[LOGO OF VANTAGE INVESTMENT ADVISORS]
Lincoln National
Social Awareness Fund, Inc.
Semi-Annual Report
June 30, 2000
<PAGE>
Lincoln National Social Awareness Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
<PAGE>
Lincoln National
Social Awareness Fund, Inc.
Managed by: [LOGO OF VANTAGE INVESTMENT ADVISORS]
For the six-month period ended June 30, 2000, the Fund returned 1.9% (net of
fees) outperforming its benchmark, the S&P 500 Index, return of -0.5%.
Equity markets have delivered mixed results in the first half of 2000, with some
segments delivering modest positive returns and others falling into negative
territory. Mid and large-cap growth stocks continued to dominate mid and
large-cap value stocks year-to-date. The year began much the same way 1999
ended, with growth outperforming value by substantial margins. In March, a
significant reversal took place, as uncertainty around the future direction of
interest rates sent stocks lower, with growth stocks and technology stocks
taking the hardest hit. Small and mid-cap stocks outperformed large-cap stocks
year-to-date, as many smaller stocks have not ascended to the valuations of some
of their larger counterparts.
The Fund selects undervalued stocks with above average earnings growth. The
extent to which the market rewarded these fundamentally attractive companies,
this contributed positively to relative returns. The Fund has a smaller average
market capitalization than the S&P 500 Index and a lower weight in oil and
pharmaceutical companies. The exposure to smaller companies significantly
boosted relative returns but higher oil prices and the perceived insensitivity
to an economic downturn led oil and pharmaceutical companies higher, slightly
hurting relative returns.
The Vantage Investment Team
Social Awareness Fund 1
<PAGE>
Lincoln National
Social Awareness Fund, Inc.
Statement of Net Assets - Unaudited
June 30, 2000
Investments:
Number Market
Common Stock: of Shares Value
---------------------------------------------------------------------------
Banking, Finance & Insurance: 20.8%
---------------------------------------------------------------------------
Allstate 417,800 $ 9,296,050
AmSouth Bancorporation 159,800 2,516,850
American Express 205,900 10,732,538
American International Group 289,300 33,992,750
Bank of America 419,400 18,034,200
Bank One 173,800 4,616,563
Bear Stearns 82,000 3,413,250
Chase Manhattan 326,400 15,034,800
Cigna 151,900 14,202,650
Citigroup 601,800 36,258,450
Comerica 272,700 12,237,413
Conseco 470,400 4,586,400
Edwards (A.G.) 420,200 16,387,800
Federal National Mortgage 276,500 14,429,844
First Union 293,200 7,275,025
Marsh & McLennan 89,600 9,357,600
Mellon Financial 99,200 3,614,600
Merrill Lynch 119,700 13,765,500
Metris 196,500 4,937,063
MGIC Investment 65,600 2,984,800
Morgan (J.P.) 205,900 22,674,738
Morgan Stanley Dean Witter 394,000 32,800,500
National City 454,000 7,746,375
Paine Webber Group 360,500 16,402,750
PMI Group 147,600 7,011,000
PNC Financial Group 83,800 3,928,125
SEI 97,200 3,869,775
SLM Holding 254,100 9,512,869
SouthTrust 101,100 2,287,388
St. Paul 74,400 2,538,900
T. Rowe Price Associates 240,000 10,200,000
Unionbancal 138,000 2,561,625
UnumProvident 187,700 3,765,731
Washington Mutual 202,400 5,844,300
---------------------------------------------------------------------------
368,818,222
Buildings & Materials: 1.3%
---------------------------------------------------------------------------
American Standard* 77,900 3,193,900
Centex 155,800 3,661,300
D.R. Horton 211,000 2,861,688
Kaufman & Broad Home 370,700 7,344,494
Martin Marietta Materials 67,800 2,741,663
York International 104,500 2,730,063
---------------------------------------------------------------------------
22,533,108
Business Services: 1.3%
---------------------------------------------------------------------------
Deluxe 218,300 5,143,694
Paychex 192,300 8,076,600
Tech Data* 100,000 4,356,250
Young & Rubicam 96,000 5,490,000
---------------------------------------------------------------------------
23,066,544
Cable, Media & Publishing: 7.6%
---------------------------------------------------------------------------
Dow Jones 208,000 15,236,000
Dun & Bradstreet 176,700 5,058,038
Gannett 276,100 16,514,231
Harte-Hanks 127,500 3,187,500
InterPublic Group 214,000 9,202,000
Knight-Ridder 222,900 11,855,494
McGraw-Hill 326,100 17,609,400
New York Times 408,100 16,119,950
Omnicom Group 263,700 23,485,781
R.H.Donnelley 94,900 1,838,688
Time Warner 107,200 8,147,200
Valassis Communications 75,800 2,889,875
Viacom Class B* 46,300 3,157,081
---------------------------------------------------------------------------
134,301,238
Number Market
of Shares Value
---------------------------------------------------------------------------
Chemicals: 1.1%
Avery Dennison 146,700 $ 9,847,238
Beckman Coulter 116,100 6,777,338
Lubrizol 115,300 2,421,300
---------------------------------------------------------------------------
19,045,876
Computers & Technology: 19.3%
---------------------------------------------------------------------------
3Com* 78,400 4,517,800
Adobe Systems 28,200 3,666,000
America Online* 381,500 20,124,125
Apple Computer* 208,600 10,925,425
Autodesk 72,100 2,500,969
Automatic Data Processing 64,900 3,476,206
BMC Software* 60,700 2,214,602
Cisco Systems* 1,202,600 76,440,263
Compaq Computer 289,900 7,410,569
Computer Associates International 210,100 10,754,494
Compuware* 232,500 2,412,188
Comverse Technology* 106,900 9,941,700
Dell Computer* 396,400 19,547,475
EMC 469,200 36,099,075
Gateway* 101,200 5,743,100
Lexmark International Group A* 38,200 2,568,950
Linear Technology 122,400 7,825,950
Macromedia* 42,000 4,060,875
Micron Technology 45,600 4,015,650
Microsoft* 725,700 58,056,000
Oracle* 348,300 29,278,969
Pitney Bowes 153,900 6,156,000
SDL* 10,000 2,851,875
Teradyne* 28,400 2,087,400
Xerox 344,000 7,138,000
Yahoo* 31,000 3,840,125
---------------------------------------------------------------------------
343,653,785
Consumer Products: 3.7%
---------------------------------------------------------------------------
Avon Products 270,700 12,046,150
Clorox 202,600 9,079,013
Corning 143,500 38,727,063
Gillete 76,500 2,672,719
United Stationers 77,600 2,512,300
---------------------------------------------------------------------------
65,037,245
Electronics & Electrical Equipment: 5.6%
---------------------------------------------------------------------------
Advanced Micro Devices* 52,500 4,055,625
Altera* 154,200 15,718,763
Arrow Electronics* 72,500 2,247,500
Atmel* 66,400 2,448,500
Avnet 144,000 8,532,000
AVX 178,000 4,082,875
Broadcom-Class A* 22,800 4,991,775
Conexant Systems* 58,000 2,820,250
JDS Uniphase* 76,400 9,158,450
Microchip Technology* 162,600 9,473,991
Molex 51,300 2,468,813
National Semiconductor* 104,000 5,902,000
Sanmina* 141,000 12,055,500
Teleflex 73,700 2,731,506
Vishay Intertechnology* 126,000 4,780,125
Waters* 64,700 8,075,369
---------------------------------------------------------------------------
99,543,042
Energy: 4.6%
---------------------------------------------------------------------------
Apache 164,700 9,686,419
Barrett Resources* 102,100 3,107,669
BJ Services* 40,200 2,512,500
BP Amoco - ADR 449,100 25,402,219
Enron 498,400 32,146,800
Equitable Resources 101,900 4,916,675
Questar 161,200 3,123,250
---------------------------------------------------------------------------
80,895,532
Food, Beverage & Tobacco: 2.9%
---------------------------------------------------------------------------
Flowers Industries 315,000 6,280,313
General Mills 193,200 7,389,900
Interstate Bakeries 146,300 2,048,200
McCormick & Company 316,400 10,283,000
Social Awareness Fund 2
<PAGE>
Number Market
Food, Beverage & Tobacco (Cont.) of Shares Value
---------------------------------------------------------------------------
Quaker Oats 156,600 $ 11,764,575
Ralston-Purina Group 217,800 4,342,388
Suiza Foods* 186,200 9,100,525
---------------------------------------------------------------------------
51,208,901
Healthcare & Pharmaceuticals: 9.2%
---------------------------------------------------------------------------
Amgen* 301,900 21,208,475
Bergen Brunswig Class A 612,300 3,367,650
Boston Scientific* 163,000 3,575,813
Cardinal Health 286,005 21,164,370
C.R.Bard 329,400 15,852,375
ICN Pharmaceuticals 116,900 3,251,281
IMS Health 220,000 3,960,000
IVAX 176,700 7,333,050
Lilly (Eli) 549,300 54,861,338
McKesson HBOC 460,600 9,643,813
Medtronic 177,700 8,851,682
Mylan Laboratories 350,100 6,389,325
UnitedHealth Group 53,600 4,596,200
---------------------------------------------------------------------------
164,055,372
Industrial Machinery: 1.6%
---------------------------------------------------------------------------
Applied Materials* 248,000 22,475,000
Ingersoll-Rand 148,700 5,985,175
---------------------------------------------------------------------------
28,460,175
Leisure, Lodging & Entertainment: 1.9%
---------------------------------------------------------------------------
McDonald's 236,600 7,793,013
Walt Disney 667,900 25,922,869
---------------------------------------------------------------------------
33,715,882
Metals & Mining: 0.1%
---------------------------------------------------------------------------
Worthington Industries 219,800 2,307,900
---------------------------------------------------------------------------
Real Estate: 0.1%
---------------------------------------------------------------------------
Felcor Lodging Trust 125,200 2,316,200
---------------------------------------------------------------------------
Retail: 6.4%
---------------------------------------------------------------------------
Albertson's 270,000 8,977,500
Federated Department Stores* 182,100 6,145,875
Great Atlantic & Pacific Tea 102,000 1,695,750
Home Depot 441,700 22,057,394
Lowe's 78,300 3,215,194
Ross Stores 149,300 2,547,431
Safeway* 275,000 12,409,375
Sears, Roebuck 162,200 5,291,775
Staples* 181,600 2,792,100
Tiffany* 57,200 3,861,000
TJX Companies New 215,500 4,040,625
Tupperware 250,400 5,508,800
Wal-Mart Stores 563,400 32,465,925
Zale* 70,400 2,569,600
---------------------------------------------------------------------------
113,578,344
Telecommunications: 10.0%
---------------------------------------------------------------------------
ADC Telecommunications* 43,500 3,648,563
ALLTEL 211,400 13,093,570
BellSouth 952,500 40,600,313
Copper Mountain Networks* 28,000 2,467,500
Nortel Networks* 268,800 18,345,600
Qualcom* 91,100 5,466,000
SBC Communications 1,134,000 49,045,500
Tellabs* 113,000 7,733,438
U.S.West 239,300 20,519,975
Vodafone Group PLC - ADR 60,100 2,490,394
Worldcom* 309,800 14,212,075
---------------------------------------------------------------------------
177,622,928
Transportation & Shipping: 1.1%
---------------------------------------------------------------------------
CNF Transportation 122,000 2,775,500
Delta Air Lines* 143,000 7,230,438
Tidewater 161,100 5,799,600
UAL 81,200 4,724,825
---------------------------------------------------------------------------
20,530,363
Utilities: 0.7%
---------------------------------------------------------------------------
Sprint* 241,400 12,311,400
---------------------------------------------------------------------------
Number Market
of Shares Value
---------------------------------------------------------------------------
Total Common Stock: 99.3%
(Cost $1,296,881,000) $1,763,002,057
---------------------------------------------------------------------------
Par
Money Market Instruments: Amount
---------------------------------------------------------------------------
Associates Corporation North America
6.85% 7/3/00 $3,000,000 $ 3,000,000
Gillette
7.03% 7/5/00 3,300,000 3,300,000
Marsh USA
6.72% 7/10/00 6,000,000 5,989,950
---------------------------------------------------------------------------
Total Money Market Instruments: 0.7%
(Cost $12,289,950) $12,289,950
---------------------------------------------------------------------------
Total Investments: 100.0%
(Cost $1,309,170,950) 1,775,292,007
---------------------------------------------------------------------------
Other Assets Over Liabilties: 0.0% 389,770
---------------------------------------------------------------------------
Net Assets: 100.0%
(Equivalent to $41.618 per share
based on 42,666,467 shares
issued and outstanding) $1,775,681,777
---------------------------------------------------------------------------
Components of Net Assets at June 30, 2000:
---------------------------------------------------------------------------
Common Stock, par value $.01 per share,
100,000,000 authorized shares $ 426,665
Paid in capital in excess of par value
of shares issued 1,090,628,017
Undistributed net investment income 6,429,660
Accumulated net realized gain on
investments and futures contracts 212,076,378
Net unrealized appreciation of investments 466,121,057
---------------------------------------------------------------------------
Total Net Assets $1,775,681,777
---------------------------------------------------------------------------
* Non-income producing security.
ADR - American Depository Reciept
See accompanying notes to financial statements.
Social Awareness Fund 3
<PAGE>
Lincoln National Social Awareness Fund, Inc.
Statement of Operations - Unaudited
Six months ended June 30, 2000
Investment income:
Dividends $ 9,497,781
------------------------------------------------------------------------------
Interest 337,630
------------------------------------------------------------------------------
Total investment income 9,835,411
------------------------------------------------------------------------------
Expenses:
Management fees 2,934,225
------------------------------------------------------------------------------
Accounting fees 313,352
------------------------------------------------------------------------------
Printing and postage 78,833
------------------------------------------------------------------------------
Legal fees 20,910
------------------------------------------------------------------------------
Custody fees 16,224
------------------------------------------------------------------------------
Directors fees 2,100
------------------------------------------------------------------------------
Other 46,885
------------------------------------------------------------------------------
3,412,529
------------------------------------------------------------------------------
Less expenses paid indirectly (6,778)
------------------------------------------------------------------------------
Total expenses 3,405,751
------------------------------------------------------------------------------
Net investment income 6,429,660
------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and futures contracts:
Net realized gain on investment transactions 206,515,102
------------------------------------------------------------------------------
Net realized loss on future contracts (314,132)
------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments and futures contracts (185,602,562)
------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and futures contracts 20,598,408
------------------------------------------------------------------------------
Net increase in net assetsresulting from operations $ 27,028,068
------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months
ended
6/30/2000 Year ended
(Unaudited) 12/31/99
-------------------------------------
<S> <C> <C>
Changes from operations:
Net investment income $ 6,429,660 $ 14,764,136
-----------------------------------------------------------------------------------------------
Net realized gain on investments and futures contracts 206,200,970 145,416,386
-----------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments and futures contracts (185,602,562) 108,381,735
-----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 27,028,068 268,562,257
-----------------------------------------------------------------------------------------------
Distributions to shareholders from: Net investment income (1,414,566) (13,349,570)
-----------------------------------------------------------------------------------------------
Net realized gain on investments (138,910,178) (75,921,751)
-----------------------------------------------------------------------------------------------
Total distributions to shareholders (140,324,744) (89,271,321)
-----------------------------------------------------------------------------------------------
Net decrease in net assets
resulting from capital share transactions (57,200,148) (101,343,266)
-----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (170,496,824) 77,947,670
-----------------------------------------------------------------------------------------------
Net Assets, beginning of period 1,946,178,601 1,868,230,931
-----------------------------------------------------------------------------------------------
Net Assets, end of period $1,775,681,777 $1,946,178,601
-----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
Social Awareness Fund 4
<PAGE>
Lincoln National Social Awareness Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each period)
<TABLE>
<CAPTION>
Six months
ended
6/30/00 Year ended December 31,
(Unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 44.292 $ 40.283 $ 35.657 $ 27.316 $ 22.590 $ 16.642
Income from investment operations:
Net investment income(2) 0.156 0.319 0.367 0.364 0.389 0.432
Net realized and unrealized gain
on investments and futures contracts 0.726 5.649 6.414 9.447 5.748 6.491
-----------------------------------------------------------------------------
Total from investment operations 0.882 5.968 6.781 9.811 6.137 6.923
-----------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.036) (0.296) (0.672) - (0.389) (0.432)
Distributions from net realized gain on
investment transactions (3.520) (1.663) (1.483) (1.470) (1.022) (0.543)
-----------------------------------------------------------------------------
Total dividends and distributions (3.556) (1.959) (2.155) (1.470) (1.411) (0.975)
-----------------------------------------------------------------------------
Net asset value, end of period $ 41.618 $ 44.292 $ 40.283 $ 35.657 $ 27.316 $ 22.590
-----------------------------------------------------------------------------
Total Return(1) 1.89% 15.44% 19.89% 37.53% 28.94% 42.83%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.39%(3) 0.38% 0.38% 0.41% 0.46% 0.50%
Ratio of net investment income
to average net assets 0.73%(3) 0.79% 1.10% 1.37% 1.58% 2.21%
Portfolio Turnover 29.03% 23.77% 37.55% 34.84% 45.90% 54.02%
Net assets, end of period (000 omitted) $1,775,682 $1,946,179 $1,868,231 $1,255,494 $636,595 $297,983
</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 in the
letter at the front of this booklet (those percentages are based upon the
change in unit value).
(2) Per share information for the periods ended June 30, 2000 & December 31,
1999 & 1998 were based on the average shares outstanding method.
(3) Annualized.
See accompanying notes to financial statements.
Social Awareness Fund 5
<PAGE>
Lincoln National Social Awareness Fund, Inc.
Notes to Financial Statements - Unaudited
June 30, 2000
The Fund: Lincoln National Social Awareness 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 The Lincoln Life & Annuity
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 capital appreciation.
The Fund buys stocks of established companies, which adhere to certain specific
social criteria.
1. Significant Accounting Policies
Investment 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. Money market instruments having
less than 60 days to maturity are valued at amortized cost, which approximates
market value. 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.
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
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
Expenses: The custodian bank of the Fund has agreed to waive its custodial fees
when the Fund maintains a prescribed amount of cash on deposit in certain
non-interest bearing accounts. For the six months ended June 30, 2000, the
custodial fees offset arrangements amounted to $6,778.
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, Vantage Investment Advisors, an affiliate of the
Advisor, is paid directly by the Advisor.
Delaware Service Company ("Delaware"), an affiliate of the Advisor, provides
accounting services and other administration support to the Fund. For these
services, the Fund pays Delaware a monthly fee based on average net assets,
subject to certain minimums.
If the aggregate annual expenses of the Fund, including the management fee, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses, exceed
1.50% of the average daily net assets of the Fund, the Advisor will reimburse
the Fund in the amount of such excess. No reimbursement was due for the six
months ended June 30, 2000.
Certain officers and directors of the Fund are also officers or directors of the
Company and receive no compensation from the Fund. The compensation of
unaffiliated directors of the Fund is borne by the Fund.
Social Awareness Fund 6
<PAGE>
Notes to Financial Statements - Unaudited - (Continued)
3. Investments
The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of investments purchased and the aggregate
proceeds from investments sold for the six months ended June 30, 2000 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized appreciation at June 30, 2000 are as
follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Appreciation
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$516,127,814 $683,739,789 $598,632,411 ($132,511,354) $466,121,057
</TABLE>
4. Supplemental Financial Instrument Information
Financial Futures Contracts: The Fund may purchase or sell financial futures
contracts, which are exchange traded. The Fund bears the market risk that arise
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" or "variation margin". The Fund is subject to the market risks of
unexpected changes in the underlying markets and interest rates; however, such
changes in the value generally are offset by changes in the value of the items
being hedged by such contracts. There were no financial futures contracts open
at June 30, 2000.
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>
Six months ended
June 30, 2000
(Unaudited): 382,705 $16,832,142 3,325,625 $140,324,744 (4,981,811) $(214,357,034) (1,273,481) $ (57,200,148)
Year ended
December 31, 1999: 2,357,528 95,474,682 2,261,344 89,271,321 (7,056,003) (286,089,269) (2,437,131) (101,343,266)
</TABLE>
6. Distributions to Shareholders
The Fund declares and distributes dividends on net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
Social Awareness Fund 7
