<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Lincoln National International Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
P. O. BOX 1110
1300 SOUTH CLINTON STREET
FORT WAYNE, INDIANA 46801
TELEPHONE: (219) 455-2000
-------------------------------------------------
OCTOBER 4, 1996
Dear Multi Fund Contractowner:
Our records show that on September 16, 1996, you had directed some of your
purchase payment money to Lincoln National International Fund, Inc. (Fund).
This means that we need your vote on an important matter which has come up in
that Fund:
As of August 29, 1996, Clay Finlay Inc., the Sub-Advisor to the Fund,
changed ownership. The senior management of Clay Finlay Inc., which had
owned all of its shares, sold them to United Asset Management Corporation,
of Boston, Massachusetts. By law this change of control terminated the Sub-
advisory Agreement with the Fund, and the shareholder of the Fund needs to
approve a new agreement.
That's where you come in. Even though The Lincoln National Life Insurance
Company ("Lincoln Life") is legally the shareholder of the Fund, it holds the
Fund's shares for the benefit of contractowners like you who have allocated
money to the Fund. In a case like this, the securities laws require Lincoln
Life to solicit your vote about whether to approve a continued relationship
with Clay Finlay Inc. now that it is no longer owned by the same people.
As stated in the Prospectus you received in connection with the purchase of
your Contract, the purchase payments you make under your Lincoln Life Contract
are allocated as follows: 1) purchase payments under an individual variable
annuity contract are allocated to Lincoln National Variable Annuity Account C
("Account C"). Account C is a segregated investment account of Lincoln Life; or
2) purchase payments under an individual flexible premium variable life
insurance policy are allocated in whole or in part, as applicable, to Lincoln
National Flexible Premium Variable Life Account K, which is also a segregated
investment account of Lincoln Life. As directed by you, the Contractowner, the
assets of Accounts C and K are invested by Lincoln Life, as applicable, in
shares of one or more underlying mutual funds ("Fund" or "Funds"). However, for
this particular matter we are soliciting only those Contractowners in Accounts
C and K who have money allocated to Lincoln National International Fund, Inc.
A Special Meeting of the Shareholder of the Fund will be held at the office of
the Fund's investment adviser, Lincoln Investment Management, Inc. ("Lincoln
Investment"). The meeting will be held at 200 East Berry Street, Room 4R-1,
Fort Wayne, Indiana, on October 30, 1996, at 10:30, a.m. local time. The
attached Statement Regarding the Special Meeting of the Shareholder of Lincoln
National International Fund, Inc. ("Statement") describes in detail the
proposed action for the meeting. Each person who is entitled to receive this
initial Statement with accompanying materials is invited to attend the meeting
and instruct Lincoln Life how to vote.
Should you decide not to attend the meeting, Lincoln Life now solicits your
proxy, showing your instructions on how you would like Lincoln Life to vote the
shares in this Special Meeting of the Fund. Therefore, Contractowners who do
not expect to attend the meeting are requested to fill in, sign, date, and
return the enclosed proxy instruction form. Please use the self-addressed,
postage-paid envelope provided. The shares of the Fund will be voted in
accordance with the directions you have given on the instruction form provided.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
/s/ Reed P. Miller
Reed P. Miller
Vice President
1
<PAGE>
LINCOLN NATIONAL INTERNATIONAL FUND, INC.
1300 SOUTH CLINTON STREET
FORT WAYNE, INDIANA 46802
-------------------------------------------------
PROXY STATEMENT
To the Shareholders of Lincoln National International Fund, Inc., for a Special
Meeting to be held October 30, 1996.
This Proxy Statement is furnished by Lincoln National International Fund, Inc.
(the "Fund") to its shareholders on behalf of the Fund's Board of Directors in
connection with the Fund's solicitation of the accompanying proxy, to be voted
at a Special Meeting of Shareholders (the "Meeting") to be held on October 30,
1996, at 10:30 a.m., local time, at the offices of Lincoln Investment
Management, Inc., 200 East Berry Street, Room 4R-1, Fort Wayne, Indiana, 46802,
for the purposes set forth below and in the accompanying Note of Special
Meeting. The approximate mailing date of this Proxy Statement is October 7,
1996. At the Meeting the shareholders will be asked:
(1) To approve or disapprove a new investment subadvisory agreement between
Lincoln Investment Management, Inc. (the "Adviser") and Clay Finlay
Inc. ("CF Inc.") pursuant to which CF Inc. will continue to act as
subadviser with respect to the assets of the Fund, effective upon CF
Inc. becoming a wholly-owned subsidiary of United Asset Management
Corporation ("UAM"); and
(2) To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Fund is a diversified, open-end management investment company and a funding
vehicle for variable annuity contracts and variable life insurance policies
offered by the separate accounts of The Lincoln National Life Insurance Company
("Lincoln Life"). In accordance with current law, the Fund anticipates that
Lincoln Life will request voting instructions from Contractowners and will vote
shares in proportion to the voting instructions received. Fund shares as to
which no timely voting instructions are received will be voted by Lincoln Life
in the same proportion as the voting instructions which are received. Voting
instructions to abstain on any item will be applied on a pro rata basis to
reduce the votes eligible to be cast.
A Contractowner may revoke the accompanying proxy at any time prior to its use
by filing with the Secretary of the Fund a written revocation or duly executed
proxy bearing a later date. The proxy will not be voted if the shareholder is
present at the Meeting and elects to vote in person. Attendance at the Meeting
alone will not serve to revoke the proxy.
The Fund requests that broker-dealer firms, custodians, nominees and
fiduciaries, as applicable, forward proxy materials to the beneficial owners of
the shares of the Fund held of record by such persons as of September 16, 1996.
CF Inc. or UAM may reimburse such broker-dealer firms, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such
proxy solicitation. In addition to the solicitation of proxies by mail,
officers and employees of the Fund, without additional compensation, may
solicit proxies in person or by telephone. The cost associated with such
solicitation and the Meeting will be borne by CF Inc. or UAM and not by the
Fund.
Contractowners of the Fund at the close of business on September 16, 1996, will
be entitled to be present and vote at the Meeting. As of that date, there were
30,237,228 shares of the Fund outstanding and entitled to vote, representing
total net assets of approximately $427,756,920. Each share is entitled to one
vote.
To the knowledge of the Fund's management, as of September 16, 1996, no current
director of the Fund owns 1% or more of the outstanding shares of the Fund. To
the knowledge of the Fund's management, as of September 16, 1996, the officers
and directors of the Fund own, as a group, less than 1% of the shares of the
Fund.
2
<PAGE>
To the knowledge of the fund's management, as of September 16, 1996, no person
owns beneficially more than 5% of the outstanding shares of the Fund.
The Fund's investment adviser is Lincoln Investment Management, Inc., located
at 200 East Berry Street, Fort Wayne, Indiana 46802. The Fund's principal
underwriter is The Lincoln National Life Insurance Company.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE IN EACH CASE AS DIRECTED
IN THE PROXY, BUT IN THE ABSENCE OF SUCH DIRECTION, THEY INTEND TO VOTE FOR THE
PROPOSAL AND MAY VOTE IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS NOT NOW
KNOWN TO THE BOARD OF DIRECTORS THAT MAY BE REPRESENTED AT THE MEETING.
APPROVAL OR DISAPPROVAL OF INVESTMENT
SUBADVISORY AGREEMENT BETWEEN
THE ADVISER AND THE SUBADVISER
BACKGROUND
General. The Meeting has been called for the purpose of considering a new
subadvisory agreement for the Fund as a result of a transaction (the "GS&L
Merger Transaction") whereby CF Inc., the current investment subadviser of the
Fund became a wholly-owned subsidiary of UAM by means of a statutory merger
between CF Inc. and CF Newco, Inc. ("CF Newco", CF Inc. and CF Newco being
sometimes collectively referred to herein as the "Subadviser"). CF Inc. now a
wholly-owned subsidiary of UAM, as the survivor in the merger, will carry on
the business of CF Inc. under its current name and with its current management.
The GS&L Merger Transaction represents a change in control of CF Inc. and, as
such, effects a termination of the existing subadvisory agreement. Accordingly,
shareholders are being asked to approve a new subadvisory agreement (the "New
Subadvisory Agreement") embodying exactly the same terms and fees with the
Subadviser under its new ownership. The Fund's Board of Directors has approved
the New Subadvisory Agreement, subject to approval by the shareholders of the
Fund, to become effective as of August 29, 1996, the date of the consummation
of the GS&L Merger Transaction.
EXISTING SUBADVISORY AGREEMENT
CF Inc. currently serves as a subadviser for the Fund under an investment
advisory agreement (the "Existing Subadvisory Agreement") dated November 19,
1990. The existing Subadvisory Agreement provides for its automatic termination
in the event of a legal assignment or change in ownership of the Subadviser.
The shareholder of the Fund last renewed the Existing Subadvisory Agreement on
August 13, 1996, (for the "interim" period through August 29, 1996).
On August 13, 1996, the Board of Directors, including a majority of the "non-
interested" Directors, also approved continuation of the terms of the Existing
Subadvisory Agreement to be embodied in the New Subadvisory Agreement. Under
the Existing Subadvisory Agreement, CF Inc. is entitled to receive from the
Adviser fees at the annual rate of 0.665% of the first $50 million of average
net assets of the Fund, 0.475% of the next $50 million of average net assets
and 0.250% of the average net assets above $100 million calculated in
accordance with the procedures set forth in the Fund's Prospectus. The fee will
be computed daily and will be paid to the Subadviser quarterly, in arrears. In
1995 CF Inc. was paid $1,146,153.36 in subadvisory fees.
NEW SUBADVISORY AGREEMENT
Therefore, except for different effective and termination dates, the terms of
the New Subadvisory Agreement are identical in all respects to the terms of the
existing Subadvisory Agreement. The proposed New Subadvisory Agreement is
attached to this Proxy Statement as Exhibit A. The description of the New
Subadvisory Agreement set forth in this Proxy Statement is qualified in its
entirety by reference to Exhibit A.
3
<PAGE>
Under the New Subadvisory Agreement, the subadviser will provide certain
investment advisory services to the Fund, including deciding what securities
will be purchased and sold by the Fund, deciding when such purchases and sales
are to be made, and arranging for such purchases and sales. All of this will be
in accordance with the provisions of the Investment Company Act of 1940, as
amended (the "Investment Company Act") and any rules thereunder, the governing
documents of the Fund, the fundamental policies of the Fund, as reflected in
its registration statement, and any policies and determinations of the Board of
Directors.
As compensation for its services to the Fund under the New Subadvisory
Agreement, the Subadviser will be entitled to receive from the Adviser fees
calculated at the same rate as those charged under the Existing Subadvisory
Agreement described above. The New Subadvisory Agreement will continue in
effect for two years from its effective date (i.e., two years from August 29,
1996) and continue in effect thereafter for successive annual periods, provided
its continuance is specifically approved at least annually by (1) a majority
vote cast in person at a meeting called for that purpose, of the Fund's Board
of Directors, or (2) a vote of the holders of a majority (as defined in the
Investment Company Act and the rules thereunder) of the outstanding voting
securities of the Fund, and (3) in either event by a majority of the Directors
who are not parties to the New Subadvisory Agreement or interested persons of
the Fund or of any such party. The New Subadvisory Agreement provides that it
may be terminated upon not more than 60 days' written notice, without penalty,
by the Fund, provided that such termination by the Fund shall be directed or
approved by a vote of the Board of Directors, or by a vote of the holders of a
majority of the shares of the Fund. The New Subadvisory Agreement may be
terminated at any time by the Adviser or the Subadviser, without penalty, upon
not less than 90 days' written notice.
The New Subadvisory Agreement provides that the Subadviser shall not be liable
for any mistake of judgment or for any loss suffered by the Fund, except for
any loss resulting from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of the Subadviser of its duties under the New
Subadvisory Agreement ("Disabling Conduct").
THE MERGER AGREEMENT
UAM, CF Newco, CF Inc. and the principal stockholders of CF Inc./1/ (the
"Principals") have entered into a merger agreement (the "Merger Agreement")
pursuant to which the Subadviser became a wholly-owned subsidiary of UAM. In
addition, the Merger Agreement also requires that certain key personnel of the
Subadviser enter into employment agreements with the Subadviser, and they have
done so. This assures that the Subadviser will continue to operate with its
same investment personnel and officers. The same persons who were responsible
for the investment policies of the Subadviser prior to the Merger continue to
direct the investment policies of the Subadviser following the merger. No
changes in the Subadviser's method of operation, or the location where it
conducts its business, are contemplated.
The Merger Agreement provides that CF Inc. will merge with CF Newco, a wholly-
owned subsidiary of UAM. Each holder of CF Inc. stock received a number of
shares of UAM's common stock based upon a ratio set forth in the Merger
Agreement..
UAM, CF Inc. and certain of the Principals have also entered into an agreement
allowing such stockholders to participate in CF Inc.'s growth in a substantial
manner, make operating decisions within the limits of CF Inc.'s share of
revenues and continue to have authority over the investment management process.
- --------
/1/Such stockholders and their respective positions with CF Inc. are as follows:
John P. Clay, President and Co-Chairman of the Board, D. Francis Finlay,
Chief Executive Officer and Co-Chairman of the Board, Gregory M. Jones,
Senior Portfolio Manager and Robert C. Schletter, Senior Portfolio Manager.
4
<PAGE>
Under the terms of Section 15(a) of the Investment Company Act, the Existing
Subadvisory Agreement terminated automatically on August 29, 1996, when the
Merger Transaction occurred. Without a specific exemption from the Commission,
that would leave the Fund without the services of CF Inc. during the interim
period from August 29, 1996, through the date of this Shareholder's meeting--
set for October 30, 1996.
To ensure that the automatic termination of the Previous Agreement would not
disrupt the sub-advisory services provided to the Portfolio, on August 22, 1996
the Fund, Lincoln Investment and CF Inc. filed an application with the
Securities and Exchange Commission ("SEC") seeking an exemptive order (the
"Order") permitting CF Inc. to continue to act as sub-adviser to the Portfolio
under the New Agreement after the termination of the previous Agreement until
approval of the New Agreement by shareholders of the Portfolio at a meeting to
be held within 120 days after August 29, 1996 (the "Interim Period"). As a
condition to the requested Order, during the Interim Period all subadvisory
fees payable under the New Agreement are being held in escrow. Such escrowed
fees will be received by CF Inc. only if the New Agreement is ratified and
approved by shareholders of the Portfolio. The Order was issued on October 1,
1996.
Meanwhile, fees for CF Inc.'s services are being held in an interest-bearing
escrow account during the transition, and will be paid over to CF Inc. as soon
as Shareholder approval of the New Subadvisory Agreement is obtained.
If a New Subadvisory Agreement is not approved by the Fund's shareholder, the
Directors will promptly seek to enter into a new subadvisory arrangement for
the Fund, subject to approval by the Fund's shareholder.
During fiscal year 1995, the Fund paid the Adviser $2,770,197 in advisory fees
and the Adviser paid CF Inc. $1,136,583 in subadvisory fees.
INFORMATION ON THE SUBADVISER AND UAM
CF Inc., a New York corporation with offices at 200 Park Avenue, New York, New
York 10166, is owned by UAM. CF Inc. is registered under the Investment
Advisers Act. The New Subadvisory Agreement was approved by the Board of
Directors of the Fund, including a majority of the non-interested Directors/2/,
at a meeting held for such purpose on August 13, 1996, and is now being
submitted for approval by the shareholder of the Fund.
The Subadviser's principal executive officer and directors are shown below. The
address of each, as it relates to his duties at the Subadviser, is the same as
that of the Subadviser.
<TABLE>
<CAPTION>
NAME AND POSITION WITH CF INC. PRINCIPAL OCCUPATION
--------------------------------------------------------------------------
<S> <C>
D. Francis Finlay Chief Executive Officer
Chief Executive Officer and Co-Chairman of the Board of
Co-Chairman of the Board the Subadviser
John P. Clay President and Co-Chairman of the
President and Co-Chairman of the Board of the Subadviser
Board
Frances R. Dakers Principal and Senior Portfolio Manager
Director of the Subadviser
Robert C. Schletter Principal and Senior Portfolio Manager
Director of the Subadviser
</TABLE>
- --------
/2/Non-interested directors are those directors who are not parties to the New
Subadvisory Agreement, or interested persons of such parties (such as an
officer or employee of the Fund or Adviser).
5
<PAGE>
Upon completion of the GS&L Merger Transaction, the Subadviser became a wholly-
owned subsidiary of United Asset Management Corporation, a company listed on
the New York Stock Exchange which is principally engaged, through affiliated
firms in the United States and abroad, in providing institutional investment
management services and acquiring institutional investment management firms
like CF Inc. As of June 1996, the UAM-affiliated firms had collectively more
than $148 billion of assets under management. UAM's corporate headquarters is
located at One International Place, Boston, Massachusetts 02110.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDER OF THE FUND APPROVE THE
NEW SUBADVISORY AGREEMENT AND THAT CF INC. CONTINUE TO ACT AS SUBADVISER.
CF Inc. also serves as a subadviser for the ARCH International Equity Portfolio
of the ARCH Fund(R), Inc. ("Arch"). As of December 31, 1995 Arch had net assets
of $41,439,983. CF Inc. receives, as compensation for its services, fees at an
annual rate of 0.75% of average daily net assets of Arch. CF Inc. currently
does not have any arrangement with Arch to waive any portion of such fees.
DIRECTORS' CONSIDERATION
The Board of Directors believes that the terms of the New Subadvisory Agreement
are fair to, and in the best interest of, the Fund and its Contractowners. The
Board of Directors, including all non-interested Directors, recommends approval
by the Contractowners of the New Subadvisory Agreement between CF Inc. and
Lincoln Investment Management, Inc.
Prior to the meeting the Directors received materials concerning the change of
ownership, the terms of the new subadvisory agreement, the proposed escrow
account and the proposal to continue CFI's services pending approval of
contractowners. The Directors noted with satisfaction that the investment
philosophy of the former CFI will be continued by the new CFI, and that key
personnel--John Clay, Francis Finlay and Frances Dakers, experts at
international investing, had been advising the fund since its inception and
would remain with CFI under the new management. Fund management represented
that the subadvisory fee, which was to remain the same as before the merger,
was reasonable and within the range of industry practice. The Board also noted
that CFI had managed the Fund's investments since the Fund's inception in mid-
1991, and that the net asset value of the Fund had increased 34% from its
inception through year-end 1995, despite the uncertainties inherent in
investing overseas.
Counsel for CFI and its parent, United Asset Management, has informed Fund
Management that CFI or UAM will reimburse the Fund for expenses which the Fund
incurs in connection with this solicitation. The board was also advised by Fund
counsel that the terms of the new subadvisory agreement would be identical to
those of the prior agreement in all material respects, except for a change to
the inception and termination dates. Finally, the Board took note of the fact
that United Asset Management was founded in 1980; that it is presently a large,
well-respected asset management organization; and that as of year-end 1995 it
had approximately $160 billion in assets under management.
The Subadviser has advised the Board of Directors that it expects that there
will be no diminution in the scope and quality of advisory services provided to
the Fund as a result of the Proposed Transaction. Accordingly, the Board of
Directors believes that the Fund should receive investment advisory services
under the New Subadvisory Agreement equal or superior to those they currently
receive under the Existing Subadvisory Agreement, at the same fee levels.
RECOMMENDATION AND REQUIRED VOTE
At the Meeting, the Shareholder of the Fund will vote on the proposed New
Subadvisory Agreement. The Board of Directors recommends that you instruct the
Shareholder to approve the New Subadvisory Agreement.
The Agreement will be approved upon the affirmative vote of a majority of the
outstanding voting securities of the Fund "Majority" for this purpose under the
Investment Company Act means the lesser of (i) 67% of the shares represented at
the meeting if more than 50% of such outstanding shares are represented, or
(ii) more than 50% of such outstanding shares.
6
<PAGE>
GENERAL INFORMATION
MISCELLANEOUS
Currently no commissions are paid to brokers affiliated with the Fund.
OTHER MATTERS TO COME BEFORE THE MEETING
The Fund's management does not know of any matters to be presented at the
Meeting other than those described in this Proxy Statement. If other business
should properly come before the Meeting, the shareholders will vote thereon in
accordance with their best judgment.
SHAREHOLDER PROPOSALS
This Meeting is a Special Meeting of the shareholder. The Fund is not required
to nor does it intend to, hold regular annual meetings of its shareholder. If
such a meeting is called, any contractowner who wishes to submit a proposal for
consideration at the meeting should submit the proposal promptly to the Fund.
REPORTS TO SHAREHOLDERS
The Fund will furnish, without charge, a copy of the most recent Annual Report
to Contractholders of the Fund, and the most recent Semi-annual Report
succeeding such Annual Report, if any, on request. Requests for such reports
should be directed to Eric Jones, Lincoln National Life Insurance Company, P.O.
Box 2340, Fort Wayne, Indiana 46801; or telephone 1-800-348-1212, Ext. 6536.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED, PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
/s/ Reed P. Miller
Reed P. Miller
Vice President
October 4, 1996
Fort Wayne, Indiana
7
<PAGE>
EXHIBIT LIST
EXHIBIT A--Form of New Subadvisory Agreement
8
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
Sub-Advisory Agreement executed as of August 29, 1996, between LINCOLN
INVESTMENT MANAGEMENT, INC., an Illinois corporation (the "Adviser"), and CLAY
FINLAY, INC., a New York corporation (the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE FUND.
(a) Subject always to the control of the Directors of Lincoln National
International Fund, Inc. (the "Fund"), a Maryland corporation, which is an
eligible investment fund for Lincoln National Variable Annuity Account C
and one or more other separate accounts of The Lincoln National Life
Insurance Company (the "Separate Accounts"), the Sub-Adviser, at its
expense, will furnish continuously an investment program for the Fund which
shall at all times meet the diversification requirements of Section 817(h)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Sub-
Adviser will make investment decisions on behalf of the Fund and place all
orders for the purchase and sale of portfolio securities. In the
performance of its duties, the Sub-Adviser will comply with the provisions
of the organizational documents and Bylaws of the Fund and the stated
investment objective, policies and restrictions of the Fund, and will use
its best efforts to safeguard and promote the welfare of the Fund, and to
comply with other policies which the Directors or the Adviser, as the case
may be, may from time to time determine. The Sub- Adviser shall make its
officers and employees available to the Adviser from time to time at such
reasonable times as the parties may agree to review investment policies of
the Fund and to consult with the Adviser regarding the investment affairs
of the Fund.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel, required for it
to execute its duties faithfully and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Fund (excluding
determination of net asset value per share and shareholder accounting
services).
(c) In the selection of brokers and dealers and the placing of orders for the
purchase and sale of portfolio investments for the Fund, the Sub-Adviser
shall use its best efforts to obtain for the Fund the most favorable price
and execution available, except to the extent it may be permitted to pay
higher brokerage commissions for brokerage and research services as
described below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Sub-Adviser, bearing in mind
the Fund's best interests at all times, shall consider all factors it deems
relevant, including by way of illustration: price; the size of the
transaction; the nature of the market for the security; the amount of the
commission; the timing of the transaction taking into account market prices
and trends; the reputation, experience and financial stability of the
broker or dealer involved; and the quality of service rendered by the
broker or dealer in other transactions. Subject to such policies as the
Directors of the Fund may determine, the Sub-Adviser shall not be deemed to
have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to
pay a broker or dealer that provides brokerage and research services to the
Sub-Adviser an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Sub-Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that particular
transaction or the Sub-Adviser's over-all responsibilities with respect to
the Fund and to other clients of the Sub-Adviser as to which the Sub-
Adviser exercises investment discretion.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for the
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1
other than as provided in Section 3.
9
<PAGE>
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Directors, officers and
employees of the Fund may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Sub-Adviser, and in any person controlled by
or under common control with the Sub-Adviser; and that the Sub-Adviser and any
person controlled by or under common control with the Sub-Adviser may have an
interest in the Fund or one or more Separate Accounts, or any other investment
vehicle for which the Fund is an eligible investment fund.
3. COMPENSATION TO BE PAID BY THE ADVISER TO THE SUB-ADVISER.
The Adviser will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser pursuant to
Section 1, a fee, computed and paid at the annual rate of 0.665 of 1% of the
first $50 million of average net assets of the Fund, 0.475 of 1% of the next
$50 million of average net assets, and 0.250 of 1% of any excess over $100
million. Such fee shall be paid by the Adviser, and not by the Fund, and
without regard to any reduction in the fees paid by the Fund to the Adviser
under its management contract as a result of any statutory or regulatory
limitation on investment company expenses or voluntary fee reduction assumed by
the Adviser. Such fee shall be payable for each month within 10 business days
after the end of such month.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment or in the event that the investment
advisory contract between the Adviser and the Fund shall have terminated for
any reason; and this Agreement shall not be amended unless such amendment be
approved at a meeting by the affirmative vote of a majority of the outstanding
shares of the Fund and by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the Directors of the Fund
who are not interested persons of the Fund or of the Adviser or of the Sub-
Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall remain in
full force and effect continuously thereafter (unless terminated automatically
as set forth in Section 4) until terminated as follows:
(a) The Fund may at any time terminate this Agreement by not more than
sixty days' written notice delivered or mailed by registered mail,
postage prepaid, to the Adviser and the Sub-Adviser; or
(b) If (i) the Directors of the Fund or the shareholders by the affirmative
vote of a majority of the outstanding shares of the Fund and (ii) a
majority of the Directors who are not interested persons of the Fund or
of the Adviser or of the Sub-Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval, do not
specifically approve at least annually the continuance of this
Agreement, then this Agreement shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, the Sub-Adviser may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940 and the Rules and Regulations thereunder; or
10
<PAGE>
(c) The Adviser may at any time terminate this Agreement by not less than
ninety days' written notice delivered or mailed by registered mail,
postage prepaid, to the Sub-Adviser, and the Sub-Adviser may at any
time terminate this Agreement by not less than 90 days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Adviser.
Action by the Fund under (a) above may be taken either (i) by vote of a
majority of its Directors, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be without the
payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Adviser in writing of the occurrence
of any of the following events:
(a) the Sub-Adviser shall fail to be registered as an investment adviser
under the Investment Advisers Act of 1940, as amended from time to
time, and under the laws of any jurisdiction in which the Sub-Adviser
is required to be registered as an investment adviser in order to
perform its obligations under this Agreement;
(b) the Sub-Adviser shall have been served or otherwise have notice of any
action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board or body, involving the
affairs of the Fund;
(c) the ownership of more than 51% of the common stock of the Sub-Adviser
issued and outstanding as of the effective date of this Agreement will
be transferred; and
(d) the Chairman of the Board of Directors or the President of the Sub-
Adviser, or any of the Sub-Adviser's portfolio managers for the Fund
shall have changed.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of the
outstanding shares" means the affirmative vote, at a duly called and held
meeting of shareholders, (a) of the holders of 67% or more of the shares of the
Fund present (in person or by proxy) and entitled to vote at such meeting, if
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person," "control,"
"interested person" and "assignment" shall have their respective meanings
defined in the Investment Company Act of 1940 and the Rules and Regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations thereunder; and
the term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Fund or
to any shareholder of the Fund, for any act or omission in the course of, or
connected with, the rendering of services hereunder.
Sub-Adviser agrees to indemnify the Adviser, the Separate Accounts and the
Depositor of the Separate Accounts for, and hold them harmless against, any and
all losses, claims, damages, liabilities (including amounts paid in settlement
with the
11
<PAGE>
written consent of the Sub-Adviser) or litigation (including legal and other
expenses) to which the Adviser, the Separate Accounts or the Depositor of the
Separate Accounts may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements arise as a result of any failure by
the Sub-Adviser, whether unintentional or in good faith or otherwise, to
adequately diversify the investment program of the Fund, pursuant to the
requirements of Section 817(h) of the Code, and the regulations issued
thereunder (including, but not by way of limitation, Reg. Sec. 1.817-5, March
2, 1989, 54 F.R. 8730), relating to the diversification requirements for
variable annuity, endowment, and life insurance contracts.
IN WITNESS WHEREOF, LINCOLN INVESTMENT MANAGEMENT, INC. and CLAY FINLAY, INC.
have each caused this Instrument to be signed in duplicate on its behalf by its
duly authorized representative, all as of the day and year first above written.
Lincoln Investment Management, Inc.
By: _________________________________
Printed Name:
Title:
Clay Finlay Inc.
By: _________________________________
Printed Name:
Title:
Accepted and agreed to as of the
day and year first above written:
Lincoln National International Fund, Inc.
By: _________________________________
Printed Name:
Title:
12
<PAGE>
[LINCOLN LOGO]
1300 S. Clinton St.
Fort Wayne, IN 46802
CONTRACT NUMBER: NUMBER OF VOTES:
INTERNATIONAL FUND, INC.
THESE INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY (THE "COMPANY")
I, the undersigned, hereby direct the Company to cast, as designated below, all
the votes attributable to the Company's flexible premium variable life insurance
policy which I own, at the Special Meeting of the Stockholder of Lincoln
National International Fund, Inc. or any adjournment thereof:
ENTER YOUR VOTE ONLY WITHIN THE
BRACKETS BELOW
1. To approve the new Investment Sub-advisory APPROVE: [ ]
Agreement effective August 29, 1996, between DISAPPROVE: [ ]
Clay Finlay Inc. ("CFI") and Lincoln Investment ABSTAIN: [ ]
Management, Inc., and to approve the interim
escrow arrangement for CFI's fees as explained
in the Proxy Statement.
2. To transact such other business as may properly come before the meeting.
Upon proper execution of this form, the votes indicated above will be cast in
the manner directed herein by the undersigned Contractowner, and in the
Company's discretion upon such matters as may properly come before the meeting
or any adjournment thereof. IF NO DIRECTION IS MADE, THE VOTES WILL BE CAST FOR
THE MATTERS DESCRIBED IN THE ITEMS LISTED ABOVE. If this form is not returned,
or is returned not properly executed, such votes will be cast by the Company in
the same proportions as those for which directions have been received from all
other Contractowners participating in the same fund. This proxy confers
authority only with respect to the meeting (and any adjournment thereof) to
which it pertains.
I acknowledge receipt of the Notice of Annual Meeting of the Shareholders and
accompanying Statement dated October 4, 1996.
Signature Dated
IF YOU HAVE QUESTIONS CONCERNING THIS PROXY, PLEASE CALL 1-800-348-1212.
<PAGE>
[LINCOLN LIFE LOGO]
1300 South Clinton
Fort Wayne, IN 46802
CONTRACT NUMBER: NUMBER OF VOTES:
INTERNATIONAL FUND, INC.
THESE INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY (THE "COMPANY")
I, the undersigned, hereby direct the Company to cast, as designated below, all
the votes attributable to the Company's variable annuity contract which I own,
at the Special Meeting of the Stockholder of Lincoln National International
Fund, Inc. or any adjournment thereof:
ENTER YOUR VOTE ONLY WITHIN THE
BRACKETS BELOW
-------------------------------
1. To approve the new Investment Sub-advisory APPROVE: [ ]
Agreement effective August 29, 1996, between DISAPPROVE: [ ]
Clay Finlay Inc. ("CFI") and Lincoln Investment ABSTAIN: [ ]
Management, Inc., and to approve the interim
escrow arrangement for CFI's fees as explained
in the Proxy Statement.
2. To transact such other business as may properly come before the meeting.
Upon proper execution of this form, the votes indicated above will be cast in
the manner directed herein by the undersigned Contractowner, and in the
Company's discretion upon such matters as may properly come before the meeting
or any adjournment thereof. IF NO DIRECTION IS MADE, THE VOTES WILL BE CAST FOR
THE MATTERS DESCRIBED IN THE ITEMS LISTED ABOVE. If this form is not returned,
or is returned not properly executed, such votes will be cast by the Company in
the same proportions as those for which directions have been received from all
other Contractowners participating in the same fund. This proxy confers
authority only with respect to the meeting (and any adjournment thereof) to
which it pertains.
I acknowledge receipt of the Notice of Annual Meeting of the Shareholders and
accompanying Statement dated October 4, 1996.
Signature --------------------------- Dated -----------------------------------
IF YOU HAVE QUESTIONS CONCERNING THIS PROXY, PLEASE CALL 1-800-348-1212.
Lincoln National Life Insurance Co. is a part of Lincoln National Corp.
