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LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC.
The fund is one of the Lincoln National Funds (funds) that sells its shares only
to Lincoln National Life Insurance Co. and its affiliates (Lincoln Life).
Lincoln Life holds the shares in its separate accounts to support variable
annuity contracts and variable life contracts (contracts). We refer to a
separate account as a variable account. Each variable account has its own
prospectus that describes the account and the contracts it supports. You choose
the fund or funds in which a variable account invests your contract assets. In
effect, you invest indirectly in the fund(s) that you choose under the contract.
The Prospectus discusses the information about the fund that you ought to know
before choosing to invest your contract assets in the fund. You can find
information common to all Lincoln National Funds in the General Prospectus
Disclosure following the fund Prospectus.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
We have not authorized any dealer, salesperson, or any other person to give any
information, or to make any representation, other than what this Prospectus
states. This Prospectus does not offer to sell fund shares, or seek offers to
buy fund shares, where it would be unlawful.
CONTENTS
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SUBJECT PAGE
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Summary description of the Fund SA-2
Investment Strategies SA-3
Risk of investment Strategies SA-4
Investment Advisor and Portfolio Manager SA-4
General Prospectus Disclosure -- Important
Additional Information
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Prospectus
May 1, 2000
SA-1
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SUMMARY DESCRIPTION
OF THE FUND
The investment objective of the Social Awareness Fund (fund) is to maximize
long-term capital appreciation (as measured by the change in the value of fund
shares over a period of three years or longer). The fund pursues this objective
primarily by buying and holding (investing in) a diverse group of equity
securities (stocks) of large-sized U.S. companies that meet the fund's social
standards: companies with market capitalizations of more than $5 billion. The
fund also holds some investments in medium-sized U.S. companies, which have
market capitalizations greater than $1 billion but less than $5 billion.
The fund's investment strategy is to invest in stocks of established companies
believed to:
- - be undervalued in the market relative to other companies in an industry, and
- - show growth potential significantly greater than the average expected growth
rate of companies in the same industry.
The fund's secondary investment strategy places some emphasis on providing
income (dividends and interest).
All companies must meet the fund's social standards. The companies may not:
- - damage the natural environment;
- - have significant involvement with nuclear power, military weapons, liquor,
tobacco or gambling; or
- - use animal testing to develop new cosmetic or personal care products.
The main investment risks of choosing to invest your contract assets in the fund
are as follows:
- - the value of the fund's shares will fluctuate, and you could lose money;
- - the value of the fund's stock investments -- and, therefore, the value of the
fund's shares -- will fluctuate over the long-term (3 years or more) in line
with broad stock market indices, such as the Standard & Poor's 500 Composite
Stock Index (S&P 500); and
- - the fund's social standards strategy can cause the value of the fund's shares
to fluctuate independently of broad stock market indices over short-term
periods (1-3 years), and cause the fund to miss opportunities to invest in
companies, industries or segments of the U.S. economy providing superior
performance.
The following information provides some indication of the risks of choosing to
invest your contract assets in the fund. The information shows:
- - changes in the fund's performance from year to year and
- - how the fund's average annual returns for one, five and ten year periods
compare with those of a broad measure of market performance.
Please note that the past performance of the fund is not necessarily an
indication of how the fund will perform in the future. Further, the returns
shown do not reflect variable contract expenses. If reflected the returns shown
would be lower.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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ANNUAL TOTAL RETURNS
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Year Annual Total Return(%)
1990 -4.30%
1991 37.22%
1992 3.60%
1993 13.56%
1994 0.19%
1995 42.83%
1996 28.94%
1997 37.53%
1998 19.89%
1999 15.44%
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During the periods shown in the above chart, the fund's highest return for a
quarter occurred in the fourth quarter of 1998 at: 23.42%.
The fund's lowest return for a quarter occurred in the third quarter of 1990 at:
(-17.85)%.
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 12/31/99)
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RUSSELL
PERIOD BACK SOCIAL AWARENESS S&P 500* 1000***
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1 year 15.44% 21.14% 20.91%
5 year 28.51% 28.66% 28.03%
10 year 18.43% 18.25% 18.13%
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* The S&P 500 is the Standard & Poor's Composite Index of 500 stocks, a widely
recognized unmanaged index of common stock prices.
*** The Russell 1000 Index measures the performance of the 1,000 largest
companies in the Russell 3000 Index. Russell 3000 companies consist of the 3,000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market.
The fund invests predominantly in large-sized companies. Accordingly, the funds
performance can be compared to the performance of the Russell 1000 Index.
SA-2
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INVESTMENT STRATEGIES
The investment objective of the fund is long-term capital appreciation.
The fund pursues this objective by investing in a diversified portfolio of
stocks primarily of large-sized U.S. companies (market capitalizations greater
than $5 billion), with some emphasis on medium-sized companies (market
capitalizations between $1 billion and $5 billion). (A company's market
capitalization is calculated by multiplying the total number of shares of its
common stock outstanding by the market price of the stock. As a point of
reference, as of December 31, 1999, the average market capitalization of the S&P
500, a broad based market index representative of larger, typically more
financially stable companies, was $146 billion.)
The fund, however, only invests in companies that meet the fund's social
standards described below.
The fund's management style focuses on seeking growth companies at a reasonable
price by blending:
- - a "growth" oriented management style, which seeks companies with earnings
and/or revenues that are growing faster than the industry average, and
- - a "value" oriented management style, which seeks companies within an industry
with current stock prices that do not reflect the stocks' perceived true
worth.
More specifically, the fund seeks to invest in companies believed to:
- - show growth potential that significantly exceeds the average expected growth
rate of companies in the same industry; and
- - be undervalued in the market relative to the companies' industry peers.
The companies sought typically have:
- - a long history of profit growth and dividend payment, and
- - a reputation for quality management, products and service.
The fund's selection of industries and the size of investments in each industry
will be similar to those of the S&P 500, after considering the fund's social
standards. The fund uses the following fundamental criteria for measuring
individual stock selection: price to earnings ratio, growth of historical and
forecasted earnings, and current yield. The fund seeks to own the most
attractive stocks in each industry. The fund compares its current investments to
possible new investments on an on-going basis. The fund replaces a current
investment, if a possible new investment appears significantly more attractive
under the fund's investment criteria.
SOCIAL STANDARDS
The fund will not knowingly buy or hold stocks of companies that engage in:
- - activities that result, or are likely to result, in damage to the natural
environment;
- - production of nuclear power, design or construction of nuclear power plants,
or manufacture of equipment for the production of nuclear power;
- - manufacture of, or contracting for, military weapons;
- - liquor, tobacco or gambling businesses; and/or
- - the use of animals for testing when developing new cosmetics and personal care
products.
The fund may modify these standards at any time, without prior shareholder
approval or notice.
The fund, its advisor and sub-advisor will not determine which stocks meet the
fund's social standards. Instead, the fund will rely on the Social Investment
Research provided by Kinder, Lydenberg, Domini & Co., Inc. (KLD), located in
Cambridge, Massachusetts.
KLD specializes in providing the financial community with social standards
research on publicly-traded U.S. corporations. KLD determines if and when a
company's activities are significant enough to merit a "concern" or "major
concern" under the fund's social standards. KLD may determine the significance
of a company's activities based on (1) their size or (2) other factors selected
by KLD. KLD continually refines and modifies its social standards screening
process.
The fund will not buy any stock where KLD indicates a "concern" or "major
concern" relating to one or more of the fund's social standards. Because of this
strategy, the fund may not invest in certain types of companies, industries and
segments of the U.S. economy.
PERIOD OF DISINVESTMENT
At times, the fund may hold stocks that do not meet the fund's social standards,
because either (1) the stocks ceased meeting the social standards after the fund
bought them or (2) the fund bought the stocks without realizing that they did
not meet the social standards. The fund will seek to sell these stocks in an
orderly manner to minimize any adverse effect on the value of the fund's
investments. Ordinarily, the fund will sell the stocks within 90 days of
determining that the stocks do not meet the social standards. However, the fund
will sell the stocks within a longer period, if the advisor or sub-advisor
believes that it would avoid a significant loss to the overall value of the
fund's investments.
SA-3
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OTHER STRATEGIES
The fund may invest in money market instruments and hold a portion of its assets
in cash for liquidity purposes, as a temporary defensive strategy. The fund may
use this temporary defensive strategy when market conditions limit the fund's
ability to use its other investment strategies to identify and obtain suitable
investments. The fund, in doing so, would not be pursuing its investment
objective. The fund also may hold cash or money market instruments while seeking
appropriate investments.
The fund also uses other investment strategies, to a lesser degree, to pursue
its investment objective. The fund's SAI describes these other investment
strategies and the risks they involve.
RISKS OF INVESTMENT STRATEGIES
Investing in stocks involves the risk that the value of the stocks purchased
will fluctuate. These fluctuations could occur for a single company, an
industry, a sector of the economy, or the stock market as a whole. These
fluctuations could cause the value of the fund's stock investments -- and,
therefore, the value of the fund's shares held under your contract -- to
fluctuate, and you could lose money.
Moreover, the fund invests in medium-sized as well as large-sized companies, and
the fund's performance may be affected if stocks in one of these two groups of
companies do not perform as well as stocks in the other group. Further,
medium-sized companies, which are not as well-established as large-sized
companies, may (1) react more severely to market conditions and (2) suffer more
from economic, political and regulatory developments.
The fund's social standards strategy prohibits the fund from investing in
certain types of companies, industries and segments of the U.S. economy.
Consequently, the value of the fund's shares will fluctuate independently of
broad stock market indices over short-term periods (1-3 years). Moreover, the
fund may (1) miss opportunities to invest in companies, industries or segments
of the U.S. economy that are providing superior performance relative to the
market as a whole and (2) become invested in companies, industries and segments
of the U.S. economy that are providing inferior performance relative to the
market as a whole. These consequences may at times adversely affect fund
performance when compared to broad market indices or to similar funds managed
without the social standards strategy.
You may consider choosing the fund for investing some portion of your contract
assets (1) if you are seeking the possibility of long-term capital appreciation,
with some emphasis on providing income, and (2) so long as you are comfortable
with the additional risks of the fund's using social standards to select
investments.
INVESTMENT ADVISOR AND PORTFOLIO MANAGER
The fund's investment advisor is Lincoln Investment Management, Inc. (Lincoln
Investment). You can find information about Lincoln Investment, including its
plans to merge into a newly created series of its affiliate, Delaware Management
Business Trust, in the General Prospectus Disclosure under "Management of the
funds -- Investment advisor." Lincoln Investment is responsible for overall
management of the fund's securities investments. This includes monitoring the
fund's sub-advisor, Vantage Investment Advisors. (Vantage). Vantage's address is
405 Lexington Avenue, 34th floor, New York, NY 10174.
Vantage is responsible for the day-to-day management of the fund's securities
investments. Vantage, founded in 1979, is a U.S. domestic equity manager with
over $9 billion in assets under management. Vantage began managing the fund in
1988. Enrique Chang, Vantage's Chief Investment Officer and a Vice-President of
Vantage, has managed the fund since November, 1997.
Mr. Chang oversees the management of all of Vantage's equity portfolios and
directs Vantage's quantitative research efforts. Prior to joining Vantage,
Mr. Chang was Director of Quantitative Analysis and Strategy with General
Reinsurance Corporation from October, 1993 to March, 1997, and Senior Vice
President and Director of Quantitative Analysis with J&W Seligman from April,
1997 to November, 1997. He graduated from Fairleigh Dickinson University, and
received an MBA in finance and quantitative analysis and an MS in statistics and
operations research from New York University.
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