<PAGE>
LINCOLN NATIONAL
GLOBAL ASSET ALLOCATION FUND, INC.
Global Asset
Allocation
DESCRIPTION OF THE FUND
The Global Asset Allocation Fund (fund) was incorporated in Maryland in 1987.
It is an open-end diversified management investment company whose investment
objective is long-term total return consistent with preservation of capital.
The concept of total return is to increase the value of a shareholder's
investment through both capital appreciation and current income. The fund
pursues its objective by investing in a diversified portfolio of equity and
fixed income securities of both United States and foreign issuers (including
money market instruments) through the allocation of fund assets among a number
of investment categories described more fully in Investment policies and
techniques. The fund's objective is fundamental and cannot be changed without
the affirmative vote of a majority of the outstanding shares of the fund. See
General information in the Appendix. There is no assurance that the objective
of the fund will be achieved.
The fund is designed to provide a complete investment program for investors
seeking a diversified portfolio that will be professionally managed to achieve
long-term results through a variety of market conditions.
PORTFOLIO MANAGERS
Since this is an asset allocation fund, day-to-day investment advice is
provided by nine individual portfolio managers from Putnam Investment
Management, Inc. (Putnam) the sub-advisor to the fund. The managers are:
William J. Landes, Managing Director, is the lead manager for the fund and is
responsible for the asset allocation of the portfolio. Landes has managed the
fund since January, 1993, and has been with Putnam since 1985.
John J. Morgan, Jr., Managing Director, is responsible for the Growth Equity
Securities segment of the fund's portfolio. Morgan has managed this segment of
the fund since July, 1992, and has been with Putnam since 1987.
Anthony I. Kreisel, Managing Director, is responsible for the Conservative
Equity Securities segment of the fund's portfolio. Kreisel has managed this
segment of the fund since November, 1992, and has been with Putnam since 1986.
Kenneth J. Taubes, Senior Vice President, is responsible for the U.S. Fixed
Income Securities segment of the fund's portfolio. Taubes has managed this
segment of the fund since December, 1996, and has been with Putnam since 1991.
D. William Kohli, Managing Director, is responsible for the International Fixed
Income Securities segment of the fund's portfolio. Kohli has managed this
segment of the fund since September, 1994, and has been with Putnam since 1994.
Before that, Kohli was with Franklin Advisory/Templeton Investment Counsel
between 1988 and 1994.
Richard M. Frucci, Senior Vice President, is responsible for the Aggressive
Equity Securities segment of the fund's portfolio. Frucci has managed this
segment of the fund since March, 1994, and has been with Putnam since 1984.
Justin M. Scott, Managing Director, is responsible for the International Equity
Securities segment of the fund's portfolio. Scott has managed this segment of
the fund since January 1997, and has been with Putnam since 1988.
Lindsey C. Strong, Vice President, is responsible for the Money Market
Instruments segment of the fund's portfolio. Strong has managed this segment of
the fund since February, 1992, and has been with Putnam since 1984.
Robert M. Paine, Senior Vice President, is responsible for the lower-rated
fixed-income securities ("junk bond") segment of the fund's portfolio. Paine
has managed this segment of the fund since September 1996 and has been with
Putnam since 1987.
INVESTMENT POLICIES AND TECHNIQUES.
The fund's investment strategy is based on two principles:
1. Greater diversification among different types of securities may reduce
fluctuations in the value of a portfolio and therefore may reduce the risk
of loss in unfavorable market conditions and/or
2. The relative market opportunities and risks in the major securities
categories typically represented in a fully diversified portfolio equities,
fixed income securities and money market instruments vary at times. By
employing an investment practice known as asset allocation, the proportion
of the
F-21
<PAGE>
Global Asset
Allocation
fund's assets invested in each category can be shifted in anticipation of or
in response to changing market conditions, in pursuit of the fund's
objective.
In regard to the asset allocation method, the fund's portfolio may include
investments in each of the following categories:
Aggressive Equity Securities
Growth Equity Securities
Conservative Equity Securities
International Equity Securities
Convertible Securities (including Common Stock Equivalents)
U.S. Fixed-Income Securities
International Fixed-Income Securities
Lower-Rated Fixed-Income Securities
Money Market Instruments
The specific allocation of fund assets among the categories will be determined
by the sub-advisor at least quarterly based on its assessment of relative
market opportunities and risks. The determination of asset mix is based on the
sub-advisor's analyses and forecasts relating to economic and market factors.
AGGRESSIVE EQUITY SECURITIES
This category will include investments in common stocks of companies which the
sub-advisor believes have potential for capital appreciation which is
significantly greater than that of the market averages. A significant portion
of the investments will generally consist of smaller and less seasoned issuers
which the sub-advisor believes have a unique proprietary product or profitable
market niche and the potential to grow rapidly. These securities present
greater opportunity for capital appreciation, but may also involve greater
risk, and may change in value more than securities of larger, more established
companies. The fund will also invest in securities of larger companies where
opportunities for above average capital appreciation appear favorable.
Portfolio securities in this category may be traded for short-term profits.
Portfolio securities in this category are not purchased to generate current
income.
GROWTH EQUITY SECURITIES
This category will include investments in common stocks of companies believed
to have above-average growth characteristics. In selecting such instruments,
growth potential is given greater consideration than current income.
CONSERVATIVE EQUITY SECURITIES
This category will include investments in common stocks of large, mature
companies that offer the potential for capital growth, current income or both.
These stocks often have relatively high levels of dividend payments.
INTERNATIONAL EQUITY SECURITIES
This category will include investments in equity securities of companies
domiciled in foreign countries, which securities are traded on a U.S. or
foreign market. The securities will primarily be in common stocks or
securities convertible into common stock. Investments will be made in small or
large companies (including relatively less well-known companies) whose
earnings are believed to be in a fairly strong growth trend or whose market
value per share is, in the sub-advisor's opinion, undervalued. With respect to
65% of the assets allocated to this category, the fund will hold securities in
at least three countries outside the United States at all times.
CONVERTIBLE SECURITIES
This category will include investments in corporate bonds, notes or preferred
stocks that can be converted into or exchanged for common stock.
U.S. FIXED-INCOME SECURITIES
This category will include investments in investment grade debt securities,
including both government and corporate obligations, primarily with maturities
of 1 to 40 years; however, a maximum of 5% of assets allocated to this
category may have maturities greater than 40 years. Investment grade bonds
include high grade bonds which are in the top three credit rating categories
of Moody's Investors Service and Standard & Poor's Corp. Investments may also
be made in bonds rated Baa and BBB, respectively, by these organizations,
which are considered medium grade. As such, they may bear a greater element of
risk than those rated in the top three categories. That risk can involve
increased market price volatility stemming from the sensitivity of interest
rates, concerns over creditworthiness and availability of quotations on the
secondary market. For a description of these ratings, see Bond Ratings in the
SAI.
INTERNATIONAL FIXED-INCOME SECURITIES
This category will include investments principally in investment grade debt
securities denominated in foreign currencies which are issued by foreign
governments and governmental or supranational agencies. The fund will invest
only in securities which, at time of purchase, are rated at least Baa or
higher by Moody's Investors Service or BBB or higher by Standard & Poor's
Corp. (medium grade), or in unrated securities judged by Putnam to be of
comparable quality. The fund may also invest in other debt securities,
convertible securities, and preferred stocks principally traded in foreign
securities markets. With respect to 65% of the assets allocated to this
category, the fund will hold securities in at least three countries outside
the United States, at all times.
F-22
<PAGE>
Global Asset
Allocation
LOWER-RATED FIXED-INCOME SECURITIES ("JUNK BONDS")
This category will include investments in U. S. and Emerging Markets fixed-
income securities rated at the time of purchase below Baa by Moody's, or BBB by
S&P, or if unrated, determined by the subadvisor to be of comparable quality,
as long as, after the purchase, 15% or less of the fund's total assets would be
invested in Securities of that quality. (Securities rated Baa or BBB, while
still considered investment-grade, are more vulnerable to adverse economic
conditions than securities in the higher-rated categories and have speculative
elements.)
The values of junk bonds (i.e., those below Baa or BBB) generally fluctuate
more than those of higher-rated fixed-income securities. In addition, the lower
rating reflects a greater possibility that the financial condition of the
issuer, or adverse changes in general economic conditions, or both, may impair
the ability of the issuer to make payments of interest and repayments of
principal. The rating services' descriptions of debt securities are included in
the Appendix to the SAI. The fund will not necessarily dispose of a security
when its rating is reduced below its rating at time of purchase, although the
subadvisor will monitor the investment to determine whether continued
investment in the security will assist in meeting the fund's investment
objective.
The fund may take full advantage of the entire range of U. S. and Emerging
Markets junk bonds, (except that no more than 10% of fund assets may be in
Emerging Markets issues). The fund and may adjust the average maturity of the
fund's portfolio from time to time, depending on its assessment of relative
yields on securities of different maturities and its expectation of future
changes in interest rates.
Through investment analysis and attention to current developments in interest
rates and economic conditions, the subadvisor seeks to minimize the risks of
investing in lower-rated securities. The lower ratings of certain fixed-income
securities held by the fund reflect a greater possibility that declines in the
financial conditions of the issuers, or in general economic conditions, or
both, or an unanticipated rise in interest rates, may make it harder for their
issuers to make payments of interest and principal. In addition, under these
circumstances, the values of these securities may be more volatile, and the
markets for them may be less liquid than those for higher-rated securities. As
a result, the fund may find it more difficult to determine the fair value of
these securities. When the fund invests in fixed-income securities in these
lower rating categories, the achievement of the fund's goals is more dependent
on the subadvisor's investment analysis than would be the case if the fund were
investing in fixed-income securities in the higher-rating categories.
In any event, the fund will not purchase securities rated at the time of
purchase lower than Caa by Moody's or CCC by S&P or, if unrated, determined by
the subadvisor to be of comparable quality, if as a result of the purchase more
than 5% of the fund's total assets would be invested in securities of that
quality. (Securities rated this low may be in default and are generally
regarded by the rating agencies as having extremely poor prospects of ever
becoming investment-grade.)
For additional information concerning the risks associated with investments by
each fund in securities in the lower-rating categories, see the SAI.
MONEY MARKET INSTRUMENTS
This category will include investments in money market instruments consisting
of certificates of deposit and bankers' acceptances of major banks, high-grade,
short-term municipal obligations, U.S. Government securities and related
repurchase agreements, high grade commercial paper and other corporate
obligations.
ASSET ALLOCATION POLICY
Under normal circumstances, not more than 50% of the fund's total assets will
be invested in the Conservative Equity Category; not more than 15% in the
Lower-Rated Fixed-Income Category; and not more than 35% in any other category.
(In addition, see individual categories for additional restrictions.) The
following limits apply in aggregate across all investment categories: 1)
investment in Emerging Market securities is limited to a maximum of 10% of the
fund's total assets; and 2) investment in "intermediate grade bonds" (i.e.,
those rated Baa by Moody's Investors Service or BBB by Standard & Poor's Corp.)
or, if unrated, are judged by Putnam to be of comparable quality, is limited to
a maximum of 35% of the fund's total assets. When conditions dictate a
defensive position or during periods of portfolio restructuring, Putnam may
invest up to 50% of the fund's total assets in each of the U.S. Fixed Income
Securities and Money Market instruments categories. Within these limitations,
Putnam will adjust the percentage of the fund assets in each category based
upon its market outlook and its analysis of long-term trends. For example, if
Putnam believes that conditions will be favorable for equity securities, a
greater proportion may be invested in Aggressive Equity Securities. Similarly,
a greater proportion will be invested in International Equity Securities if
foreign equity markets are viewed favorably. Since the fund's objective of
total return consistent with preservation of capital may be achieved by receipt
of income, as well as by capital gains, Putnam may increase the proportion of
fund assets in Fixed-Income Securities or Convertible Securities when it
believes the outlook for the bond market is favorable.
F-23
<PAGE>
Global Asset
Allocation
In pursuing the fund's objective, Putnam expects generally to employ a
relatively conservative strategy for seeking total return. Accordingly, its
asset allocation decisions will seek to have the fund's assets decline
significantly less in value than the Standard and Poor's 500 Index (S&P 500)
in unfavorable securities markets, while correlating more closely with the
performance of the index in favorable securities markets. There is no
assurance that this strategy will be successful.
CHANGES IN INVESTMENT POLICIES
The investment policies of the fund may be changed without shareholder
approval, although the shareholders will be notified of any material changes,
additions or deletions.
FOREIGN INVESTMENTS; AMERICAN
DEPOSITARY RECEIPTS (ADRS) AND
EUROPEAN DEPOSITARY RECEIPTS (EDRS)
The International Equity and International Fixed Income Securities investment
categories will each invest 100% of their respective assets in securities
principally traded in foreign markets. The other investment categories may do
so as well, but only up to the following percentages of their total assets:
the Money Market Instruments category 50%; all other categories 10%.
(Eurodollar certificates of deposit are excluded for purposes of these
limitations.) Foreign investments can involve risks not present in domestic
investments. For a discussion of those risks, see Foreign investments in the
Appendix. A detailed discussion of how the fund intends to handle these risks
appears in the SAI.
For the domestic categories, the fund may invest in depositary receipts. These
consist of ADRs and EDRs, and involve investing indirectly in an underlying
foreign security. Generally ADRs, which are in registered form, are U.S.
dollar-denominated securities designed for use in the U.S. securities markets
and which may be converted into the underlying security. EDRs, which are in
bearer form, are designed for use in the European securities markets.
PORTFOLIO TURNOVER
The fund's annual portfolio turnover rate is expected to average approximately
150%. (For example, a rate of portfolio turnover of 100% would occur if all of
the fund's portfolio were replaced in a period of one year.) The actual
turnover rate will vary, depending upon the turnover rate in each investment
category, the amount of assets allocated to each category, and the extent to
which assets are reallocated among categories from time to time. High
portfolio turnover may involve correspondingly greater brokerage commissions
and other transaction costs, which are borne directly by the fund. See
Portfolio Transactions and Brokerage in the SAI. During 1996 the fund's
portfolio turnover was 167.33% and in 1995 it was 146.49%.
INVESTMENT RESTRICTIONS
There are some specific investment restrictions that help the fund limit
investment risks for its shareholder. The restrictions in this section are
fundamental. See General information in the Appendix.
The fund may not:
1. Acquire more than 10% of the voting securities of any one issuer;
2. Invest more than 5% of its total assets in securities of any one issuer
(other than the U.S. Government or its agencies or instrumentalities);
3. Invest more than 5% of its net assets in securities restricted as to
resale; and/or
4. Invest more than 25% of its assets in any one industry.
A complete listing of all of the fund's fundamental and non-fundamental
restrictions can be found in the SAI.
STRATEGIC PORTFOLIO TRANSACTIONS
The portfolio managers for the fund have considerable discretion in the
selection of appropriate fund investments. In the exercise of that discretion,
the portfolio managers may, at any given time, invest a portion of the fund's
assets in one or more strategic portfolio transactions which we define as
derivative transactions and cash enhancement transactions.
For your convenience, in the Appendix, we have included a basic discussion of
these special financial arrangement transactions and some of the risks
associated with them. Note also that the SAI booklet for the 11 funds contains
definitions of the more commonly used derivative transactions, technical
explanations of how these transactions will be used and the limits on their
use. You should consult your financial counselor if you have specific
questions.
THE GLOBAL ASSET ALLOCATION FUND IS AUTHORIZED: a) for derivative
transactions, to: buy and sell foreign currency forward contracts; buy and
sell foreign currency futures contracts; and buy exchange-listed and over-the-
counter put and call options on foreign currency futures contracts and on
foreign currencies. For hedging purposes, the fund may sell covered call
options on foreign currencies. All of the foregoing may also be done as cross-
hedging that is, using a currency different from the one in which the
portfolio securities are denominated. (See Foreign currency exchange
transactions in the SAI.)
F-24
<PAGE>
Global Asset
Allocation
In addition, the fund may sell covered call and put options on equity and
fixed-income (debt) securities of U.S. issuers; sell put and call options and
buy put options on securities of U.S. issuers; buy and sell futures contracts
and options on futures contracts with respect to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities; buy and
sell futures contracts and related options with respect to stock indices,
foreign fixed-income securities and foreign currencies (See Options and futures
portfolio strategies in the SAI); engage in spread and straddle transactions.
b) for cash enhancements transactions, to: lend portfolio securities if such
loans of securities do not exceed 25% of the fund's assets, and engage in
repurchase transactions. Collateral will be continually maintained at no less
than 102% of the value of the loaned securities or of the repurchase price, as
applicable.
F-25
<PAGE>
Account K
This page was intentionally left blank.
F-26
<PAGE>
Appendix
APPENDIX - CONTAINS IMPORTANT INFORMATION FOR ALL FUNDS
This Appendix constitutes part of the Prospectuses of Lincoln National
Aggressive Growth Fund, Inc. (Aggressive Growth Fund), Lincoln National Bond
Fund, Inc. (Bond Fund), Lincoln National Capital Appreciation Fund, Inc.
(Capital Appreciation Fund), Lincoln National Equity-Income Fund, Inc. (Equity-
Income Fund), Lincoln National Global Asset Allocation Fund, Inc. (Global Asset
Allocation Fund), Lincoln National Growth and Income Fund, Inc. (Growth and
Income Fund), Lincoln National International Fund, Inc. (International Fund),
Lincoln National Managed Fund, Inc. (Managed Fund), Lincoln National Money
Market Fund, Inc. (Money Market Fund), Lincoln National Social Awareness Fund,
Inc. (Social Awareness Fund), and Lincoln National Special Opportunities Fund,
Inc. (Special Opportunities Fund). Unless otherwise indicated, the following
information applies to each fund.
NET ASSET VALUE
Each fund's net asset value per share is determined as of close of business
(currently 4:00 p.m., New York Time) on the New York Stock Exchange (NYSE) on
each day it is open for trading. The net asset value per share for all funds
except the Money Market Fund is determined by adding the values of all
securities and other assets, subtracting liabilities (including dividends
payable) and dividing by the number of shares outstanding. Debt securities and
other assets of the fund, other than equity securities, for which market
quotations are readily available, are valued at their bid quotations.
When market quotations are not readily available, debt securities and other
assets are valued at their fair value as determined in good faith. This
valuation is made by or under the authority of each fund's Board of Directors
and it may include the use of valuations furnished by outside sources,
including pricing services which utilize electronic data processing techniques
for valuing normal institutional-size trading units of debt securities. The
value of equity securities is based on the last sale prices of those securities
on national securities exchanges or over-the-counter, or in the absence of
recorded sales, at the average of readily available closing bid and asked
prices on exchanges or over-the-counter. In the absence of readily available
closing bid and asked prices, equity securities will be valued at fair value.
See the SAI Appendix for a discussion of the methodology utilized to value
short-term investments (other than for the Money Market Fund), options, futures
and options thereon, and foreign securities.
MONEY MARKET FUND. The net asset value per share of the Money Market Fund is
determined by the amortized cost method of valuation, under Rule 2a-7, as
amended (the Rule) under the Investment Company Act of 1940 (1940 Act). Under
the Rule, the fund's net asset value using the amortized cost method must
fairly reflect market value. The Board of Directors of the fund has established
procedures to assist fund management and the investment advisor in complying
with the requirements of the Rule, which imposes specific standards for the
maturity, quality and diversification of portfolio securities. The Rule also
assigns certain specific duties to fund management and the Board.
MANAGEMENT OF THE FUNDS
The business and affairs of each fund are managed under the direction of its
Board of Directors. The Board has the power to amend the bylaws of each fund,
to declare and pay dividends and to exercise all the powers of the fund except
those granted to the shareholder. Lincoln Life is the sole shareholder of each
fund.
INVESTMENT ADVISOR. Lincoln Investment is the investment advisor to the funds
and is headquartered at 200 East Berry Street, Fort Wayne, Indiana 46802.
Lincoln Investment (the advisor) is registered with the Securities and Exchange
Commission (the Commission or SEC) as an investment advisor and has acted as an
investment advisor to mutual funds for over 40 years. The advisor also acts as
investment advisor to Lincoln National Convertible Securities Fund, Inc., and
Lincoln National Income Fund, Inc., closed-end investment companies, and also
acts as sub-adviser to two of the series of Delaware Group Adviser Funds, Inc.,
an open-end series investment company.
The advisor is a wholly-owned subsidiary of Lincoln National Corp. (LNC), a
publicly-held insurance holding company organized under Indiana law. Through
its subsidiaries, LNC provides life insurance and annuities, property-casualty
insurance, reinsurance and financial services. Directors, officers and
employees of the advisor and each fund are permitted to engage in personal
securities transactions subject to restrictions and procedures set forth in the
Code of Ethics adopted by the advisor and each fund. Such restrictions and
procedures include substantially all of the recommendations of the Advisory
Group of the Investment Company Institute and comply with SEC rules and
regulations.
Under advisory agreements described in the Prospectus for the variable account,
the advisor provides portfolio management and investment advice to the funds
and administers their other affairs, subject to the supervision of each fund's
Board of Directors.
F-45
<PAGE>
Appendix
As compensation for its annual rate based on the
services to each fund, the average daily net asset
advisor is paid a monthly value of each fund, as
investment advisory fee at shown in the following
an chart:
<TABLE>
<CAPTION>
First Next In excess of
Fund $200 million $200 million $400 million
...Of average daily net asset value
- ---------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth .75 of 1% .70 of 1% .65 of 1%
Capital Appreciation .80 of 1 .80 of 1 .80 of 1
Equity-Income .95 of 1 .95 of 1 .95 of 1
Global Asset Allocation .75 of 1 .70 of 1 .68 of 1
International .90 of 1 .75 of 1 .60 of 1
All other funds .48 of 1 .40 of 1 .30 of 1
</TABLE>
The advisory fees for the
Capital Appreciation, Equi-
ty- Income, and Interna-
tional funds reflect the
more extensive services and
increased expense associated
with portfolios of securi-
ties issued outside the
United States.
- --------------------------------------------------------------------------------
FUND EXPENSES (see accompanying text below)
<TABLE>
<CAPTION>
1996 ratio of the advisor's
compensation to average 1996 ratio of total expenses
Fund net assets to average net assets
- ---------------------------------------------------------------------------------
<S> <C> <C>
Aggressive Growth .75% .82%
Bond .46 .51
Capital Appreciation .80 .93
Equity-Income .95 1.08
Global Asset Allocation .73 1.00
Growth and Income .33 .36
International .82 1.19
Managed .39 .43
Money Market .48 .57
Social Awareness .42 .46
Special Opportunities .40 .44
</TABLE>
Expenses specifically assumed by each fund include: compensation and expenses
of Directors of the fund who are not interested persons of the fund as defined
in the 1940 Act; registration, filing, printing, and other fees in connection
with filings with regulatory authorities, including the costs of printing and
mailing updated Prospectuses and SAIs provided to current contract owners; fees
and expenses of independent auditors; the expenses of printing and mailing
proxy statements and shareholder reports; custodian and transfer agent charges;
brokerage commissions and securities and options transaction costs incurred by
the fund; taxes and corporate fees; fees for accounting, valuation and related
services; legal fees incurred in connection with the affairs of the fund (other
than legal services provided by personnel of the advisor or its affiliated
companies); the fees of any trade association of which the fund is a member;
and expenses of shareholder and Director meetings.
SUB-ADVISORS. As advisor, Lincoln Investment is primarily responsible for
investment decisions affecting each of the funds. However, Lincoln Investment
has entered into sub-advisory agreements with several professional investment
management firms. These firms provide some or substantially all of the
investment advisory services required by a number of the funds, including day-
to-day investment management of those funds' portfolios. Each sub-advisor makes
investment decisions for its respective fund in accordance with that fund's
investment objectives and places orders on behalf of that fund to effect those
decisions. See the following tables for more information about the sub-advisors
and their fees:
F-46
<PAGE>
Appendix
<TABLE>
<CAPTION>
Date of
Fund Sub-advisor agreement Annual fee rate based on average daily net asset value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Lynch & Mayer 12/20/93 .50 of 1% of the first $150 million .35 of 1% of the
Growth 520 Madison Avenue excess over $150 million
New York, NY 10022
Capital Janus 1/1/94 .60 of 1% of the first $100 million .55 of 1% of the
Appreciation 100 Fillmore Street excess over $100 million
Denver, CO 80206
Equity- Fidelity 12/20/93 .75 of 1%
Income 82 Devonshire Street
Boston, MA 02108
Global Asset Putnam 6/8/87 the greater of (a) $40,000; or (b) .47 of 1% of the
Allocation One Post Office Square first $200 million; .42 of 1% of the next $200 million;
Boston, MA 02104 and .40 of 1% of any excess over $400 million
International Clay Finlay 8/29/96 .665 of 1% of the first $50 million; .475 of 1% of the
200 Park Avenue next $50 million; and .250 of 1% of any
New York, NY 10166 excess over $100 million
- --------------------------------------------------------------------------------
<CAPTION>
Annual fee rate based on market value of securities
held in the portfolio of each respective client fund at
Date of the close of business on the last trading day of each
Fund Sub-advisor agreement calendar quarter
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth and Vantage 8/21/85 .20 of 1%
Income 630 5th Avenue
New York, NY 10111
Managed Vantage 8/21/85 .20 of 1%
(stock portfolio only)
Social
Awareness Vantage 4/30/88 .20 of 1%
Special
Opportunities Vantage 8/21/85 .20 of 1%
</TABLE>
No additional compensation from the assets of the funds will be assessed as a
result of the sub-advisory agreements; the sub-advisors are paid by Lincoln
Investment. (There is no sub-advisor for the Bond and Money Market Funds.)
SERVICE MARKS. The service mark for the funds and the name Lincoln National
have been adopted by the funds with the permission of LNC, and their continued
use is subject to the right of LNC to withdraw this permission in the event the
advisor should not be the investment advisor of the funds.
In the Prospectus and sales literature, the name Fidelity Investments will be
used with the Equity-Income Fund, Janus with the Capital Appreciation Fund and
Putnam with the Global Asset Allocation Fund. The continued use of these names
is subject to the right of the respective sub-advisor to withdraw its
permission in the event it ceases to be the sub-advisor to the particular fund
it advises.
PURCHASE OF SECURITIES BEING OFFERED
Shares of the funds' common stock ($0.01 par value) will be sold to Lincoln
Life for allocation to the variable annuity account (VAA), which has been
established for the purpose of funding variable annuity contracts; shares in
the funds will also be sold to Lincoln Life for allocation to one or more of
the variable life accounts, which have been established for the purpose of
funding variable life insurance contracts. Shares of each fund are sold and
redeemed at their net asset value per share determined daily. See Sale and
redemption of shares. Also see Net asset value. The funds' shares are sold to
Lincoln Life for the variable accounts on a no-load basis - that is, without
the imposition of a sales charge.
F-47
<PAGE>
Appendix
SALE AND REDEMPTION OF SHARES
The shares of each fund are sold and redeemed by the fund at their net asset
value per share next determined after receipt by Lincoln Life of a purchase or
redemption order in acceptable form. Redemption of fund shares held by Lincoln
Life for its own account will be effected at the fund's net asset value per
share next determined after receipt of the redemption request by the fund. The
value of shares redeemed may be more or less than original cost, depending upon
the market value of the portfolio securities at the time of redemption. Payment
for shares redeemed will be made within seven days after the redemption request
is received in proper form by the funds. However, the right to redeem fund
shares may be suspended or payment postponed for any period during which (1)
trading on the NYSE is restricted as determined by the Commission, or the NYSE
is closed for other than weekends and holidays; (2) an emergency exists, as
determined by the Commission, as a result of which (a) disposal by each fund of
securities owned by it is not reasonably practicable, or (b) it is not
reasonably practicable for each fund to determine fairly the value of its net
assets; or (3) the Commission by order so permits for the protection of
shareholders of the funds.
DISTRIBUTION AND FEDERAL INCOME TAX CONSIDERATIONS
Each fund's policy is to distribute, at least once a year, substantially all of
its net investment income. Net realized capital gains may only be distributed
annually. These distributions, when paid to Lincoln Life for the variable
accounts, will be reinvested automatically in additional shares of that fund,
at its net asset value per share.
Each fund intends to qualify and has elected to be taxed as a regulated
investment company under the provisions of Subchapter M of the Internal Revenue
Code of 1986, as amended (the code). If a fund qualifies as a regulated
investment company and complies with the provisions of the code relieving
regulated investment companies which distribute substantially all of their net
income (both ordinary income and capital gain) from Federal income tax and the
4% nondeductible Federal excise tax, the funds will be relieved of those taxes
on the amounts distributed. See the SAI for a more complete discussion.
Each fund is subject to asset diversification requirements under Section 817(h)
of the code and the related regulation that the United States Treasury
Department has adopted. Each fund intends to comply with these diversification
requirements.
Since the sole shareholder of the funds is Lincoln Life, there is no discussion
here about the Federal income tax consequences at the shareholder level. For
information concerning the Federal income tax consequences to holders of
annuity or life insurance contracts, including the failure of a fund to comply
with the diversification requirements discussed above, see the Prospectus for
the variable account at the front of this booklet.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
In the Annual Report for the funds, the portfolio manager for each fund
discusses that fund's performance for the previous fiscal year and the factors
which affected that performance. We will send you a copy of the Annual Report
free upon request.
DESCRIPTION OF SHARES
The authorized capital stock of each fund consists of 50 million shares of
common stock (150 million for the Growth and Income Fund and 100 million each
for the Equity-Income Fund, International Fund and Managed Fund), $0.01 par
value. As of April 1, 1997, each fund had the following number of shares issued
and outstanding:
<TABLE>
<S> <C>
Aggressive Growth 19,033,638
Bond 22,323,906
Capital Appreciation 21,172,476
Equity-Income 32,730,897
Global Asset Allocation 25,529,165
Growth and Income 79,849,479
International 31,897,933
Managed 44,089,292
Money Market 9,655,455
Social Awareness 27,849,619
Special Opportunities 24,121,470
</TABLE>
Fund shares will be owned by Lincoln Life and will be held by it in the
variable accounts. As sole shareholder of each fund, Lincoln Life may be deemed
to be a control person as that term is defined under the 1940 Act. However, as
stated in the Prospectuses for the variable accounts, Lincoln Life provides to
contractowners of the variable accounts the right to direct the voting of fund
shares at shareholder meetings, to the extent provided by law. Lincoln Life
will vote for or against any proposition, or will abstain from voting, any fund
shares attributable to a contract for which no timely voting instructions are
received, and any fund shares
F-48
<PAGE>
Appendix
held by Lincoln Life for its own account, in proportion to the voting
instructions that it received with respect to all contracts participating in
that fund. However, if the 1940 Act or any regulation under it should change,
and as a result Lincoln Life determines it is permitted to vote fund shares in
its own right, it may elect to do so.
All the shares of each fund are of the same class with equal rights and
privileges. Each full share is entitled to one vote and each fractional share
is entitled to a proportionate fractional vote, on all matters subjected to a
vote of the shareholder. All shares, full and fractional, participate
proportionately in any dividends and capital gains distributions and, in the
event of liquidation, in that fund's net assets remaining after satisfaction of
outstanding liabilities.
When issued, each share is fully-paid and non-assessable and the shareholder
has no preemptive or conversion rights. Fund shares have non-cumulative voting
rights, which means that holders of more than 50% of the shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
In that event the holders of the remaining shares so voting will not be able to
elect any directors. Shares may be redeemed as set forth under Sale and
redemption of shares.
The Bylaws of the funds allow them, in proper cases, to dispense with their
annual meetings of the shareholder. Generally, this may be done as long as: (1)
a majority of the Directors then in office have at some point been elected by
the shareholder and, if any vacancy is filled by vote of the Board of
Directors, then immediately after filling the vacancy at least two thirds of
the Directors shall have been elected by the shareholder; (2) there is no
change in the independent auditor of the funds; (3) there is no material change
to the investment advisory and/or sub-advisory agreements and/or fundamental
policies; and (4) a shareholder vote is not required with respect to a
distribution agreement. In adopting this procedure for dispensing with annual
meetings that are a formality, the Directors of the funds have undertaken to
comply with the requirements of Section 16(c) of the 1940 Act. That Section
protects contract owners by providing a procedure by which they may require
management to convene a meeting of the shareholder to vote on removal of one or
more Directors. The Directors also have agreed to facilitate communication
among contract owners for the purpose of calling those meetings. Further
information about these procedures is available from fund management.
STRATEGIC PORTFOLIO TRANSACTIONS-ADDITIONAL INFORMATION
Because of their different investment objectives and portfolio management
philosophies many of the funds engage to varying degrees in strategic portfolio
transactions, in order to preserve or enhance the value of their assets. These
can be generally identified as either derivative transactions or cash
enhancement transactions. Derivative transactions are recognized by the
investment community as an acceptable way to seek to increase the fund's
overall value (or, depending on the condition of the securities markets, at
least to slow its decrease). Cash enhancement transactions are designed to make
some extra money for the fund when it has excess cash, or to help the fund
obtain some cash for temporary purposes when needed. See the Prospectus for
each fund for a listing of the kinds of transactions in which each fund may
engage.
1. DERIVATIVE TRANSACTIONS
A. Introduction
A derivative transaction is a financial agreement the value of which is
dependent upon the values of one or more underlying assets or upon the
values of one or more indices of asset values. The following types are
currently in fairly common use in the investment community, although not
every fund will use all of them:
1. Equity contracts: stock options and indexed options; equity swaps; stock
index futures and options on futures; swaptions;
2. Interest rate contracts: interest rate futures and options on them;
forward rate agreements (FRAs); interest rate swaps and their related
transactions (e.g., caps, floors, collars and corridors); and/or
3. Currency derivative contracts: currency forward contracts; currency
options; currency futures; currency swaps; cross-currency interest rate
swaps.
SIMPLIFIED DEFINITIONS FOR THESE TRANSACTIONS ARE PROVIDED IN THE SAI APPENDIX.
Although they may be structured in complex combinations, derivative
transactions in which the funds engage generally fall into two broad
categories: options contracts or forward contracts. The combined forms are
constantly evolving. In fact, variations on the types listed previously may
come into use after the date of these Prospectuses. Therefore, where the
Prospectus for a particular fund discloses the intent of that fund to engage in
any of the types listed, that fund hereby reserves the right to engage in
related variations on those transactions.
F-49
<PAGE>
Appendix
The funds intend to engage in derivative transactions only defensively.
Examples of this defensive use might be: to hedge against a perceived decrease
in a fund's asset value; to control transaction costs associated with market
timing (e.g., by using futures on an unleveraged basis); and to lock in
returns, spreads, or currency exchange rates in anticipation of future cash
market transactions.
There is no discussion here of asset-backed or mortgage-backed securities (such
as collateralized mortgage obligations, structured notes, inverse floaters,
principal-only or interest-only securities, etc.). See the Prospectus and SAI
for the Capital Appreciation and Equity-Income funds, which are authorized to
engage in this kind of trading.
B. Risk factors commonly associated with derivative transactions.
There are certain risks associated with derivatives, and some derivatives
involve more of these risks than others. We briefly describe the most common
ones here; however, this is not an exhaustive list. Consult your financial
counselor if you have additional questions.
CREDIT RISK is the possibility that a counterparty to a transaction will
fail to perform according to the terms and conditions of the transaction,
causing the holder of the claim to suffer a loss.
CROSS-CURRENCY SETTLEMENT RISK (or Herstatt risk) is related to the
settlement of foreign exchange contracts. It arises when one of the
counterparties to a contract pays out one currency prior to receiving
payment of the other. Herstatt risk arises because the hours of operation of
domestic interbank fund transfer systems often do not overlap due to time
zone differences. In the interval between the time one counterparty has
received payment in one indicated currency and the time the other
counterparty(ies) receive payment in the others, those awaiting payment are
exposed to credit risk and market risk.
LEGAL RISK is the chance that a derivative transaction, which involves
highly complex financial arrangements, will be unenforceable in particular
jurisdictions or against a financially troubled entity; or will be subject
to regulation from unanticipated sources.
MARKET LIQUIDITY RISK is the risk that a fund will be unable to control its
losses if a liquid secondary market for a financial instrument does not
exist. It is often considered as the risk that a (negotiable or assignable)
financial instrument cannot be sold quickly and at a price close to its
fundamental value.
MARKET RISK is the risk of a change in the price of a financial instrument,
which may depend on the price of an underlying asset.
OPERATING RISK is the potential of unexpected loss from inadequate internal
controls or procedures; human error; system (including data processing
system) failure; or employee dishonesty.
SETTLEMENT RISK between two counterparties is the possibility that a
counterparty to whom a firm has made a delivery of assets or money defaults
before the amounts due or assets have been received; or the risk that
technical difficulties interrupt delivery or settlement even if the
counterparties are able to perform. In the latter case, payment is likely to
be delayed but recoverable.
SYSTEMIC RISK is the uncertainty that a disruption (at a firm, in a market
segment, to a settlement system, etc.) might cause widespread difficulties
at other firms, in other market segments, or in the financial system as a
whole.
SPECIAL NOTE FOR OPTIONS AND FUTURES TRANSACTIONS: Gains and losses on
options and futures transactions depend on the portfolio manager's ability
to correctly predict the direction of stock prices and interest rates, and
other economic factors. Options and futures trading may fail as hedging
techniques in cases where the price movements of the securities underlying
the options and futures do not follow the price movements of the portfolio
securities subject to the hedge. The loss from investing in futures
transactions is potentially unlimited.
SOME OF THESE RISKS MAY BE PRESENT IN EACH TYPE OF TRANSACTION, WHILE OTHERS
MAY PERTAIN ONLY TO CERTAIN ONES. These risks are discussed here only
briefly. Before you invest in a particular fund, please consult your
financial counselor if you have questions about the risks associated with
that fund's use of derivatives.
C. Varying usage of derivative transactions
Subject to the terms of the Prospectus and SAI for each fund, that fund's
portfolio manager decides which types of derivative transactions to employ,
at which times and under what circumstances. For a description of the
limits, risk factors and circumstances under which derivative transactions
will be used by each fund, refer to the SAI booklet.
D. Increased government scrutiny
Derivative transactions are coming under increased scrutiny by Congress and
industry regulators (such as the SEC and the Office of the Comptroller of
the Currency), and by self-regulatory agencies (such as the NASD). Should
legislation or regulatory initiatives be enacted resulting in
F-50
<PAGE>
Appendix
additional restrictive requirements for derivative transactions, Lincoln
Life and the funds reserve the right to make all necessary changes in the
contracts and the Registration Statements for the funds, respectively, to
comply with those requirements.
2. CASH ENHANCEMENT TRANSACTIONS
Cash enhancement transactions also involve certain risks to the fund. They
are discussed more fully in the SAI.
A. Lending of portfolio securities
Any fund authorized to do so may make secured loans of its portfolio
securities, in order to realize additional income. The loans are limited to
a maximum of a stipulated amount of the fund's total assets. As a matter of
policy, securities loans are made to broker/dealers under agreements
requiring that the loans be continuously secured by collateral in cash or
short-term debt obligations at least equal at all times to 102% of the value
of the securities lent.
The borrower pays the fund an amount equal to any dividends or interest
received on securities lent. The fund retains all or a portion of the
interest received on securities lent. The fund also retains all or a portion
of the interest received on investment of the cash collateral, or receives a
fee from the borrower.
With respect to the loaned securities, voting rights or rights to consent
pass to the borrower. However, the fund retains the right to call in the
loans and have the loaned securities returned at any time with reasonable
notice. This is important when issuers of the securities ask holders of
those securities - including the fund - to vote or consent on matters which
could materially affect the holders' investment. The fund may also call in
the loaned securities in order to sell them. None of the funds' portfolio
securities will be loaned to Lincoln Investment, to any sub-advisor, or to
any of their respective affiliates. The fund may pay reasonable finder's
fees to persons unaffiliated with it in connection with the arrangement of
the loans.
B. Repurchase (Repo) and reverse repurchase (Reverse Repo) transactions
1. Repos. From time to time, the funds may enter into Repo transactions. In
a typical Repo transaction, the fund involved buys U.S. Government or
other money market securities from a financial institution (such as a
bank, broker, or savings and loan association). At the same time, as part
of the arrangement, the fund obtains an agreement from the seller to re-
purchase those same securities from the fund at a specified price on a
fixed future date.
The repurchase date is normally not more than seven days from the date of
purchase. Keeping the term under seven days is significant, because the
SEC considers Repo Agreements with maturities of more than seven days to
be illiquid assets of the fund, and the funds have strict limitations on
the percentage of their respective assets which may be illiquid.
2. Reverse repos. A fund may also be authorized to enter into Reverse Repo
transactions. This simply means the fund is on the reverse side of a Repo
transaction. That is, the fund is the Seller of some of its portfolio se-
curities, subject to buying them back at a set price and date.
Authorized funds will engage in Reverse Repos for temporary purposes, such
as for obtaining cash to fund redemptions; or for the purpose of
increasing the income of the fund by investing the cash proceeds at a
higher rate than the cost of the agreement. Entering into a reverse repo
transaction is considered to be the borrowing of money by the fund. Funds
authorized to engage in Repos as buyers are not necessarily authorized to
do Reverse Repos.
FOREIGN INVESTMENTS
There are certain risks involved in investing in foreign securities, including
those resulting from fluctuations in currency exchange rates; devaluation of
currencies; political or economic developments including the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions; reduced availability of public information concerning issuers;
and the fact that foreign companies are not generally subject to uniform
accounting, auditing, and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic
companies. With respect to certain foreign countries, there is also the
possibility of expropriation, nationalization, confiscatory taxation, and
limitations on the use or removal of cash or other assets of a fund, including
the withholding of interest payments or dividends. These risks may be
particularly great in so-called developing or undeveloped countries, sometimes
referred to as Emerging Markets.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the NYSE. Accordingly, a fund's foreign investments may be less
liquid and their prices may be more volatile than comparable investments in
securities of U.S. companies. Moreover, the settlement periods for foreign
securities, which are often longer than those for securities of U.S. issuers,
may affect portfolio
F-51
<PAGE>
Appendix
liquidity. The funds will incur costs in converting foreign currencies into
U.S. dollars. Custody charges are generally higher for foreign securities. In
buying and selling securities on foreign exchanges, a fund normally pays fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less governmental
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries that in the United States. There may be difficulty in
enforcing legal rights outside the United States. For example, in the event of
default on any foreign debt obligations, it may be more difficult or impossible
for the fund to obtain or to enforce a judgment against the issuers of these
securities. The advisor or sub-advisor will take all these factors into
consideration in managing a fund's foreign investments.
Certain state insurance regulations impose additional restrictions on the
extent to which a fund may invest in foreign securities. See the SAI.
The share price of a fund that invests in foreign securities will reflect the
movements of both the prices of the portfolio securities and the currencies in
which those securities are denominated. Depending on the extent of a fund's
investments abroad, changes in a fund's share price may have a low correlation
with movements in the U.S. markets. Because most of the foreign securities in
which the fund invests will be denominated in foreign currencies, or otherwise
will have values that depend on the performance of foreign currencies relative
to the U.S. dollar, the relative strength of the U.S. dollar may be an
important factor in the performance of the fund.
FOREIGN CURRENCIES
When an advisor or sub-advisor believes that a currency in which a portfolio
security or securities is denominated or exposed may suffer a decline against
the U.S. dollar, it may hedge that risk by entering into a forward contract to
sell an amount of foreign currency approximating the value of some or all of
the portfolio securities denominated in or exposed to that foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and a fund may hold various foreign currencies,
the value of the net assets of that fund as measured in U.S. dollars will be
affected favorably or unfavorably by changes in exchange rates. Generally,
currency exchange transactions will be conducted on a spot (i.e., cash) basis
at the spot rate prevailing in the currency exchange market. The cost of
currency exchange transactions will generally be the difference between the bid
and offer spot rate of the currency being purchased or sold. Some foreign
currency values may be volatile, and there is the possibility of government
controls on currency exchange or governmental intervention in currency markets
which could adversely affect the fund.
Investors should be aware that exchange rate movements can be significant and
can endure for long periods of time. In order to protect against uncertainty in
the level of future foreign currency exchange rates, a fund's advisor or sub-
advisor may attempt to manage exchange rate risk through active currency
management, including the use of certain foreign currency hedging transactions.
For example, it may hedge some or all of its investments denominated in a
foreign currency against a decline in the value of that currency relative to
the U.S. dollar by entering into contracts to exchange that currency for U.S.
dollars (not exceeding the value of the fund's assets denominated in or exposed
to that currency), or by participating in options or futures contracts with
respect to that currency. If the advisor or sub-advisor believes that a
particular currency may decline relative to the U.S. dollar, the fund may also
enter into contracts to sell that currency (up to the value of the fund's
assets denominated in or exposed to that currency) in exchange for another
currency that the advisor or sub-advisor expects to remain stable or to
appreciate relative to the U.S. dollar. This technique is known as currency
cross-hedging. Refer to the Prospectus for each fund to determine which funds
may engage in these transactions.
These strategies are intended to minimize the effect of currency appreciation
as well as depreciation, but do not protect against a decline in the underlying
value of the hedged security. In addition, these strategies may reduce or
eliminate the opportunity to profit from increases in the value of the original
currency and may adversely impact the fund's performance if the advisor or sub-
advisor's projection of future exchange rates is inaccurate. See Strategic
portfolio transactions.
GENERAL INFORMATION
Your inquiries should be directed to Lincoln National Life Insurance Co., at
P.O. Box 2340, Fort Wayne, Indiana 46801; or, you may call 1-800-4LINCOLN (454-
6265).
The funds will issue unaudited semiannual reports showing current investments
in each fund and other information; and annual financial statements audited by
their independent auditors.
Under the 1940 Act a fundamental policy of a fund may not be changed without
the affirmative vote of a majority of the fund's outstanding shares.
As used in this Prospectus, the term majority of the fund's outstanding shares
means the vote of: (1) 67% or more of each fund's shares present at a meeting,
if the holders of more than 50% of the outstanding
F-52
<PAGE>
Appendix
shares of each fund are present or represented by proxy, or (2) more than 50%
of each fund's outstanding shares, whichever is less.
These Prospectuses do not contain all the information included in their
Registration Statements filed with the Commission. The Registration Statements,
including the exhibits filed with them, may be examined at the office of the
Commission in Washington, D.C. Statements contained in the Prospectuses about
the contents of any contract or other document referred to in them are not
necessarily complete. In each instance, reference is made to the copy of that
contract or other document filed as an exhibit to the Registration Statement of
which the particular Prospectus forms a part, and each statement is qualified
in all respects by that reference.
The use of funds by both variable annuity and variable life insurance separate
accounts is known as mixed funding. Due to differences in redemption rates, tax
treatment, or other considerations, the interests of contract owners under the
variable life accounts may conflict with those of contract owners under the
variable annuity account, in those cases where mixed funding occurs. For
example, violation of the federal tax laws by one variable account investing in
the funds could cause the contracts and Policies funded through another
variable account to lose their tax-deferred status, unless remedial action were
taken. The Board of Directors of each fund will monitor for any material
conflicts and determine what action, if any, should be taken.
Should any conflict arise which requires that a substantial amount of assets be
withdrawn from any of the funds, orderly portfolio management could be
disrupted, to the detriment of those contract owners still investing in that
fund. Also, if that fund believes that any portfolio has become so large as to
materially impair investment performance, then the fund will examine other
investment options.
Lincoln Life performs the dividend and transfer functions for the funds.
F-53
<PAGE>
This page was intentionally left blank.
F-54
<PAGE>
Appendix
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF
CONTENTS-11 UNDERLYING
FUNDS*
<TABLE>
<CAPTION>
Item
- --------------------------------------------------------------------------------
<S> <C>
General Information and History
Investment objective
Investment policies and techniques
Investment restrictions
Portfolio transactions and brokerage
Determination of net asset value
</TABLE>
*Note: This is a generic table. There are variations in the contents of the SAI
from fund to fund.
<TABLE>
<CAPTION>
Item
- --------------------------------------------------------------------------------
<S> <C>
Appendix
Investment advisor and sub-advisor
Directors and officers
Investment policies and techniques (continued): options, futures,
securities valuation, securities lending, repurchase and reverse
repurchase agreements
Custodian
Independent auditors
Financial statements
Bond and commercial paper ratings
U.S. Government obligations
Taxes
State requirements
Derivative transactions - definitions
</TABLE>
- --------------------------------------------------------------------------------
Please send me a free copy of the current Statement of Additional Information
for Lincoln National Life Insurance Co. Variable Annuity Account C:
(Please Print)
Name: __________________________________________________________________________
Address: _______________________________________________________________________
City __________________________ State ____________Zip _________________________
Mail to Lincoln National Life Insurance Co., P.O. Box 2340, Fort Wayne, Indiana
46081
11
<PAGE>
This page was intentionally left blank.
F-54
<PAGE>
PREFACE TO THE MULTI FUND(R) PROSPECTUSES
THE PREFACE AND DIRECTORY ARE PART OF THE PROSPECTUS FOR EACH OF THE FOLLOWING
FUNDS:
Lincoln National Aggressive Growth Fund, Inc. (AG)
Lincoln National Bond Fund, Inc. (B)
Lincoln National Capital Appreciation Fund, Inc. (CA)
Lincoln National Equity-Income Fund, Inc. (E-I)
Lincoln National Global Asset Allocation Fund, Inc. (GAA)
Lincoln National Growth and Income Fund, Inc. (GI)
Lincoln National International Fund, Inc. (I)
Lincoln National Managed Fund, Inc. (M)
Lincoln National Money Market Fund, Inc. (MM)
Lincoln National Social Awareness Fund, Inc. (SA)
Lincoln National Special Opportunities Fund, Inc. (SO)
Preface/Directory
Shares of all the funds are sold to Lincoln National Life Insurance Co.
(Lincoln Life) for allocation to its Variable Annuity Account C (the variable
annuity account [VAA]) to fund variable annuity contracts and for allocation to
its Variable Life Account K to fund variable life insurance contracts.
To fund its variable life contracts, Variable Life Account D buys shares of the
Bond, Growth and Income, Managed, Money Market and Special Opportunities Funds.
To fund its variable life contracts, Variable Life Account G buys shares of the
Growth and Income and Special Opportunities Funds.
Each of these Variable Life and Annuity Accounts may be referred to as a
variable account. For each fund listed above, see Description of the fund in
its Prospectus for a statement of that fund's investment objective. Each of
these funds is referred to individually as a fund; collectively, as the funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (SEC) NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THESE PROSPECTUSES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
These Prospectuses set forth concisely the information about each fund that you
ought to know before investing. Please read and keep this Prospectus booklet
for future reference.
A separate Statement of Additional Information (SAI) for each fund has been
filed with the SEC. By this reference, each SAI, dated May 1, 1997, is
incorporated into the Prospectus of the fund with which it is registered. A
free copy will be provided upon request. Either write Lincoln National Life
Insurance Co., P.O. Box 2340, Fort Wayne, Indiana 46801 or call 1-800-4LINCOLN
(454-6265).
The Financial Highlights table of each fund contains per-share data calculated
on the basis of a share outstanding throughout the period, together with
financial ratios and other supplemental data. The Financial Highlights table is
incorporated by reference to the fund's 1996 Annual Report. A copy of the
Annual Report will be provided on request and without charge. Either write
Lincoln National Life Insurance Co., P.O. Box 2340, Fort Wayne, Indiana 46801
or call 1-800-4LINCOLN (454-6265).
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THESE
PROSPECTUSES, IN CONNECTION WITH THE OFFERS CONTAINED IN THEM. IF ANY ARE GIVEN
OR MADE, THE INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUND(S) IN QUESTION. THESE PROSPECTUSES DO NOT
CONSTITUTE OFFERS BY THE FUNDS TO SELL, OR SOLICITATIONS OF ANY OFFERS TO BUY,
ANY OF THE SECURITIES OFFERED BY THEM IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL FOR THE FUNDS TO MAKE THOSE OFFERS.
Prospectuses dated May 1, 1997
23
<PAGE>
DIRECTORY FOR THE FUND PROSPECTUSES
Preface/Directory
<TABLE>
<CAPTION>
Subject Page
- ----------------------------------------
<S> <C>
PREFACE 23
DESCRIPTION OF THE FUND
Aggressive Growth Fund 25
Bond Fund 31
Capital Appreciation Fund 35
Equity-Income Fund 39
Global Asset Allocation Fund 43
Growth and Income Fund 49
International Fund 51
Managed Fund 55
Money Market Fund 59
Social Awareness Fund 61
Special Opportunities Fund 65
- ----------------------------------------
INVESTMENT POLICIES AND TECHNIQUES
Aggressive Growth Fund 25
Bond Fund 31
Capital Appreciation Fund 35
Equity-Income Fund 39
Global Asset Allocation Fund 43
Growth and Income Fund 49
International Fund 51
Managed Fund 55
Money Market Fund 59
Social Awareness Fund 61
Special Opportunities Fund 65
- ----------------------------------------
INVESTMENT RESTRICTIONS
Aggressive Growth Fund 28
Bond Fund 33
Capital Appreciation Fund 38
Equity-Income Fund 41
Global Asset Allocation Fund 46
Growth and Income Fund 49
International Fund 53
Managed Fund 57
Money Market Fund 60
Social Awareness Fund 62
Special Opportunities Fund 66
</TABLE>
<TABLE>
<CAPTION>
Subject Page
- -------------------------------------------------------------
<S> <C>
STRATEGIC PORTFOLIO TRANSACTIONS
Aggressive Growth Fund 29
Bond Fund 33
Capital Appreciation Fund 38
Equity-Income Fund 42
Global Asset Allocation Fund 46
Growth and Income Fund 50
International Fund 53
Managed Fund 57
Money Market Fund 60
Social Awareness Fund 62
Special Opportunities Fund 67
- -------------------------------------------------------------
APPENDIX - CONTAINS IMPORTANT INFORMATION FOR ALL FUNDS
Net asset value 69
Management of the funds 69
Purchase of securities being offered 71
Sale and redemption of shares 72
Distributions and federal income tax considerations 72
Management discussion of fund performance 72
Description of shares 72
Strategic portfolio transactions-Additional information 73
Foreign investments 75
General information 76
Statement of Additional Information
Table of contents - 11 underlying funds 79
</TABLE>
24
