C. Commercial paper and other corporate obligations of U.S. corporations
(including loan participation certificates) 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.
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
59
<PAGE>
replaced in a period of one year.) During 1997 the FUND'S portfolio turnover was
53.40% and in 1996 it was 108.86%.
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. 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.
60
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THIS PAGE WAS INTENTIONALLY LEFT BLANK.
61
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APPENDIX -- CONTAINS IMPORTANT INFORMATION FOR ALL FUNDS
This Appendix constitutes part of the Prospectuses of Lincoln National
Aggressive Growth Fund, Inc. (Aggressive Growth Fund), Lincoln National Bond
Fund, Inc. (Bond Fund), Lincoln National Capital Appreciation Fund, Inc.
(Capital Appreciation Fund), Lincoln National Equity-Income Fund, Inc.
(Equity-Income Fund), Lincoln National Global Asset Allocation Fund, Inc.
(Global Asset Allocation Fund), Lincoln National Growth and Income Fund, Inc.
(Growth and Income Fund), Lincoln National International Fund, Inc.
(International Fund), Lincoln National Managed Fund, Inc. (Managed Fund),
Lincoln National Money Market Fund, Inc. (Money Market Fund), Lincoln National
Social Awareness Fund, Inc. (Social Awareness Fund), and Lincoln National
Special Opportunities Fund, Inc. (Special Opportunities Fund). Unless otherwise
indicated, the following information applies to each FUND.
NET ASSET VALUE
Each FUND'S net asset value per share is determined as of close of business
(currently 4:00 p.m., New York Time) on the New York Stock Exchange (NYSE) on
each day it is open for trading. The net asset value per share for all FUNDS
except the Money Market Fund is determined by adding the values of all
securities and other assets, subtracting liabilities (including dividends
payable) and dividing by the number of shares outstanding. Debt securities and
other assets of the FUND, other than equity securities, for which market
quotations are readily available, are valued at their bid quotations.
When market quotations are not readily available, debt securities and other
assets are valued at their fair value as determined in good faith. This
valuation is made by or under the authority of each FUND'S Board of Directors
and it may include the use of valuations furnished by outside sources, including
pricing services which utilize electronic data processing techniques for valuing
normal institutional-size trading units of debt securities. The value of equity
securities is based on the last sale prices of those securities 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. In the absence of readily available closing bid and asked
prices, equity securities will be valued at fair value. See the SAI Appendix for
a discussion of the methodology utilized to value short-term investments (other
than for the Money Market Fund), options, futures and options thereon, and
foreign securities.
MONEY MARKET FUND. The net asset value per share of the Money Market Fund is
determined by the amortized cost method of valuation, under Rule 2a-7, as
amended (the Rule) under the Investment Company Act of 1940 (1940 Act). Under
the Rule, the FUND'S net asset value using the amortized cost method must fairly
reflect market value. The Board of Directors of the FUND has established
procedures to assist FUND management and the INVESTMENT ADVISOR in complying
with the requirements of the Rule, which imposes specific standards for the
maturity, quality and diversification of portfolio securities. The Rule also
assigns certain specific duties to FUND management and the Board.
MANAGEMENT OF THE FUNDS
The business and affairs of each FUND 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 shareholder. LINCOLN LIFE is the sole shareholder of each
FUND.
INVESTMENT ADVISOR. LINCOLN INVESTMENT is the INVESTMENT ADVISOR to the FUNDS
and is headquartered at 200 East Berry Street, Fort Wayne, Indiana 46802.
LINCOLN INVESTMENT (THE ADVISOR) is registered with the Securities and Exchange
Commission (the Commission or 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 Convertible Securities Fund, Inc., and
Lincoln National Income Fund, Inc., closed-end investment companies, and also
acts as sub-adviser to two of the series of Delaware Group Adviser Funds, Inc.,
an open-end series investment company.
The ADVISOR is a wholly-owned subsidiary of Lincoln National Corp. (LNC), a
publicly-held insurance holding company organized under Indiana law. Through its
subsidiaries, LNC provides life insurance and annuities, property-casualty
insurance, reinsurance and financial services. Directors, officers and employees
of the ADVISOR and each FUND are permitted to engage in personal securities
transactions subject to restrictions and procedures set forth in the Code of
Ethics adopted by the ADVISOR and each FUND. Such restrictions and procedures
include substantially all of the recommendations of the Advisory Group of the
Investment Company Institute and comply with SEC rules and regulations.
Under advisory agreements described in the Prospectus for the VARIABLE ACCOUNT,
the ADVISOR provides portfolio management and investment advice to the FUNDS and
administers their other affairs, subject to the supervision of each FUND'S Board
of Directors.
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As compensation for its services to each FUND, the advisor is paid a monthly
investment advisory fee at an annual rate based on the average daily net asset
value of each FUND, as shown in the following chart:
<TABLE>
<CAPTION>
FUND ...OF AVERAGE DAILY NET ASSET VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Aggressive Growth .75 of 1% of the first $200 million; .70 of 1% of the next $200
million; .65 of 1% of the excess over $400 million
Capital Appreciation* .75 of 1% of the first $500 million; .70 of 1% of the excess over
$500 million
Equity-Income* .75 of 1% of the first $500 million; .70 of 1% of the excess over
$500 million
Global Asset Allocation .75 of 1% of the first $200 million; .70 of 1% of the next $200
million; and .68 of 1% of the excess over $400 million
International .90 of 1% of the first $200 million; .75 of 1% of the next $200
million; and .60 of 1% in excess over $400 million
All other FUNDS .48 of 1% of the first $200 million; .40 of 1% of the next $200
million; and .30 of 1% in excess over $400 million
</TABLE>
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FUND EXPENSES (see accompanying text below)
<TABLE>
<CAPTION>
1997 RATIO OF THE
ADVISOR'S
COMPENSATION TO 1997 RATIO OF TOTAL
AVERAGE EXPENSES
FUND NET ASSETS TO AVERAGE NET ASSETS
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Aggressive Growth .73% .81%
Bond .46 .53
Capital Appreciation* .75 .84
Equity-Income* .75 .82
Global Asset Allocation .72 .89
Growth and Income .32 .35
International .79 .93
Managed .37 .42
Money Market .48 .59
Social Awareness .36 .41
Special Opportunities .37 .42
</TABLE>
* The management fees for the Capital Appreciation and the Equity-Income funds
have been decreased effective May 1, 1998 and January 1, 1998 respectively, and
the expense information in this table has been restated to reflect current fees.
Expenses 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.
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:
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<TABLE>
<CAPTION>
DATE OF ANNUAL FEE RATE BASED ON AVERAGE DAILY NET ASSET
FUND SUB-ADVISOR AGREEMENT VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Aggressive Lynch & Mayer 12/20/93 .50 of 1% of the first $150 million .35 of 1% of the
Growth 520 Madison Avenue excess over $150 million
New York, NY 10022
Capital Janus 1/1/94; .55 of 1% of the first $100 million .50 of 1% of the
Appreciation 100 Fillmore Street Amended next $400 million; and .45 of 1% of the excess over
Denver, CO 80206 5/1/98 $500 million
Equity Income Fidelity 12/20/93 .48 of 1%
82 Devonshire Street Amended
Boston, MA 02108 1/1/98
Global Asset Putnam 6/8/87 the greater of (a) $40,000; or (b) .47 of 1% of the
Allocation One Post Office first $200 million; .42 of 1% of the next $200
Square million; and .40 of 1% of any excess over $400
Boston, MA 02104 million
International Delaware 4/27/98 .50 of 1% of the first $200 million; .40 of 1% of the
International next $200 million; and .35 of 1% of any excess over
Advisers, Ltd. $400 million
80 Cheapside,
London, England
EC2V 6EE
- -------------
<CAPTION>
ANNUAL FEE RATE BASED ON MARKET VALUE OF SECURITIES
HELD IN THE PORTFOLIO OF EACH RESPECTIVE CLIENT FUND
DATE OF AT THE CLOSE OF BUSINESS ON THE LAST TRADING DAY OF
FUND SUB-ADVISOR AGREEMENT EACH CALENDAR QUARTER
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth and Vantage 8/21/85 .20 of 1%
Income 630 5th Avenue
New York, NY 10111
Managed Vantage 8/21/85 .20 of 1%
(STOCK PORTFOLIO
ONLY)
Social Vantage 4/30/88 .20 of 1%
Awareness
Special Vantage 8/21/85 .20 of 1%
Opportunities
</TABLE>
No additional compensation from the assets of the FUNDS will be assessed as a
result of the sub-advisory agreements; the sub-advisors are paid by LINCOLN
INVESTMENT. (There is no sub-advisor for the Bond and Money Market Funds.)
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 Global Asset Allocation Fund. 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.
PURCHASE OF SECURITIES BEING OFFERED
Shares of the FUNDS' common stock ($0.01 par value) will be sold to LINCOLN LIFE
for allocation to the VARIABLE ANNUITY ACCOUNT (VAA), which has been established
for the purpose of funding VARIABLE ANNUITY CONTRACTS; shares in the FUNDS will
also be sold to LINCOLN LIFE for allocation to one or more of the variable life
accounts, which have been established for the purpose of funding variable life
insurance contracts. Shares of each FUND are sold and redeemed at their net
asset value per share determined daily. See Sale and redemption of shares. Also
see Net asset value. The FUNDS' shares are sold to LINCOLN LIFE for the VARIABLE
ACCOUNTS on a no-load basis -- that is, without the imposition of a sales
charge.
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<PAGE>
SALE AND REDEMPTION OF SHARES
The shares of each FUND are sold and redeemed by the FUND at their net asset
value per share next determined after receipt by LINCOLN LIFE of a purchase or
redemption order in acceptable form. Redemption of FUND shares held by LINCOLN
LIFE for its own account will be effected at the FUND'S net asset value per
share next determined after receipt of the redemption request by the FUND. The
value of shares redeemed may be more or less than original cost, depending upon
the market value of the portfolio securities at the time of redemption. Payment
for shares redeemed will be made within seven days after the redemption request
is received in proper form by the FUNDS. However, the right to redeem FUND
shares may be suspended or payment postponed for any period during which (1)
trading on the NYSE is restricted as determined by the Commission, or the NYSE
is closed for other than weekends and holidays; (2) an emergency exists, as
determined by the Commission, as a result of which (a) disposal by each FUND of
securities owned by it is not reasonably practicable, or (b) it is not
reasonably practicable for each FUND to determine fairly the value of its net
assets; or (3) the Commission by order so permits for the protection of
shareholders of the FUNDS.
DISTRIBUTION AND FEDERAL INCOME TAX CONSIDERATIONS
Each FUND'S policy is to distribute, at least once a year, substantially all of
its net investment income. Net realized capital gains may only be distributed
annually. These distributions, when paid to LINCOLN LIFE for the VARIABLE
ACCOUNTS, will be reinvested automatically in additional shares of that FUND, at
its net asset value per share.
Each FUND intends to qualify and has elected to be taxed as a regulated
investment company under the provisions of Subchapter M 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 ordinary income and capital gain) from Federal income tax and the
4% nondeductible Federal excise tax, the FUNDS will be relieved of those taxes
on the amounts distributed. See the SAI for a more complete discussion.
Each FUND is subject to asset diversification requirements under Section 817(h)
of the code and the related regulation that the United States Treasury
Department has adopted. Each FUND intends to comply with these diversification
requirements.
Since the sole shareholder of the FUNDS is LINCOLN LIFE, there is no discussion
here about the Federal income tax consequences at the shareholder level. For
information concerning the Federal income tax consequences to holders of annuity
or life insurance contracts, including the failure of a FUND to comply with the
diversification requirements discussed above, see the Prospectus for the
VARIABLE ACCOUNT at the front of this booklet.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
In the Annual Report for the FUNDS, the portfolio manager for each FUND
discusses that FUND'S performance for the previous fiscal year and the factors
which affected that performance. We will send you a copy of the Annual Report
free upon request.
DESCRIPTION OF SHARES
The authorized capital stock of each FUND consists of 50 million shares of
common stock (150 million for the Growth and Income Fund and 100 million each
for the Equity-Income Fund, International Fund, Social Awareness Fund and
Managed Fund), $0.01 par value. As of March 1, 1998, each FUND had the following
number of shares issued and outstanding:
<TABLE>
<S> <C>
Aggressive Growth 24,053,290
Bond 23,710,935
Capital Appreciation 29,127,492
Equity-Income 42,380,182
Global Asset Allocation 30,669,482
Growth and Income 91,450,856
International 31,597,979
Managed 49,579,824
Money Market 9,274,413
Social Awareness 39,436,497
Special Opportunities 27,558,445
</TABLE>
FUND shares will be owned by LINCOLN LIFE and will be held by it in the VARIABLE
ACCOUNTS. As sole 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
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<PAGE>
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
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 IN THE SAI APPENDIX.
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 Prospectuses. Therefore, where the Prospectus for a particular FUND
discloses the intent of that FUND to engage in any of the types listed, that
FUND hereby
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<PAGE>
reserves the right to engage in related variations on those transactions.
The FUNDS intend to engage in derivative transactions only defensively. 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 (such
as collateralized mortgage obligations, structured notes, inverse floaters,
principal-only or interest-only securities, etc.). See the Prospectus and SAI
for the Capital Appreciation and Equity-Income FUNDS, which 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 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
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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
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 FUNDS'
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 FUNDS 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.
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 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.
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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 United States. In addition, there is generally less
governmental supervision and regulation of securities exchanges, brokers and
issuers in foreign countries that in the United States. There may be difficulty
in enforcing legal rights outside the United States. 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.
Certain state insurance regulations impose additional restrictions on the extent
to which a FUND may invest in foreign securities. See the SAI.
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 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.
Additionally, several European countries are participating in the European
Economic and Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro". It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. FUNDS investing in securities of
participating countries could be adversely affected if the computer systems used
by their major service providers are not properly prepared to
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handle both the imminent implementation of this single currency and the prospect
of the adoption of the Euro by additional countries in the future. These FUNDS
are taking steps to obtain satisfactory assurances that their major service
providers are, in turn, taking steps reasonably designed to address these
matters with respect to the computer systems they use. There can be no
assurances that these steps will be sufficient to avoid any adverse impact on
the business of any FUND.
GENERAL INFORMATION
Your inquiries should be directed to Lincoln National Life Insurance Co., at
P.O. Box 2340, Fort Wayne, Indiana 46801; or, you may call 1-800-4LINCOLN
(454-6265).
The FUNDS will issue unaudited semiannual reports showing current investments in
each FUND and other information; and annual financial statements audited by
their independent auditors. In 1998, in response to certain changes to the
federal securities laws, the Board of Directors of each FUND recommended, and
shareholders of each FUND approved, changes to the fundamental policies for
certain of the FUNDS. The Board of Directors of each FUND also changed or
eliminated certain non-fundamental policies of certain FUNDS.
Under the 1940 Act a fundamental policy of a fund may not be changed without the
affirmative vote of a majority of the fund's outstanding shares.
As used in this Prospectus, the term majority of the FUND'S outstanding shares
means the vote of: (1) 67% or more of each FUND'S shares present at a meeting,
if the holders of more than 50% of the outstanding shares of each FUND are
present or represented by proxy, or (2) more than 50% of each FUND'S outstanding
shares, whichever is less.
These Prospectuses do not contain all the information included in their
Registration Statements filed with the Commission. The Registration Statements,
including the exhibits filed with them, may be examined at the office of the
Commission in Washington, D.C. Statements contained in the Prospectuses about
the contents of any CONTRACT or other document referred to in them are not
necessarily complete. In each instance, reference is made to the copy of that
CONTRACT or other document filed as an exhibit to the Registration Statement of
which the particular Prospectus forms a part, and each statement is qualified in
all respects by that reference.
The use of FUNDS by both variable annuity and variable life insurance separate
accounts is known as 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 account, in those cases where mixed funding occurs. For
example, violation of the federal tax laws by one VARIABLE ACCOUNT investing in
the FUNDS could cause the contracts and Policies 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, should be taken.
Should any conflict arise which requires that a substantial amount of assets be
withdrawn from any of the FUNDS, orderly portfolio management could be
disrupted, to the detriment of those CONTRACT OWNERS still investing in that
FUND. Also, if that FUND believes that any portfolio has become so large as to
materially impair investment performance, then the FUND will examine other
investment options.
LINCOLN LIFE performs the dividend and transfer functions for the FUNDS.
PREPARING FOR YEAR 2000
THE 'YEAR 2000' ISSUE. Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the year 2000. This 'year 2000 issue' affects virtually all companies and
organizations.
Lincoln Life is responsible, as part of its year 2000 updating process, for the
updating of FUND-related computer systems. An affiliate of Lincoln Life,
Delaware Service Company (Delaware), provides substantially all of the necessary
accounting and valuation services for the FUNDS. Delaware, for its part, is
responsible for updating all of its computer systems, including those which
serve the FUNDS, to accommodate the year 2000. Lincoln Life and Delaware have
begun formal discussions with each other to assess the requirements for their
respective systems to interface properly in order to facilitate the accurate and
orderly operation of the FUND beginning in the year 2000.
The year 2000 issue is pervasive and complex and affects virtually every aspect
of the businesses of Lincoln Life, Delaware, and the FUNDS (the Companies). The
computer systems of Lincoln Life and Delaware (including those computer systems
which serve the FUNDS) and their interfaces with the computer systems of
vendors, suppliers, customers and other business partners are particularly
vulnerable. The inability to properly recognize date-sensitive electronic
information and to transfer data between systems could cause errors or even
complete failure of systems, which would result in a temporary inability to
process transactions correctly and
80
<PAGE>
engage in normal business activities for the FUNDS. Lincoln Life and Delaware,
respectively, are redirecting significant portions of their internal information
technology efforts and are contracting, as needed, with outside consultants to
help update their systems to accommodate the year 2000. Also, in addition to the
discussions with each other noted above, Lincoln Life and Delaware have
respectively initiated formal discussions with other critical parties that
interface with their systems to gain an understanding of the progress by those
parties in addressing year 2000 issues. While Lincoln Life and Delaware are
making substantial efforts to address their own systems (including those which
serve the FUNDS) and the systems with which they interface, it is not possible
to provide assurance that operational problems will not occur. Lincoln Life and
Delaware presently believe that, with the modification of existing computer
systems, updates by vendors and conversion to new software and hardware, the
year 2000 issue will not pose significant operations problems for their
respective computer systems. In addition, the Companies are incorporating
potential issues surrounding year 2000 into their contingency planning process,
in the event that, despite these substantial efforts, there are unresolved year
2000 problems. If the remediation efforts noted above are not completed timely
or properly, the year 2000 issue could have a material adverse impact on the
operation of the businesses of Lincoln Life, Delaware, the FUNDS, or all of
them.
The cost of addressing year 2000 issues and the timeliness of completion will be
closely monitored by management for Lincoln Life, Delaware and the FUNDS and,
for each company, will be based on its management's best estimates which are
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. Nevertheless, there can be no guarantee by Lincoln Life, by Delaware or
by the FUNDS that estimated costs will be achieved, and actual results could
differ significantly from those anticipated. Specific factors that might cause
such differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer problems, and other uncertainties.
81
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82
<PAGE>
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF
CONTENTS -- 11 UNDERLYING
FUNDS*
<TABLE>
<CAPTION>
ITEM ITEM
- ------------------------------------------------ ------------------------------------------------
<S> <C>
General Information and History Appendix
Investment objective Investment advisor and sub-advisor
Investment policies and techniques Directors and officers
Investment restrictions Investment policies and techniques
Portfolio transactions and brokerage (continued): options, futures, securities
Determination of net asset value valuation, securities lending, repurchase and
reverse repurchase agreements
Custodian
Independent auditors
Financial statements
Bond and commercial paper ratings
U.S. Government obligations
Taxes
State requirements
Derivative transactions -- definitions
*NOTE: THIS IS A GENERIC TABLE. THERE ARE
VARIATIONS IN THE CONTENTS OF THE SAI FROM FUND
TO FUND.
</TABLE>
- --------------------------------------------------------------------------------
Please send me a free copy of the current Statement of Additional Information
for Lincoln National Life Insurance Co. Variable Annuity Account C:
(Please Print)
Name: __________________________________________________________________________
Address: _______________________________________________________________________
City _________________________________ State ____________________ Zip __________
Mail to Lincoln National Life Insurance Co., P.O. Box 2340, Fort Wayne, Indiana
46081
83
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THIS PAGE WAS INTENTIONALLY LEFT BLANK.
84
<PAGE>
LINCOLN NATIONAL
MANAGED FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
This SAI should be read in conjunction with the Prospectus
of Lincoln National Managed Fund, Inc. (FUND) dated May 1,
1998. You may obtain a copy of the FUND'S 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).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- --------------------------------------------------
INVESTMENT OBJECTIVE MF-2
- --------------------------------------------------
INVESTMENT POLICIES MF-2
- --------------------------------------------------
INVESTMENT RESTRICTIONS MF-3
- --------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE MF-4
- --------------------------------------------------
DETERMINATION OF NET ASSET VALUE MF-5
- --------------------------------------------------
APPENDIX
Investment advisor and sub-advisor A-1
- --------------------------------------------------
Directors and officers A-3
- --------------------------------------------------
Investment policies and techniques
(continued): options, futures, securities
valuation, securities lending, repurchase
and reverse repurchase agreements A-4
- --------------------------------------------------
<CAPTION>
PAGE
- --------------------------------------------------
<S> <C>
Custodian A- 9
- --------------------------------------------------
Independent auditors A- 9
- --------------------------------------------------
Financial statements A- 9
- --------------------------------------------------
Bond and commercial paper ratings A- 9
- --------------------------------------------------
U.S. Government obligations A-11
- --------------------------------------------------
Taxes A-12
- --------------------------------------------------
State requirements A-12
- --------------------------------------------------
Derivative transactions-definitions A-12
- --------------------------------------------------
</TABLE>
THIS SAI IS NOT A PROSPECTUS.
The date of this SAI is May 1, 1998.
MF-1
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the FUND is maximum long-term total return (capital
gains plus income) consistent with prudent investment strategy. 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 Prospectus. There can be no assurance that
the objective of the FUND will be achieved.
This FUND attempts to minimize the risk associated with different investment
sectors (i.e., money market, bond market and stock market) by maintaining some
balance among these various sectors. The FUND'S INVESTMENT ADVISOR (the ADVISOR)
commits the FUND'S assets to securities in the various sectors based on periodic
reassessment of the opportunities in the different areas. A principal risk in
this kind of investing involves the allocation of assets among the various
sectors. Adverse market fluctuations could result if the ADVISOR'S decisions
with regard to asset allocation are inappropriately timed. References to ADVISOR
in this SAI include both Lincoln Investment Management, Inc. (LINCOLN
INVESTMENT) and Vantage Global Advisors, Inc.
INVESTMENT POLICIES
The FUND pursues its investment objective by investing in money market
instruments, bond and other debt securities, and common stock and other equity
securities. (See Description of the fund and Investment policies in the
Prospectus.)
In addition, the FUND may write (sell) and purchase options and invest in
futures contracts and options thereon. A more detailed description of put and
call options and futures contracts and options thereon appears in the Appendix.
OPTIONS TRADING
The FUND may write (sell) put and covered call options and purchase covered put
options for stock and stock indices and to write and purchase options to close
out positions previously entered into by the FUND; provided, that the aggregate
cost of all outstanding options would 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.
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.
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 SAI Appendix 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 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 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 only to firms deemed by the ADVISOR to be creditworthy.
REPURCHASE AGREEMENTS
The FUND may make short-term investments in repurchase agreements. A repurchase
agreement typically involves the purchase by the FUND of securities (U.S.
Government or other money market securities) from a financial institution such
as a bank, broker-dealer or savings and loan association, coupled with an
agreement by the seller to repurchase the same securities from the FUND at the
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The difference between
MF-2
<PAGE>
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 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
transaction will be in the actual or constructive possession of the FUND during
the term of the transaction, as provided in the agreement.
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.
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. See the Appendix for a more
complete discussion of the use of futures contracts and options thereon as well
as the risks related thereto.
INVESTMENT RESTRICTIONS
In addition to the investment restrictions listed in the Prospectus, the
following investment restrictions have been adopted by the FUND as fundamental
policies. Under the Investment Company Act of 1940, as amended (1940 Act), a
fundamental policy may not be changed without the affirmative vote of a majority
of the outstanding voting securities of the FUND. See General information in the
Prospectus. 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. 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.
3. 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.
4. Make loans except that it may lend its portfolio securities if such loans
are fully collateralized and such loans of securities do not exceed 15% of
its total assets at any one time. See Investment policies. The purchase of
debt securities (including loan participation certificates) and the entry
into repurchase agreements are not considered the making of loans.
5. Purchase puts, calls or combinations thereof, except the FUND may write and
purchase put and call options and effect closing transactions as described
under Investment policies.
6. 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.
7. Invest more than 10% of its total assets in securities (including repurchase
agreements and non-negotiable time deposits maturing in more than seven
days) which are subject to legal or contractual restrictions upon resale or
are otherwise not readily marketable.
8. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities.
9. Make short sales of securities.
10. Purchase or sell commodities or commodity futures contracts, except
financial futures contracts and options thereon.
11. Purchase securities of investment companies except in connection with an
acquisition, merger, consolidation or reorganization.
MF-3
<PAGE>
12. Invest in companies for the purpose of, or with the effect of acquiring
control.
13. Pledge its assets or assign or otherwise encumber them except to secure
borrowings effected within the limitations set forth in Restriction 2 in the
Prospectus. (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.)
14. 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 restrictions described above. (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.)
15. 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 securities 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 and sub-advisor in the Appendix. It will be the practice
of the ADVISOR to allocate purchase and sale transactions among the FUND and
others whose assets are managed in such manner as is deemed 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 the most favorable price and efficient execution. To the
extent that the execution and price offered by more than one dealer are
comparable, the ADVISOR may, in its discretion, purchase and sell portfolio
securities to and from dealers who provide the FUND with research advice or
other services, which services may be used for the benefit of other clients for
which the advisor acts as advisor. 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
MF-4
<PAGE>
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 1997,
the ADVISOR directed transactions totalling approximately $15.8 million to these
brokers and paid commissions of approximately $21,000 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 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 during 1997,
1996, and 1995 was $533,846, $630,422, and $471,755, 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.
DETERMINATION OF NET ASSET VALUE
A description of the days on which the FUND'S net asset value per share will be
determined is given in the Prospectus. The New York Stock Exchange's most recent
announcement (which is subject to change) states that in 1998 it 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.
It may also be closed on other days. It may also be closed on other days.
Although the Directors expect the same holiday schedule to be observed in the
future, the NYSE may modify its holiday schedule at any time. To the extent that
the FUND'S securities are traded in other markets on days when the NYSE is
closed, the FUND'S NAV may be affected on days when investors do not have access
to the FUND to purchase or redeem shares.
MF-5
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
MF-6
<PAGE>
APPENDIX
(NOTE: THIS IS UNIFORM INFORMATION FOR THE 11 FUNDS. SEE EACH FUND'S SAI FOR
INFORMATION SPECIFIC TO THAT FUND.)
THIS APPENDIX CONSTITUTES PART OF THE SAIS OF LINCOLN NATIONAL AGGRESSIVE GROWTH
FUND, INC. (AGGRESSIVE GROWTH FUND), LINCOLN NATIONAL BOND FUND, INC. (BOND
FUND), LINCOLN NATIONAL CAPITAL APPRECIATION FUND, INC. (CAPITAL APPRECIATION
FUND), LINCOLN NATIONAL EQUITY-INCOME FUND, INC. (EQUITY-INCOME FUND), LINCOLN
NATIONAL GLOBAL ASSET ALLOCATION FUND, INC. (GLOBAL ASSET ALLOCATION FUND),
LINCOLN NATIONAL GROWTH AND INCOME FUND, INC. (GROWTH AND INCOME FUND), LINCOLN
NATIONAL INTERNATIONAL FUND, INC. (INTERNATIONAL FUND), LINCOLN NATIONAL MANAGED
FUND, INC. (MANAGED FUND), LINCOLN NATIONAL MONEY MARKET FUND, INC. (MONEY
MARKET FUND), LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC. (SOCIAL AWARENESS
FUND), AND LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. (SPECIAL
OPPORTUNITIES FUND). UNLESS OTHERWISE INDICATED, THE FOLLOWING INFORMATION
APPLIES TO EACH FUND.
INVESTMENT ADVISOR AND SUB-ADVISOR
LINCOLN INVESTMENT Management, Inc. (LINCOLN INVESTMENT) is the investment
ADVISOR to the FUNDS and is headquartered at 200 E. Berry Street, Fort Wayne,
Indiana 46802. LINCOLN INVESTMENT (THE ADVISOR) is a 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 Advisory Agreements with the FUNDS, the ADVISOR provides portfolio
management and investment advice to the FUNDS and administers its other affairs,
subject to the supervision of the funds' 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 Appendix to the Prospectus. LINCOLN
LIFE has paid the organizational expenses of all the FUNDS. The rates of
compensation to the ADVISOR and the sub-advisors are set forth in the Appendix
to the Prospectus.
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth Fund $2,109,952 $1,428,803 $ 725,544
Bond Fund 1,221,295 1,188,030 1,061,701
Capital Appreciation Fund 2,940,632 1,549,656 726,011
Equity-Income Fund 6,053,404 3,303,336 1,457,623
Global Asset Allocation Fund 2,808,358 2,072,722 1,570,876
Growth and Income Fund 9,714,765 7,063,276 5,077,981
International Fund 3,741,563 3,319,701 2,770,197
Managed Fund 2,873,786 2,480,524 2,120,656
Money Market Fund 451,243 417,468 385,019
Social Awareness Fund 3,355,544 1,877,030 1,048,366
Special Opportunities Fund 2,824,015 2,274,229 1,809,514
</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.
The current advisory agreements between the ADVISOR and the FUNDS will remain in
effect from year to year if approved annually by: (1) the Board of Directors of
each FUND or by the vote of a majority of the outstanding voting securities of
each FUND, and (2) a vote of a majority of the directors who are not interested
persons of the FUNDS or the advisor, cast in person at a meeting called for the
purpose of voting on such approval. The advisory agreement may be terminated
without penalty at any time, on 60 days' written notice by: (1) the Board of
Directors of each FUND, (2) vote of a majority of the outstanding voting
securities of each FUND or (3) the advisor. The advisory agreement terminates
automatically in the event of assignment.
In like manner, the current sub-advisory agreement will remain in effect from
year to year if approved annually by the Board of Directors of the applicable
FUNDS or by the vote of a majority of the outstanding voting securities of those
FUNDS. The sub-advisory agreements may be terminated without penalty at any
time, on 60 days' written notice, by: (1) the Board of Directors of the
applicable FUND, (2) vote of the majority of the outstanding voting securities
of the applicable FUND, (3) the sub-advisor, or (4) the advisor. The
sub-advisory agreements terminate automatically in the event of assignment.
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>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth Fund $1,229,800 $ 893,059 $ 483,982
Bond Fund N/A N/A N/A
Capital Appreciation Fund 2,072,388 1,117,383 545,800
Equity-Income Fund 4,781,931 2,612,405 1,152,337
Global Asset Allocation Fund 1,724,369 1,284,185 1,034,321
Growth and Income Fund 6,155,225 4,440,325 3,108,208
International Fund 1,503,294 1,326,484 1,146,153
Managed Fund 974,080 820,633 672,474
Money Market Fund N/A N/A N/A
Social Awareness Fund 1,901,560 923,516 462,593
Special Opportunities Fund 1,519,961 1,168,134 868,019
</TABLE>
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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>
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<S> <C> <C>
* KELLY D. CLEVENGER Vice President, Lincoln National Life Insurance Co.
CHAIRMAN OF THE BOARD,
PRESIDENT AND DIRECTOR, age
45
1300 S. Clinton Street
Fort Wayne, IN 46802
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JOHN B. BORSCH, JR. Retired, formerly Associate Vice President--Investments, Northwestern
DIRECTOR, age 64 University
1776 Sherwood Road
Des Plaines, IL 60016
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NANCY L. FRISBY, CPA Regional Vice President/Chief Financial Officer (formerly Vice
DIRECTOR, age 56 President--Finance; Regional Controller of Finance), St. Joseph Medical
700 Broadway Center, Fort Wayne, Indiana
Fort Wayne, IN 46802
- ------------------------------------------------------------------------------------------------------------------
* BARBARA S. KOWALCZYK Senior Vice President and Director, Corporate Planning and Development,
DIRECTOR, age 46 Lincoln National Corporation; Director, Lincoln Life and Annuity Company
1300 S. Clinton St. of New York (formerly Executive Vice President, LINCOLN INVESTMENT
Fort Wayne, IN 46802 Management, Inc.)
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KENNETH G. STELLA President, Indiana Hospital and Health Association
DIRECTOR, age 54
One America Square
Indianapolis, IN 46282
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* JANET C. WHITNEY Vice President and Treasurer, Lincoln National Corp. (formerly Vice
TREASURER, age 49 President and General Auditor)
200 East Berry Street
Fort Wayne, IN 46802
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* CYNTHIA A. ROSE Assistant Secretary, Lincoln National Life Insurance Co.
SECRETARY, age 43
200 East Berry Street
Fort Wayne, IN 46802
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Interested persons of the FUNDS, as defined in the 1940 Act. Directors' fees
of $250 per meeting are paid by each FUND to each director who is not an
interested person of the FUND. During 1997, each FUND paid $1,000 in director's
fees to each such director, plus out of pocket expenses to attend meetings.
During 1997, the FUND complex paid each of these directors aggregate fees of
$11,000. Mr. Stanley R. Nelson, a director who retired in 1997, received $750 in
director fees from each FUND and aggregate fees of $8,250 from the FUND complex.
Mr. Stella became a director in 1998 and thus received no fees during 1997.
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INVESTMENT POLICIES AND TECHNIQUES
OPTIONS AND FINANCIAL FUTURES TRADING
This discussion relates to the Bond, Growth and Income, Managed, Social
Awareness and Special Opportunities Funds. Neither the International Fund nor
the Money Market Fund has sought the authority to engage either in options or in
futures trading. (NOTE: The Aggressive Growth, Capital Appreciation,
Equity-Income and Global Asset Allocation Funds have their own respective
discussions 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.
A. In General. 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.
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.
B. Call Options. The FUND may write only call options which are covered,
meaning that the FUND either owns the underlying security or has an absolute
and immediate right to acquire that security, without additional cash
consideration, upon conversion or exchange of other securities currently
held in its portfolio. In addition, the FUND will not, before the expiration
of a call option, permit the call to become uncovered. If the FUND writes a
call option, the purchaser of the option has the right to buy (and the FUND
has the obligation to sell) the underlying security at the exercise price
throughout the term of the option. The amount paid to the FUND by the
purchaser of the option is the premium. The FUND'S obligation to deliver the
underlying security against payment of the exercise price would terminate
either upon expiration of the option or earlier if the FUND were to effect a
closing purchase transaction through the purchase of an equivalent option on
an exchange. The FUND would not be able to effect a closing purchase
transaction after it had received notice of exercise.
In order to write a call option, the FUND is required to deposit in escrow the
underlying security or other assets in accordance with the rules of The Options
Clearing Corp. (OCC) and the various exchanges. The FUND may not purchase call
options except in connection with a closing purchase transaction. It is possible
that the cost of effecting a closing purchase transaction may be greater than
the premium received by the FUND for writing the option.
Generally, the INVESTMENT ADVISOR (THE ADVISOR) intends to write listed covered
calls during periods when it anticipates declines in the market values of
portfolio securities and the premiums received (net of transaction costs) may
offset to some extent the decline in the FUND'S net asset value occasioned by
such declines in market value. The ADVISOR will generally not write listed
covered call options when it anticipates that the market value of the FUND'S
portfolio securities will increase.
If the ADVISOR decides that at a price higher than the current value a portfolio
security would be overvalued and should be sold, the FUND may write a call
option on the security at that price. Should the security subsequently reach
that price and the option be exercised, the FUND would, in effect, have
increased the selling price of that security, which it would have sold at that
price in any event, by the amount of the premium. In the event the market price
of the security declined and the option were not exercised, the premium would
offset all or some portion of that decline. It is possible, of course, that the
price of the security could increase beyond the exercise price; in that event,
the FUND would forego the opportunity to sell the security at that higher price.
In addition, call options may be used as part of a different strategy in
connection with sales of portfolio securities. If, in the judgment of the
advisor, the market price of a security is overvalued and it should be sold, the
FUND may elect to write a call with an exercise price substantially below the
current market price. So long as the value of the underlying security remains
above the exercise price during the term of the option, the option will be
exercised, and the FUND will be required to sell
A-4
<PAGE>
the security at the exercise price. If the sum of the premium and the exercise
price exceeds the market price of the security at the time the call is written,
the FUND would, in effect, have increased the selling price of the security. The
FUND would not write a call under these circumstances if the sum of the premium
and the exercise price were less than the current market price of the security.
In summary, a principal reason for writing calls on a securities portfolio is to
attempt to realize, through the receipt of premium income, a greater return than
would be earned on the securities alone. A covered call writer, such as the
FUND, which owns the underlying security has, in return for the premium, given
up the opportunity for profit from a price increase in the underlying security
above the exercise price, but has retained the risk of loss should the price of
the security decline. Unlike one who owns securities not subject to a call, the
FUND as a call writer may be required to hold such securities until the
expiration of the call option or until the FUND engages in a closing purchase
transaction at a price that may be below the prevailing market.
C. Put Options. The FUND may also write put options. If the FUND writes a put
option, it is obligated to purchase a given security at a specified price at
any time during the term of the option. The rules regarding the writing of
put options are generally comparable to those described above with respect
to call options.
Writing put options may be a useful portfolio investment strategy when the FUND
has cash or other reserves available for investment as a result of sales of FUND
shares or because the ADVISOR believes a more defensive and less fully invested
position is desirable in light of market conditions. If the FUND wishes to
invest its cash or reserves in a particular security at a price lower than
current market value, it may write a put option on that security at an exercise
price which reflects the lower price it is willing to pay. The buyer of the put
option generally will not exercise the option unless the market price of the
underlying security declines to a price near or below the exercise price. If the
FUND writes a put option, the price of the underlying security declines and the
option is exercised, the premium, net of transaction charges, will reduce the
purchase price paid by the FUND for the security. Of course, the price of the
security may continue to decline after exercise of the put options, in which
event the FUND would have foregone an opportunity to purchase the security at a
lower price, or the option might never be exercised.
If, before the exercise of a put, the ADVISOR determines that it no longer
wishes to invest in the security on which the put has been written, the FUND may
be able to effect a closing purchase transaction on an exchange by purchasing a
put of the same series as the one which it has previously written. The cost of
effecting a closing purchase transaction may be greater than the premium
received on writing the put option, and there is no guarantee that a closing
purchase transaction can be effected. The FUND may purchase put options only in
connection with a closing transaction.
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.
At the time a put option is written, the FUND will be required to establish, and
will maintain until the put is exercised or has expired, a segregated account
with its custodian consisting of cash or short-term U.S. Government securities
equal in value to the amount which the FUND will be obligated to pay upon
exercise of the put. 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
A. In General. 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, as
explained later, the FUND is also authorized to buy futures contracts on an
unleveraged basis and not as an anticipatory hedge.)
A-5
<PAGE>
The FUND will not invest in futures contracts and options thereon if immediately
thereafter the amount committed to margins plus the amount paid or option
premiums exceeds 5% of the FUND'S total assets. In addition the FUND will not
hedge more than 1/3 of its net assets.
B. Futures contracts. 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. Currently, futures contracts are
available on Treasury bills, notes, and bonds as well as interest-rate and
stock market indexes.
There are a number of reasons why entering into futures contracts for hedging
purposes can be beneficial to the FUND. First, futures markets may be more
liquid than the corresponding cash markets on the underlying securities. Such
enhanced liquidity results from the standardization of the futures contracts and
the large transaction volumes. Greater liquidity permits a portfolio manager to
effect a desired hedge both more quickly and in greater volume than would be
possible in the cash market. Second, a desired sale and subsequent purchase can
generally be accomplished in the futures market for a fraction of the
transaction costs that might be incurred in the cash market.
The purpose of selling a futures contract is to protect the FUND'S portfolio
from fluctuation in asset value resulting from security price changes. Selling a
futures contract has an effect similar to selling a portion of the FUND'S
portfolio securities. If security prices were to decline, the value of the
FUND'S futures contracts would increase, thereby keeping the net asset value of
the FUND from declining as much as it otherwise might have. In this way, selling
futures contracts acts as a hedge against the effects of declining prices.
However, an increase in the value of portfolio securities tends to be offset by
a decrease in the value of corresponding futures contracts.
Similarly, when security prices are expected to rise, futures contracts may be
purchased to hedge against anticipated subsequent purchases of portfolio
securities at higher prices. By buying futures, the FUND could effectively hedge
against an increase in the price of the securities it intends to purchase at a
later date in order to permit the purchase to be effected in an orderly manner.
At that time, the futures contracts could be liquidated at a profit if prices
had increased as expected, and the FUND'S cash position could be used to
purchase securities.
When a purchase or sale of a futures contract occurs, a deposit of high-quality,
liquid securities called initial margin is made by both buyer and seller with a
custodian for the benefit of the broker. Unlike other types of margin, a futures
margin account does not involve any loan or borrowing but is merely a good faith
deposit that must be maintained in a minimum amount of cash or U.S. Treasury
bills. All futures positions, both long and short, are marked-to-market daily,
with cash payments called variation margin being made by buyers and sellers to
the custodian, and passed through to the sellers and buyers, to reflect daily
changes in the contract values.
Most futures contracts are typically canceled or closed out before the scheduled
settlement date. The closing is accomplished by purchasing (or selling) an
identical futures contract to offset a short (or long) position. Such an
offsetting transaction cancels the contractual obligations established by the
original futures transaction. Other financial futures contracts call for cash
settlements rather than delivery of securities.
If the price of an offsetting futures transaction varies from the price of the
original futures transaction, the hedger will realize a gain or loss
corresponding to the difference. That gain or loss will tend to offset the
realized loss or gain on the hedged securities position, but may not always or
completely do so.
The FUND will not enter into any futures contract if, immediately thereafter,
the aggregate initial margin for all existing futures contracts and options
thereon and for premiums paid for related options would exceed 5% of the FUND'S
total assets. The FUND will not purchase or sell futures contracts or related
options if immediately thereafter more than 1/3 of its net assets would be
hedged.
C. Risks and limitations involved in futures hedging. 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. 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
A-6
<PAGE>
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. 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 (discussed later) 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.
Pursuant to Rule 4.5 under the Commodity Exchange Act, investment companies
registered under the 1940 Act are exempted from the definition of commodity pool
operator in the Commodity Exchange Act, subject to compliance with certain
conditions. The exemption is conditioned upon a requirement that all of the
investment company's commodity futures transactions constitute bona fide hedging
transactions (except on an unleveraged basis, as described in (F.) With respect
to long positions assumed by the FUND, the FUND will segregate with its
custodian an amount of cash and other assets permitted by Commodity Futures
Trading Commission (CFTC) regulations equal to the market value of the futures
contracts and thereby insure that the use of futures contracts is unleveraged.
The FUND will use futures in a manner consistent with these requirements.
D. Options on futures contracts. The FUND only intends to engage in options on
futures contracts for bona fide hedging purposes in compliance with CFTC
regulations. An option on a futures contract gives the purchaser the right,
but not the obligation, to assume a position in a futures contract (which
position may be a long or short position) at a specified exercise price at
any time during the option exercise period. The writer of the option is
required upon exercise to assume an offsetting futures position (which
position may be a long or short position). Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated balance in the
writer's futures margin account that represents the amount by which the
market price of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such closing
transactions can be effected.
The FUND will be required to deposit initial and variation margin with respect
to put and call options on futures contracts written by it pursuant to the
FUND'S futures commissions merchants' requirements similar to those applicable
to the futures contracts themselves, described previously.
E. Risks of futures transactions. 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,
A-7
<PAGE>
there can be no assurance that such liquidity will always exist.
F. The FUND also is authorized, subject to the limitations set out in the
Prospectus, to purchase futures contracts on an unleveraged basis, when not
intended as an anticipatory hedge. When a contract is purchased on this
basis the investment company establishes a segregated account, composed of
cash and/or cash equivalents, equal to the total value of the contract (less
margin on deposit). As with other futures trading, these purchases must not
be for speculative purposes.
The ability to engage in these purchases on an unleveraged basis can
significantly decrease transaction costs to the FUNDS in certain instances. For
example, if an inordinately large deposit should occur on a single day, the
sheer volume of securities purchases required for that day may place the FUND at
a market disadvantage by requiring it to purchase particular securities in such
volume that its own buying activity could cause prices to increase. In addition,
if this deposit had involved market-timing and as a result there subsequently
were an oversized withdrawal, the FUND could again suffer market disadvantage,
this time because the volume of sales could, for the same reason, force prices
of particular securities to decrease. The FUND, by buying a futures contract
(followed by the appropriate closing transaction) instead of purchasing
securities could achieve considerable savings in transaction costs without
departing from FUND objectives. Furthermore, as stated in (C.), price changes in
a futures contract generally parallel price changes in the securities that the
FUND might otherwise have purchased. Thus, purchase of a futures contract on an
unleveraged basis allows the FUND to comply with its objective while at the same
time achieving these lower transaction costs.
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 Preface to this Prospectus booklet for
information about how to obtain a copy of the SAI booklet.
LENDING OF PORTFOLIO SECURITIES
As described in the Prospectus, 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.
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REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
The FUNDS may make short-term investments in repurchase agreements. A repurchase
agreement typically involves the purchase by the FUND of securities (U.S.
Government or other money market securities) from a financial institution such
as a bank, broker-dealer or savings and loan association, coupled with an
agreement by the seller to repurchase the same securities from the FUND at the
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. 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
transaction will be in the actual or constructive possession of the particular
FUND during the terms of the transaction, as provided in the agreement.
In a reverse repurchase agreement, the FUND involved sells a portfolio security
to another party, such as a bank or broker-dealer, in return for cash and agrees
to repurchase the instrument at a particular price and time. 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. The FUND will enter into reverse repurchase
agreements only with parties that the ADVISOR or sub-advisor deems creditworthy.
Reverse repurchase agreements are considered to be borrowing transactions, and
thus are subject to the FUND'S limitation on borrowing. Not every FUND is
authorized to enter into reverse repurchase agreements.
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 1997
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 reporting matters; and meetings with the Audit
Committee.
FINANCIAL STATEMENTS
The audited financial statements and the report of Ernst & Young LLP,
Independent Auditors, for the FUNDS are incorporated by reference to the FUNDS'
1997 Annual Report. We will provide a copy of the 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.
A-9
<PAGE>
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.
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 FUND 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 FUND
will not invest in commercial paper rated A-3).
A-10
<PAGE>
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
Federal tax considerations with respect to the FUND. State and local taxes vary.
STATE REQUIREMENTS
The California Department of Insurance has established the following guidelines
for an underlying portfolio of a VARIABLE ACCOUNT. The FUNDS intend to comply
with these guidelines:
BORROWING
The borrowing limit for any FUND is 33 1/3 percent of total assets. Entering
into a reverse repurchase agreement shall be considered "borrowing" as that term
is used herein.
FOREIGN INVESTMENTS -- DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or a global FUND is sufficiently diversified if it is
invested in a minimum of three different countries at all times, and has
invested no more than 50 percent of total assets in any one second-tier
country and no more than 25 percent of total assets in any one third-tier
country. First-tier countries are: Germany, the United Kingdom,
A-11
<PAGE>
Japan, the United States, France, Canada, and Australia. Second-tier
countries are all countries not in the first or third tier. Third-tier
countries are countries identified as "emerging" or "developing" by the
International Bank for Reconstruction and Development ("World Bank") or
International Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a minimum
of three countries. The name of the FUND must accurately describe the FUND.
c. The name of a single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
DERIVATIVE TRANSACTIONS-
DEFINITIONS
The Prospectus for each FUND and the uniform Appendix for the Prospectus booklet
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).
A-12
<PAGE>
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 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-13
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
A-14
<PAGE>
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Part A.
------
The financial highlights of Lincoln National Managed Fund, Inc. (the
Fund) for the years ended December 31, 1997, 1996, 1995, 1994, 1993, 1992, 1991,
1990, 1989, 1988, 1987, and 1986 are incorporated by reference to Pages 53-54
of the Fund's 1997 Annual Report
Part B.
------
The following financial statements of the Fund are incorporated by
reference to Pages 34-37, 43, 45-52 and 55 of the Fund's 1997 Annual Report:
- Statement of Net Assets -- December 31, 1997
- Statement of Operations -- Year Ended December 31, 1997
- Statements of Changes in Net Assets -- Years Ended December 31,
1997 and 1996
- Notes to Financial Statements -- December 31, 1997
- Report of Independent Auditors, Ernst & Young LLP
In total, only pages 34-37, 43, 45-52, and 55 of the Fund's 1997 Annual
Report are incorporated by reference into this Registration Statement. No other
pages of that Report are incorporated by reference.
(2) Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable, or the required information is
included in the financial statements, and therefore have been omitted.
(b) Exhibits:
1 - (a) Articles
- (b) Articles Supplementary (Filed with Post-Effective
Amendment No. 16 to this Registration Statement.)
2 - By-Laws
3 - N/A
4 - Certificate
5(a) - Advisory Agreement between Lincoln Investment Management Inc.
and Lincoln National Managed Fund, Inc.
(b) - Sub-Advisory Agreement between Lincoln Investment Management
Inc. and Modern Portfolio Theory Associates dated April 30,
1988.
6 - Specimen Agents Contract (Filed with Post-Effective Amendment
No. 16 to this Registration Statement)
7 - N/A
8(a) - Custody Agreement
9(a) - Agreement to Purchase Shares
9(b) - Trade Name Agreement
9(c) - N/A
9(d) - Services Agreement between Delaware Management Holdings,
Inc., Delaware Service Company, Inc. and Lincoln National
Life Insurance Company is incorporated herein by reference to
the Registration Statement of Lincoln National Life Insurnce
Company on Form S-6 (333-40745) filed on November 21, 1997.
10 - Opinion of Counsel
11 - Consent of Ernst & Young LLP, Independent Auditors
12 - N/A
13 - Investment Letter
14 - N/A
15 - N/A
16 - N/A
17(a) - Financial Data Schedule
18(a) - Power of Attorney, John B. Borsch, Jr.
18(b) - Power of Attorney, Barbara S. Kowalczyk
18(c) - Power of Attorney, Nancy L. Frisby
19(a) - Org Chart
19(b) - Memorandum Concerning Books and Records
<PAGE>
Item 25. 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 Variable Life Accounts D 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 26. Number of Holders of Securities
As of April 1, 1998, there was one record holder of common stock, $.01
par value per share.
Item 27. Indemnification
Reference is made to Article IX of Registrant's Bylaws (filed as
Exhibit No. 2 to this Registration Statement), Section 8 of the Agreement
to Purchase Shares between Registrant and Lincoln National Pension Insurance
Company (filed as Exhibit 9(a) to this Registration Statement), and
Section 2-418 of the Maryland General Corporation Law.
Item 28. 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 April 1, 1998, the officers and/or directors of the
Investment Adviser held the following positions:
<TABLE>
<CAPTION>
Position Other Substantial Business
Investment Profession, Vocation or
Name Adviser Employment; Address
- ------------------------ --------------------- ---------------------------------------------------------
<S> <C> <C>
JoAnn Becker Senior Vice President 200 East Berry Street,
and Director Fort Wayne, Indiana 46802
David A. Berry Vice President Vice President, Lincoln National Income Fund, Inc. and
Lincoln National Convertible Securities Fund, Inc.,
Second Vice President, Lincoln Life & Annuity Company of
New York, 200 East Berry Street, Fort Wayne, Indiana
46802
Steven R. Brody Senior Vice President President and Director, Lincoln National Realty
and Director Corporation; Vice President, The Lincoln National Life
Insurance Company, and Lincoln Advisor Funds, Inc.,
200 East Berry Street, Fort Wayne, Indiana 46802
David C. Fischer Vice President Vice President, Lincoln National Income Fund, Inc.,
200 East Berry Street
Fort Wayne, Indiana 46802
Mark Laurent Second Vice President 200 East Berry Street,
Fort Wayne, Indiana 46802
Thomas M. McMeekin President and President and Director, Lincoln National Convertible
Director Securities Fund, Inc., Lincoln National Income Fund,
Inc., President, Chief Executive Officer and Director,
Lincoln National Mezzanine Corporation; Executive Vice
President and Chief Investment Officer, Lincoln National
Corporation; Director, Delaware Management Holdings,
Inc., Lincoln National (China) Inc., Lincoln National
(India) Inc., Lincoln National Investment Companies,
Inc., Lincoln National Realty Corporation, Lynch & Mayer,
Inc., Vantage Global Advisors, Lincoln National Life
Insurance Company,
200 East Berry Street,
Fort Wayne, Indiana 46802
Jil Schoeff-Lindholm Portfolio Manager 200 East Berry Street,
Fort Wayne, Indiana 46802
Cedrick Walta Short Term Investment 200 East Berry Street,
Manager Fort Wayne, Indiana 46802
Denny Westrick Second Vice President 200 East Berry Street,
Fort Wayne, Indiana 46802
Jay Yentis Second Vice President 200 East Berry Street,
Fort Wayne, Indiana 46802
</TABLE>
<PAGE>
28(b) The Sub-advisor:
As of March 12, 1998, the officers and/or directors of the Sub-adviser held
the following positions:
VANTAGE INVESTMENT ADVISORS
630 Fifth Avenue
New York, NY 10111
OFFICERS
--------
T. Scott Wittman President
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
Mark C. Viani Vice President
Pamela L. Friedman Assistant Vice President
Chris P. Harvey Assistant Vice President
Christopher J. Rowe Assistant Vice President
BOARD OF DIRECTORS
------------------
Jeffrey J. Nick
Bruce D. Barton
Dennis A. Blume
H. Thomas McMeekin
T. Scott Wittman
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
See Exhibit 19.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant furnishes the following undertakings pursuant to the
Securities Act of 1933 (the "Act"):
(a) - (c): The undersigned Registrant hereby undertakes to file a
post-effective amendment, using financial statements which need
not be certified, within four to six months from the effective
date of Registrant's 1933 Act Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any such action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
(d) Registrant undertakes to provide, without charge, a copy of the
Fund's most recent Annual Report to any recipients of its
Prospectus who requests it.
<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 Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Wayne, and State of Indiana,
on the 17th day of April, 1998.
LINCOLN NATIONAL
MANAGED 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 by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Kelly D. Clevenger Chairman of the Board April 17, 1998
- ----------------------- and President
Kelly D. Clevenger (Principal Executive Officer)
* Director April 17, 1998
- -----------------------
John B. Borsch, Jr.
*** Director April 17, 1998
- -----------------------
Barbara S. Kowalczyk
** Director April 17, 1998
- -----------------------
Nancy L. Frisby
Director April 17, 1998
- -----------------------
Kenneth G. Stella
/s/ Eric Jones Chief Accounting Officer April 17, 1998
- ----------------------- (Principal Accounting Officer)
Eric Jones
/s/ Janet C. Whitney Vice President and Treasurer April 17, 1998
- ----------------------- (Principal Financial Officer)
Janet C. Whitney
</TABLE>
*By /s/ John L. Steinkamp, pursuant to Power of Attorney filed with
----------------------- Post-Effective Amendment No. 2 to this Registration
John L. Steinkamp Statement.
**By /s/ John L. Steinkamp, pursuant to a Power of Attorney filed with
---------------------- Post-Effective Amendment No. 12 to this Registration
John L. Steinkamp Statement.
***By /s/ Jeremy Sachs, pursuant to a Power of Attorney filed with
--------------------- Post-Effective Amendment No. 13 to this Registration
Jeremy Sachs Statement.
<PAGE>
EXHIBIT INDEX TO FORM N-1A
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1 Articles
2 By-Laws
4 Certificate
5(a) Advisory Agreement between Lincoln Investment Management
Inc. and Lincoln National Managed Fund, Inc.
5(b) Sub-Advisory agreement between Lincoln National
Investment Management, Inc. and Modern Portfolio Theory
Associates dated April 30, 1988
8(a) Custody Agreement
9(a) Agreement to Purchase Shares
9(b) Trade Name Agreement
10 Opinion of Counsel
11 Consent of Ernst & Young LLP, Independent Auditors
13 Investment Letter
17(a) Financial Data Schedule
18(a) Power of Attorney, John B. Borsch, Jr.
18(b) Power of Attorney, Barbara S. Kowalczyk
18(c) Power of Attorney, Nancy L. Frisby
19(a) Org Chart
19(b) Memorandum Concerning Books and Records
<PAGE>
Maryland
State Department of Assessments and Taxation
8309928
THE ARTICLES OF INCORPORATION
OF
LINCOLN NATIONAL MANAGED FUND, INC.
HAVE BEEN RECEIVED AND APPROVED BY THE STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION THIS 17th DAY OF February, 1993 at 2:40 P.M.
AND WILL BE RECORDED.
BY:
301 West Preston Street, Baltimore, Maryland 21201 / Phone: 383-3720
<PAGE>
STATE OF MARYLAND
No. 8018
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street Baltimore, Maryland 21201
THIS IS TO CERTIFY THAT the within instrument is a true copy of the
THE ARTICLES OF INCORPORATION
OF
LINCOLN NATIONAL MANAGED FUND, INC.
as approved and received for record by the State Department of Assessment and
Taxation of Maryland, February 17, 1983
at 2:40 o'clock P.M.
AS WITNESS my hand and official seal of the said
Department at Baltimore this fourteenth day
of March, 1983.
A. MARGARET HUBER, CHARTER SPECIALIST
<PAGE>
ARTICLES OF INCORPORATION
of Lincoln National Managed Fund, Inc.
(A Maryland Corporation)
FIRST: INCORPORATOR. The undersigned, whose address is 1300 South
Clinton Street, Fort Wayne, Indiana 46801, being at least 18 years of age, is
acting as sole incorporator to form a corporation under and by virtue of the
General Laws of the State of Maryland authorizing the formation of corporations
hereinafter referred to as the "General Corporation Law
SECOND: NAME. The name of the corporation (hereinafter called the
"Corporation") is Lincoln National Managed Fund, Inc.
THIRD: PURPOSE. The purposes for which the Corporation is formed are:
A. To engage in, conduct, operate and carry on the business of an
open-end management investment company as defined in the Investment Company Act
of 1940 (including any amendment thereof or successor statute) (hereinafter
called the "1940 Act");
B. To invest and reinvest in, buy or otherwise acquire, hold for
investment or otherwise, sell or otherwise dispose of, lend or pledge, trade or
deal in securities, obligations, commodities, commodity futures contracts or
interests therein of all kinds, however evidenced, (Or rights, options, or
warrants to acquire or dispose of such securities, obligations, commodities,
commodity futures contracts or interests) of, or issued or guaranteed by or on
behalf of: (I) any national, state or local governments, foreign or domestic,
or their agencies, instrumentalities or subdivisions (including, without
limitation, the United States, any state of the United States, multi-state
agency, political subdivision of a state, municipality, or any governmental
entity, unit, agency or instrumentality of any of the foregoing), and (ii) any
private or public company, corporation, association, board of trade, exchange,
general or limited partnership, trust or other enterprise or organization,
foreign or domestic; including as to both clauses (I) and (ii) without
limitation stocks, and all other forms of equity securities, convertible
securities, bonds, debentures, bills, notes and all other evidences of
indebtedness, negotiable or non-negotiable instruments, government securities,
money market instruments, certificates of deposit, finance paper, commercial
paper, secured call loans, commodities, commodity futures contracts, bankers'
acceptances, investment contracts and repurchase agreements; and
C. To do every other act not inconsistent with law which is appropriate
to promote and attain the purposes set forth in these Articles of Incorporation.
<PAGE>
FOURTH: PRINCIPAL OFFICE AND RESIDENT AGENT. The address of the
principal office of the Corporation in this State is 929 North Howard Street,
Baltimore, Maryland 21201. The name of the resident agent of the Corporation in
this State is The Prentice-Hall Corporation System, Maryland, Inc., a
corporation of this State, and the address of the resident agent is 929 North
Howard Street, Baltimore, Maryland 21201.
FIFTH: CAPITAL STOCK.
A. AUTHORIZED SHARES. The total number of shares of stock which the
Corporation shall have authority to issue is 50,000,000 shares of the par value
of $.0l per share, all of which shall be of a single class designated Common
Stock (and hereinafter referred to as such), such shares having an aggregate par
value of
$500, 000.
B. PREEMPTIVE RIGHTS. No holder of any stock of the Corporation shall as
such holder have any preemptive or other right to purchase or subscribe for any
stock which the Corporation may issue or sell, whether or not exchangeable for
any other stock of the Corporation, and whether out of the number of shares
authorized by the Articles of Incorporation as originally filed or by any
amendment thereof or out of shares of the stock of the Corporation acquired by
it after the issue thereof.
C. FRACTIONAL SHARES. The Corporation may issue fractional as well as
full shares, and each fractional share shall be dealt with and have rights
identical to those to which a full share is entitled but in such proportion, in
all instances, as such fractional share bears to a full share; provided,
however, that the Corporation shall in no event be obliged to issue certificates
for fractional shares.
D. MAJORITY VOTE. Notwithstanding any provision of the General
Corporation Law requiring that any action be taken or authorized by the
affirmative vote of the holders of a designated proportion greater than a
majority of the shares or votes entitled to be cast, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding and entitled to
vote thereon.
SIXTH: REDEMPTION OF SHARES. All shares of Common Stock now or
hereafter authorized shall be subject to redemption, in the sense used in the
General Corporation Law, in the manner, upon the terms and conditions and at the
redemption price determined as provided in these Articles of Incorporation. All
shares so redeemed or repurchased shall be deemed to be acquired for retirement
in the sense contemplated by the General Corporation Law and the number of
authorized shares of Common Stock shall not
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be reduced by the number of any shares redeemed or repurchased by the
Corporation.
A. REDEMPTION BY STOCKHOLDERS. Each holder of Common Stock, upon request
in proper form, as determined by the Board of Directors, delivered to the
Corporation or its agent appointed for such purpose, accompanied, in the case of
shares for which certificates have been issued, by surrender of the appropriate
stock certificate or certificates in proper form for transfer, as determined by
the Board of Directors, shall be entitled to require the Corporation to redeem
all or any part of the shares of Common Stock standing in the name of such
holder on the books of the Corporation, to the extent that funds or property are
legally available therefor, at a redemption price per share equal to the net
asset value per share applicable to such redemption, determined as provided in
these Articles of Incorporation and in resolutions of the Board of Directors
adopted from time to time. Payment of the redemption price shall be made not
later than the seventh day following the day of receipt by the Corporation or
such agent of the written request and stock certificates, if any, in proper form
as described in the preceding sentence, except that no payment need be made
until funds for the purchase price of shares redeemed have been collected by or
for the account of the Corporation.
B. RIGHTS OF HOLDERS OF SHARES REDEEMED. The right of any holder of
shares of Common Stock redeemed as provided in Paragraph A to receive dividends
or distributions thereon and all other rights of such holder with respect to
such shares shall terminate at the time as of which the redemption price of such
shares is determined, except the right of such holder to receive (I) the
redemption price of such shares in accordance with the provisions hereof, and
(ii) any dividend or distribution to which such holder had previously become
entitled.
C. DETERMINATION OF NET ASSET VALUE PER SHARE. The Board of Directors
shall determine from time to time the net asset value per share of the
outstanding shares of Common Stock. It may delegate this authority to any one
or more of the Directors or officers of the Corporation, to the investment
adviser, the custodian of the Corporation's assets or to another agent of the
Corporation or agent of any of the foregoing appointed for such purpose; except
that the authority to suspend the determination of net asset value may not be
delegated. The net asset value shall be determined as of the close of trading
on the New York Stock Exchange on each day such Exchange is open for trading,
unless the Board of Directors shall, by resolution, prescribe a different time
or times as of which such determination shall be made. The time at which shares
of Common Stock issued and sold by the Corporation shall be deemed to be
outstanding and the time at which shares of Common Stock redeemed or repurchased
by the Corporation shall be deemed no longer to be outstanding shall be fixed by
resolution of the Board of Directors. A determination of net asset value shall
be applicable to requests for redemption
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<PAGE>
and, if and to the extent determined by the Board of Directors, to other
transactions of the Corporation in shares of Common Stock, effected during such
periods as the Board of Directors shall prescribe by resolution.
D. SUSPENSION OF REDEMPTION RIGHTS. The Board of Directors may declare a
suspension of the redemption rights granted in Paragraph A: (I) for any period
during which the New York Stock Exchange is closed (other than customary
week-end and holiday closings) , or during which trading in the markets
customarily utilized by the Corporation is restricted; (ii) for any period
during which an emergency exists, as determined by the Securities and Exchange
Commission, as a result of which disposal of the Corporation's investments or
determination of net asset value is not reasonably practicable, or (iii) for
such periods as the Securities and Exchange Commission by order may permit for
the protection of the Corporation's investors. Such suspension shall take
effect at such time as the Board of Directors or authorized officer shall
specify and shall continue until the Board of Directors or authorized officer
shall declare the suspension at an end, except that the suspension shall
terminate in any event on the first day on which (1) the condition giving rise
to the suspension shall have ceased to exist and (2) no other condition exists
under which suspension is authorized under this Paragraph D. Each declaration
by the Board of Directors pursuant to this Paragraph D shall be consistent with
applicable rules and regulations, if any, of the Securities and Exchange
Commission or any other governmental body having jurisdiction over the
Corporation. To the extent not inconsistent with such rules and regulations,
the determination of the Board of Directors shall be conclusive.
E. EFFECT OF SUSPENSION OF REDEMPTION RIGHTS.
Notwithstanding any other provision of this Article Sixth, the rights of
holders of Common Stock to require the Corporation to redeem and receive payment
for their shares, including holders who shall have requested redemption of
shares but who shall not have received payment therefor, shall be suspended
during any period when a suspension of redemption rights authorized by Paragraph
D is in effect. No determination of net asset value per share shall be required
to be made during a period when such a suspension is in effect. Any holder who
shall have his redemption right so suspended may, during the period of such
suspension, by appropriate written notice of revocation delivered to the office
or agency where request for redemption was made, revoke any request or
instruction for redemption not honored and withdraw any certificates tendered
for redemption. The redemption price of shares for which redemption requests
have not been revoked shall be the net asset value of such shares determined
after the termination of such suspension, and payment shall be made within seven
days after the date upon which the requirements of Paragraph A were met plus the
period during which suspension was in effect.
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<PAGE>
SEVENTH: BOARD OF DIRECTORS. The number of Directors of the Corporation
shall be four, which number may be changed pursuant to the Bylaws of the
Corporation. The names of the Directors, who shall act until the first annual
meeting or until their successors are duly elected and qualified are:
John B. Borsch, Jr.
Peter J. Cross
Roxanne Decyk
Stanley R. Nelson
B. POWERS. The following powers are expressly vested in the Board
of Directors of the Corporation and may be exercised without the approval of the
stockholders of the Corporation:
(I) To make, adopt, alter, amend and repeal Bylaws of the
Corporation;
(ii) To declare and pay dividends and distributions in cash, shares of
Common Stock or other securities or property from surplus or any
funds legally available therefor, at such intervals (which may be
as frequently as daily) or on such other periodic basis as it
shall determine; to declare such dividends or distributions by
means of a formula or other method of determination at meetings
held less frequently than the frequency of the effectiveness of
such declarations; to provide that dividends may be paid in cash
or in shares of Common Stock at the election of each stockholder;
to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less
frequently than the effectiveness of the declaration thereof; and
to provide for the payment of declared dividends on a date
earlier than the specified payment date;
(iii) Inasmuch as the computation of net income, profits or earnings
for Federal income tax purposes may vary from the computation
thereof on the books of the Corporation, in its discretion, to
distribute for any fiscal year as dividends and as capital gains
distributions, respectively, additional amounts sufficient to
enable the Corporation to avoid or reduce its liability for
taxes;
(iv) To issue, reissue, sell or cause to be issued and sold any of the
authorized shares of Common Stock, including any additional
shares hereafter authorized and any shares redeemed or
repurchased by the Corporation, to
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<PAGE>
such persons as the Board of Directors shall determine, for such
consideration, not less than the greater of the par value thereof
or the net asset value per share determined as provided in these
Articles of Incorporation and in resolutions of the Board of
Directors adopted from time to time, and upon terms and
conditions determined by the Board of Directors, all such shares
when so issued and sold being fully paid and nonassessable;
provided that no shares of Common Stock shall be issued or sold
by the Corporation, except as a stock dividend distributed to
stockholders, for less than an amount which would result in
proceeds to the Corporation at least equal to the net asset value
per share, determined as provided in these Articles of
Incorporation and in resolutions of the Board of Directors
adopted from time to time, and provided further that in the case
of shares issued or sold for a consideration other than cash, the
resolution authorizing their issue or sale shall include a fair
description of any consideration other than cash and a statement
of the actual value of such consideration as determined by the
Board of Directors or a statement that the Board of Directors has
determined that the actual value is or will be not less than a
certain sum; and
(v) To authorize the purchase by the Corporation, either directly or
through an agent, of shares of Common Stock, in the open market
or otherwise, upon terms and conditions determined by the Board
of Directors at prices not in excess of the net asset value of
such shares determined as provided in these Articles of
Incorporation and in resolutions of the Board of Directors
adopted from time to time.
C. GOOD-FAITH DETERMINATIONS CONCLUSIVE. Any determination made in
good faith and, so far as accounting matters are involved in accordance with
generally accepted accounting principles, by or pursuant to the direction of the
Board of Directors, as to: the amount of the assets, debts, obligations, or
liabilities of the Corporation; the amount of any reserves or charges set up and
the propriety thereof; the purpose for creating such reserves or charges; the
use, alteration or cancellation of any reserves or charges; (whether or not any
debt, obligation or liability for which such reserves or charges were created
shall have been paid or discharged or shall be then or thereafter required to he
paid or discharged); the price or bid or asked
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<PAGE>
price or yield equivalent of any investment owned or held by the Corporation;
the market or fair value of any investment or any other asset of the
Corporation, the number of shares of Common Stock of the Corporation
outstanding; the ability to liquidate investments in orderly fashion; and any
matters relating to the issue, sale, redemption, purchase and/or other
acquisition or disposition of investments or Common Stock of the Corporation,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its Common Stock, past, present and future, and Common Stock of the
Corporation shall be issued and sold on the condition and understanding that any
and all such determinations shall be binding as aforesaid.
EIGHTH: GENERAL:
A. The Corporation reserves the right from time to time to amend, alter,
change, add to, or repeal any provisions contained in these Articles of
Incorporation in the manner now or hereafter prescribed or permitted by statute,
including any amendment which alters the contract rights, as expressly set forth
in these Articles of Incorporation, of any outstanding Common Stock, and all
rights conferred on stockholders and others herein are granted subject to this
reservation.
B. Nothing contained in these Articles of Incorporation shall be deemed
to authorize any action in contravention of any provision of the 1940 Act or any
rule or regulation thereunder.
C. The titles contained in these Articles of Incorporation are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
IN WITNESS WHEREOF, the undersigned incorporator hereby acknowledges these
Articles of Incorporation to be his act further acknowledges that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein are true in all material respects and that this statement is made under
the penalties for perjury.
/s/ JOHN L. STEINKAMP
John L. Steinkamp
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+[LOGO]
LINCOLN NATIONAL PENSION
LINCOLN NATIONAL PENSION INSURANCE COMPANY
FORT WAYNE, INDIANA
February 14, 1983
State Department of Assessments and Taxation Baltimore, Maryland
Re: Incorporation of Lincoln National Managed Fund, Inc. Gentlemen and Ladies:
Enclosed is one executed copy of the Articles of Incorporation for Lincoln
National Managed Fund, Inc. Also, enclosed are Lincoln National Pension
Insurance Company's checks for $ 24.00 and $ 100.00 in payment of (1) the
required filing and recording fees and (2) the Bonus Tax on $500,000 of
aggregate authorized par value (i.e. 50,000,000 shares of $ 0.01 par value per
share Common Stock), respectively.
This new corporation will be a registered investment company under the
Investment Company Act of 1940. It will be a sister company to Lincoln National
Growth Fund, Inc.; Lincoln National Corporate Bond Fund, Inc.; Lincoln National
Money Market Fund, Inc.; and Lincoln National Special Opportunities Fund, Inc. -
all Maryland corporations.
If you have any questions or comments regarding the incorporation of this
company, please call me at 219/427-3628.
Very truly yours,
/s/ JOHN T. STEINKAMP
John T. Steinkamp
Second Vice President and
Associate General Counsel
cc: Mr. Nikels
Mr. Cross
1300 SOUTH CLINTON STREET
FORT WAYNE / INDIANA / 46801
(219) 424-5421
<PAGE>
Bylaws
of
Lincoln National Managed Fund, Inc.
(as last amended January 24, 1989)
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS: (a) The annual meeting of the stockholders of
the Corporation (if such meeting be held) shall be held on the third Tuesday in
August in each year (or if said day be a legal holiday then on the next
succeeding day not a legal holiday), at 10:30 a.m., at the office of the
Corporation in the City of Baltimore, Maryland, or at such other time and place
within the United States as may be fixed by the Chairman of the Board or the
President, for the purpose of electing directors and for transacting such other
business as may properly be brought before the meeting. Only such business, in
addition to that prescribed by law, by the Articles of Incorporation or by these
Bylaws, may be brought before such meeting as may be specified by resolution of
the Board of Directors, or by writing filed with the Secretary of the
Corporation and signed by the Chairman of the Board or the President or by a
majority of the directors or by stockholders holding at least one-half of the
Common Stock of the Corporation outstanding and entitled to vote at the meeting.
(b) Upon the affirmative vote of a majority of the whole board, the annual
meeting may be dispensed with in any year in which none of following is required
to be acted upon by stockholders pursuant to the Investment Company Act of
1940:
i. Election of directors;
ii. Approval of an investment advisory agreement;
iii. Ratification of the selection of independent public accountants; and
iv. Approval of a distribution agreement. (Last amended January 24, 1989.)
SECTION 2. SPECIAL MEETINGS: Special meetings of the stockholders for any
purpose or purposes may be held upon call by the Chairman of the Board or the
President or by a majority of the Board of Directors, and shall be called by the
Chairman of the Board, the President, a Vice President, the Secretary or any
director at the request in writing of a majority of the Board of Directors or of
stockholders holding at least one-quarter of the stock of the Corporation
outstanding and entitled to vote at the meeting, at such time and date and at
such place where an annual meeting of
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<PAGE>
stockholders could be held, each as may be fixed by the Chairman of the Board,
the President or the Board of Directors, as the case may be, and as may be
stated in the notice setting forth such call. Such request shall state the
purpose or purposes of the proposed meeting and the matters proposed to be acted
upon and only such matters so specified may properly be brought before such
meeting.
Special meetings of the stockholders shall be called by the Chairman of the
Board, the President, a Vice President, the Secretary or any Director when
requested to do so by stockholders representing the requisite beneficial
interest in the Corporation pursuant to Section 16(c) of the Investment Company
Act of 1940, for the purpose of removing one or more directors. The time and
place for any such meeting will be fixed as provided in the previous paragraph.
Whenever stockholders or beneficial owners of stock in the Corporation apply to
the Board of Directors for assistance in communicating with other stockholders
or beneficial owners for this purpose, the Board shall facilitate that
communication pursuant to that Section 16(c). (Last amended January 24, 1989.)
Whenever the Board of Directors shall change the independent public
accountant for the Corporation, a meeting of stockholders shall be called by the
Board for the purpose of ratifying or rejecting the selection of the new
accountant. The time and place for any such meeting will be fixed as provided
in the first paragraph of this SECTION. (Last amended January 24, 1989.)
SECTION 3. NOTICE OF MEETINGS: Written or printed notice of every annual
or special meeting of stockholders, stating the time and place thereof and, in
the case of every special meeting, the purpose of such meeting, shall be
delivered personally or mailed to each stockholder of record entitled to vote at
the meeting at his address as the same appears on the books of the Corporation
or left at his residence or usual place of business, in each case at least ten
days but not more than ninety days prior to such meeting. Such further notice
shall be given as may be required by law. Meetings may be held without notice if
all of the stockholders entitled to vote are present or represented at the
meeting, or if notice is waived in writing, either before or after the meeting,
by those not present or represented at the meeting. No notice of an adjourned
meeting of the stockholders other than an announcement of the time and place
thereof at the preceding meeting shall be required.
SECTION 4. QUORUM: At every meeting of the stockholders, the holders of
record of one-half of the outstanding shares of Common Stock of the Corporation
entitled to vote at the meeting, whether present in person or represented by
proxy, shall, except as otherwise provided by law, constitute a quorum. If at
any meeting there shall be no quorum, the holders of record of a majority of
such shares entitled to vote at the meeting so present or represented may
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<PAGE>
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall have been obtained, when any business may be
transacted which might have been transacted at the meeting as first convened had
there been a quorum.
SECTION 5. PRESIDING OFFICER: Meetings of the stockholders shall be
presided over by the Chairman of the Board or, if he is not present, the
President or, if neither is present by a Vice President or, in their absence, by
a chairman to be chosen at the meeting. The Secretary of the Corporation, or,
if he is not present, an Assistant Secretary of the Corporation or, if neither
is present, a secretary to be chosen at the meeting shall act as secretary of
the meeting.
SECTION 6. PROXIES: Each stockholder entitled to vote at any meeting
shall have one vote in person or by proxy for each share of Common Stock held by
him, but no proxy shall be voted on after eleven months from its date, unless
such proxy provides for a longer period. Fractional shares shall be entitled to
fractional votes. All elections of directors shall be had and all questions,
except as otherwise provided by law or by the Articles of Incorporation or by
these Bylaws, shall be decided by a majority of the votes cast by stockholders
present or represented and entitled to vote thereon in person or by proxy.
SECTION 7. BALLOTING: The vote on the election of directors, and other
questions properly brought before any meeting, need not be by ballot except when
so demanded by a majority vote of the shares present in person or by proxy and
entitled to vote theron, or when so ordered by the chairman of such meeting.
The chairman of each meeting at which directors are to be elected by ballot or
at which any question is to be so voted on shall, at the request of any
stockholder present or represented by proxy at the meeting and entitled to vote
at such election or on such question, appoint two inspectors of election. No
director or candidate for the office of director shall be appointed as such
inspector. Inspectors shall first take and subscribe an oath or affirmation
faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of their ability, and shall take charge
of the polls and after the balloting shall make a certificate of the result of
the vote taken.
SECTION 8. RECORD DATE: The Board of Directors may close the stock
transfer books of the Corporation for a period not exceeding twenty days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of stock shall go into effect; or, in lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date, not exceeding sixty days and not less than ten days preceding the date of
any meeting of stockholders, and not exceeding sixty
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days preceding the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
stock shall go into effect, or a date in connection with the obtaining of any
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at any such meeting and at any adjournment thereof, or
entitled to receive payment of any such dividend, or to receive any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of stock, or to give such consent, and in such case such
stockholders, and only such stockholders, as shall be stockholders of record on
the date so fixed, shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER, QUALIFICATION AND TERM OF OFFICE: The Board of
Directors of the Corporation shall consist of not less than three nor more than
ten persons, none of whom need be stockholders of the Corporation. The number
of directors shall be four unless increased or decreased by the Board of
Directors from time to time, as it sees fit, by vote of a majority of the whole
Board. The directors shall be elected and shall hold office, except as
otherwise provided in SECTIONS 2 and 3 hereof, until their respective successors
are elected and qualify. A majority of the whole Board, but in no event less
than two, shall constitute a quorum for the transaction of business, but if at
any meeting of the Board there shall be less than a quorum present, a majority
of the directors present may adjourn the meeting from time to time, until a
quorum shall have been obtained, when any business may be transacted which might
have been transacted at the meeting as first convened had there been a quorum.
No notice of an adjourned meeting of the directors other than an announcement of
the time and place thereof at the preceding meeting shall be required. The acts
of the majority of the directors present at any meeting at which there is a
quorum shall, except as otherwise provided by law, by the Articles of
Incorporation or by these Bylaws, be the acts of the Board. (Last amended
January 24, 1989)
SECTION 2. RESIGNATIONS: Any director may resign his office at any time
by delivering a written resignation to the Board of Directors, the President or
the Secretary. Unless otherwise specified therein, such resignation shall take
effect upon delivery and need not be accepted. A director who is an "interested
person," as defined in the
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Investment Company Act of 1940 shall resign as a director of the Corporation
upon the termination of his employment relationship with the investment adviser
or an affiliated corporation of the investment adviser. The Board of Directors
may, at its option, decline to accept the resignation of a director who tenders
his resignation under these circumstances.
SECTION 3. VACANCIES: (a) The Board of Directors, by vote of a majority
of the whole Board, may elect directors to fill vacancies in the Board resulting
from an increase in the number of directors or from any other cause except
removal of a director pursuant to Subsection (b) of this SECTION 3. A director
so chosen shall hold office until the expiration of the term of the director
whom he shall have succeeded, and, in the case of an increase in the number of
directors, the directors so chosen shall hold office until the next meeting of
stockholders and until their respective successors are elected and qualify.
(Last amended January 24, 1989.)
(b) The stockholders, at any meeting called for the purpose, may, with or
without cause, remove any director by the affirmative vote of two-thirds of the
outstanding shares of the Corporation which are entitled to be represented at
such meeting. (Last amended January 24, 1989.)
The stockholders may, at any meeting called for the purpose, fill the
vacancy in the Board thus caused, by the affirmative vote of not less than a
majority of the outstanding shares of the Corporation entitled to be cast at
such meeting. (Last amended January 24, 1989.)
SECTION 4. PLACE, TIME AND NOTICE OF MEETINGS:
Meetings of the Board of Directors shall be held at such place, within or
without the State of Maryland, as may from time to time be fixed by resolution
of the Board or as may be specified in the call of any meeting. Regular
meetings of the Board of Directors shall be held at such times as may from time
to time be fixed by resolution of the Board, and special meetings may be held at
any time upon the call of a majority of the persons constituting the Board of
Directors, the Chairman of the Board, the President or the Secretary, by oral,
telephonic, telegraphic or written notice, duly served on, sent, mailed or given
to each director at least twenty- four hours before the meeting. The notice of
any special meeting shall specify the purposes thereof. Notice need not be
given of regular meetings of the Board held at times fixed by resolution of the
Board. Meetings may be held at any time without notice if all of the directors
are present or if notice is waived in writing, either before or after the
meeting, by those not present.
SECTION 5. CONFERENCE TELEPHONE: Members of the Board of Directors or a
committee of the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
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<PAGE>
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting.
SECTION 6. PRESIDING OFFICER: Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or, if he is not present, by the
President or, if neither of the above is present, by a Vice President or, if
none of the above is present, by a chairman to be chosen at the meeting; and the
Secretary or, if he is not present, an Assistant Secretary or, if neither is
present, a secretary to be chosen at the meeting shall act as secretary of the
meeting.
SECTION 7. COMPENSATION: The directors, other than those who are
"interested persons" as defined in the Investment Company Act of 1940 shall
receive such fees or compensation for services to the Corporation (including
attendance at meetings of the Board or of committees designated by the Board
pursuant to Section 9 of this Article II) as may be fixed by the Board of
Directors.
SECTION 8. CONFLICTS OF INTEREST: Except as otherwise provided by law or
in the Articles of Incorporation, a director of the Corporation shall not, in
the absence of fraud, be disqualified by his office from dealing or contracting
with the Corporation either as a vendor, purchaser or otherwise, nor in the
absence of fraud shall any transaction or contract of the Corporation be void or
voidable or affected by reason of the fact that any directors, or any firm of
which any director is a member, or any corporation of which any director is an
officer, director or stockholder, is in any way interested in such transaction
or contract; provided, that at the meeting of the Board of Directors authorizing
or confirming said contract or transaction, the existence of an interest of such
director, firm or corporation is disclosed or made known and there is present a
quorum of the Board of Directors, and such contract or transaction is approved
by a majority of such quorum, which majority shall consist of directors not so
interested or connected. Nor shall any director be liable to account to the
Corporation for any profit realized by him from or through any such transaction
or contract of the Corporation, ratified or approved as aforesaid, by reason of
the fact that he or any firm of which he is a member, or any corporation of
which he is an officer, director or shareholder, was interested in such
transaction or contract. Directors so interested may be counted when present at
meetings of the Board of Directors for the purpose of determining the existence
of a quorum. Any contract, transaction or act of the Corporation or of the
Board of Directors (whether or not approved or ratified as hereinabove provided)
which shall be ratified by a majority in interest of a quorum of the
stockholders having voting power at any annual meeting or any special meeting
called for such purpose or approved in writing by a majority in interest of the
stockholders having voting power without a meeting shall,
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<PAGE>
except as otherwise provided by law, be as valid and as binding as though
ratified by every stockholder of the Corporation.
SECTION 9. COMMITTEES: The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of two or more of the directors of
the Corporation, which, to the extent permitted by law and provided in said
resolution or resolutions, shall have and may exercise the powers of the Board
over the business and affairs of the Corporation, and may have power to
authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors. A
majority of the members of any such committee may determine its action and fix
the time and place of its meetings unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power at any time to change the
membership of, to fill vacancies in, or to dissolve any such committee.
ARTICLE III
OFFICERS
SECTION 1. GENERAL: The Board of Directors annually shall elect from
among its members a Chairman of the Board and a President of the Corporation,
and shall elect one or more Vice Presidents, a Secretary and a Treasurer and,
from time to time, any other officers and agents as it may deem proper. Any two
of the above-mentioned officers, except those of the President and a Vice
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument be required by law or by these Bylaws to be executed, acknowledged or
verified by any two or more officers. The Board of Directors may fill any
vacancy which occurs in any office. (Last amended January 24, 1989.)
SECTION 2. TERM OF OFFICE: The term of office of all officers shall be
one year or until their respective successors are chosen; but any officer or
agent chosen or elected by the Board of Directors may be removed, if the Board
of Directors in its judgment finds that the best interests of the Corporation
will be thus served, at any time, by the affirmative vote of a majority of the
members of the Board then in office.
SECTION 3. POWERS: Subject to such limitations as the Board of Directors
may from time to time prescribe, the officers of the Corporation shall each have
such powers and duties as generally appertain to their respective offices, as
well as such powers and duties as from time to time may be conferred by the
Board of Directors. Any officer, agent or employee of the Corporation may be
required by the Board of
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<PAGE>
Directors to give bond for the faithful discharge of his duties, in such sum and
of such character as the Board may from time to time prescribe.
ARTICLE IV
CERTIFICATES OF STOCK
SECTION 1. CERTIFICATES: Each stockholder of the Corporation shall be
entitled, upon written request by such stockholder to the Corporation, to a
certificate or certificates, in such form as the Board of Directors may from
time to time prescribe, which shall represent and certify the number of whole
shares of stock of the Corporation owned by such stockholder. The certificates
for shares of stock of the Corporation shall bear the signature, either manual
or facsimile, of the President or a Vice President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, and shall be
sealed with the seal of the Corporation or bear a facsimile of such seal. The
validity of any stock certificate shall not be affected if any officer whose
signature appears thereon ceases to be an officer of the Corporation before such
certificate is issued.
SECTION 2. TRANSFERS: The shares of stock of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by a duly authorized attorney, upon surrender for cancellation of a certificate
or certificates for a like number of shares, with a duly executed assignment and
power of transfer endorsed thereon or attached thereto, or, if no certificate
has been issued to the holder in respect of shares of stock of the Corporation,
upon receipt of written instructions, signed by such holder, to transfer such
shares from the account maintained in the name of such holder by the Corporation
or its agent. Such proof of the authenticity of the signatures as the
Corporation or its agent may reasonably require shall be provided.
SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES:
No certificate for shares of stock of the Corporation shall be issued in place
of any certificate alleged to have been lost, stolen, mutilated or destroyed
except upon production of such evidence of the loss, theft, mutilation or
destruction, and upon indemnification of the Corporation and its agents to such
extent and in such manner as the Board of Directors may from time to time
prescribe.
ARTICLE V
CORPORATE BOOKS
The books of the Corporation, except the original or a duplicate stock
ledger which shall be kept at the office of the Corporation located in Fort
Wayne, Indiana, may be
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<PAGE>
kept outside the State of Maryland at such place or places as the Board of
Directors may from time to time determine.
ARTICLE VI
SIGNATURES
Except as otherwise provided in these Bylaws or as the Board of Directors
may generally or in particular cases authorize the execution thereof in some
other manner, all deeds, leases, transfers, contracts, bonds, notes, checks,
drafts and other obligations made, accepted or endorsed by the Corporation and
all endorsements, assignments, transfers, stock powers or other instruments of
transfer of securities owned by or standing in the name of the Corporation shall
be signed or executed by the President or any Vice President or by any other
officer or agent authorized to act in such matters, whether by law, the Articles
of Incorporation, these Bylaws, or any general or special authorization of the
Board of Directors. If the corporate seal is required, it shall be affixed by
the Secretary or an Assistant Secretary.
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall end on December 31 each year. (Amended
March 9, 1982)
ARTICLE VIII
CORPORATE SEAL
The corporate seal of the Corporation shall consist of a flat faced
circular die with the word "Maryland" together with the name of the Corporation,
the year of its organization, and such other appropriate legend as the Board of
Directors may from time to time determine, cut or engrave thereon. In lieu of
the corporate seal, when so authorized by the Board of Directors or a duly
empowered committee thereof, a facsimile thereof may be impressed or affixed or
reproduced.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify directors, officers, employees and agents of the
Corporation against judgments, fines, settlements and expenses to the fullest
extent authorized and in the manner permitted by applicable federal and state
law. (Amended December 14, 1981)
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<PAGE>
ARTICLE X
ADDITIONAL PROVISIONS
In any case where an officer or director of the Corporation or of any
investment adviser of the Corporation or a member of any committee of the
Corporation, is also an officer or director of another corporation and the
purchase or sale of the securities issued by such other corporation is under
consideration, the officer, director or committee member concerned will abstain
from participating in any decision made on behalf of the Corporation to purchase
or sell any securities issued by such other corporation.
ARTICLE XI
AMENDMENTS
The Bylaws of the Corporation may be amended, added to, rescinded or
repealed at any meeting of the stockholders, or by vote of a majority of the
directors then in office at any meeting of the Board of Directors, provided
notice of the substance of the proposed change is contained in the notice of the
meeting or any waiver thereof; except that after the initial issue of any shares
of capital stock of the Corporation, the provisions of this Article XI may be
altered, amended or repealed only upon the affirmative vote of the holders of a
majority of all shares of capital stock of the Corporation at the time
outstanding and entitled to vote.
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<PAGE>
Exhibit 4
INCORPORATED UNDER THE LAWS OF THE STATE OF
MARYLAND
LINCOLN NATIONAL MANAGED FUND, INC.
AUTHORIZED CAPITAL 50,000,000 SHARES $.01 PAR VALUE
THIS CERTIFIES THAT SPECIMENT IS THE OWNER OF ______________________________
FULL PAID AND NON-ASSESSABLE shares of the Capital Stock of LINCOLN NATIONAL
MANAGED FUND, INC. TRANSFERABLE ON THE BOOKS OF THE CORPORATION IN PERSON OR BY
DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND SEALED WITH THE SEAL OF THE
CORPORATION, THIS _________________________ DAY OF _________________________
A.D. 19
- ----------------------------------- ----------------------------------------
Secretary President
<PAGE>
ADVISORY AGREEMENT
Agreement, made this ____ day of March, 1983 between Lincoln National
Managed Fund, Inc., a Maryland corporation (the "Fund"), and Lincoln National
Investment Management Company (the "Adviser"),
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory and administrative services to the Fund, and the Adviser is willing to
render such services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. APPOINTMENT OF ADVISER. The Fund hereby appoints the Adviser to act
as investment adviser to the Fund and to administer its corporate affairs,
subject to the supervision of the Board of Directors of the Fund for the period
and on the terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. INVESTMENT ADVISORY DUTIES. Subject to the supervision of the Board
of Directors of the Fund, the Adviser shall manage the investment operations of
the Fund, subject to the following:
<PAGE>
(a) the Adviser shall provide supervision of the Fund's investments,
furnish a continuous investment program for the Fund's portfolio, determine
from time to time what securities will be purchased, retained or sold by the
Fund, and what portion of the assets will be invested or held uninvested as
cash;
(b) the Adviser shall use the same skill and management of the Fund's
portfolio as it management of other accounts for which it has investment
responsibility;
(c) the Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Articles of Incorporation,
Bylaws and Prospectus of the Fund and with the instructions and directions of
the Board of Directors of the Fund and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state laws and
regulations;
(d) the Adviser shall determine the securities to be purchased or sold by
the Fund and will place orders pursuant to its determinations either directly
with the issuer or with any broker and/or dealer who specializes in the
securities in which the Fund is active, but shall in no event place such orders
with any affiliated person of the Adviser. In placing orders with brokers
and/or dealers the Adviser shall attempt to obtain the best price and the most
favorable execution of its orders, subject to such other considerations as may
be set forth in the then most recent prospectus of the Fund;
(e) the Adviser shall maintain books and records with respect to the
Fund's securities transactions and shall render to the Fund's Board of Directors
such periodic and special reports as the Fund's Board of Directors may
reasonably request;
(f) the investment advisory services of the Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others. In addition, it is understood that the
persons employed by the Adviser to assist in the performance of its duties under
this Agreement will not necessarily devote their full time to such activity.
-2-
<PAGE>
3. ADMINISTRATIVE FUNCTIONS. The Adviser will administer the Fund's
corporate affairs, subject to the overall supervision of the Board of Directors
of the Fund and, in connection therewith, shall furnish the Fund with office
space and all necessary office facilities, equipment and personnel, and shall
provide all necessary executive and other personnel (including certain of its
officers and employees) for managing the investments and affairs of the Fund.
In connection with its administration of the affairs of the Fund, the
Adviser will bear all of the following expenses:
(i) the salaries and expenses of all personnel, except the fees and
expenses of directors who are not "interested persons" of the Fund, as that
term is defined in the 1940 Act;
(ii) all expenses incurred by the Adviser in connection with
administering the Fund's business other than these assumed by the Fund
herein; and
The Fund assumes and will pay the following expenses, except to the extent
incurred in connection with the organization of the Fund:
(a) the fee of the Adviser;
(b) the compensation and expenses of directors who are not
"interested persons" of the Fund;
(c) the fees and expenses of the custodian of the Fund's assets;
(d) the fees and expenses of independent accountants for the Fund;
-3-
<PAGE>
(e) brokerage commissions and securities transaction costs incurred
by the Fund, including any portion of such commissions attributable to
research and brokerage services as defined by Section 28(e) of the
Securities Exchange Act of 1934, as amended;
(f) all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies;
(g) the fees of any trade association of which the Fund may be a
member;
(h) the cost of stock certificates representing shares of the Fund;
(i) the fees and expenses involved in registering and maintaining
registrations of the Fund and its shares with the Securities and Exchange
Commission (the "Commission"), and qualifying its shares under state
securities laws, including the preparation and printing of the Fund's
registration statements and updated prospectuses provided to current
stockholders;
(j) expenses of stockholders' and directors' meetings and of
preparing and printing proxy material and mailing reports to stockholders;
(k) the charges and expenses of outside legal counsel for the Fund,
including legal services rendered in connection with the Fund's corporate
existence, corporate and financial structure and relations with its
stockholders, registrations and qualifications of securities and
litigation; and
(l) expenses of any extraordinary nature (including litigation and
indemnification expenses) which are not incurred in the ordinary course of
the Fund's business.
4. CONTRACTUAL SERVICES. The Adviser may contract with other entities to
assist it in rendering services described in this Agreement; provided, however,
that the Adviser will continue to be contractually bound with respect to the
performance of its duties and obligations as set forth herein.
-4-
<PAGE>
5. BOOKS AND RECORDS. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2 hereof. The
Adviser agrees that all records which it maintains for the Fund are the property
of the Fund and it will surrender promptly to the Fund any of such records upon
the Fund's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 3la-2 of the Commission under the 1940 Act any such records
as are required to be maintained by Rule 3la-1 of the Commission under the 1940
Act.
6. COMPENSATION. The Fund shall pay the Adviser, as full compensation
for all services rendered and all facilities and personnel furnished hereunder,
a monthly fee at the annual rate of .48 of 1% of the first $200,000,000 of
average daily net asset value of the Fund, .40 of 1% of the next $200,000,000
and .30 of 1% of the average daily net asset value of the Fund in excess of
$400,000,000 during the fiscal year computed in the manner used for the
determination of the offering price of shares of the Fund. The fee for each
month shall be payable to the Adviser not later than the tenth day of the
following month.
7. REIMBURSEMENT OF EXPENSES. If, in any fiscal year, the total of the
Fund's expenses (including the fee payable pursuant to paragraph 6 hereof, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses) exceeds
1-1/2% of the average daily net asset value of the Fund, computed in the manner
above described, the Adviser will pay such
-5-
<PAGE>
excess. For purposes of this paragraph, the term "fiscal year" shall include
the portion of any fiscal year which shall have elapsed at the date of
termination of this Agreement, and the expense limitation shall be that part of
1-1/2% proportioned to the portion of a full fiscal year elapsed.
8. LIMITATION OF LIABILITY. The Adviser shall not be liable for any
error of judgment or mistake of law or fact or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard of its obligations and
duties under this Agreement.
9. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall continue until the earlier of one year from the effective
date of the Fund's Registration Statement or the date of the first annual or
special meeting of the stockholders of the Fund, and, if approved by a majority
of the Fund's outstanding voting securities (as defined in the 1940 Act),
thereafter shall continue automatically for periods of one calendar year so long
as such continuance is specifically approved at least annually (a) by the vote
of a majority of the Fund's outstanding voting securities or by the Fund's Board
of Directors, and (b) by the vote of a majority of those members of the Board of
Directors of the Fund who are not parties to this Agreement or interested
persons (as
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<PAGE>
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval; provided, however, that this
Agreement may be terminated by the Fund at any time, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by vote of a majority of the Fund's outstanding voting securities on 60 days'
written notice to the Adviser, or by the Adviser at any time, without the
payment of any penalty, on 90 days' written notice to the Fund. This Agreement
will automatically and immediately terminate in the event of its "assignment"
(as defined in the 1940 Act).
10. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, but the consent of the Fund must be approved (a) by vote of a majority
of those members of the Board of Directors of the Fund who are not "interested
persons" of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such amendment, and (b) by vote of a majority of the
Fund's outstanding voting securities, provided, however, that compliance with
subparagraph (b) of this paragraph 10 shall not be required to amend this
Agreement so as to lower the Adviser's compensation under paragraph 6 hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Lincoln National Managed Fund, Inc.
(CORPORATE SEAL)
By
----------------------------
Vice President
ATTEST:
- --------------------------------
Assistant Secretary
Lincoln National Investment Management
Company
(CORPORATE SEAL)
By
----------------------------
Senior Vice President
ATTEST:
- --------------------------------
Assistant Secretary
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<PAGE>
Sub-Advisory Agreement
This Agreement is made as of the first day of January, 1991, by and
between Lincoln National Investment Management Company ("LNIMC"), an Illinois
corporation, and Modern Portfolio Theory Associates, Inc. ("MPT"), a Delaware
corporation.
In consideration of the mutual promises set forth below, the parties agree
as follows:
1. MPT will furnish to LNIMC such services as LNIMC may request in
connection with LNIMC's performance of its obligations under its contract with
The Lincoln National Life Insurance Company ("LNL") to provide investment
advisory services with respect to LNL's non-registered separate accounts. LNIMC
will continue to have responsibility for all services under its contract with
LNL.
2. For its services hereunder, MPT shall be paid a monthly fee based on
the schedule attached as Exhibit A.
3. This Agreement may be terminated by either party at any time upon not
less than thirty (30) days prior written notice to the other party. This
Agreement will terminate automatically in the event of its assignment. No
termination of this Agreement will affect the terms of the contract between
LNIMC and LNL. In the event of the assignment or termination of LNIMC's advisory
contract with LNL, this Agreement will terminate automatically.
Termination of this Agreement pursuant to this Section 3 shall be without
the payment of any penalty.
4. This Agreement shall remain in effect for one year from the date hereof
and will be automatically extended for additional one year terms on each
anniversary date hereof unless terminated by either of the parties hereto by
written notice to the other given at least thirty days prior to such
termination.
5. MPT represents that it is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. MPT shall promptly notify LNIMC in
writing if it shall fail to be registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and under the laws of any
jurisdiction in which MPT is required to be registered as an investment adviser
in order to perform its obligations under this Agreement.
6. This Agreement shall supersede and replace any agreement heretofore
made and entered into by and between LNIMC and MPT regarding MPT providing
investment advisory services for LNIMC with respect to LNL's non-registered
separate accounts.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
Lincoln National Investment
Management Company
Date: September 12, 1991 By: /s/ JON A. BOSCIA
--------------------- ------------------------
Jon A. Boscia
Its: President
Modern Portfolio Theory
Associates, Inc.
Date: 9/13/91 By: /s/ CRAIG J. LAZZARA
--------------------- ------------------------
Craig J. Lazzara
Its: President
-2-
<PAGE>
Exhibit A
The investment management fee will be .20% per annum applied to the market
value of assets under management of MPT. Assets under management are valued as
of the last business day of each month.
<PAGE>
SUBADVISORY AGREEMENT
This Agreement is between Lincoln National Investment Management Company
("LNIMC"), an Indiana corporation, and Modern Portfolio Theory Associates, Inc.
("MPT"), a Delaware corporation. This Agreement is effective as of August 21,
1985.
In consideration of the mutual promises set forth below, the parties agree
as follows:
1. MPT shall furnish to LNIMC such services as LNIMC may request in
connection with LNIMC's performance of its obligations under its contracts with
its clients which are registered investment companies (Clients). LNIMC will
continue to have responsibility for all services under its contracts with its
Clients.
2. LNIMC shall reimburse MPT for costs and expenses incurred by MPT,
determined in a manner acceptable to LNIMC, in furnishing the services described
in paragraph 1 above.
3. This Agreement may be terminated by either party at any time upon not
less than thirty (30) days prior written notice to the other party. This
Agreement will terminate automatically in the event of its assignment. No
termination of this Agreement will affect the terms of contracts between LNIMC
and any Client. In the event of the assignment or termination of LNIMC's
advisory contracts with a particular Client, this Agreement will terminate
automatically as to that Client.
4. This Agreement shall continue in effect as to a particular Client for a
period of more than two years from its execution only so long as such
continuance is specifically approved at least annually in accordance with the
requirements of the Investment Company Act of 1940 applicable to continuation of
advisory contracts.
LINCOLN NATIONAL INVESTMENT MODERN PORTFOLIO THEORY
MANAGEMENT COMPANY ASSOCIATES, INC.
By: [ILLEGIBLE] By: [ILLEGIBLE]
-------------------------- --------------------------
Attest: /s/ JOHN L. STEINKAMP Attest: [ILLEGIBLE]
---------------------- ----------------------
<PAGE>
CUSTODY AGREEMENT
AGREEMENT, effective March 30, 1998, between THE CHASE MANHATTAN BANK (the
"Bank") and THE LINCOLN NATIONAL MANAGED FUND, INC. ("Customer") a registered
investment company under the Investment Company Act of 1940, as amended.
CUSTODY ACCOUNT DEFINED. The Customer hereby requests the Bank to open and
to maintain a "Custody Account" in the Customer's name as Entitlement Holder, in
order to hold therein, as the Customer's Securities Intermediary, upon the
following terms and conditions, all Financial Assets which are the property of
Customer. As used herein, the term "Custody Account" shall include all such
custody accounts opened pursuant to this Custody Agreement (the "Agreement").
From time to time, Customer may instruct the Bank to open additional Custody
Accounts in Customer's name. Unless Customer and Bank shall otherwise expressly
agree in writing, all such Custody Accounts shall be governed by the terms of
this Agreement.
OTHER DEFINITIONS.
"Financial Assets" means Securities. As the context requires a Financial
Asset means either the interest itself or the means by which a person's
claim to it is evidenced, including a certificated or uncertificated
Security, a security certificate, or a Security Entitlement.
"Securities" means stocks, bonds, rights, warrants and other negotiable and
non-negotiable paper issued in certificated form or in uncertificated form
and commonly traded or dealt in on securities exchanges or financial
markets, and other obligations of an issuer, or shares, participations and
interests in an issuer recognized in any area in which it is issued or
dealt in as a medium for investment and any other property as shall be
acceptable to you for the Custody Account.
"Security Entitlement" means the rights and property interest of an
Entitlement Holder with respect to a Financial Asset as set forth in Part 5
of Article 8 of the New York Uniform Commercial Code.
"Entitlement Holder" means a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against
the Securities Intermediary.
"Securities Intermediary" means the Bank, a Depository, and any other
financial institution which in the ordinary course of its business
maintains Securities accounts for others and acts in that capacity.
"Instructions" shall have the meaning set forth in Section 2 of this
Agreement.
1
<PAGE>
1. TRANSACTIONS
(A) TRANSACTIONS REQUIRING INSTRUCTIONS
(i) Receipt and Disbursement of Funds
Bank shall open and maintain a separate cash account in the
name of the Customer for each Custody Account ("Custody Cash
Account") to which cash will be credited and debited in respect
of all transactions to the Custody Account pursuant to this
Agreement, and in which cash shall not be subject to withdrawal
by check or draft. Bank shall make payment from the Custody
Cash Account only upon the Instructions of the Customer.
Bank is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by
Bank for the account of the Customer.
(ii) Segregated Account
Upon receipt of Instructions from Customer, Bank will establish
and maintain a segregated Securities account or accounts on
Bank's records for and on behalf of Customer, in which may be
credited cash and/or Financial Assets:
(a) in accordance with the provisions of an agreement among
Customer and a broker/dealer (registered under the
Securities and Exchange Act of 1934 ("Exchange Act")
and a member of the National Association of Securities
Dealers, Inc. ("NASD"), or any futures commission
merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Options
Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Training
Commission or any registered contract market), or of
any similar organization, regarding escrow or other
arrangements in connection with the transactions by
Customer;
(b) for the purpose of segregating cash or Financial Assets
with options purchased or sold by Customer; and
(c) for other proper corporate purposes as per the
Instruction of an Authorized Officer.
(iii) Receipt and Holding of Securities
Bank shall hold in the Custody Account, and at all times
separate from the assets of Bank, all Financial Assets
(including Securities received by it in physical form) for the
account of the Customer. All such Financial Assets
2
<PAGE>
held in the Custody Account are to be held or disposed of by
Bank for, and subject at all times to the Instructions of, the
Customer pursuant to the terms of this Agreement. The Bank
shall have no power or authority to assign, hypothecate, pledge
or otherwise dispose of any such Financial Assets and
investments, except pursuant to the Instructions of the
Customer and except as permitted by Section 14 hereof.
Unless the Bank receives contrary Instructions from the
Customer, the Bank is authorized to keep certificated
Securities in the Bank's own vaults (and to the extent it does
so, Bank shall maintain those Securities separate from the
securities it maintains for its other customers), or in book
entry form registered in the Bank's name or in the name of the
Bank's nominee or nominees or, where Securities are eligible
for deposit in a Depository (hereinafter defined), such as The
Depository Trust Company, the Federal Reserve Bank of New York
or Participants Trust Company, the Bank may use any such
Depository and permit the registration of registered Securities
in the name of its nominee or nominees, and the Customer agrees
to hold the Bank and the nominees harmless from any liability
as holders of record. The Customer shall accept the return or
delivery of Securities of the same class and denomination as
those deposited with the Bank by the Customer or otherwise
received by the Bank for the Custody Account, and the Bank need
not retain the particular certificates so deposited or
received.
If any of the Customer's Securities registered in the Bank's
name or the name of the Bank's nominee or held in a Depository
and registered in the name of the Depository's nominee are
called for partial redemption by the issuer of such Securities,
the Bank is authorized to allot the called portion to the
respective beneficial holders of the Securities in any manner
deemed to be fair and equitable by the Bank in the Bank's sole
discretion.
(iv) Transfer, Exchange, Redelivery of Securities
The Bank shall release or deliver any Financial Assets of the
Customer held by it only as authorized by this Agreement. The
Bank agrees to transfer, exchange, or deliver Financial Assets
held by it hereunder (a) for the sale of such Financial Assets
for the account of the Customer against receipt by the Bank of
payment therefor; (b) when such Financial Assets are called,
redeemed or retired or otherwise become payable; (c) in
exchange for or upon conversion into other Financial Assets
alone or other Financial Assets and cash, whether pursuant to
any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise; (d) upon
conversion of such Financial Assets, pursuant to their terms,
into other Financial Assets; (e) upon exercise of subscription,
purchase or other similar rights represented by such
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Financial Assets; (f) for the purpose of exchanging interim
receipts or temporary certificated Securities for definitive
certificated Securities; or (g) for other corporate purposes.
As to any deliveries made by the Bank pursuant to items (a),
(b), (c), (d), (e), (f) and (g), Financial Assets or cash
receivable in exchange therefor shall be deliverable to or for
the account of the Bank and credited by Bank to the Custody
Account or the Custody Cash Account, as appropriate.
Before making any transfer, exchange or delivery, as per items
(a) through (g), the Bank shall receive an Instruction
authorizing such transfer, exchange or delivery.
(B) TRANSACTIONS WITHOUT INSTRUCTIONS
Unless and until the Bank receives an Officer's Certificate (defined
in Section 2 hereof) to the contrary, the Bank shall: (a) present for
payment all coupons and other income items held by it for the account
of the Customer which call for payment upon presentation, and credit
such payment to the Custody Cash Account; (b) collect interest and
cash dividends received, with notice to the Customer, and credit such
interest and cash dividends to the Custody Cash Account; (c) deposit
to the Custody Account all stock dividends, rights and similar
Securities (except for fractional shares) issued with respect to any
Securities held by it hereunder; (d) execute as agent on behalf of the
Customer all necessary ownership certificates required by the Internal
Revenue Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any State now or hereafter in
effect, inserting the Customer's name on such certificate as the owner
of the Securities covered thereby, to the extent it may lawfully do
so.
2. INSTRUCTIONS.
(A) DEFINITION. As used in this Agreement the term "Instructions"
includes, without limitation, instructions to sell, assign, transfer,
deliver, purchase, hold or receive for the Custody Account, any and
all stocks, bonds and other Financial Assets, or to transfer funds in
the Custody Cash Account.
(B) BY RESOLUTION OR CERTIFICATE. The Bank is authorized to rely and
act upon all written Instructions given or purported to be given
by one or more officers, employees or agents of the Customer
(i) authorized by or in accordance with a corporate resolution
of the Customer delivered to the Bank; or (ii) described as
authorized in a certificate ("Officer's Certificate") delivered
to the Bank by the Customer's Secretary or an Assistant Secretary
or similar officer of the Customer (each such officer, employee or
agent or combination of officers, employees and agents authorized
pursuant to clause (i) or described pursuant to clause (ii) of this
paragraph (B) is hereinafter referred to as an "Authorized Officer").
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(C) BY FACSIMILE SIGNATURE. The Bank may rely and act upon Instructions,
otherwise valid, which bear or purport to bear the facsimile signature
of any Authorized Officer regardless of by whom or by what means the
actual or purported facsimile signature or signatures thereon may have
been affixed thereto, if such facsimile signature or signatures
resemble the facsimile specimen or specimens from time to time
furnished to the Bank by any of such Authorized Officers, the
Customer's Secretary or an Assistant Secretary or similar officer of
the Customer.
(D) OTHER ACCEPTABLE INSTRUCTIONS. The Bank may rely and act upon
Instructions received by telex, facsimile transmission, bank wire or
other teleprocess, electronic or electro-magnetic medium or electronic
instruction or trade information system acceptable to the Bank, which
Instructions the Bank believes in good faith to have been given by an
Authorized Officer or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may
specify. The Bank may also rely and act upon Instructions transmitted
electronically through the Bank's TITAN Data Entry System or any
similar electronic instruction system acceptable to the Bank.
Subject to the next following paragraph with respect to the transfer
of cash from the Custody Cash Account, the Bank may rely and act upon
any Instructions delivered to the Bank by telephone, and Instructions
delivered by telephone shall be promptly thereafter confirmed in
writing by an Authorized Officer; however, the Bank shall incur no
liability for the Customer's failure to send such confirmation in
writing, for the failure of any such written confirmation to conform
to the telephone Instructions which the Bank received, or for the
failure of any such written confirmation to be signed or properly
signed.
With respect to Instructions by telephone from an Authorized Officer
to transfer cash from the Custody Cash Account, PRIOR TO EXECUTING
EACH SUCH INSTRUCTION the Bank shall obtain oral confirmation for the
transfer by calling back any one of the individuals on a list of
persons authorized to confirm those oral funds transfer Instructions
(which individual shall not be the initiator of that Instruction), and
the Bank shall NOT transfer the cash until it has received that oral
confirmation. Written confirmation shall thereafter promptly be given
by the Customer; however, the Bank shall incur no liability for the
Customer's failure to send such confirmation in writing, for the
failure of any such written confirmation to conform to the telephone
Instructions which the Bank received, or for the failure of any such
written confirmation to be signed or properly signed.
(E) ADDITIONAL TERMS RELATING TO INSTRUCTIONS. The Bank shall incur no
liability to the Customer or otherwise when the Bank acts or refrains
from acting, as the case may be, in accordance with Instructions on
which the Bank is authorized to rely
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pursuant to the provisions of this Agreement. In addition, the Bank
shall incur no liability for refraining from acting upon any
Instructions which for any reason the Bank, in good faith, is unable
to verify to the Bank's own satisfaction.
Unless otherwise expressly provided, all authorizations and
Instructions shall continue in full force and effect until canceled or
superseded by subsequent authorizations or Instructions received by
the Bank's account administrator with reasonable opportunity to act
thereon. The Bank's authorization to rely and act upon Instructions
pursuant to this paragraph shall be in addition to, and shall not
limit, any other authorization which the Customer may give the Bank
regarding the Customer's accounts with the Bank.
The Customer agrees that, if the Bank requires test arrangements,
authentication methods or procedures or other security devices to be
used with respect to Instructions which the Customer may give
hereunder, thereafter Instructions given by the Customer shall be
given and processed in accordance with terms and conditions for the
use of such arrangements, methods or procedures or devices as the Bank
may put into effect and modify from time to time. The Customer shall
safeguard any testkeys, identification codes or other security devices
which the Bank makes available to the Customer and Customer agrees
that it shall be responsible for any loss, liability or damage
incurred by the Bank or by itself as a result of the Bank's acting in
accordance with Instructions from any unauthorized person using the
proper security device, unless that unauthorized use is the result of
the Bank's negligence or willful misconduct. Either party may
electronically record any Instructions given by telephone, and any
other telephone discussions with respect to the Custody Account or
transactions pursuant to this Agreement.
Except as may be provided otherwise herein, the Bank is authorized to
execute the Customer's Instructions and take other actions pursuant to
this Agreement in accordance with the Bank's customary processing
practices for customers similar to the Customer and, in accordance
with such practices, the Bank may retain agents, including
subsidiaries or affiliates of the Bank, to perform certain of such
functions.
In acting upon Instructions to deliver Securities against payment, the
Bank is authorized, in accordance with customary securities processing
practices, to deliver such Securities to the purchaser thereof or
dealer therefor (including to an agent for any such purchaser or
dealer) against a receipt, with the expectation of collecting payment
from the purchaser, dealer or agent to whom the Securities were so
delivered before the close of business on the same day.
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3. STATEMENTS
The Bank shall notify the Customer of each Financial Asset transaction
effected for the Custody Account and of income on and redemptions of the
Financial Assets in the Custody Account, as well as furnish the Customer a
listing of such Financial Assets, at such times upon which the Bank and the
Customer mutually agree. Periodic statements shall be rendered to the
Customer as the Customer may reasonably require, but not less frequently
than monthly.
Unless Customer shall send to Bank a written exception or objection to any
statement of account within 60 days of Customer's receipt of such statement
from Bank, Customer shall be deemed to have approved such statement, except
for items which the Bank later discovers and corrects, and except for
items which Customer discovers after the 60-day period and which Customer
could not reasonably have been expected to discover within the 60-day
period. In any instance in which any statement shall be deemed to have
been approved by Customer, or where Customer has otherwise approved such
statement, Bank shall, to the extent permitted by law, be released,
relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom.
4. ACCESS TO RECORDS
Books and records of the Bank relating to the Custody Account and the
Custody Cash Account shall be open to inspection and audit at all
reasonable times during normal business hours upon request of, and
reasonable advance notice by, Customer's independent public accountants;
directors, officers, employees or agents of the Customer designated to the
Bank; and legally authorized regulatory officials (upon proof to the Bank
of such official status) who are then in the process of reviewing the
Customer's financial affairs.
5. CORPORATE ACTIONS
Promptly after sufficient copies are received by the Bank for forwarding to
customers, the Bank shall send to Customer, or to Customer's designee, such
proxies (signed in blank, if issued in the Bank's name or the name of the
Bank's nominee or a nominee of a Depository) and communications with
respect to the Financial Assets in the Custody Account which call for
voting or which relate to legal proceedings. In addition, the Bank shall
follow coupon payments, redemptions, exchanges or similar matters with
respect to the Financial Assets in the Custody Account and promptly advise
the Customer of rights issued, tender offers or any other discretionary
rights with respect to such Financial Assets, in each case, of which the
Bank receives notice at its Corporate Action Department from the issuer or
from the Depository in which such Financial Assets are held for the account
of the Bank, or from notice published in publications and reported in
reporting services routinely used by the Bank for this purpose.
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6. CUSTODIAN RESPONSIBILITY
The Bank shall be obligated to indemnify the Customer for the loss of
Financial Assets credited to the Custody Account resulting from (i) the
negligence or willful misconduct of the Bank or the Bank's officers,
employees or agents retained by the Bank to hold such Financial Assets; or
(ii) burglary, robbery, hold-up, theft or mysterious disappearance,
including loss by damage or destruction. In the event of a loss of
Financial Assets held in the Custody Account for which the Bank is required
to indemnify the Customer pursuant to the immediately preceding sentence,
at the Bank's option but subject to mutual agreement of the parties, the
Bank shall promptly either: a) replace such Financial Assets by, among
other means, posting appropriate security or bond with the issuer(s) of
such Financial Assets and obtaining their reissue; or 2) replace (i) the
value thereof determined based upon the market value of the Financial
Assets which are the subject of such loss as of the date of the discovery
of such loss, and (ii) the value of any loss of rights or privileges
resulting from the loss of such Financial Assets. The foregoing indemnity
shall be the Bank's exclusive liability to the Customer for the Bank's loss
of Financial Assets from the Custody Account.
In respect of all the Bank's other duties and obligations pursuant to the
terms of this Agreement, the Bank shall be liable to the Customer only to
the extent of the Customer's general damages suffered or incurred as a
result of any act, omission, or failure to act of the Bank or the Bank's
officers, employees or agents which constitutes negligence or willful
misconduct. General damages shall mean only those damages as directly and
necessarily result from such act or omission without reference to any
special conditions or circumstances of the Customer or of any transaction,
whether or not the Bank has been advised of any such special conditions or
circumstances. Anything in this Agreement to the contrary notwithstanding,
in no event shall the Bank be liable to the Customer under this Agreement
for special, indirect or consequential loss or damage of any kind
whatsoever, whether or not the Bank is advised as to the possibility of
such loss or damage and regardless of the form of action through which any
such loss or damage may be claimed.
With respect to Depositories, the Customer agrees to be bound by the
Depository rules and procedures applicable to the Bank as a participant in
respect of any securities held by the Bank in the Bank's account with such
Depository. "Depository" shall mean a "securities depository" as defined
in Rule 17f-4 of the Investment Company Act of 1940.
All collection and receipt of funds or Financial Assets and all payment and
delivery of funds or Financial Assets under this Agreement shall be made by
the Bank as the Customer's agent, at the Customer's risk with respect to
the Customer's actions or omissions and those of persons other than the
Bank (except for a Depository), including, without limitation, the risk
associated with the securities processing practice of delivering securities
against a receipt and the risk that the counterparty in any transaction
into which the Customer enters will not transfer funds or Financial Assets
or otherwise perform in accordance with the Customer's expectation of its
obligations thereunder.
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In no event shall the Bank be responsible or liable for any loss due to
forces beyond the Bank's control, including, but not limited to, acts of
God, flood, nuclear fusion, fission or radiation, war (declared or
undeclared), terrorism, insurrection, revolution, riot, strikes or work
stoppages for any reason, embargo, closure or disruption of any market,
government action, including any laws, ordinances, regulations or the like
which restrict or prohibit the providing of the services contemplated by
this Agreement. In the event that the Bank is unable substantially to
perform for any of the reasons described in the immediately preceding
sentence, the Bank shall so notify the Customer as soon as reasonably
practicable.
The Bank shall be responsible for only those duties expressly stated in
this Agreement or expressly contained in Instructions to perform the
services described herein given to the Bank pursuant to the provisions of
this Agreement and accepted by the Bank. Without limiting the foregoing,
the Bank shall have no duty or responsibility:
(A) to supervise the investment of, or make recommendations with respect
to the purchase, retention or sale of, Financial Assets relating to
the Custody Account, or to maintain any insurance on the Financial
Assets in the Custody Account for the Customer's benefit;
(B) with regard to any Financial Asset in the Custody Account as to which
a default in the payment of principal or interest has occurred: (i) to
give notice of default or make demand for payment to the issuer or
(ii) to take any other action with respect to such default except, in
each instance, where the Bank has been requested by the Customer and
the Bank has agreed in writing to do so;
(C) for any act or omission, or for the solvency or insolvency, or notice
to the Customer of the solvency or insolvency, of any broker or agent
which is selected by the Customer or any third party to effect any
transaction for the Custody Account or to perform any service under
this Agreement;
(D) to evaluate, or report to the Customer regarding, the financial
condition of any person, firm or corporation to which the Bank
delivers Financial Assets or funds pursuant to this Agreement;
(E) for any loss occasioned by delay in the actual receipt of notice by
the Bank of any payment, redemption or other transaction in respect to
which the Bank is authorized to take some action pursuant to this
Agreement, (unless the delay was caused by the negligence or
intentional misconduct of Bank); or
(F) for any errors or omissions made by any third party securities pricing
service used by the Bank to value Securities credited to the Custody
Account as part of any service subscribed to by the Customer from the
Bank.
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7. SETTLEMENTS
The Customer agrees with the Bank that all credits of Financial Assets and
funds by the Bank to the Custody Account and the Custody Cash Account,
respectively, on the settlement or payable date shall be provisional when
made and the Bank shall be entitled to reverse any such credits subject to
actual receipt or collection of immediately available funds.
The Customer shall have sufficient immediately available funds each day in
the Custody Cash Account to pay for the settlement of all Financial Assets
delivered to the Bank against payment and credited to the Custody Account.
Should the Customer fail to have sufficient immediately available funds in
the Custody Cash Account to settle these deliveries of Financial Assets
pursuant to the preceding sentence, this shall constitute a "Deficit." In
the event of a Deficit the Bank, in its sole discretion, may elect (i) to
reject the settlement of any or all of the Financial Assets delivered to
the Bank that day to the Custody Account; (ii) to settle the deliveries on
the Customer's behalf and debit the Custody Cash Account (A) for the amount
of such Deficit, and (B) for the amount of the funding or other cost or
expense incurred or sustained by the Bank for the Customer's failure to
have sufficient immediately available funds in the Custody Cash Account by
the applicable settlement deadline for Customer; or (iii) to reverse the
posting of the Financial Assets credited to the Custody Account.
Bank shall have the right to reverse any erroneous or provisional credit
entries to the Custody Cash Account retroactively to the date upon which
the correct entry, or no entry, should have been made.
The foregoing rights are in addition to and not in limitation of any other
rights or remedies available to the Bank under this Agreement or otherwise.
Any advances made by the Bank to the Customer in connection with the
purchase, sale, redemption, transfer or other designation of Financial
Assets or in connection with disbursements of funds to any party, which
create or result in an overdraft in the Custody Cash Account shall be
deemed a loan by the Bank to the Customer, payable on demand, and bear
interest on the amount of the loan each day that the loan remains unpaid at
the Bank's prime rate in effect as announced by the Bank from time to time.
No prior action or course of dealing on the Bank's part with respect to the
settlement of securities transactions on the Customer's behalf shall be
used by or give rise to any claim or action by the Customer against the
Bank for the Bank's refusal to pay or settle for a securities transaction
the Customer has not timely funded as required herein.
8. DEPOSITORIES
The parties agree that, as of the date of this Agreement, the Depositories
the use of which the Customer has consented are Federal Reserve/Treasury
Book Entry System (the "System"),
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Participant's Trust Company ("PTC"), and The Depository Trust Company
("DTC"). Other Depositories may be used under this Agreement if both
parties consent in writing to the use thereof.
If and to the extent that the Depositories permit the withdrawal of a
Financial Asset in certificated form and Customer requires a certificate
for making a loan or otherwise, Custodian shall take all necessary and
appropriate action to obtain such certificate upon receipt of an Officer's
Certificate requesting the same.
9. RESPONSIBLE AS PRINCIPAL
The Customer agrees that the Customer shall be responsible to the Bank as a
principal for all of the Customer's obligations to the Bank arising under
or in connection with this Agreement, notwithstanding that the Customer may
be acting on behalf of other persons, and the Customer warrants the
Customer's authority to deposit in the Custody Account and Custody Cash
Account, respectively, any Financial Assets and funds which the Bank
receives therefor and to give Instructions relative thereto. The Customer
further agrees that the Bank shall not be subject to, nor shall the Bank's
rights and obligations with respect to this Agreement and the Custody
Account or the Custody Cash Account be affected by, any agreement between
the Customer and any such person.
10. CREDITING AND DEBITING PROCEDURES
With respect to all transactions for the Custody Account and the Custody
Cash Account, including, without limitation, dividend and interest payments
and sales and redemptions of Financial Assets, availability of funds
credited to the Custody Account and Custody Cash Account shall be based on
the type of funds used in the trade settlement or payment, including, but
not limited to, same day availability for federal or same day funds and
next business day availability for clearing house or next day funds.
Furthermore, with respect to all purchases and sales of Financial Assets
for the Custody Account, the proceeds from the sale of Financial Assets
shall be credited to the Custody Cash Account on the date proceeds are
received by the Bank and the cost of Financial Assets purchased shall be
debited to the Custody Cash Account on the date Financial Assets are
received by the Bank, unless the Customer requests the Bank's contractual
settlement service for the Custody Account in which case the following
provisions shall apply with respect to the delivery and receipt of
Financial Assets for the Custody Account for those Financial Assets and
transactions as to which the Bank customarily offers this service:
(A) When the Customer instructs the Bank to deliver or receive Financial
Assets, on the contractual settlement date the Bank shall credit the
Custody Cash Account with the expected proceeds of the transaction and
debit the Custody Account for the Financial Assets which the Customer
has instructed the Bank to deliver, in the case of deliveries, and
debit the Custody Cash Account for the cost of the Financial Assets
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which the Customer has instructed the Bank to receive and credit the
Custody Account with such Financial Assets, in the case of receives.
These credits and debits are provisional accounting entries which the
Bank shall reverse on the Customer's Instructions and which the Bank
may reverse, even in the absence of Instructions from Customer, if the
transaction with respect to which they were made fails to settle
within a reasonable period, determined by the Bank in the Bank's
discretion, after the contractual settlement date, except that if the
Bank delivers Financial Assets which are returned by the recipient
thereof, the Bank may reverse such credits and debits at any time.
The Bank has no obligation to use this crediting and debiting
procedure with respect to a delivery of Financial Assets if the
Customer does not have actually in the Customer's account sufficient
Financial Assets to make the delivery.
(B) As with other transactions processed by the Bank, the Bank's
responsibility with respect to transactions for which the Bank uses
this crediting and debiting procedure shall be governed by the
provisions of this Custody Agreement, including the section headed
"Custodian Responsibility". The Customer agrees that the Bank's using
this procedure is not an assurance by the Bank that the transaction
will actually settle on the contractual settlement date and does not
impose any additional responsibility on the Bank with respect to the
transaction. Without limiting the Bank's right to reverse credits and
debits described above, the account statements which the Bank
furnishes to the Customer shall reflect transactions as to which the
Bank uses this procedure as if they had actually settled on the
contractual settlement date, unless prior to the date to which the
statement relates, the Bank has reversed such credits and debits.
(C) The Customer agrees that the Bank may terminate this contractual
settlement service to the Customer at any time and for any reason.
With respect to Financial Assets or transactions as to which the Bank
does not customarily offer this service, the Bank shall (i) in the
case of deliveries of Financial Assets, credit the proceeds of the
transaction to the Custody Cash Account on the date they are received
by the Bank and debit the Financial Assets from the Custody Account on
the date they are delivered by the Bank, and (ii) in the case of
Financial Assets received, debit the Custody Cash Account for the
cost of such Financial Assets and credit the Custody Account with such
Financial Assets on the date the Financial Assets are received by the
Bank.
11. TAXES
Unless the Customer has already done so, the Customer shall deliver
promptly to the Bank with respect to each Custody Account established under
this Agreement, two duly completed and executed copies of United States
Internal Revenue Service Form W-9, certifying that the Customer is entitled
to receive United States source payments under or in connection with this
Agreement without deduction as withholding or at a reduced rate of
withholding for
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United States federal income taxes. The Customer agrees to provide duly
executed and completed updates of such form (or successor applicable
forms), on or before the date that such form expires or becomes obsolete or
after the occurrence of an event requiring a change in the most recent form
previously delivered by the Customer to the Bank.
Upon receipt of Instructions the Bank is authorized to deduct from the cash
received or credited to the Custody Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of Custody Account.
The Customer further agrees to pay, indemnify, and hold the Bank harmless
from and against any and all liabilities, penalties, interest or additions
to tax with respect to, or resulting from, any delay in, or failure by, the
Bank (i) to pay, withhold or report any federal, state or foreign taxes
imposed on, or in respect of, the property held in the Custody Account(s),
or this Agreement, or (ii) to report interest, dividend or other income
paid or credited to the Custody Cash Account, whether such failure or delay
by the Bank to pay, withhold or report tax or income is a result of (x) the
Customer's failure to comply with the terms of this section, or (y) the
Bank's own acts or omissions; provided, however, that the Customer shall
not be liable to the Bank for penalties or additions to tax as a result of
Bank's failure to pay or withhold tax or to report to Customer interest,
dividend or other income paid or credited to the Custody Cash Account
solely as a result of Bank's negligent acts or omissions.
12. FEES
The Customer agrees to pay the Bank quarterly in arrears such compensation
for the Bank's services pursuant to this Agreement as may mutually be
agreed upon in writing. The current Compensation Schedule is reflected in
Schedule A of this Agreement.
The Customer shall pay the Bank or reimburse the Bank from time to time for
all necessary and proper disbursements and expenses made or incurred by the
Bank in the performance of this agreement.
13. INDEMNIFICATION
(A) Customer agrees to indemnify and hold Bank and its directors,
officers, agents and employees (collectively the "Indemnitees")
harmless from and against any and all claims, liabilities, losses,
damages, fines, penalties, and expenses, including out-of-pocket and
incidental expenses and reasonable legal fees ("Losses") which may be
imposed on, incurred by, or asserted against, the Indemnitees or any
of them for following any Instructions or other directions upon which
Bank is authorized to rely pursuant to the terms of this Agreement.
(B) In addition to and not in limitation of paragraph (a) immediately
above, Customer also agrees to indemnify and hold the Indemnitees and
each of them harmless from
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and against any and all Losses that may be imposed on, incurred by, or
asserted against, the indemnitees or any of them in connection with or
arising out of Bank's performance under this Agreement, provided the
Indemnitees have not acted with negligence or engaged in willful
misconduct.
(C) (i) In the event that an Indemnitee wishes to assert a claim for
indemnification under paragraph (A) or (B) above, within a reasonable
time after receipt of notice or the commencement of an action or other
claim against the Indemnitee, the Indemnitee shall deliver written
notice to the Customer and provide a copy of the action or claim. The
Indemnitee shall cooperate with the Customer with respect to the
Customer's investigation of the claim. The Customer may assume the
defense of the action upon notice to the Indemnitee, with legal
counsel reasonably acceptable to the Indemnitee; provided, if the
Customer is a party to the action the Indemnitee may retain the
defense of such action if the Indemnitee is advised by counsel that
there are legal defenses available to the Indemnitee which are
different from or in addition to those available to the Customer.
(ii) If the customer assumes the defense of the action pursuant to
the foregoing paragraph (i), the following additional provisions shall
apply: (1) the Customer shall provide the Indemnitee with copies of
all documents received by it or by its counsel with respect to the
indemnified matter promptly upon receipt thereof and with copies of
all documents proposed to be delivered by it or by its counsel with
respect to the indemnified matter, and shall use its reasonable best
efforts to provide such documents sufficiently in advance of any
deadline for delivery of such documents to allow the Indemnitee to
review and comment thereon prior to such deadline and prior to actual
delivery; (2) the Customer shall consult with the Indemnitee in good
faith as to the conduct of the defense and shall give due regard to
any comments or suggestions made by the Indemnitee, but the Customer
shall not settle such action without the written consent of the
Indemnitee, which consent shall not be unreasonably withheld; and (3)
in the event the Indemnitee in good faith disagrees with the defense
of the action, the Indemnitee may assume such defense at its own
expense, but the Customer shall not otherwise be released from its
obligation to indemnify the Indemnitee with respect to such action.
(D) It is expressly understood and agreed that Losses claimable by the
Indemnitees against the Customer under the indemnities in paragraphs
(A) and (B) of this section 13 shall not include legal fees incurred
by the Indemnitees to defend themselves against a claim or action by
the Customer that the Indemnitees failed to properly perform under the
terms of this Agreement.
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14. SECURITY INTEREST
To the extent Bank has advanced funds on Customer's behalf in connection
with the settlement of purchases and sales of Securities for the Custody
Account, Bank shall have a security interest in the Securities which are
the subject of such purchases and sales until Customer shall have repaid
the amount of such advance to Bank, and Bank's security interest in such
Securities shall be released upon Customer's repayment of such advance to
Bank.
15. ASSIGNMENT
This Agreement may not be assigned by either party without the written
consent of the other party, which consent shall not be withheld
unreasonably.
16. AMENDMENT
This Agreement may be amended at any time upon mutual written agreement of
the parties. The amendment will state the date upon which it becomes
effective.
Notwithstanding the foregoing, the Compensation Schedule reflected in
Exhibit A to this Agreement may be amended by having both parties sign and
date a new Schedule, without executing a formal amendment. Each such
amended Schedule shall become a part of this Agreement as of a date stated
thereon.
17. TERMINATION
Either party may terminate this Agreement at any time upon sixty (60) days'
written notice to the other party. If Customer notifies Bank of
termination under this provision, and subsequently desires to postpone the
effective date of termination, customer may do so for up to another sixty
(60) days, as long as Customer, prior to the expiration of the original
60-day period, notifies Bank of its intention to postpone.
In the event Bank shall be dissolved or shall become incapable of acting,
or in the event that control of Bank or its offices shall be taken over by
any governmental authority, Customer, to the extent permitted by law, may
terminate this agreement at any time without regard to the 60-day notice
provision set forth in the immediately preceding paragraph.
The Customer's obligations to the Bank pursuant to the sections under the
headings "Settlements," "Fees," "Indemnification," "Taxes," and "Security
Interest" shall survive the termination of this Agreement. In like manner,
the Bank's obligations to the Customer pursuant to the paragraphs under the
headings "Access to Records," "Corporate Actions," and "Custodian
Responsibility" shall survive the termination of this Agreement.
15
<PAGE>
Except as provided in Section 14, upon termination of this Agreement or in
the event a successor to the Bank shall be selected or appointed the Bank
shall make delivery or payment of cash or Financial Assets held by the Bank
hereunder whether or not full payment shall have been made to the Bank of
all the Bank's fees, compensation, costs, and expenses, or whether the Bank
shall have been furnished with security and indemnity satisfactory to the
Bank against any liability, obligation, fees, compensation, cost or expense
in connection with this Agreement (to the extent the Bank is entitled
thereto under this Agreement.) Anything in this agreement to the contrary
notwithstanding, except as provided in Section 14 nothing herein shall be
construed to allow the Bank to recoup or set off any of the Bank's fees,
charges, or other claims against any Financial Assets held by the Bank as
custodian hereunder.
18. NOTICES
Notices with respect to termination, specification of Authorized Officers
and terms and conditions for Instructions required hereunder shall be in
writing, and shall be deemed to have been duly given if delivered
personally; delivered by courier service; or sent by mail (postage
prepaid), as the case may be, to and received at the following addresses
(or to such other address as either party hereto may from time to time
designate by notice duly given in accordance with this paragraph):
To the Customer at:
Lincoln National Managed Fund, Inc.
Attention: Securities Custody/Treasurer
1300 South Clinton Street
Fort Wayne, Indiana 46802
To the Bank, to the attention of the individual designated by the Bank as
the safekeeping account administrator for the Customer's account, at:
The Chase Manhattan Bank
North American Insurance Securities Services
3 Chase Metro Tech Center, Sixth Floor
Brooklyn, New York 11245
19. GOVERNING LAW; HEADINGS
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to its law as to conflict of
laws.
The headings of the paragraphs hereof are included for convenience of
reference only and do not form a part of this Agreement.
16
<PAGE>
20. PRIOR PROPOSALS; SUCCESSORS AND ASSIGNS
This Agreement (including any Riders relating to additional services in
respect of the Custody Account or the Custody Cash Account which the
Customer may request of the Bank) shall contain the complete agreement of
the parties hereto with respect to the Custody Account and the Custody Cash
Account (except as may be expressly provided to the contrary herein) and
supersedes and replaces any previously made proposals, representations,
warranties or agreements with respect thereto by either or both of the
parties hereto. This Agreement shall become effective upon execution hereof
by the Customer and acceptance by the Bank. It is binding on the parties,
their successors and assigns.
21. SEPARABILITY
Any provisions of this Agreement which may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
22. RESERVATION OF RIGHT
The Bank shall have the right not to accept for deposit to the Custody
Account any Securities which are in a form or condition which the Bank and
the Customer mutually agree are not suitable for the services which the
Bank provides under this Agreement.
23. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original and together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed, in one or more counterparts, in its name and on its behalf by its duly
authorized representatives:
THE CHASE MANHATTAN BANK The Lincoln National Managed Fund, Inc.
By: By:
-------------------------------- ------------------------------
Typed Name: Typed Name:
------------------------ ----------------------
Title: Title:
----------------------------- ---------------------------
17
<PAGE>
AGREEMENT TO PURCHASE SHARES
Lincoln National Pension Insurance Company ("LNP), on its behalf and on
behalf of Lincoln National Pension Variable Annuity Account C (the "Variable
Account"), and Lincoln National Managed Fund, Inc. (the "Fund") hereby agree
that shares of the Fund shall be made available to serve as an underlying
investment medium for variable annuity contracts to be offered by LNP through
the Variable Account subject to the following provisions:
1. LNP represents and warrants that it is an insurance company duly
organized and existing in good standing under Indiana law and that it has
legally and validly established the Variable Account as permitted under Indiana
law and has registered the Variable Account as a unit investment trust in
accordance with the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act"), to serve as a segregated investment account for certain
variable annuity contracts (the "Contracts"). LNP further represents and
warrants that the Contracts will be registered under the Securities Act of 1933,
as amended (the "1933 Act"), and the Contracts will be issued and sold in
compliance with all applicable federal and state laws. The Contracts will
provide for the allocation of net amounts received by LNP thereunder to separate
divisions of the Variable Account designated as "sub-accounts" for investment in
the shares of registered investment companies selected by LNP ("underlying
funds"). The Fund will be an underlying fund for one of the sub-accounts.
<PAGE>
2. Fund shares may be purchased and redeemed by LNP in accordance with
the provisions of the then current prospectus of the Fund. The Fund anticipates
that it will make its shares available indefinitely for purchase by LNP
hereunder, but the Fund reserves the right to suspend or terminate sales of its
shares hereunder at any time or times when its Board of Directors makes a good
faith determination that further sales would be to the detriment of current
holders of Fund shares. In the event that the Fund determines to sell shares of
the Fund to parties in addition to LNP, the Fund shall provide LNP with notice
60 days prior to such sales. LNP may terminate this Agreement following receipt
of such notice upon written notice to the Fund at any time no less than five
days prior to commencement of such additional sales.
3. Payment for Fund shares shall be made by LNP within five days after
placement of the order for Fund shares. The Fund reserves the right to delay
issuance or transfer of Fund shares and/or to delay the accrual and/or
declaration of dividends in accordance with any policy set forth in its then
current prospectus with respect to such shares until any payment check has
cleared. If payment is not received by the Fund or an agent of the Fund within
the five-day period, the Fund may, without notice, cancel the order and require
LNP to reimburse promptly the Fund for any loss suffered by the Fund resulting
from such failure to make timely payment. The Fund represents and warrants
-2-
<PAGE>
that Fund shares sold hereunder shall be registered under the Securities Act of
1933 and duly authorized for issuance in accordance with Maryland law.
4. LNP and its agents shall make no representation concerning the Fund or
Fund shares except those contained in the then current prospectus of the Fund or
in current printed sales literature of the Fund, or as otherwise approved by the
Fund in writing.
5. Administrative services to owners of and participants under Contracts
shall be the responsibility of LNP and shall not be the responsibility of the
Fund. The Fund will, at its cost, furnish LNP copies of its proxy material,
reports to stockholders and other communications to stockholders in such
quantities as LNP shall reasonably require for distribution to owners of or
participants under the Contracts and LNP will distribute these materials to such
owners or participants as required. The Fund will also, at LNP's cost, provide
LNP with copies of its current prospectus in such quantities as LNP shall
request for distribution in connection with sales of Contracts. LNP will vote
Fund shares for which no instructions have been received in the same proportion
as Fund shares for which instructions have been received from Contract owners.
LNP and persons under its control will in no way recommend action in connection
with the solicitation of proxies for Fund shares held in the Variable Account.
-3-
<PAGE>
6. The Fund shall amend the Registration Statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares and shall provide LNP with as many copies
of its current prospectus as LNP may reasonably request.
7. This Agreement may be terminated as to the issuance of Fund shares as
follows:
(a) at the option of LNP or the Fund upon 90 days' written notice to
the other party;
(b) at the option of LNP if Fund shares are not available for any
reason to meet the requirements of the Contracts as determined by LNP; or
(c) at the option of the Fund upon institution of any proceedings
against LNP relating to the Variable Account or the issuance and sale of
the Contracts, by the National Association of Securities Dealers, Inc., the
Securities and Exchange Commission, the Indiana Insurance Commissioner or
any other regulatory body.
(d) as provided in paragraph 2 hereof.
8. (a) LNP agrees to indemnify and hold harmless the Fund and each of
its directors who is not an "interested person" of the Fund, as defined in the
1940 Act (collectively the "Indemnified Parties") against any losses, claims,
damages, liabilities (including amounts paid in settlement thereof with the
written consent of LNP) or expenses or actions with respect thereto to which
such Indemnified Parties may become subject, under the Federal securities laws
or otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements
-4-
<PAGE>
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus of the Variable Account or
contained in the Contracts or sales literature (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, provided that this agreement to indemnify
shall not apply as to an Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with written information furnished to LNP by
such Indemnified Party expressly for use in the Registration Statement
or prospectus for the Variable Account or the Contracts or sales
literature (or any amendment or supplement);
(ii) arise out of or as a result of conduct, statements, or
representations (other than statements, or representations contained
in the prospectus of the Fund and sales literature not supplied by
LNP) of LNP or persons under its control, with respect to the sale and
distribution of the Contracts, or
(iii) arise as a result of any failure by LNP to provide the
services and furnish the materials set forth in paragraph 4 hereof.
LNP will reimburse any legal or other expenses reasonably incurred by the
Indemnified Parties in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement is in addition to
any liability which LNP may otherwise have.
(b) Promptly after receipt by any of the Indemnified Parties of notice of
the commencement of any action, or the making of any claim for which indemnity
may apply under this paragraph, the Indemnified Parties will, if a claim in
respect thereof is to
-5-
<PAGE>
be made against LNP, notify LNP of the commencement thereof; but the omission so
to notify LNP will not relieve LNP from any liability which it may have to the
Indemnified Parties otherwise than under this Agreement. In case any such
action is brought against the Indemnified Parties, and LNP is notified of the
commencement thereof, LNP will be entitled to participate therein and to assume
the defense thereof, with counsel satisfactory to the party named in the action,
and after notice from LNP to such party of LNP's election to assume the defense
thereof, LNP will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party inde-pendently in
connection with the defense thereof other than reasonable costs of
investigation.
Executed and agreed to this ___ day of __________________ , 1983.
LINCOLN NATIONAL PENSION INSURANCE
COMPANY
By
--------------------------------
Vice President
LINCOLN NATIONAL MANAGED FUND, INC.
By
--------------------------------
-6-
<PAGE>
TRADENAME AGREEMENT
THIS AGREEMENT, made this ___ day of ___________________ , 1983, between
Lincoln National Corporation ("LNC") and Lincoln National Managed Fund, Inc.
(the "Fund").
W I T N E S S E T H:
LNC, an Indiana Corporation, holds diversified interests, primarily in
insurance and related financial service companies. Various subsidiary and
affiliated corporations organized or acquired by LNC use the words "Lincoln
National" in their names and businesses, and these words when used by a company
associated with LNC have a recognized business acceptance and identity
throughout the United States and in foreign countries. The right to use the
words "Lincoln National" as a part of a corporate name and business is an asset
of LNC, and it is entitled to protect its valuable property right against
improper use by others.
Lincoln National Investment Management Company, a subsidiary of LNC, has
agreed to act as investment adviser to the Fund. LNC believes that it is in its
best interests to agree to make the words "Lincoln National" available for use
by the Fund so long as the Fund has in effect an investment advisory contract
with Lincoln National Investment Management Company.
Accordingly, in consideration of the premises and for other good and
valuable consideration, the parties hereto agree as follows:
1. The use of the words "Lincoln National" as a part of the corporate
name and business of Fund is subject to consent of LNC, which consent is hereby
granted upon the conditions and terms set forth herein.
2. The Fund is authorized to use the words "Lincoln National" in its
corporate name and business only while the Fund is a party to an investment
advisory contract with Lincoln National Investment Management Company and for a
period not exceeding 90 days following the termination of any such contract. In
the event that the Fund ceases to be a party to an investment advisory contract
with Lincoln National Investment Management Company the Fund shall promptly take
such steps as may be necessary to change its corporate name and business
practices so as to eliminate the words "Lincoln National" therefrom and within a
period of not exceeding 90 days following the termination of such contract, the
Fund shall cease to identify itself and its business by a name containing the
words "Lincoln National," or any name that, in the opinion of LNC, is
confusingly similar, or indicates an affiliation with LNC or any of its
subsidiaries and affiliates.
<PAGE>
3. The use of the words "Lincoln National" by the Fund shall not prevent
LNC or any of its subsidiaries or affiliates, or any of their respective
successors or assigns, from using or permitting the use of the words "Lincoln
National" alone or with any other word or words by or in connection with any
other entity or business, whether or not the same directly or indirectly
competes or conflicts with the Fund or its business in any manner.
IN WITNESS WHEREOF, LNC and the Fund have caused this Agreement to be
executed by their duly authorized officers and their corporate seals to be
hereunto affixed, all upon the day aforesaid.
Attest: LINCOLN NATIONAL CORPORATION
By
- ------------------------------- ---------------------------------
Assistant Secretary Vice President
Attest: LINCOLN NATIONAL MANAGED FUND, INC.
By
- ------------------------------- ---------------------------------
Secretary Vice President
-2-
<PAGE>
Lincoln National Managed Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46801
March 1, 1983
Lincoln National Managed Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46801
Gentlemen:
As Counsel for Lincoln National Managed Fund, Inc., a Maryland
corporation (the "Fund"), I have made such examination of law and have examined
such records and documents as I have deemed necessary to render the opinion
expressed below.
I am of the opinion that the Common Stock, $ .01 par value, of the
Fund will be, if and when issued by the Fund in the manner and upon the terms
set forth in the Registration Statement on Form N-1, validly authorized and
issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the Fund's
Registration Statement.
Very truly yours,
John L. Steinkamp
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Financial Statements"
in the Statement of Additional Information and to the incorporation by reference
in this Post-Effective Amendment No. 17 to the Registration Statement (Form
N-1A) (No. 2-82276) of Lincoln National Managed Fund, Inc. of our report dated
February 4, 1998, included in the Multi Fund Variable Annuity Annual Report
1997.
Philadelphia, Pennsylvania
April 14, 1998
<PAGE>
EXHIBIT 13
INVESTMENT LETTER
March 3 , 1993
---------
Lincoln National Managed Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46801
Gentlemen:
This will advise you that in consideration of your issuance to the undersigned
of 10,100 shares of Common Stock (the Stock) $.01 par value of Lincoln National
Managed Fund, Inc. (the Fund) for an aggregate purchase price of $101,000,
Lincoln National Pension Variable Annuity Account C (LNP) represents and
warrants that the Stock will be held by LNP for its own account, for investment
and not with a view to distribution.
LNP understands that the Stock being issued to it has not been registered under
the Securities Act of 1933, as amended (the Act), and agrees that the Stock may
not be sold or transferred except pursuant to an effective Registration
Statement under the Act or unless exemption from such registration is available
under the Act with respect to such proposed sale or transfer.
In order to insure compliance with the Act, LNP agrees that the Fund may, if it
desires, refuse to transfer the Stock unless: (i) a Registration Statement under
the Act is then in effect with respect to such Stock; or (ii) an opinion has
been obtained from counsel for the Fund to the effect that an exemption from
counsel for the Fund to the effect that an exemption from registration under the
Act is available with respect to the proposed transfer and that no such
registration is required; or (iii) a no-action letter has been obtained with
respect to such transfer from the staff of the Securities and Exchange
Commission.
LNP further agrees that a legend briefly describing the restrictions set forth
in this letter may be placed on the stock certificate, if any, delivered to LNP.
Very truly yours,
LINCOLN NATIONAL PENSION VARIABLE ANNUITY ACCOUNT C
By: LINCOLN NATIONAL PENSION INSURANCE COMPANY
By /s/ Marilyn A. Vachon
-------------------------------------
Secretary and Assistant Treasurer
<PAGE>
POWER OF ATTORNEY
LET IT BE KNOWN That each person whose signature appears below appoints
John L. Steinkamp, and Robert A. Nikels, jointly and severally, his attorneys-in
fact, with power of substitution, for him in all capacities, to sign all
amendments and/or post-effective amendments to the Registration Statement of
Lincoln National Managed Fund, Inc. under the Securities Act of 1933 and/or the
Investment Company Act of 1940, and to file such amendments and/or
post-effective amendments (with exhibits) with the Securities and Exchange
Commission, ratifying all that each attorney-in-fact may do or cause to be done
by virtue of this power.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this 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 3d day of
March, 1983.
LINCOLN NATIONAL MANAGED FUND, INC.
By /s/ Peter J. Cross
----------------------------------
Peter J. Cross, Chairman
of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Peter J. Cross Director 3/3/83
--------------------- (Principal Executive
Peter J. Cross Officer)
/s/ John B. Borsch, Jr. Director 3/3/83
---------------------
John B. Borsch, Jr.
(Continued on next page)
<PAGE>
SIGNATURES (Continued)
Signature Title Date
--------- ----- ----
/s/ Roxanne Decyk Director 2/28/83
---------------------
Roxanne Decyk
/s/ Stanley R. Nelson Director 3/3/83
---------------------
Stanley R. Nelson
/s/ Robert A. Nikels Vice President 3/3/83
---------------------- (Principal Accounting
Robert A. Nikels Officer)
/s/ Max A. Roesler Treasurer 3/3/83
--------------------- (Principal Financial
Max A. Roesler Officer)
<PAGE>
Power of Attorney
LET IT BE KNOWN that I, Barbara S. Kowalczyk, hereby revoke all Powers of
Attorney authorizing any person to act as attorney-in-fact relative to Lincoln
National Managed Fund, Inc. which were previously executed by me and appoint
Jeremy Sachs, John L. Steinkamp and C. Suzanne Womack, jointly and severally, my
attorneys-in-fact, with power of substitution, for me in any and all capacities,
to sign any and all amendments to the Registration Statement for Lincoln
National Managed Fund, Inc. and to file such amendments, with exhibits and other
documents, with the Securities and Exchange Commission, hereby ratifying all
that each attorney-in-fact may do or cause to be done by virtue of this power.
/s/ Barbara S. Kowalczyk
-----------------------------------
Barbara S. Kowalczyk
STATE OF INDIANA )
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me
this 20th day of December, 1993.
/s/ Mary L. Lung
-------------------
Notary Public
Commission Expires: 12-20-97
-------------
<PAGE>
Power of Attorney
LET IT BE KNOWN that I, Nancy L. Frisby, hereby revoke all Powers of
Attorney authorizing any person to act as attorney-in-fact relative to
Lincoln National Managed Fund, Inc. which were previously executed by me and
appoint Jeremy Sachs, John L. Steinkamp and C. Suzanne Womack, jointly and
severally, my attorneys-in-fact, with power of substitution, for me in any
and all capacities, to sign any and all amendments to the Registration
Statement for Lincoln National Managed Fund, Inc. and to file such
amendments, with exhibits and other documents, with the Securities and
Exchange Commission, hereby ratifying all that each attorney-in-fact may do
or cause to be done by virtue of this power.
/s/ Nancy L. Frisby
-----------------------------------
Nancy L. Frisby
STATE OF INDIANA )
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me
this 2nd day of February, 1993.
/s/ [ILLEGIBLE]
-------------------
Notary Public
Commission Expires: July 6, 1993
----------------
<PAGE>
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 |
--------------------------------
| --------------------------------------------
|--| City Financial Planners, Ltd. |
| | 100% - Englad/Wales - Distribution of life|
| | assurance & pension products |
| --------------------------------------------
| -------------------------------
|--| The Insurers' Fund, Inc. # |
| | 100% - Maryland - Inactive |
| -------------------------------
| ------------------------------------------------
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
| ------------------------------------------------
| ------------------------------------------------
|--| Lincoln Funds Corporation |
| | 100% - Delaware - Intermediate Holding Company |
| ------------------------------------------------
| ---------------------------------------------------
|--|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. |
| |--| (formerly Financial Services Department, Inc.)|
| | | 100% - Indiana - Insurance Agency |
| | -----------------------------------------------
| | -----------------------------------------
| | | Financial Investments, Inc. |
| |--| (formerly 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 Financial Group, Inc. |
|--| (formerly Lincoln National Sales Corporation)|
| | 100% - Indiana - Insurance Agency |
| ----------------------------------------------
| | ----------------------------------------
| |--| Lincoln Financial Advisors Corporation |
| | | (formerly LNC Equity Sales Corporation)|
| | | 100% - Indiana - Broker-Dealer |
| | ----------------------------------------
| | -------------------------------------------------------------
| | |Corporate agencies: Lincoln Financial Group, Inc. ("LFG") |
| |--|has subsidiaries of which LFG 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 (India) Inc. |
| | 100% - Indiana - India 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>
<TABLE>
<CAPTION>
<S><C>
-------------------------------
| |
| 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 - Investment Advisor |
| | | | ------------------------------------------------
| | | | | | --------------------------------------
| | | | | --| Delaware International Advisers, Ltd.|
| | | | | | 18.9% - England - Investment Advisor |
| | | | | --------------------------------------
| | | | -------------------------------------------------
| | | |--| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | -------------------------------------------------
| | | | ---------------------------------------
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | ---------------------------------------
| | | | | | -------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-MutualFund Distributor & Broker/Dealer |
| | | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | | | |
| | | | | | -------------------------------------------------------
| | | | | | ------------------------------------
| | | | | |--| 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 |
------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
--------------------------------
| |
| 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. |
| | | | | ------------------------------------------------------
| | | | | -----------------------------------------------
| | | | |---| Delaware Capital Management, Inc. |
| | | | | |(formerly 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 |
| | | | | -----------------------------------------------------
| | | | | -----------------------------------------------------
| | | | |---| Delaware Investment & Retirement Services, Inc. |
| | | | | 100% - Delaware - Registered Transfer Agent |
| | | | -----------------------------------------------------
| | | -----------------------------------------
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | -----------------------------------------
| | | | -----------------------------------------
| | | |--| Lynch & Mayer Asia, Inc. |
| | | | | 100% - Delaware - Investment Management |
| | | | -----------------------------------------
| | | | ----------------------------------------
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | | ----------------------------------------
| | | ----------------------------------------------------
| | | | Vantage Global Advisors, Inc. |
| | |--| (formerly Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
| | | ----------------------------------------------------
</TABLE>
<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. |
| |--| (formerly 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|
| | --------------------------------------------------
| | -------------------------------------------
| |--| Cigna Associates, Inc. |
| | | 100% - Connecticut - Insurance Agency |
| | -------------------------------------------
| | | ----------------------------------------------------------
| | |--| Cigna Associates of Massachusetts, Inc. |
| | | | 100% - Massachusetts - Insurance Agency |
| | ----------------------------------------------------------
| | -------------------------------------------
| |--|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. |
| |--| (formerly Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------------
| | ------------------------------------------------
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (formerly Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -----------------------------------------------
| | --------------------------------------------------------
| |--| 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 |
| -----------------------------------------------------------
|
| ----------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| ----------------------------------------------
| | -------------------------------------------------------
| |--| Lincoln European Reinsurance S.A. |
| | | 79% - Belgium |
| | | (Remaining 21% owned by Lincoln National Underwriting |
| | | Services, Ltd. |
| | -------------------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| ----------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly 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.) |
| | ---------------------------------------------------------
| | | ------------------------------------------------------
| | |--| Lincoln European Reinsurance S.A. |
| | | | 21% - Belgium |
| | | |(Remaining 79% owned by Lincoln National Reinsurance |
| | | | Company Limited |
| | | ------------------------------------------------------
| | --------------------------------------------------------
| | | 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 |
| | | (formerly One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| | -------------------------------------------------------
| | -----------------------------------
| |--|Cannon Fund Managers Limited |
| | | 100% - England/Wales - Inactive |
| | -----------------------------------
| | --------------------------------------------------------
| |--| 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 |
| | | (formerly: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| | ------------------------------------------------
| |
| | --------------------------------------------------
| |--| Lincoln Financial Group PLC |
| | | (formerly: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | --------------------------------------------------
| | | ----------------------------------------------------
| | |--| Lincoln Unit Trust Management Limited |
| | | |(formerly: Laurentian Unit Trust Management Limited)|
| | | | 100% - England/Wales - Unit Trust Management |
| | | ----------------------------------------------------
| | | | --------------------------------------------------
| | | |--| LUTM Nominees Limited |
| | | | | 100% - England/Wales - Nominee Services (Dormat) |
| | | | --------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S><C>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | --------------------------------------------------
| |--| Lincoln Financial Group PLC |
| | | (formerly: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | --------------------------------------------------
| | | ---------------------------------------
| | |--| Lincoln Milldon Limited |
| | | |(formerly: Laurentian Milldon Limited) |
| | | | 100% - England/Wales - Sales Company |
| | | ---------------------------------------
| | | -----------------------------------------------------------
| | |--| Laurtrust Limited |
| | | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | | -----------------------------------------------------------
| | | --------------------------------------------------
| | |--| Lincoln Management Services Limited |
| | | |(formerly: 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 |
| ------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
--------------------------------
| 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 |
| | | | -------------------------------------
| | | | --------------------------
| | | |--| P.N. Kemp-Gee & Co. Ltd. |
| | | | | 100% - Inactive |
--------------------------
</TABLE>
<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 (formerly Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | ----------------------------------------------------------
| | | -----------------------------------------------
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| | -----------------------------------------------
| | -----------------------------------------------------------
| |--| Lincoln Independent Limited |
| | |(formerly: Laurentian Independent Financial Planning Ltd.) |
| | | 100% - England/Wales - Independent Financial Adviser |
| | -----------------------------------------------------------
| | ----------------------------------------------
| |--| Lincoln Investment Management Limited |
| | |(formerly: 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 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 |
|--| (formerly 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 FINANCIAL GROUP, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Southwest Financial Group, Inc. (Phoenix, AZ)
3) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3a) 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
(formerly: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Lincoln Financial Group of Michigan, Inc. (Troy, MI)
12a) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (formerly: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (formerly: 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.
<PAGE>
JANUARY 1997 CON'T
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (formerly
Laurentian Financial Group PLC); Lincoln Milldon Limited (formerly
Laurentian Milldon Limited); Lincoln Management Services Limited
(formerly 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.
<PAGE>
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on
June 30, 1997.
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 Planners, 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.
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.
<PAGE>
BOOKS AND RECORDS
LINCOLN NATIONAL MANAGED 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.
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Annual Reports F&RM Eric Jones Permanently, the first two
To Shareholders years in an easily accessible
place
Semi-Annual F&RM Eric Jones Permanently, the first two
Reports years in an easily accessible
place
Form N-SAR F&RM 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 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
- --------- -------- ----------------- ---------
Public Bond Delaware Fund Accounting Permanently, the first two
Trades years in an easily accessible
Notifications place
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 Delaware Fund Accounting Permanently, the first two
Journals 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
SEPARATE LEDGER ACCOUNTS
SECURITIES IN TRANSFER
Bank Advices Delaware Fund Accounting Permanently, the first two
years in an easily accessible
place
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
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.)
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
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>
(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.
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
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 F&RM 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 Bankers Mutual Funds Permanently, the fist two
Custodian of Trust Division years in an easily accessible
Securities Company place
<PAGE>
(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.
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
CORPORATE DOCUMENTS
Corporate Executive- Sue Womack Permanently, the first two
charter, cer- Corp. Secy. years in an easily accessible
tificate of place
incorporation.
Bylaws and Corp. Secy. Sue Womack
minute books.
(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 LIM/VGA Mutual Funds Six years, the first two
Purchase Order Division (Stocks) years in an easily accessible
Pat Roller place
(Bonds)
Confirmations LIM/VGA Mutual Funds Six years, the first two
Division (Stocks) years in an easily accessible
place
Notification Investment Pat Roller Six years, the first two
Form years in an easily accessible
(from AOS place
Trading
System)
(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 years in an easily accessible
(From AOS place
S-T System)
Bank Advice LNIMC Ann Warner Six years, the first two
and 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.
Not applicable
(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 LNIMC Pat Roller Six years, the first two
Authorization years in an easily accessible
place
VGA Mutual Funds Division
(Stocks)
Advisory Law Division Jeremy Sachs Six years, the first two
Agreements years in an easily accessible
place
<PAGE>
(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.
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Issue Folders VGA Mutual Funds Six years, the first two
Division years in an easily accessible
place
Brokerage/ LNIMC Pat Roller
Credit (Bonds)
Information
(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 Nancy Alford Six years, the first two
Admin. years in an easily accessible
Product Mgt. 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
and Cash place
Recon-
ciliations
March 12, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND
ANNUAL REPORT DATED 12-31-97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000715974
<NAME> MANAGED FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 673,318,280
<INVESTMENTS-AT-VALUE> 843,553,234
<RECEIVABLES> 7,347,650
<ASSETS-OTHER> 594,610
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 851,495,494
<PAYABLE-FOR-SECURITIES> 526,484
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 323,495
<TOTAL-LIABILITIES> 849,979
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 589,115,335
<SHARES-COMMON-STOCK> 44,065,341
<SHARES-COMMON-PRIOR> 41,543,163
<ACCUMULATED-NII-CURRENT> 29,120,567
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 62,174,659
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 170,234,954
<NET-ASSETS> 850,645,515
<DIVIDEND-INCOME> 8,114,272
<INTEREST-INCOME> 24,278,217
<OTHER-INCOME> 0
<EXPENSES-NET> (3,271,922)
<NET-INVESTMENT-INCOME> 29,120,567
<REALIZED-GAINS-CURRENT> 62,174,659
<APPREC-INCREASE-CURRENT> 59,803,118
<NET-CHANGE-FROM-OPS> 151,098,344
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (18,028,760)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,267,957
<NUMBER-OF-SHARES-REDEEMED> (1,423,434)
<SHARES-REINVESTED> 2,677,655
<NET-CHANGE-IN-ASSETS> 174,905,098
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 18,028,760
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,873,786
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,271,922
<AVERAGE-NET-ASSETS> 771,858,833
<PER-SHARE-NAV-BEGIN> 16.266
<PER-SHARE-NII> 0.661
<PER-SHARE-GAIN-APPREC> 2.811
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.434)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 19.304
<EXPENSE-RATIO> 0.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
