[LOGO OF LINCOLN FINANCIAL GROUP]
Lincoln National
Managed Fund, Inc.
Semi-Annual Report
June 30, 1999
<PAGE>
Lincoln National Managed Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
<PAGE>
Lincoln National Managed Fund, Inc.
Managed by: [LOGO OF LINCOLN FINANCIAL GROUP]
The Fund had a return of 3.7% for the first six months of 1999 while its
customized benchmark (55% S&P 500 Index, 40% Lehman Brothers
Government/Corporate Bond Index and 5% Salomon Brothers 90 day T-Bill) returned
5.9% for the same time period. The asset allocation of the Fund at the end of
June was 58.8% equities (54.6% large cap, 4.2% small cap), 37.8% bonds and 3.4%
cash. The equity allocations have had the greatest impact on the Fund. The large
cap portion returned 10.3% for the first six months of the year. By contrast,
the S&P 500 Index returned 12.2% year-to-date. The small cap piece contributed a
strong return of 14.8% in the second quarter. However, the return for the small
cap component of the portfolio has lagged the Russell 2000 Index for the
year-to-date, with a (3.3)% return. The performance of the Fund has been hurt by
the bond component, as bonds had a (2.6)% return on the year. Bond prices have
gone down in 1999, as the U.S. economy has remained robust, with bond market
participants anticipating tighter Federal Reserve policy to slow economic
growth. We believe the equity indices are ahead of where they should be given
expected earnings and current interest rate levels. With the valuation market so
high, a sudden change in market sentiment could lead to a severe correction.
Therefore, the Fund's allocation will stay at a more neutral position.
David C. Fischer
Managed Fund 1
<PAGE>
Lincoln National Managed Fund, Inc.
Statement of Net Assets - Unaudited
June 30, 1999 Investments:
Par Market
Long-Term Debt Investments: Amount Value
- --------------------------------------------------------------------------
U.S. Government and Agency Obligations: 19.3%
- --------------------------------------------------------------------------
Federal Farm Credit Bank
5.75%, 3/23/05 $24,000,000 $23,348,395
Federal Home Loan Mortgage Corporation
6.39%, 10/15/06 1,971,743 1,957,571
6.00%, 6/11/08 13,800,000 13,400,447
5.13%, 10/15/08 44,800,000 40,783,313
7.30%, 12/1/12 2,911,380 2,946,862
8.50%, 1/1/17 446,827 474,475
7.50%, 5/25/20 3,504,863 3,547,276
Federal National Mortgage Association
0.00%, 8/7/01 7,000,000 6,192,845
6.73%, 8/1/05 2,068,060 2,067,398
7.18%, 10/1/05 3,869,466 3,903,053
6.66%, 11/1/05 965,019 965,000
6.66%, 12/1/05 1,929,094 1,934,457
7.04%, 7/1/06 2,423,278 2,470,229
0.00%, 7/24/06 11,500,000 7,399,766
7.15%, 10/1/15 2,726,767 2,742,528
7.00%, 10/1/25 1,631,701 1,622,013
6.50%, 6/1/28 13,752,658 13,301,399
Government National Mortgage Association
6.50%, 12/15/23 956,481 928,086
U.S. Treasury Bill (+)
4.97%, 7/22/99 1,200,000 1,196,589
U.S. Treasury Bond
6.13%, 8/15/07 18,000,000 18,199,107
U.S. Treasury Note
10.75%, 8/15/05 15,000,000 18,604,866
U.S. Treasury Strip
0.00%, 2/15/11 36,200,000 17,801,759
- --------------------------------------------------------------------------
185,787,434
Asset Backed: 0.0%
- --------------------------------------------------------------------------
Mid-State Trust
7.63%, 4/1/22 97,205 98,617
Collaterlized Mortgage Obligations: 1.1%
CMO Ser 1996-23
6.50%, 9/25/21 3,823,745 3,810,465
Norwest Asset Sec Corp Ser 99-5
6.25%, 3/25/14 5,028,617 4,938,259
Vanderbuilt MTG Ser99-A CL 1A2 144A
5.97%, 3/7/12 1,300,000 1,281,719
- --------------------------------------------------------------------------
10,030,443
Automobile & Auto Parts: 0.2%
- --------------------------------------------------------------------------
Chrysler
7.45%, 2/1/2097 1,000,000 996,250
Goodyear Tire & Rubber
6.63%, 12/1/06 1,250,000 1,229,688
- --------------------------------------------------------------------------
2,225,938
Banking, Finance & Insurance: 8.4%
- --------------------------------------------------------------------------
Ahmanson, H. F.
8.25%, 10/1/02 2,000,000 2,087,500
Aristar Financial
7.50%, 7/1/99 1,500,000 1,500,000
Banc One
9.88%, 3/1/09 500,000 600,000
Banque Paribas-NY
8.35%, 6/15/07 1,600,000 1,728,000
Barnett Bank
6.90%, 9/1/05 1,500,000 1,501,875
Barnett Capital Trust I
8.06%, 12/01/26 1,900,000 1,928,500
Citicorp Notes
6.33%, 1/5/06 1,600,000 1,546,000
Comerica Bank
7.88%, 9/15/26 1,500,000 1,533,750
Dow Capital
9.00%, 5/15/10 3,000,000 3,371,250
Par Market
Banking, Finance & Insurance (Cont.) Amount Value
- --------------------------------------------------------------------------
Fannie Mae- When Issued
0.00%, 6/1/17 $38,300,000 $11,944,939
Finova Capital
6.12%, 5/28/02 1,000,000 991,250
First Union
8.00%, 8/15/09 2,000,000 2,182,500
First of America Capital Trust I
8.12%, 1/31/27 2,000,000 2,032,500
Fleet Financial Group
7.25%, 9/1/99 1,000,000 1,002,940
General Electric Capital
8.30%, 9/20/09 3,000,000 3,307,500
General Motors Acceptance
7.88%, 3/7/01 1,500,000 1,541,250
8.88%, 6/1/10 1,500,000 1,695,000
Household Finance
9.63%, 7/15/00 875,000 905,612
Hydro-Quebec
7.20%, 10/5/09 3,000,000 3,414,683
International Lease Finance
8.25%, 1/15/00 2,000,000 2,029,793
John Deere Capital
8.63%, 8/1/19 2,000,000 2,132,500
Lehman Brothers Holdings
8.88%, 3/1/02 1,000,000 1,045,000
Mellon Capital I Notes
7.72%, 12/1/26 1,500,000 1,466,250
Mercantile Bancorp
7.30%, 6/15/07 1,325,000 1,349,844
Midland Bank PLC
5.31%, 9/29/49 1,600,000 1,279,200
Morgan Stanley Group
6.88%, 3/1/07 2,250,000 2,247,188
National Westminister Bank
9.45%, 5/1/01 500,000 522,500
NationsBank
8.13%, 6/15/02 1,000,000 1,041,250
Nynex Capital Funding
7.63%, 10/15/09 3,000,000 3,324,277
PNC Funding
6.88%, 7/15/07 1,663,000 1,658,843
PSE&G 144A
6.25%, 5/15/03 2,500,000 2,440,625
Salomon Brothers
7.25%, 1/15/00 1,000,000 1,010,099
Salomon Smith Barney
7.88%, 10/1/99 3,000,000 3,018,824
Simon DeBartolo Group
7.13%, 6/24/05 600,000 585,750
SouthTrust Bank of Birmingham
7.69%, 5/15/25 2,750,000 2,918,438
Standard Chartered PLC Notes
5.28%, 12/29/49 3,000,000 1,977,900
State Street Capital-B
8.04%, 3/15/27 1,400,000 1,410,500
Union Bank Switzerland
7.25%, 7/15/06 2,250,000 2,269,688
Wachovia Capital Trust I
7.64%, 1/15/27 1,900,000 1,850,125
- --------------------------------------------------------------------------
80,393,643
Building & Materials: 0.2%
- --------------------------------------------------------------------------
Champion International
7.70%, 12/15/99 1,500,000 1,507,500
- --------------------------------------------------------------------------
Cable, Media & Publishing: 0.5%
- --------------------------------------------------------------------------
Century Communications
0.00%, 1/15/08 350,000 157,500
Charter Communications 144A
8.63%, 4/1/09 700,000 673,750
News America Holdings
8.45%, 8/1/34 1,500,000 1,580,625
Time Warner
9.13%, 1/15/13 2,000,000 2,320,000
- --------------------------------------------------------------------------
4,731,875
Chemicals: 0.0%
- --------------------------------------------------------------------------
ISP Holdings
9.00%, 10/15/03 350,000 351,750
Managed Fund 2
<PAGE>
Par Market
Amount Value
- --------------------------------------------------------------------------
Consumer Products: 0.3%
- --------------------------------------------------------------------------
Westvaco
8.30%, 8/1/22 $2,500,000 $2,634,375
- --------------------------------------------------------------------------
Energy: 0.3%
- --------------------------------------------------------------------------
Enron
9.50%, 6/15/01 1,000,000 1,056,250
Petro-Canada
8.60%, 10/15/01 1,500,000 1,571,250
- --------------------------------------------------------------------------
2,627,500
- --------------------------------------------------------------------------
Environment Services: 0.2%
- --------------------------------------------------------------------------
Waste Management
6.63%, 7/15/02 2,000,000 2,010,000
Food, Beverage & Tobacco: 0.0%
Nabisco
7.55%, 6/15/15 750,000 744,375
Healthcare & Pharmaceuticals: 0.2%
Allegiance
7.30%, 10/15/06 1,000,000 1,022,500
Tenet Healthcare
8.00%, 1/15/05 350,000 343,000
- --------------------------------------------------------------------------
1,365,500
Leisure, Lodging & Entertainment: 0.2%
- --------------------------------------------------------------------------
Darden Restaurants
6.38%, 2/1/06 1,500,000 1,419,375
- --------------------------------------------------------------------------
Metals & Mining: 0.6%
- --------------------------------------------------------------------------
Cyprus Amax Minerals
7.38%, 5/15/07 2,500,000 2,343,750
Inco
9.60%, 6/15/22 1,000,000 891,250
Newmont Gold
8.91%, 1/5/09 665,276 711,014
Placer Dome
7.37%, 6/3/26 1,000,000 970,000
Placer Dome-Series A
7.31%, 1/26/21 1,000,000 871,250
- --------------------------------------------------------------------------
5,787,264
Miscellaneous: 0.9%
- --------------------------------------------------------------------------
Buckeye Cellulose
8.50%, 12/15/05 175,000 176,750
Corp Andina
7.75%, 3/1/04 2,000,000 2,025,000
ESI Tractebel
7.99%, 12/30/11 350,000 344,313
Lilly (Eli)
8.38%, 2/7/05 2,250,000 2,411,550
Manitoba
7.75%, 7/17/16 1,500,000 1,623,750
Polymer Group
9.00%, 7/1/07 350,000 343,000
Republic of Korea
8.88%, 4/15/08 1,600,000 1,700,000
- --------------------------------------------------------------------------
8,624,363
Paper & Forest Products: 0.0%
- --------------------------------------------------------------------------
Big Flower Press 350,000 325,500
Retail: 0.4%
Sears Roebuck
9.05%, 2/6/12 2,500,000 2,893,750
Service Corp International
7.00%, 6/1/15 1,000,000 995,000
- --------------------------------------------------------------------------
3,888,750
Telecommunications: 0.7%
- --------------------------------------------------------------------------
Litton Industries
6.98%, 3/15/36 1,000,000 1,006,250
Pacificorp
9.15%, 8/9/11 1,500,000 1,766,250
Qwest Communications International
0.00%, 2/1/08 350,000 261,625
Par Market
Telecommunications (Cont.) Amount Value
- --------------------------------------------------------------------------
Southwestern Bell Capital
7.13%, 6/1/05 $ 2,000,000 $2,030,000
U.S. Cellular
7.25%, 8/15/07 1,500,000 1,515,000
- --------------------------------------------------------------------------
6,579,125
Transportation & Shipping: 1.1%
- --------------------------------------------------------------------------
American Airlines
10.18%, 1/2/13 1,500,000 1,769,868
Burlington Northern Railroad
6.94%, 1/2/14 454,072 447,782
Chicago & Northwestern Transportation
6.25%, 7/30/12 1,323,702 1,285,646
CSX
7.25%, 5/1/27 1,000,000 1,016,250
Federal Express
7.96%, 3/28/17 1,129,243 1,161,709
General American Transportation
7.50%, 2/28/15 1,401,974 1,433,518
Norfolk Southern
7.05%, 5/1/37 2,000,000 2,027,500
United Airlines
9.35%, 4/7/16 1,500,000 1,649,917
- --------------------------------------------------------------------------
10,792,190
Utilities: 3.2%
- --------------------------------------------------------------------------
Calpine
7.75%, 4/15/09 350,000 335,125
Colonial Gas-Series A
6.81%, 5/19/27 1,500,000 1,522,500
Consumers Energy
6.50%, 6/15/05 1,000,000 993,750
Detriot Edison
6.56%, 5/1/1 2,000,000 2,007,500
Duquesne Light
8.70%, 6/1/16 2,462,000 2,655,883
Great Lakes Power
9.00%, 8/1/04 1,500,000 1,601,250
Houston Light & Power Capital Trust II
8.26%, 2/1/37 1,900,000 1,938,000
MidAmerican Energy
6.50%, 12/15/01 1,250,000 1,248,438
Nevada Power
7.06%, 5/1/00 1,500,000 1,511,250
Noble Affiliates
7.25%, 10/15/23 600,000 561,000
Old Dominion Electric
7.48%, 12/1/13 1,500,000 1,518,750
Pacific Gas and Electric
6.25%, 8/1/03 2,000,000 1,982,500
Pennsylvania Power & Light
7.70%, 10/1/09 3,000,000 3,210,000
PSI Energy
8.85%, 1/15/22 495,000 558,731
Public Service
6.38%, 11/1/05 1,500,000 1,468,125
South Carolina Electric
9.00%, 7/15/06 2,500,000 2,756,250
Texas Gas Transmissions
8.63%, 4/1/04 2,000,000 2,160,000
Texas Utilities
7.38%, 8/1/01 1,500,000 1,530,000
Washington Water Public
8.01%, 12/17/01 1,000,000 1,025,000
- --------------------------------------------------------------------------
30,584,052
Total Long Term Debt Investments: 37.8%
(Cost $ 368,265,407) 362,509,569
- --------------------------------------------------------------------------
Number
Common Stock: of Shares
- --------------------------------------------------------------------------
Aerospace & Defense: 1.1%
- --------------------------------------------------------------------------
GenCorp 34,000 858,500
General Dynamics 5,500 376,750
Gulfstream Aerospace * 44,200 2,986,263
Kellstrom Industries * 39,900 733,163
United Technologies 80,000 5,735,000
- --------------------------------------------------------------------------
10,689,676
Managed Fund 3
<PAGE>
Number Market
of Shares Value
- --------------------------------------------------------------------------
Automobiles & Auto Parts: 1.6%
Autonation 152,300 $ 2,712,844
Ford Motor 57,000 3,216,938
Goodrich (B.F.) 97,600 4,148,000
Hertz-Class A 9,600 595,200
Navistar International 82,100 4,105,000
Smith (A.O.) 30,500 842,563
- --------------------------------------------------------------------------
15,620,545
Banking, Finance & Insurance: 8.9%
- --------------------------------------------------------------------------
Allstate 92,820 3,329,918
AmSouth Bancorporation 105,600 2,448,600
American International Group 56,800 6,649,150
Arcadia Financial 107,300 831,575
Astoria Financial 7,200 316,125
Bank of America 79,590 5,834,942
Bank of Boston 39,700 2,029,663
Bank One 122,852 7,317,372
Chase Manhattan 82,400 7,137,900
Chicago Title 21,300 760,144
Citigroup 175,574 8,339,741
Comerica 43,850 2,606,334
Conseco 157,800 4,803,038
Dime Bancorp 41,700 839,213
Dime Community Bancshares 30,000 693,750
Flagstar Bancorp 28,500 717,844
Federal Home Loan 16,100 933,800
Federal National Mortgage 13,100 895,713
Fidelity National Financial 25,080 526,680
Firstar 20,100 562,800
Harbor Florida Bancshares 67,000 818,656
Marsh & McLennan 86,300 6,515,650
Merrill Lynch & Company 14,400 1,151,100
Metris 50,616 2,062,602
Morgan (J.P.) 26,200 3,681,100
Pff Bancorp 39,000 734,906
Paine Webber Group 106,600 4,983,550
Queens County Bancorp 23,700 766,547
Roslyn Bancorp 44,075 758,916
RenaissanceRe Holdings * 18,500 684,500
SEI 16,200 1,430,156
SLM Holding 52,100 2,386,831
Washington Mutual 39,480 1,396,605
- --------------------------------------------------------------------------
84,945,421
Buildings & Materials: 0.8%
- --------------------------------------------------------------------------
Centex 64,400 2,419,025
Kaufman & Broad Home 15,000 373,125
M.D.C. Holdings 40,100 862,150
Nortek * 24,300 760,894
NVR Inc 14,600 761,938
Standard Pacific 51,900 671,456
USG 28,900 1,618,400
Vulcan Materials 10,500 506,625
- --------------------------------------------------------------------------
7,973,613
Cable, Media & Publishing: 1.6%
- --------------------------------------------------------------------------
Big Flower Holdings 21,100 672,563
Consolidated Graphics 16,800 840,000
Donnelley & Sons 75,100 2,783,394
Hollinger International 59,500 706,563
Knight-Ridder 26,200 1,439,363
McGraw-Hill 58,700 3,166,131
New York Times 143,800 5,293,638
R.H.Donnelley 18,280 357,603
Valassis Communications 7,200 263,700
- --------------------------------------------------------------------------
15,522,955
Chemicals: 1.2%
- --------------------------------------------------------------------------
Avery Dennison 6,300 380,363
Commercial Metals Company 21,700 618,450
Cytec Industries 18,200 580,125
Dollar Thrifty Automotive 32,000 744,000
Dow Chemical 43,000 5,455,625
ETHYL 154,100 924,600
First Commonwealth Financial 29,300 699,538
Number Market
Chemicals (Cont.) of Shares Value
- --------------------------------------------------------------------------
Lubrizol 30,300 $ 850,294
Quaker Chemical 45,600 741,000
URS * 30,000 879,375
- --------------------------------------------------------------------------
11,873,370
Computers & Technology: 8.8%
- --------------------------------------------------------------------------
American Managment Systems 35,200 1,127,500
American Power Conversion 92,400 1,856,663
Apex PC Solutions 38,200 781,906
Apple Computer * 118,100 5,476,888
Avtoration 22,800 862,125
Bell & Howell * 20,200 763,813
BMC Software 16,000 863,500
Cisco Systems * 59,200 3,812,850
Computer Associates International 49,700 2,733,500
Dell Computer * 116,800 4,317,950
Electronics Arts * 23,300 1,261,113
IMRglobal 41,000 791,813
Intelligroup * 88,500 631,945
International Business Machine 58,400 7,548,200
Keane * 25,000 565,625
Lexmark International Group A * 77,200 5,100,025
Mercury Interactive 51,300 1,817,944
Microsoft * 242,400 21,846,300
MTS Systems 58,300 706,888
Oracle 119,450 4,434,581
RWD Technologies 46,300 481,809
Splash Technology Holdings * 84,800 597,575
Sun Microsystems * 119,300 8,220,516
Sunquest Information Systems 55,000 892,031
Symantec * 43,400 1,108,056
Xerox 82,000 4,843,125
Xircom 25,400 764,381
- --------------------------------------------------------------------------
84,208,622
Consumer Products: 1.7%
- --------------------------------------------------------------------------
Avon Products 18,100 1,004,550
Brady Corp 23,900 776,750
Chattem 21,200 675,750
Clorox 34,100 3,642,306
Kimberly-Clark 20,300 1,157,100
Procter & Gamble 89,100 7,952,175
Racing Champions 45,000 317,813
WD-40 26,200 659,913
- --------------------------------------------------------------------------
16,186,357
Electronics & Electrical Equipment: 3.1%
- --------------------------------------------------------------------------
FirstEnergy 24,200 750,200
General Electric 147,600 16,678,800
Honeywell 32,800 3,800,700
Intel 112,900 6,714,022
Read-Rite 80,000 496,250
Sawtek 19,000 871,625
Triumph Group 25,500 650,250
- --------------------------------------------------------------------------
29,961,847
Energy: 3.8%
- --------------------------------------------------------------------------
Ashland 19,600 786,450
Atlantic Richfield 60,500 5,055,531
Enron 14,800 1,209,900
Exxon 134,600 10,381,025
Friede Goldman International * 45,000 624,375
Gulf Island Fabrication * 50,500 604,422
Kerr-McGee 18,191 912,961
Occidental Petroleum 98,800 2,087,150
Oceaneering International 44,900 724,013
Royal Dutch Petroleum 94,000 5,663,500
Semco Energy Incorporated 36,000 552,375
Sun 37,700 1,138,069
Texaco 85,800 5,362,500
USX-Marathon Group 31,700 1,032,231
- --------------------------------------------------------------------------
36,134,502
Food, Beverage & Tobacco: 3.6%
- --------------------------------------------------------------------------
Canandaigua Brands Class A * 15,000 786,094
CKE Restaurants 84,920 1,379,950
Coca Cola 76,800 4,800,000
Managed Fund 4
<PAGE>
Number Market
Food, Beverage & Tobacco (Cont.) of Shares Value
- --------------------------------------------------------------------------
ConAgra 59,100 $ 1,573,538
General Mills 45,400 3,649,025
Heinz (H.J.) 60,550 3,035,069
Omega Protein * 112,400 590,100
Philip Morris 175,800 7,064,963
Pilgrims Pride 34,700 1,041,000
Quaker Oats 72,400 4,805,550
Ralcorp Holdings * 39,500 634,469
Riviana Foods 39,900 758,100
Ryan's Family Steakhouses 64,100 743,159
Schweitzer-Mauduit International 47,500 712,500
Suiza Foods * 48,100 2,014,188
United Natural Foods 26,000 645,125
- --------------------------------------------------------------------------
34,232,830
Healthcare & Pharmaceuticals: 6.2%
- --------------------------------------------------------------------------
Ameripath * 82,000 704,688
Amgen * 122,400 7,447,275
Baxter International Contigent Value Rights 93,900 8,451
Bergen Brunswig Class A 11,264 194,299
Boston Scientific 22,800 1,001,775
Bristol-Myers Squibb 104,400 7,353,675
CareMatrix * 67,100 832,459
Hanger Orthopedic Group * 43,500 617,156
Johnson & Johnson 49,900 4,890,200
Lilly (Eli) 27,100 1,941,038
Lincare Holdings * 91,400 2,287,856
Matria Healthcare * 110,800 806,763
Medicis Pharmaceutical Class A * 26,000 659,750
Medtronic 74,884 5,831,592
Merck & Company 85,600 6,334,400
Ocular Sciences 24,000 416,250
Pfizer 49,200 5,399,700
Protein Design Labs 31,100 687,116
Rexall Sundown 36,200 440,056
Roberts Pharmacueticals 42,100 1,020,925
Schering-Plough 176,700 9,365,100
The Cooper Companies * 34,300 855,356
Theragenics 85,300 591,769
- --------------------------------------------------------------------------
59,687,649
Industrial Machinery: 0.3%
- --------------------------------------------------------------------------
Cascade 51,400 719,600
Ingersoll-Rand 37,300 2,410,513
- --------------------------------------------------------------------------
3,130,113
Leisure, Lodging & Entertainment: 0.5%
- --------------------------------------------------------------------------
Carnival Cruise Lines 62,000 3,007,000
Eastman Kodak 11,700 792,675
Foodmaker 26,600 754,775
Silver Leaf Resorts * 85,000 547,188
- --------------------------------------------------------------------------
5,101,638
Metals & Mining: 0.4%
- --------------------------------------------------------------------------
Amcol International * 61,500 884,063
Armco 109,000 722,125
Terex 23,100 703,106
USX-U.S. Steel Group 69,800 1,884,600
- --------------------------------------------------------------------------
4,193,894
Miscellaneous: 1.3%
- --------------------------------------------------------------------------
ACX Technologies 55,500 901,875
Advo * 36,500 757,375
Beazer Homes USA 33,000 765,188
Barnes Group 32,000 696,000
Insight Enterprises * 22,350 552,464
Lawter International Inc 62,000 751,750
Media Arts Group * 78,500 343,438
Prime Medical Services 95,000 703,594
Plantronics 11,700 761,963
Spacelabs Medical 42,400 795,000
Tyco International 58,100 5,504,975
- --------------------------------------------------------------------------
12,533,622
Packaging & Containers: 0.1%
- --------------------------------------------------------------------------
Shorewood Packaging 38,000 700,625
- --------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------
Paper & Forest Products: 0.2%
- --------------------------------------------------------------------------
Fort James 23,500 $ 890,063
Weyerhaeuser 14,100 969,375
- --------------------------------------------------------------------------
1,859,438
Retail: 4.0%
- --------------------------------------------------------------------------
Best Buy 19,000 1,282,500
Cato Class A 59,200 688,200
Cost Plus * 19,700 895,119
Family Dollar Stores 184,000 4,416,000
Fossil * 18,700 902,275
Home Depot 54,900 3,537,619
Jostens 84,500 1,779,781
Kenneth Cole Productions-A 25,000 696,875
Kroger * 25,800 720,788
Lowe's Companies 58,500 3,316,219
Micro Warehouse * 47,900 850,225
Musicland Stores * 85,100 755,263
Russ Berrie 26,500 655,875
Safeway * 71,000 3,514,500
Sherwin-Williams 15,400 427,350
Talbots 21,600 823,500
TJX 147,600 4,916,925
Trans World Entertainment * 58,750 657,266
Wal-Mart Stores 150,600 7,266,450
- --------------------------------------------------------------------------
38,102,730
Telecommunications: 6.5%
- --------------------------------------------------------------------------
Ameritech 120,200 8,834,700
A T & T 131,100 7,317,019
Bell Atlantic 107,428 7,023,106
BellSouth 165,600 7,762,500
Dycom 15,450 865,200
General Instrument * 69,200 2,941,000
GTE 58,300 4,412,581
InterVoice 58,000 835,563
Lucent Technologies 121,200 8,173,425
MCI Worldcom 13,200 1,135,613
Melita International 55,200 741,750
Tellabs * 81,000 5,475,094
U.S.West 114,900 6,750,375
- --------------------------------------------------------------------------
62,267,926
Textiles, Apparel & Furniture: 0.9%
- --------------------------------------------------------------------------
Albany International 34,000 705,500
Johnson Controls 62,300 4,318,169
Tommy Hilfiger 49,600 3,642,500
- --------------------------------------------------------------------------
8,666,169
Transportation & Shipping: 0.7%
- --------------------------------------------------------------------------
Alaska Air Group * 13,900 580,325
America West Holdings Class B 33,800 637,975
AMR 9,900 675,675
Amtran Airlines * 31,500 781,594
Canadian Pacific 19,600 466,725
Canadian National Railway 7,100 475,700
Continental Airlines Class B 37,200 1,404,300
Landstar Systems 18,000 649,688
M.S. Carriers 24,300 720,647
- --------------------------------------------------------------------------
6,392,629
Utilities: 1.5%
- --------------------------------------------------------------------------
Aquarion 22,500 781,875
Black Hills 27,550 637,094
Calpine 14,400 777,600
E'town 2,300 105,225
Energy East 61,900 1,609,400
General Public Utilities 40,100 1,691,719
Northwestern 28,800 696,600
Otter Tail Power 17,300 666,591
PECO Energy 56,400 2,372,325
Public Service Company of New Mexico 36,400 723,450
Public Service Enterprise Group 19,000 776,625
Texas Utilities 52,300 2,157,375
Unicom 45,400 1,750,738
- --------------------------------------------------------------------------
14,746,617
- --------------------------------------------------------------------------
Managed Fund 5
<PAGE>
Market
Value
- --------------------------------------------------------------------------
Total Common Stock: 58.8%
(Cost $ 363,288,541) $564,732,788
- --------------------------------------------------------------------------
Par
Money Market Instruments: Amount
- --------------------------------------------------------------------------
Caterpillar
5.85%, 7/1/99 $1,400,000 1,400,000
Fluor Corp
5.04%, 7/8/99 1,400,000 1,400,000
Marsh USA
5.15%, 7/8/99 5,000,000 5,000,000
5.14%, 7/23/99 8,000,000 8,000,000
Volkswagen of America
0.00%, 7/6/99 8,300,000 8,294,260
Wells Fargo
5.04%, 7/12/99 5,000,000 4,992,315
- --------------------------------------------------------------------------
Total Money Market Instruments: 3.0%
(Cost $29,086,575) 29,086,575
- --------------------------------------------------------------------------
Total Investments: 99.6%
(Cost $760,640,523) 956,328,932
- --------------------------------------------------------------------------
Other Assets Over Liabilities: 0.4% 4,094,225
- --------------------------------------------------------------------------
Net Assets: 100.0%
(Equivalent to $18.644 per share based on
51,514,263 shares issued and outstanding) $960,423,157
- --------------------------------------------------------------------------
Components of Net Assets at June 30, 1999:
- --------------------------------------------------------------------------
Common Stock, $.01 par value
100,000,000 authorized shares 515,143
Paid in capital in excess of par value
of shares issued 721,877,301
Undistributed net investment income 15,225,583
Accumulated net realized gain on
investments and futures contracts 26,573,696
Net unrealized appreciation of
investments and futures contracts 196,231,434
- --------------------------------------------------------------------------
Total Net Assets $960,423,157
- --------------------------------------------------------------------------
** Non-income producing security.
(+) Fully or Partially pledged as collateral for open futures contracts.
See accompanying notes to financial statements.
Managed Fund 6
<PAGE>
Lincoln National Managed Fund, Inc.
Statement of Operations - Unaudited
Six months ended June 30, 1999
Investment income:
Interest $ 13,527,086
- -----------------------------------------------------------------------------
Dividends 3,692,835
- -----------------------------------------------------------------------------
Total investment income 17,219,921
- -----------------------------------------------------------------------------
Expenses:
Management fees 1,694,821
- -----------------------------------------------------------------------------
Accounting fees 192,800
- -----------------------------------------------------------------------------
Printing and postage 53,824
- -----------------------------------------------------------------------------
Legal fees 22,800
- -----------------------------------------------------------------------------
Custody fees 19,523
- -----------------------------------------------------------------------------
Directors fees 2,100
- -----------------------------------------------------------------------------
Other 11,517
- -----------------------------------------------------------------------------
1,997,385
- -----------------------------------------------------------------------------
Expenses paid indirectly (3,047)
- -----------------------------------------------------------------------------
Total expenses 1,994,338
- -----------------------------------------------------------------------------
Net investment income 15,225,583
- -----------------------------------------------------------------------------
Net realized and unrealized gain
on investments and futures contracts:
Net realized gain (loss) on investment transactions and
futures contracts 26,807,959
- -----------------------------------------------------------------------------
Net change in unrealized depreciation of
investments and futures contracts (8,015,652)
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and futures contracts 18,792,307
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $34,017,890
- -----------------------------------------------------------------------------
Statements of Changes in Net Assets
Six months
ended
6/30/99 Year ended
(Unaudited) 12/31/98
--------------------------
Changes from operations:
- -------------------------------------------------------------------------------
Net investment income $ 15,225,583 $ 30,054,285
- -------------------------------------------------------------------------------
Net realized gain on investments and
futures contracts 26,807,959 44,287,952
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/(depreciation)
on investments and future contracts (8,015,652) 34,012,132
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 34,017,890 108,354,369
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (5,000,529) (54,174,323)
- -------------------------------------------------------------------------------
Net realized gain on investments (44,522,215) (62,174,659)
- -------------------------------------------------------------------------------
Total distributions to shareholders (49,522,744) (116,348,982)
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share transactions 10,441,975 122,835,134
- -------------------------------------------------------------------------------
Total increase/decrease in net assets (5,062,879) 114,840,521
- -------------------------------------------------------------------------------
Net Assets, at beginning of period 965,486,036 850,645,515
- -------------------------------------------------------------------------------
Net Assets, at end of period $960,423,157 $965,486,036
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
Managed Fund 7
<PAGE>
Lincoln National Managed Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each period)
<TABLE>
<CAPTION>
Six months
ended
6/30/99 Year ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.971 $19.304 $16.266 $15.895 $12.783 $14.152
Income (loss) from investment operations:
Net investment income 0.298 0.599 0.661 0.628 0.623 0.628
Net realized and unrealized gain (loss)
on investments 0.373 1.632 2.811 1.291 3.132 (0.814)
---------------------------------------------------------------
Total from investment operations 0.671 2.231 3.472 1.919 3.755 (0.186)
---------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.101) (1.162) - (0.628) (0.623) (0.628)
Distributions from net realized gain on
investment transactions (0.897) (1.402) (0.434) (0.920) (0.020) (0.555)
---------------------------------------------------------------
Total dividends and distributions (0.998) (2.564) (0.434) (1.548) (0.643) (1.183)
---------------------------------------------------------------
Net asset value, end of period $ 18.644 $18.971 $19.304 $16.266 $15.895 $12.783
---------------------------------------------------------------
Total Return(1) 3.65% 12.72% 21.82% 12.05% 29.29% (1.84%)
Ratios and supplemental data:
Ratio of expenses to average net assets 0.42%(2) 0.42% 0.42% 0.43% 0.43% 0.44%
Ratio of net investment income
to average net assets 3.32%(2) 3.31% 3.77% 4.05% 4.37% 4.45%
Portfolio Turnover 16.04% 57.36% 53.40% 108.86% 112.52% 160.79%
Net assets, end of period (000 omitted) $960,423 $965,486 $850,646 $675,740 $589,165 $442,140
</TABLE>
(1) Total return percentages in this table are calculated on the basis
prescribed by the Securities and Exchange Commission. These percentages are
based on the underlying mutual fund shares. The total return percentages in
the table are NOT calculated on the same basis as the performance
percentages in the letter at the front of this booklet (those percentages
are based upon the change in unit value).
(2) Annualized
See accompanying notes to financial statements.
Managed Fund 8
<PAGE>
Lincoln National Managed Fund, Inc.
Notes to Financial Statements - Unaudited
June 30, 1999
The Fund: Lincoln National Managed Fund, Inc. (the "Fund") is registered as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended. The Fund's shares are sold only to Lincoln National
Life Insurance Company and Lincoln National Life Insurance Company of New York
(the "Companies") for allocation to their variable annuity products and variable
universal life products.
The Fund's investment objectives is to maximize long-term total return (capital
gains plus income) consistent with prudent investment strategy. The Fund invests
in a mix of stocks, bonds, and money market securities, as determined by an
investment committee.
1. Significant Accounting Policies
Investment Valuation: Portfolio securities which are traded on an exchange are
valued at the last reported sale price on the exchange or market where primarily
traded or listed or, in the absence of recent sales, at the mean between the
last reported bid and asked prices. Long-term debt investments are valued at
their mean quotations. Financial futures are valued at the settlement price
established each day by the board of trade or exchange on which they are traded.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors. Money market instruments having less
than 60 days to maturity are stated at amortized cost, which approximates market
value.
Investment Transactions and Investment Income: Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis and includes
amortization of any premium and discount. Realized gains or losses from
investment transactions are reported on an identified cost basis.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
Expenses: The custodian bank of the Fund has agreed to waive its custodial fees
when the Fund maintains a prescribed amount of cash on deposit in certain
non-interest bearing accounts. For the six months ended June 30, 1999, the
custodial fees offset arrangements and amounted to $3,047.
Taxes: The Fund has complied with the special provisions of the Internal Revenue
Code for regulated investment companies. As such, the Fund is not subject to
U.S. federal income taxes to the extent that it distributes all of its taxable
income for its fiscal year.
2. Management Fees and Other Transactions With Affiliates
Lincoln Investment Management Company (the "Advisor") and its affiliates manage
the Fund's investment portfolio and maintain its accounts and records. For these
services, the Advisor receives a management fee at an annual rate of .48% of the
first $200,000,000 of the average daily net assets of the Fund, .40% of the next
$200,000,000, and .30% of the average daily net assets of the Fund in excess of
$400,000,000. The sub-advisor of the equity securities held by the Fund, Vantage
Investment Advisors, an affiliate of the Advisor, is paid directly by the
Advisor.
Delaware Service Company ("Delaware"), an affiliate of the Advisor, provides
accounting services and other administration support to the Fund. For these
services, the Fund pays Delaware a monthly fee based on average net assets,
subject to certain minimums.
If the aggregate annual expenses of the Fund, including the management fee, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses, exceed
1.50% of the average daily net assets of the Fund, the Advisor will reimburse
the Fund in the amount of such excess. No reimbursement was due for the six
months ended June 30, 1999.
Certain officers and directors of the Fund are also officers or directors of the
Companies and receive no compensation from the Fund. The compensation of
unaffiliated directors of the Fund is borne by the Fund.
Managed Fund 9
<PAGE>
Notes to Financial Statements - Unaudited - (Continued)
3. Investments
The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of investments purchased and the aggregate
proceeds from investments sold for the six months ended June 30, 1999 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized appreciation at June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Appreciation
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$146,923,245 $170,502,224 $221,957,897 $(26,269,488) $195,688,409
</TABLE>
4. Supplemental Financial Instrument Information
Financial Futures Contracts: The Fund may purchase or sell financial futures
contracts, which are exchange traded. The Fund bears the market risk that arises
from changes in the value of these financial instruments. The Fund deposits with
its custodian a specified amount of cash or eligible securities called "initial
margin". The market value of investments pledged to cover margin requirements
for open positions at June 30, 1999 was $1,196,589. Unrealized gain or loss on
the contracts is reflected in the accompanying financial statements. The Fund is
subject to the market risks of unexpected changes in the underlying markets and
interest rates. Financial futures contracts open at June 30, 1999 were as
follows:
<TABLE>
<CAPTION>
Notional Unrealized
Contracts Cost Amount Expiration Dates Gain (Loss)
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
105 S&P 500 stock index contracts $34,636,383 September 1999 $1,623,211)
(154) Russell 2000 stock index contracts (34,493,814) September 1999 (1,080,186)
----------
$1,543,025
==========
</TABLE>
5. Summary of Changes From Capital Share Transactions
<TABLE>
<CAPTION>
Shares Issued Upon Net Increase
Capital Reinvestment of Capital Shares Resulting From Capital
Shares Sold Dividends Redeemed Share Transactions
-------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
June 30, 1999 (unaudited): 403,141 $ 7,562,568 2,697,270 $ 49,522,744 (2,478,684) $(46,643,337) 621,727 $10,441,975
Year ended
December 31, 1998: 2,294,167 42,347,303 6,521,374 $116,348,981 (1,988,346) $(35,861,150) 6,827,195 $122,835,134
</TABLE>
6. Distributions to Shareholders
The Fund declares and distributes dividends on net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
Managed Fund 10
