[LINCOLN FINANCIAL GROUP LOGO]
Lincoln National
Managed Fund, Inc.
Annual Report
December 31, 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
Report of Ernst & Young LLP, Independent Auditors
<PAGE>
Lincoln National Managed Fund, Inc.
Managed by: [LINCOLN FINANCIAL GROUP LOGO]
The Fund had a return of 7.8% for the 1999 fiscal year while its customized
benchmark (55% S&P 500 Index, 40% Lehman Brothers Government/ Corporate Bond
Index and 5% Salomon Smith Barney 90 day T-Bill*) returned 11.0% for the same
period.
Embracing a robust economy and shrugging off the implications of the year's
three increases in short-term interest rates by the Federal Reserve, equity
markets across the board turned in impressive performances in 1999, with the
major indices achieving all-time highs near year-end. For 1999, the S&P 500
returned 21.1%, and the Russell 2000 had a 21.3% return. The large cap portion
of the equities position had a return of 19.3% for the year, not far off its
benchmark. Meanwhile the Fund's exposure to small cap stocks was the main drag
on performance with a return of -2.5% for the year.
The implications of higher rates continued to hamper the bond market
performance. The Lehman Brothers Government/Corporate Index had a return of
- -2.1% for the year. The yield on the long Treasury bond ended the year at 6.48%,
up strongly from 5.09% at the beginning of the year.
The uncertainty of late 1999 was Y2K. As this uncertainty is now a realized
non-event, we turn to the 21st century with new uncertainties. The biggest will
be: how high do interest rates need to go to lower economic growth to an
acceptable level for the Federal Reserve Board?
David C. Fischer
Growth of $10,000 invested 1/1/90 through 12/31/99
1/1/90 12/31/99
Managed Fund $10,000 $30,629
Salomon Brothers 90 Day Treasury Bill $10,000 $17,789
Lehman Brothers Government/Corporate Bond Index $10,000 $23,877
S&P 500 Index $10,000 $70,087
This chart illustrates, hypothetically, that $10,000 was invested in the Managed
Fund on 1/1/90. As the chart shows, by December 31, 1999, the value of the
investment at net asset value, with any dividends and capital gains reinvested,
would have grown to $30,629. For comparison, look at how the Indices did over
the same period. Past performance is not indicative of future performance.
Remember, an investor cannot invest directly in an index.
Average annual return Ended
on investments 12/31/99
- --------------------------------------------------
One Year + 7.75%
- --------------------------------------------------
Five Years +16.47%
- --------------------------------------------------
Ten Years +11.84%
- --------------------------------------------------
* Standard & Poor's 500 Index - Broad based measurement of changes in stock
market conditions based on average performance of 500 widely held common
stocks. Lehman Brothers Gov't/Corp Bond Index - Measures performance of
diversified, investment grade, bond issues. Salomon Brothers 90 Day T-Bill
Index - Measures the return on short term securities. An investor cannot
invest directly in the above index/indexes, which is/are unmanaged.
Managed Fund 1
<PAGE>
Lincoln National Managed Fund, Inc.
Statement of Net Assets
December 31, 1999
Investments:
Par Market
Long-Term Debt Investments: Amount Value
- -------------------------------------------------------------------------------
U.S. Government and Agency Obligations: 17.6%
Federal Farm Credit Bank
5.75%, 3/23/05 $19,000,000 $18,085,813
Federal Home Loan Mortgage Corporation
6.39%, 10/15/06 1,957,792 1,909,458
6.00%, 6/11/08 13,800,000 12,889,675
6.63%, 9/15/09 40,000,000 38,869,040
7.30%, 12/1/12 2,897,136 2,898,946
8.50%, 1/1/17 386,217 403,476
Federal National Mortgage Association
0.00%, 8/7/01 7,000,000 6,317,364
6.73%, 8/1/05 2,055,487 1,982,332
7.18%, 10/1/05 3,848,419 3,784,458
6.66%, 11/1/05 959,324 920,720
6.66%, 12/1/05 1,917,361 1,831,482
7.04%, 7/1/06 2,394,244 2,370,300
0.00%, 7/24/06 11,500,000 7,323,695
6.63%, 9/15/09 11,000,000 10,696,497
7.15%, 10/1/15 2,683,655 2,615,597
7.50%, 5/25/20 2,243,692 2,499,539
7.00%, 10/1/25 1,528,083 1,485,584
6.50%, 6/1/28 13,002,012 12,282,838
Government National Mortgage Association
6.50%, 12/15/23 855,679 811,558
U.S. Treasury Notes
5.88%, 2/15/04 16,000,000 15,732,770
10.75%, 8/15/05 15,000,000 17,903,426
- -------------------------------------------------------------------------------
163,614,568
Asset-Backed: 0.0%
- -------------------------------------------------------------------------------
Mid-State Trust
7.63%, 4/1/22 65,814 65,885
- -------------------------------------------------------------------------------
Collaterlized Mortgage Obligations: 1.0%
- -------------------------------------------------------------------------------
Federal National Mortgage Association Series
1996-23
6.50%, 9/25/21 3,310,472 3,265,512
Norwest Asset Sec Corp Series 99-5
6.25%, 3/25/14 4,738,058 4,572,226
Vanderbilt MTG Series 99-A CL 1A2 144a
5.97%, 3/7/12 1,300,000 1,270,750
- -------------------------------------------------------------------------------
9,108,488
Automobile & Auto Parts: 0.2%
- -------------------------------------------------------------------------------
Chrysler
7.45%, 2/1/97 1,000,000 935,872
Goodyear Tire & Rubber
6.63%, 12/1/06 1,250,000 1,194,990
- -------------------------------------------------------------------------------
2,130,862
Banking, Finance & Insurance: 8.7%
- -------------------------------------------------------------------------------
Ahmanson, H. F.
8.25%, 10/1/02 2,000,000 2,052,498
Associates Corporation
6.25%, 11/1/08 5,000,000 4,616,393
Banc One
9.88%, 3/1/09 500,000 576,112
Banque Paribas-NY
8.35%, 6/15/07 1,600,000 1,641,624
Barnett Bank
6.90%, 9/1/05 1,500,000 1,464,970
Barnett Capital Trust I
8.06%, 12/1/26 1,900,000 1,809,958
Beaver Valley Funding
9.00%, 6/1/17 350,000 352,972
Citicorp Notes
6.33%, 1/5/06 1,600,000 1,512,340
Comerica Bank
7.88%, 9/15/26 1,500,000 1,437,858
Dow Capital
9.00%, 5/15/10 3,000,000 3,256,589
Par Market
Amount Value
Banking, Finance & Insurance (Cont.)
- -------------------------------------------------------------------------------
Fannie Mae- When Issued
0.00%, 6/1/17 $26,260,000 $ 7,548,600
Finova Capital
6.12%, 5/28/02 1,000,000 973,107
First Chicago
7.00%, 10/16/06 3,400,000 3,298,133
First Union
8.00%, 8/15/09 2,000,000 2,049,503
First of America Capital Trust I
8.12%, 1/31/27 2,000,000 1,907,615
General Electric Capital
8.30%, 9/20/09 3,000,000 3,167,104
General Motors Acceptance
8.88%, 6/1/10 1,500,000 1,611,078
Household Finance
9.63%, 7/15/00 875,000 887,704
Hydro-Quebec
7.20%, 10/5/09 (1) 3,000,000 3,314,802
International Lease Finance
8.25%, 1/15/00 2,000,000 2,001,084
John Deere Capital
8.63%, 8/1/19 2,000,000 2,059,159
Lehman Brothers
7.38%, 1/15/07 4,000,000 3,902,895
Mellon Capital I Notes
7.72%, 12/1/26 1,500,000 1,379,772
Mercantile Bancorp
7.30%, 6/15/07 1,325,000 1,296,760
Midland Bank
6.25%, 9/29/49 1,600,000 1,329,520
Morgan Stanley Group
6.88%, 3/1/07 2,250,000 2,178,930
National Westminister Bank
9.45%, 5/1/01 500,000 516,590
NationsBank
8.13%, 6/15/02 1,000,000 1,025,710
Nynex Capital Funding
7.63%, 10/15/09 (1) 3,000,000 3,103,113
Paine Webber Group
6.38%, 5/15/04 3,400,000 3,244,997
PNC Funding
6.88%, 7/15/07 1,663,000 1,587,475
PSE&G Capital 144A
6.25%, 5/15/03 2,500,000 2,402,658
Salomon Brothers
7.25%, 1/15/00 1,000,000 1,000,295
Simon DeBartolo Group
7.13%, 6/24/05 600,000 564,974
SouthTrust Bank of Birmingham
7.69%, 5/15/25 2,750,000 2,728,388
Standard Chartered PLC
6.28%, 12/29/49 3,000,000 2,116,050
State Street Capital-B
8.04%, 3/15/27 1,400,000 1,322,643
Union Bank Switzerland
7.25%, 7/15/06 2,250,000 2,178,646
Wachovia Capital Trust I
7.64%, 1/15/27 1,900,000 1,740,979
- -------------------------------------------------------------------------------
81,159,598
Cable, Media & Publishing: 0.5%
- -------------------------------------------------------------------------------
Century Communications
0.00%, 1/15/08 350,000 155,750
Charter Communications
8.63%, 4/1/09 350,000 324,625
News America Holdings
8.45%, 8/1/34 1,500,000 1,520,162
Time Warner
9.13%, 1/15/13 2,000,000 2,195,294
- -------------------------------------------------------------------------------
4,195,831
Chemicals: 0.1%
- -------------------------------------------------------------------------------
ISP Holdings
9.00%, 10/15/03 350,000 344,750
Polymer Group
9.00%, 7/1/07 350,000 343,000
- -------------------------------------------------------------------------------
687,750
Managed Fund 2
<PAGE>
Par Market
Amount Value
Consumer Products: 0.3%
- -------------------------------------------------------------------------------
Westvaco
8.30%, 8/1/22 $2,500,000 $ 2,561,679
- -------------------------------------------------------------------------------
Energy: 0.6%
- -------------------------------------------------------------------------------
Central Power & Light
6.63%, 7/1/05 3,000,000 2,861,635
Enron
9.50%, 6/15/01 1,000,000 1,030,806
Petro-Canada
8.60%, 10/15/01 1,500,000 1,538,195
- -------------------------------------------------------------------------------
5,430,636
Environmental Services: 0.1%
- -------------------------------------------------------------------------------
Waste Management
6.63%, 7/15/02 1,000,000 940,274
- -------------------------------------------------------------------------------
Food, Beverage & Tobacco: 0.1%
- -------------------------------------------------------------------------------
Nabisco
7.55%, 6/15/15 750,000 703,326
- -------------------------------------------------------------------------------
Healthcare & Pharmaceuticals: 0.1%
- -------------------------------------------------------------------------------
Allegiance
7.30%, 10/15/06 1,000,000 989,878
Tenet Healthcare
8.00%, 1/15/05 350,000 337,572
- -------------------------------------------------------------------------------
1,327,450
Leisure, Lodging & Entertainment: 0.1%
- -------------------------------------------------------------------------------
Darden Restaurants
6.38%, 2/1/06 1,500,000 1,386,460
- -------------------------------------------------------------------------------
Metals & Mining: 0.7%
- -------------------------------------------------------------------------------
AK Steel
7.88%, 2/15/09 350,000 333,375
Cyprus Amax Minerals
7.38%, 5/15/07 2,500,000 2,370,188
Inco
9.60%, 6/15/22 1,000,000 944,860
Newmont Gold
8.91%, 1/5/09 642,313 667,617
Placer Dome
7.37%, 6/3/26 1,000,000 936,497
Placer Dome-Series A
7.31%, 1/26/21 1,000,000 826,982
- -------------------------------------------------------------------------------
6,079,519
Miscellaneous: 0.9%
- -------------------------------------------------------------------------------
Corp Andina
7.75%, 3/1/04 2,000,000 2,007,397
ESI Tractebel
7.99%, 12/30/11 350,000 315,875
Lilly (Eli)
8.38%, 2/7/05 2,250,000 2,344,725
Manitoba
7.75%, 7/17/16 1,500,000 1,537,998
Republic of Korea
8.88%, 4/15/08 1,600,000 1,684,224
- -------------------------------------------------------------------------------
7,890,219
Paper & Forest Products: 0.0%
- -------------------------------------------------------------------------------
Buckeye Cellulose *
8.50%, 12/15/05 175,000 171,500
- -------------------------------------------------------------------------------
Real Estate: 0.0%
- -------------------------------------------------------------------------------
Toll
8.13%, 2/1/09 350,000 324,625
- -------------------------------------------------------------------------------
Retail: 0.4%
- -------------------------------------------------------------------------------
Sears Roebuck
9.05%, 2/6/12 2,500,000 2,664,668
Service Corp International
7.00%, 6/1/15 1,000,000 831,578
- -------------------------------------------------------------------------------
3,496,246
Par Market
Amount Value
Telecommunications: 0.7%
- -------------------------------------------------------------------------------
Litton Industries
6.98%, 3/15/36 $1,000,000 $ 965,845
Pacificorp
9.15%, 8/9/11 1,500,000 1,669,526
Qwest Communications International
0.00%, 2/1/08 (1) 350,000 267,750
Southwestern Bell Capital
7.13%, 6/1/05 2,000,000 1,983,088
U.S. Cellular
7.25%, 8/15/07 1,500,000 1,446,488
- -------------------------------------------------------------------------------
6,332,697
Transportation & Shipping: 1.1%
- -------------------------------------------------------------------------------
American Airlines
10.18%, 1/2/13 1,500,000 1,668,481
Burlington Northern Railroad
6.94%, 1/2/14 453,633 421,851
Chicago & Northwestern Transportation
6.25%, 7/30/12 1,278,249 1,200,234
CSX
7.25%, 5/1/27 1,000,000 972,102
Federal Express
7.96%, 3/28/17 1,129,243 1,106,500
General American Transportation
7.50%, 2/28/15 1,382,449 1,353,130
Norfolk Southern
7.05%, 5/1/37 2,000,000 1,966,275
United Airlines
9.35%, 4/7/16 1,500,000 1,538,235
- -------------------------------------------------------------------------------
10,226,808
Utilities: 3.0%
- -------------------------------------------------------------------------------
AES
9.50%, 6/1/09 350,000 353,500
Calpine
7.75%, 4/15/09 350,000 332,500
Colonial Gas-Series A
6.81%, 5/19/27 1,500,000 1,490,629
Consumers Energy
6.50%, 6/15/05 1,000,000 986,489
Detroit Edison
6.56%, 5/1/01 2,000,000 1,981,887
Duquesne Light
8.70%, 6/1/16 2,422,000 2,557,864
Great Lakes Power
9.00%, 8/1/04 1,500,000 1,525,498
Houston Light & Power Capital Trust II
8.26%, 2/1/37 1,900,000 1,771,809
MidAmerican Energy
6.50%, 12/15/01 1,250,000 1,234,535
Nevada Power
7.06%, 5/1/00 1,500,000 1,501,349
Noble Affiliates
7.25%, 10/15/23 600,000 528,802
Old Dominion Electric
7.48%, 12/1/13 1,500,000 1,452,230
Pacific Gas & Electric
6.25%, 8/1/03 2,000,000 1,937,290
PSI Energy
8.85%, 1/15/22 495,000 523,347
Public Service
6.38%, 11/1/05 1,500,000 1,417,853
Scana
7.44%, 10/19/04 500,000 495,967
South Carolina Electric
9.00%, 7/15/06 2,500,000 2,653,718
Texas Gas Transmissions
8.63%, 4/1/04 2,000,000 2,069,801
Texas Utilities
7.38%, 8/1/01 1,500,000 1,506,136
Washington Water Public
8.01%, 12/17/01 1,000,000 1,009,208
- -------------------------------------------------------------------------------
27,330,412
Managed Fund 3
<PAGE>
Market
Value
- -------------------------------------------------------------------------------
Total Long-Term Debt Investments: 36.2%
(Cost $338,447,114) $335,164,833
- -------------------------------------------------------------------------------
Number
Common Stock: of Shares
- -------------------------------------------------------------------------------
Aerospace & Defense: 1.4%
- -------------------------------------------------------------------------------
GenCorp 30,700 303,163
General Dynamics 44,200 2,331,550
Honeywell International 61,500 3,547,781
Kellstrom Industries * 35,700 325,763
Northrop 16,600 897,438
Titan * 2,200 103,674
United Technologies 80,000 5,200,000
- -------------------------------------------------------------------------------
12,709,369
Automobiles & Auto Parts: 1.3%
- -------------------------------------------------------------------------------
Autonation * 152,300 1,408,775
Avis Rent-A-Car * 33,500 856,344
CSX Auto * 5,400 94,500
Dollar Thrifty Automotive * 24,500 586,469
Ford Motor 57,000 3,045,938
Goodrich (B.F.) 58,700 1,614,250
Hertz Class A 9,600 481,200
Navistar International * 82,100 3,889,488
Polaris Industries 7,100 257,374
- -------------------------------------------------------------------------------
12,234,338
Banking, Finance & Insurance: 8.3%
- -------------------------------------------------------------------------------
Allstate 80,620 1,934,880
Ambac Financial Group 23,200 1,210,750
American General 7,500 569,063
American International Group 60,200 6,509,125
Americredit * 26,200 484,700
AmSouth Bancorporation 105,600 2,039,400
Arcadia Financial 59,700 264,919
Astoria Financial 7,200 219,825
Banco Santander Puerto Rico 18,000 277,874
Bank of America 68,390 3,432,323
Bank One 95,152 3,050,811
BSB Bancorp 29,700 573,581
Capitol Federal Financial 43,800 427,734
Chase Manhattan 82,400 6,401,450
Chicago Title 6,300 291,375
Citigroup 151,373 8,410,662
Citizens Bank 25,400 563,563
Comerica 43,850 2,047,247
Commerce Group 10,400 271,700
Conseco 157,800 2,820,675
Dime Bancorp 41,700 630,712
Dime Community Bancshares 30,000 555,938
Federal Home Loan Bank 16,100 757,706
Federal National Mortgage Association 13,100 817,931
Financial Federal 22,700 517,844
Firstar 10,050 212,306
Flagstar Bancorp 5,400 92,981
Fleet Boston Financial 47,020 1,636,884
Goldman Sachs Group 10,000 941,875
Harbor Florida Bancshares 27,400 353,631
Hudson United Bancorp 28,800 736,200
Lehman Brothers Holdings 25,300 2,142,594
Marsh & McLennan 57,800 5,530,738
Merrill Lynch & Company 14,400 1,202,400
Metris 50,616 1,806,359
MGIC Investment 10,000 601,875
Morgan (J.P.) 26,200 3,317,575
Nextcard * 2,900 83,556
Paine Webber Group 106,600 4,137,413
PNC Financial Group 19,900 885,550
Profit Recovery Group * 2,400 63,675
Provident Bankshares 12,600 219,319
Queens County Bancorp 23,700 640,641
RenaissanceRe Holdings 18,500 756,188
Roslyn Bancorp 35,775 658,484
SEI 16,200 1,928,306
SLM Holding 36,300 1,533,675
St. Paul 16,000 539,000
Number Market
of Shares Value
Banking, Finance & Insurance (Cont.)
- -------------------------------------------------------------------------------
Susquehanna Bancshares 8,700 $ 136,480
Triad Guaranty * 22,900 520,259
UnionBanCal 11,600 457,475
Washington Mutual 39,480 1,026,480
- -------------------------------------------------------------------------------
77,243,707
Building & Materials: 0.7%
- -------------------------------------------------------------------------------
American Standard * 11,600 532,150
Beazer Homes USA * 16,800 323,400
Centex Construction Products 10,600 413,400
D.R. Horton 30,000 414,375
Kaufman & Broad Home 15,000 362,813
M.D.C. Holdings 23,100 362,381
National R.V. Holdings * 30,700 590,975
Nortek * 18,500 518,000
NVR * 12,500 596,875
Standard Pacific 56,900 625,900
Toll Brothers * 30,000 558,750
USG 28,900 1,361,913
Vulcan Materials 5,250 209,672
- -------------------------------------------------------------------------------
6,870,604
Cable, Media & Publishing: 1.6%
- -------------------------------------------------------------------------------
Actv * 3,800 172,781
Consolidated Graphics * 16,800 250,950
Donnelley & Sons 75,100 1,863,419
Hollinger International 34,400 445,050
Knight-Ridder 36,500 2,171,750
Macrovision * 1,200 88,500
McGraw-Hill 33,800 2,082,925
New York Times 118,700 5,831,138
R.H.Donnelley * 18,280 345,034
Scholistic * 14,900 927,059
Sirius Satellite Radio * 3,300 146,644
Valassis Communications * 7,200 304,200
Zomax * 2,000 90,438
- -------------------------------------------------------------------------------
14,719,888
Chemicals: 0.9%
- -------------------------------------------------------------------------------
Avery Dennison 7,300 531,988
Cytec Industries * 18,200 420,875
Dow Chemical 37,600 5,024,300
Ethyl 136,000 535,500
Lubrizol 30,300 935,513
Omnova Solutions 34,000 263,500
Pioneer Natural Resources 15,800 141,212
Quaker Chemical 23,600 336,300
- -------------------------------------------------------------------------------
8,189,188
Computers & Technology: 13.2%
- -------------------------------------------------------------------------------
About.com * 3,200 286,600
Acclaim Entertainment * 49,900 257,297
Advanced Digital Information * 8,500 415,703
American Management Systems * 38,100 1,191,816
American Power Conversion * 92,400 2,434,163
Ancor Communications * 2,700 183,769
Apple Computer * 50,000 5,139,063
Aspen Technology * 5,600 148,575
Autobytel.com * 9,000 136,688
Avant * 20,400 306,638
Avtoration * 14,800 696,525
Barra * 6,500 208,812
Bell & Howell * 20,200 642,613
Black Box * 9,500 637,688
BMC Software * 16,000 1,278,500
BroadVision * 5,000 850,313
Brooktrout * 5,600 104,475
Caci International * 17,100 387,956
Cisco Systems * 104,400 11,180,588
Clarify * 1,100 139,459
Computer Associates International 49,700 3,475,894
Concentric Network * 2,800 86,100
Dell Computer * 88,400 4,505,638
Electronics Arts * 23,300 1,958,656
EMC * 59,600 6,511,300
Emulex * 2,800 316,312
Entrust Technologies * 1,800 107,831
Managed Fund 4
<PAGE>
Number Market
of Shares Value
Computers & Technology (Cont.)
- -------------------------------------------------------------------------------
Go2net * 3,100 $ 270,088
Infocure * 13,300 415,209
Informix * 28,900 331,447
International Business Machine 62,000 6,696,000
Intraware * 1,700 135,681
Lexmark International Group Class A * 59,900 5,420,950
Mercury Computer Systems * 7,600 263,625
Mercury Interactive * 52,700 5,689,953
Micromuse * 900 153,113
Micros Systems * 4,900 363,059
Microsoft * 223,500 26,086,641
Microstrategy * 3,300 693,103
Midway Games * 19,200 459,600
National Computer Systems 9,700 364,356
Nvidia * 5,200 243,913
Oracle * 107,950 12,093,773
Proxicom * 1,500 186,328
Razorfish * 900 85,556
Remedy * 4,100 195,006
S1 * 2,100 163,800
Sandisk * 1,600 153,400
Sun Microsystems * 143,300 11,092,316
Sunquest Information Systems * 25,000 320,313
Sybase * 48,000 814,500
Symantec * 76,400 4,486,113
Wallace Computer Services 39,600 658,350
Whittman-Hart * 9,400 504,369
Xircom * 6,600 495,000
- -------------------------------------------------------------------------------
122,424,534
Consumer Products: 2.3%
- -------------------------------------------------------------------------------
Avon Products 18,100 597,300
Brady 23,900 811,106
Clorox 47,800 2,407,925
Fortune Brands 12,400 409,975
F.Y.I. * 4,100 139,528
Herbalife International 15,000 213,300
Kimberly-Clark 56,000 3,654,000
Minnesota Mining & Manufacturing 17,800 1,742,175
Procter & Gamble 56,000 6,135,500
Salton * 14,000 468,124
TeleSpectrum Worldwide * 42,300 297,422
Tupperware 15,500 262,531
Tyco International 116,200 4,517,275
- -------------------------------------------------------------------------------
21,656,161
Electronics & Electrical Equipment: 5.0%
- -------------------------------------------------------------------------------
Amkor Technologies * 14,900 419,063
Amphenol Class A * 2,200 146,438
Applied Materials * 14,900 1,887,178
Barnes Group 19,500 318,094
Cable Design Technologies * 8,800 202,400
Cleco 5,100 163,519
Corning 7,500 967,031
Credence Systems * 5,100 440,034
CTS 2,100 158,288
Cypress Semiconductor * 20,400 660,450
DII Group * 9,400 667,106
DuPont Photomasks * 6,800 327,675
Electro Scientific Industries * 4,200 305,813
FirstEnergy 24,200 549,038
General Electric 127,900 19,792,525
Hadco * 8,800 448,800
Harmonic Lightwaves * 3,200 303,500
Integrated Device Technologies * 15,700 454,809
Intel 106,500 8,762,953
International Rectifier * 26,900 699,400
Kemet * 17,200 775,075
Lam Research * 5,000 558,125
LTX * 8,500 191,781
Mettler-Toledo International * 3,700 141,294
Optical Coating Laboratory 500 147,375
Sawtek * 9,100 606,003
Sensormatic Electronics * 5,200 90,675
Smith (A.O.) 24,700 540,313
Solectron * 12,400 1,179,550
Texas Instruments 31,300 3,032,188
TriQuint Semiconductor * 800 88,924
Number Market
of Shares Value
Electronics & Electrical Equipment (Cont.)
- -------------------------------------------------------------------------------
Varian Semiconductor Equipment * 3,500 $ 118,891
Veeco Instruments * 3,200 149,700
Waters * 29,400 1,558,200
- -------------------------------------------------------------------------------
46,852,208
Energy: 3.6%
- -------------------------------------------------------------------------------
Apache * 15,500 572,531
Atlantic Richfield * 60,500 5,233,250
Conoco 30,800 762,300
Constellation Energy 30,100 872,900
Enron 29,600 1,313,500
Exxon Mobil 98,100 7,903,181
Gulf Island Fabrication * 20,000 186,875
Houston Exploration * 34,000 673,624
Hs Resources * 7,900 136,275
Kerr-McGee 18,191 1,127,842
Murphy Oil 12,400 711,450
Northwest Natural Gas 28,200 615,994
Nuevo Energy * 7,800 146,250
Occidental Petroleum 98,800 2,136,550
Royal Dutch Petroleum 94,000 5,681,125
Stone Energy * 8,700 309,938
Texaco 72,800 3,953,950
USX-Marathon Group 31,700 782,594
UTI Energy * 6,200 142,988
Vintage Petroleum 8,400 101,325
- -------------------------------------------------------------------------------
33,364,442
Food, Beverage & Tobacco: 2.6%
- -------------------------------------------------------------------------------
Canandaigua Brands Class A * 12,400 632,400
CKE Restaurants 84,920 498,905
Coca Cola 67,600 3,937,700
ConAgra 59,100 1,333,444
General Mills 90,800 3,246,100
Heinz (H.J.) 50,950 2,028,447
Jack in the Box * 30,600 633,038
Michael Foods 12,000 296,250
Philip Morris 116,900 2,710,619
Quaker Oats 72,400 4,751,250
Ralcorp Holdings * 17,600 350,900
Riviana Foods 9,300 166,238
RJ Reynolds Tobacco Holdings 15,800 278,475
Ryan's Family Steakhouses * 40,500 343,616
Schweitzer-Mauduit International 47,500 638,281
Suiza Foods * 48,100 1,905,963
Universal 5,000 114,063
- -------------------------------------------------------------------------------
23,865,689
Healthcare & Pharmaceuticals: 5.5%
- -------------------------------------------------------------------------------
Abgenix * 800 104,400
Affymetrix * 1,700 288,416
Albany Molecular Research * 12,000 368,981
Ameripath * 37,800 310,669
Amgen * 140,000 8,404,375
Apria Healthcare Group * 12,000 215,250
Bergen Brunswig Class A 11,264 93,630
Bindley Western Industries 29,000 436,813
Boston Scientific * 22,800 498,750
Bristol-Myers Squibb 88,300 5,667,756
Cephalon * 2,800 97,125
Chirex * 10,200 148,219
Corixa * 15,000 254,063
Cygnus * 20,000 363,750
Enzo Biochem * 7,000 315,438
Genzyme * 7,500 337,031
Gliatech * 15,000 252,656
Idec Pharmaceuticals * 4,600 451,519
Johnson & Johnson 54,300 5,056,688
King US * 10,900 610,400
Lilly (Eli) 27,100 1,802,150
Lincare Holdings * 72,400 2,513,638
Matria Healthcare * 52,300 217,372
Medicis Pharmaceutical Class A * 10,800 459,675
MedQuist * 16,000 411,500
Medtronic 94,168 3,431,247
Merck & Company 85,600 5,740,550
NBTY * 20,000 221,250
Ocular Sciences * 26,100 492,638
Managed Fund 5
<PAGE>
Number Market
of Shares Value
Healthcare & Pharmaceuticals (Cont.)
- -------------------------------------------------------------------------------
Pfizer 109,500 $ 3,551,906
Prime Medical Services * 37,500 339,844
Protein Design Labs * 1,600 112,100
Rexall Sundown * 36,200 373,313
Schering-Plough 150,000 6,328,125
Spacelabs Medical * 8,300 154,328
The Cooper Companies 7,500 225,938
- -------------------------------------------------------------------------------
50,651,503
Industrial Machinery: 0.4%
- -------------------------------------------------------------------------------
Advanced Energy Industries * 4,600 226,406
Astec Industries * 5,000 94,219
Asyst Technologies * 3,600 235,913
Cascade 39,400 361,988
Ingersoll-Rand 28,800 1,585,800
Kulicke & Soffa Industries * 8,600 365,768
PRI Automation * 4,100 274,188
Zebra Technologies Class A * 6,900 400,416
- -------------------------------------------------------------------------------
3,544,698
Leisure, Lodging & Entertainment: 0.5%
- -------------------------------------------------------------------------------
Carnival Cruise Lines 62,000 2,964,375
Eastman Kodak 22,700 1,503,875
Harrah's Entertainment 20,000 528,750
Preview Travel * 1,500 78,844
Topps * 10,600 109,644
- -------------------------------------------------------------------------------
5,185,488
Metals & Mining: 0.3%
- -------------------------------------------------------------------------------
Amcol International 26,100 420,863
Commercial Metals Company 21,700 736,444
Terex 23,100 641,025
US Can Corporation * 18,100 359,738
Worthington Industries 24,300 401,709
- -------------------------------------------------------------------------------
2,559,779
Miscellaneous: 0.2%
- -------------------------------------------------------------------------------
Advo * 36,500 866,875
Diamond Tech Partners * 2,000 173,125
Kelly Services 10,000 251,874
Lason * 5,000 54,844
Navigant Consulting * 20,500 222,938
Teletech Holdings * 4,100 138,888
URS * 28,400 615,925
- -------------------------------------------------------------------------------
2,324,469
Packaging & Containers: 0.1%
- -------------------------------------------------------------------------------
ACX Technologies * 25,700 274,669
Shorewood Packaging 11,600 219,674
- -------------------------------------------------------------------------------
494,343
Paper & Forestry Products: 0.5%
- -------------------------------------------------------------------------------
Georgia-Pacific 22,000 1,116,500
Temple-Inland 13,700 903,344
Weyerhaeuser 33,400 2,398,538
- -------------------------------------------------------------------------------
4,418,382
Real Estate: 0.2%
- -------------------------------------------------------------------------------
Brandywine Realty Trust 9,300 152,288
Health Care REIT 5,600 84,700
Healthcare Realty Trust 18,800 293,750
Hospitality Properties Trust 17,000 324,063
Macerich 21,300 443,306
Security Capital Group Class B * 34,500 431,250
- -------------------------------------------------------------------------------
1,729,357
Retail: 3.9%
- -------------------------------------------------------------------------------
Barnesandnoble.com * 6,600 93,225
Bebe Stores * 2,900 77,575
Best Buy * 19,000 953,563
Borders Group * 11,700 187,931
CDW Computer Centers * 5,200 408,688
Charming Shoppes 127,300 839,384
Children's Place * 7,000 113,531
Cost Plus * 14,050 499,214
Family Dollar Stores 184,000 3,001,500
Fossil * 25,050 580,064
Home Depot 82,350 5,646,122
Insight Enterprises * 13,650 552,398
Number Market
Retail (Cont.) of Shares Value
- -------------------------------------------------------------------------------
Jostens 60,700 $1,475,769
Lowe's Companies 58,500 3,495,375
Micro Warehouse * 59,000 1,089,656
Petco Animal Supplies * 7,300 107,675
Rent-Way * 5,700 106,519
Russ Berrie 26,900 706,125
Safeway * 71,000 2,524,938
Sherwin-Williams 32,400 680,400
The Men's Wearhouse * 5,800 170,738
TJX 112,600 2,301,263
United Stationers 2,800 80,238
Wal-Mart Stores 151,600 10,479,350
- -------------------------------------------------------------------------------
36,171,241
Telecommunications: 7.3%
- -------------------------------------------------------------------------------
Adtran * 3,100 159,747
Advanced Fibre Communications * 2,200 98,588
AT&T 131,100 6,653,324
Bell Atlantic 81,028 4,988,286
BellSouth 165,600 7,752,150
Commscope * 11,200 451,500
Dycom * 15,450 680,766
General Instrument * 69,200 5,882,000
GTE 58,300 4,113,794
InterVoice Brite * 11,400 265,763
Leap Wireless * 3,700 289,525
Lucent Technologies 121,200 9,067,274
MCI Worldcom * 39,750 2,107,992
MGC Communications * 2,800 141,575
Nortel Networks 39,300 3,969,300
Omnipoint * 1,900 228,830
Plantronics * 4,200 300,562
Powertel * 6,700 671,256
Proxim * 1,900 211,730
SBC Communications 158,183 7,711,420
Tellabs * 81,000 5,196,656
U.S. West 94,900 6,832,800
World Access * 4,400 85,662
- -------------------------------------------------------------------------------
67,860,500
Textiles, Apparel & Furniture: 0.7%
- -------------------------------------------------------------------------------
Furniture Brands International * 30,000 660,000
Johnson Controls 62,300 3,543,312
Tommy Hilfiger * 99,200 2,312,600
- -------------------------------------------------------------------------------
6,515,912
Transportation & Shipping: 0.6%
- -------------------------------------------------------------------------------
Alaska Air Group 13,900 488,238
Alexander & Baldwin 8,500 193,374
America West Holdings Class B * 33,800 701,350
American Freightways * 5,900 95,690
Canadian National Railway 14,200 373,638
Canadian Pacific 19,600 422,624
Continental Airlines Class B * 37,200 1,650,750
Delta Air Lines 11,700 582,806
Eagle USA Airfreight * 2,400 103,725
Landstar Systems * 9,300 390,309
M.S. Carriers * 24,300 575,606
- -------------------------------------------------------------------------------
5,578,110
Utilities: 1.0%
- -------------------------------------------------------------------------------
Calpine * 11,000 704,000
Cascade Natural Gas 4,800 77,400
Energy East 61,900 1,288,294
General Public Utilities 40,100 1,200,493
Indiana Energy 10,000 177,500
Northwestern 18,300 402,600
Otter Tail Power 17,300 650,912
Public Service Company of New Mexico 26,300 427,374
Public Service Enterprise Group 19,000 661,438
Puget Sound Energy 46,100 893,188
Sierra Pacific Resources 9,300 161,006
Texas Utilities 25,200 896,175
UGI 10,300 210,506
Unicom 45,400 1,520,900
- -------------------------------------------------------------------------------
9,271,786
Total Common Stocks: 62.1%
(Cost $372,827,143) 576,435,696
- -------------------------------------------------------------------------------
Managed Fund 6
<PAGE>
Number Market
of Shares Value
- -------------------------------------------------------------------------------
Rights:
Baxter International Contigent Value Rights * 93,900 $ 22,536
- -------------------------------------------------------------------------------
Total Rights: 0.0%
(Cost $0) 22,536
- -------------------------------------------------------------------------------
Par
Money Market Instruments: Amount
- -------------------------------------------------------------------------------
Associates Corp North America
4.00%, 1/3/00 $6,500,000 6,500,000
General Electric Company
4.43%, 1/3/00 4,500,000 4,500,000
U.S. Treasury Bill (+)
4.69%, 7/20/00 1,255,000 1,221,593
- -------------------------------------------------------------------------------
Total Money Market Instruments: 1.3%
(Cost $12,221,593) 12,221,593
- -------------------------------------------------------------------------------
Total Investments: 99.6%
(Cost $723,495,850) 923,844,658
- -------------------------------------------------------------------------------
Other Assets Over Liabilities: 0.4% 3,727,784
- -------------------------------------------------------------------------------
Net Assets: 100.0%
(Equivalent to $18.910 per share based on
49,053,178 shares issued and outstanding) $927,572,442
- -------------------------------------------------------------------------------
Components of Net Assets at December 31, 1999:
- -------------------------------------------------------------------------------
Common Stock, par value $.01 per share,
100,000,000 authorized shares $ 490,532
Paid in capital in excess of par value of shares issued 681,564,323
Undistributed net investment income 3,289,188
Accumulated net realized gain on investments and
futures contracts 44,348,677
Net unrealized appreciation of investments and futures
contracts 197,879,722
- -------------------------------------------------------------------------------
Total Net Assets $927,572,442
- -------------------------------------------------------------------------------
* Non-income producing security.
(1) Step-up Bond
(+) Fully or Partially pledged as collateral for open futures contracts.
See accompanying notes to financial statements.
Managed Fund 7
<PAGE>
Lincoln National Managed Fund, Inc.
Statement of Operations
Year ended December 31, 1999
Investment income:
Interest $ 27,303,504
- ------------------------------------------------------------------------------
Dividends 7,122,062
- ------------------------------------------------------------------------------
Total investment income 34,425,566
- ------------------------------------------------------------------------------
Expenses:
Management fees 3,376,216
- ------------------------------------------------------------------------------
Accounting fees 377,647
- ------------------------------------------------------------------------------
Printing and postage 99,908
- ------------------------------------------------------------------------------
Custody fees 52,471
- ------------------------------------------------------------------------------
Legal fees 38,696
- ------------------------------------------------------------------------------
Directors fees 4,200
- ------------------------------------------------------------------------------
Other 15,755
- ------------------------------------------------------------------------------
3,964,893
- ------------------------------------------------------------------------------
Expenses paid indirectly (15,780)
- ------------------------------------------------------------------------------
Total expenses 3,949,113
- ------------------------------------------------------------------------------
Net investment income 30,476,453
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and futures contracts:
- ------------------------------------------------------------------------------
Net realized gain on investment transactions 42,972,028
- ------------------------------------------------------------------------------
Net realized gain on future contracts 2,118,574
- ------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments and futures contracts (6,367,364)
- ------------------------------------------------------------------------------
Net realized and unrealized gain on
investments and futures contracts 38,723,238
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $69,199,691
- ------------------------------------------------------------------------------
Statements of Changes in Net Assets
Year ended Year ended
12/31/99 12/31/98
----------------------------
Changes from operations:
- -----------------------------------------------------------------------------
Net investment income $ 30,476,453 $ 30,054,285
- -----------------------------------------------------------------------------
Net realized gain on investment transactions
and futures contracts 45,090,602 44,287,952
- -----------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
on investments and future contracts (6,367,364) 34,012,132
- -----------------------------------------------------------------------------
Net increase in net assets
resulting from operations 69,199,691 108,354,369
- -----------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (27,187,265) (54,174,323)
- -----------------------------------------------------------------------------
Net realized gain on investment transactions (44,522,215) (62,174,659)
- -----------------------------------------------------------------------------
Total distributions to shareholders (71,709,480) (116,348,982)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions (35,403,805) 122,835,134
- -----------------------------------------------------------------------------
Total increase (decrease) in net assets (37,913,594) 114,840,521
- -----------------------------------------------------------------------------
Net Assets, at beginning of year 965,486,036 850,645,515
- -----------------------------------------------------------------------------
Net Assets, at end of year $927,572,442 $965,486,036
- -----------------------------------------------------------------------------
See accompanying notes to financial statements.
Managed Fund 8
<PAGE>
Lincoln National Managed Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout the year)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.971 $19.304 $16.266 $15.895 $12.783
Income (loss) from investment operations:
Net investment income 0.622 0.599 0.661 0.628 0.623
Net realized and unrealized gain
on investments 0.767 1.632 2.811 1.291 3.132
-------------------------------------------------
Total from investment operations 1.389 2.231 3.472 1.919 3.755
-------------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.552) (1.162) - (0.628) (0.623)
Distributions from net realized gain on
investment transactions (0.898) (1.402) (0.434) (0.920) (0.020)
-------------------------------------------------
Total dividends and distributions (1.450) (2.564) (0.434) (1.548) (0.643)
-------------------------------------------------
Net asset value, end of year $ 18.910 $18.971 $19.304 $16.266 $15.895
-------------------------------------------------
Total Return1 7.75% 12.72% 21.82% 12.05% 29.29%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.42% 0.42% 0.42% 0.43% 0.43%
Ratio of net investment income
to average net assets 3.25% 3.31% 3.77% 4.05% 4.37%
Portfolio Turnover 44.79% 57.36% 53.40% 108.86% 112.52%
Net assets, end of year (000 omitted) $927,572 $965,486 $850,646 $675,740 $589,165
</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).
See accompanying notes to financial statements.
Managed Fund 9
<PAGE>
Lincoln National Managed Fund, Inc.
Notes to Financial Statements
December 31, 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 The 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 objective 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
Security Valuation: All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. 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 year ended December 31, 1999, the
custodial fees offset arrangements and amounted to $15,780.
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 year
ended December 31, 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 10
<PAGE>
Notes to Financial Statements - (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 year ended December 31, 1999 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized appreciation at December 31, 1999 are as
follows:
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Appreciation
---------------------------------------------------------------------
$406,439,022 $466,516,698 $235,410,213 $(35,061,406) $200,348,807
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 December 31, 1999 was $1,221,593. 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 December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
Notional Unrealized
Contracts to buy (sell) Cost Amount Expiration Dates Gain (Loss)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
58 S&P 500 Index contracts $20,802,222) March 2000 $ 718,678)
(146) Russell 2000 Index contracts (34,038,586) March 2000 (3,187,763)
-----------
$(2,469,085)
===========
</TABLE>
5. Summary of Changes From Capital Share Transactions
<TABLE>
<CAPTION>
Shares Issued Upon Net Increase (Decrease)
Capital Reinvestment of Capital Shares Resulting From Capital
Shares Sold Dividends Redeemed Share Transactions
---------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1999: 573,212 $10,677,943 3,925,375 $71,709,480 (6,337,945) $(117,791,228) (1,839,358) $ (35,403,805)
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 from net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
Managed Fund 11
<PAGE>
Lincoln National Managed Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and Board of Directors
Lincoln National Managed Fund, Inc.
We have audited the accompanying statement of net assets of Lincoln National
Managed Fund, Inc. (the "Fund") as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the Fund's custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Lincoln National Managed Fund, Inc. at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia,
Pennsylvania
February 4, 2000
Managed Fund 12
