As filed with the Securities and Exchange Commission on February 28, 1996
Securities Act File No. 33-67490
Investment Company Act File No. 811-7972
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 4 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 6 [X]
Lincoln Advisor Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
200 East Berry Street
Fort Wayne, Indiana 46802
(Address of Principal Executive Offices) (Zip Code)
Registrants Telephone Number, including Area Code: (219) 455-2000
John L. Steinkamp, Esq.
Lincoln Advisor Funds, Inc.
200 East Berry Street
Fort Wayne, Indiana 46802
(Name and Address of Agent for Service)
Copies to:
Arthur J. Simon, Esq.
Gardner, Carton & Douglas
321 North Clark Street, Suite 3400
Chicago, Illinois 60610
Approximate date of commencement of proposed sale to the public: As
soon as practical after the effective date of the Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ X] on February 29, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on pursuant to paragraph (a)(2) of rule 485
DECLARATION PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby declares that an indefinite number or amount of its shares
have been registered under the Securities Act of 1933. Form 24F-2 for the fiscal
year ended October 31, 1995 was filed on November 17, 1995. Amended and Restated
Form 24F-2 was filed on December 22, 1995.
---------------
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
FORM N-1A
CROSS REFERENCE SHEET
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Part A
Item No. Prospectus Heading
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1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Fund Expenses
3. Condensed Financial Information Fund Expenses; Financial Highlights
4. General Description of the Registrant Cover Page; The Portfolios' Fundamental Objectives
and Other Investment Policies; Management
5. Management of the Fund Management; General Information
6. Capital Stock and Other Securities Dividends, Distributions and Taxes; Other Shareholder
Matters
7. Purchase of Securities Being Offered Net Asset Value; How to Purchase Shares
8. Redemption or Repurchase How to Sell Shares; How to Exchange Shares
9. Pending Legal Proceedings not applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Heading in Statement
Item No. of Additional Information
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10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and History General Information
13. Investment Objectives and Policies Investment Objectives and Policies; Investment
Restrictions
14. Management of the Fund Management
15. Control Persons and Principal Holders of
Securities Principal Holders of Securities
16. Investment Advisory and Other Services Investment Advisor; Distributor; General
Information
17. Brokerage Allocation and Other Practices
Execution of Portfolio Transactions
18. Capital Stock and other Securities General Information
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares; Net Asset Value
Securities Being Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriters Distributor
22. Calculation Performance Data Calculation of Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
Lincoln Advisor Funds, Inc. (the "Fund")
Supplement dated March 1, 1996
to the Prospectus dated March 1, 1996
INTRODUCTION. On January 4 and February 23, 1996, the Board of Directors of the
Fund met to consider a proposal by Lincoln National Corporation ("LNC"), the
corporate parent of Lincoln Investment Management, Inc., the Fund's investment
advisor, to restructure the Fund. In that regard, the Board of Directors
considered and approved a proposal to liquidate three of the Portfolios as
described below under "Portfolio Liquidations". In addition, the Board approved
the recommendation to reorganize the other six Portfolios, subject to approval
by the shareholders of the respective Portfolios. Proxy materials describing the
proposal to reorganize the six Portfolios and soliciting the necessary
shareholder approvals will be mailed in advance of the shareholder meeting,
which is expected to be held on or about May 3, 1996.
The impetus for the proposed restructuring was the merger in April 1995 of
Delaware Management Holdings, Inc. ("DMC") with and into a wholly-owned
subsidiary of LNC. DMH, through its subsidiary, Delaware Management Company,
Inc. ("DMC"), MANAGES THE assets of a family of 20 retail mutual funds known as
the Delaware Group (the "Delaware Group funds"). As a result, LNC, through its
subsidiaries, currently operate two mutual fund families which in several cases
offer similar funds.
PORTFOLIO LIQUIDATIONS. The Board of Directors, including a majority of the
directors who are not interested persons of the Fund or LNC or any of its
affiliates (the "independent directors"), carefully reviewed all of the
Portfolios. With respect to the Lincoln Growth and Income Portfolio, the Lincoln
Tax-Free Income Portfolio and the Lincoln Cashfund Portfolio, the Board
determined that Delaware Group funds exist that have investment objectives and
policies that are substantially similar to those Portfolios. In that regard, the
prospect that the Portfolios will receive cash inflows from sales in the future
in amounts sufficient to permit the Portfolios to operate at a reasonable
expense level does not appear favorable. Further, it was determined that a
tax-free combination of the Portfolios and the Delaware Group funds was not
feasible in light of certain circumstances.
The Board, therefore, has determined that liquidation of the Lincoln Growth and
Income Portfolio, the Lincoln Tax-Free Income Portfolio and the Lincoln Cashfund
Portfolio is in the best interests of the shareholders of the respective
Portfolios. Effective February 26, 1996, the Lincoln Growth and Income
Portfolio, the Lincoln Tax-Free Income Portfolio and the Lincoln Cashfund
Portfolio will cease marketing their shares. Shareholders of these Portfolios
may at any time prior to the complete liquidation redeem their shares of the
Portfolios and Delaware Distributors, L. P., the Fund's distributor, will waive
any contingent deferred sales charges that otherwise would have been payable
upon redemption of Class B or Class C shares of these Portfolios. In addition,
shareholders of the Portfolios will have the opportunity to purchase Class A
shares of any Delaware Group fund, as more fully described below under "Special
Exchange Privileges". Each of the Portfolios are expected to make a final
liquidating distribution on or before May 3, 1996. The redemption of shares or
the receipt of a liquidating distribution will be taxable.
<PAGE>
RESTRUCTURINGS. The Board of Directors, including a majority of the independent
directors, has determined to recommend to shareholders a change in the
investment advisor to the remaining six Portfolios of the Fund, from Lincoln
Investment Management, Inc. (formerly Lincoln National Investment Management
Company) ("LIM") to DMC. If shareholders of the Lincoln U. S. Growth Portfolio,
the Lincoln World Growth Portfolio, the Lincoln New Pacific Portfolio, the
Lincoln Enterprise Portfolio, the Lincoln Corporate Income Portfolio and the
Lincoln Government Income Portfolio approve new investment advisory agreements
with DMC, the name of the fund will be changed to the Delaware Group Advisor
Funds, Inc. With the exception of the Lincoln New Pacific Portfolio which will
have lower advisory fees, advisory fees payable under the proposed investment
advisory agreements with DMC will be the same as those payable under the current
investment advisory agreements with LIM. Further, it is anticipated that DMC
will initially waive fees and subsidize expenses of the Portfolios, if
necessary, so that their expense ratios will not exceed those that currently
exist. However, any such waiver or expense reimbursement would be voluntary and
could be terminated by the investment advisor upon notice to the Portfolio and
its shareholders.
The Board of Directors, including a majority of the independent directors,
approved, subject to shareholder approval, a subadvisory agreement with LIM with
respect to each of the Lincoln Corporate Income Portfolio and the Lincoln
Government Income Portfolio, Portfolios for which LIM currently acts as
investment advisor. Currently, there are subadvisors to LIM for the Lincoln U.S.
Growth Portfolio, the Lincoln World Growth Portfolio, the Lincoln New Pacific
Portfolio and the Lincoln Enterprise Portfolio. The Board of Directors,
including a majority of the independent directors, will recommend that
subadvisory agreements with the following subadvisors be approved by the
shareholders of the applicable Portfolios:
LINCOLN U. S. GROWTH PORTFOLIO: Lynch & Mayer, Inc., which is an indirect
wholly-owned subsidiary of LNC, is currently the subadvisor to LIM with respect
to the Lincoln Enterprise Portfolio, and is proposed to become subadvisor to the
Lincoln U. S. Growth Portfolio. If approved by the shareholders of the Lincoln
U. S. Growth Portfolio, Lynch & Mayer, Inc. would replace Provident Investment
Counsel, Inc., and would receive a fee that is the same as that currently paid
by the Fund's investment advisor to the subadvisor.
LINCOLN WORLD GROWTH PORTFOLIO: Walter Scott & Partners Limited, which is
currently acting as subadvisor to LIM with respect to the Lincoln World Growth
Portfolio, would act as subadvisor to DMC for a fee that is the same as that
paid under the current subadvisory agreement, if the new subadvisory agreement
is approved by shareholders of the Lincoln World Growth Portfolio.
LINCOLN NEW PACIFIC PORTFOLIO: John Govett & Company Limited ("Govett"). Govett,
the current subadvisor the Lincoln New Pacific Portfolio, is serving without
compensation because its recent sale to Allied Irish Banks p.l.c. resulted in
the automatic termination of its subadvisory agreement. If approved by the
shareholders of the Lincoln New Pacific Portfolio, Govett would act as
subadvisor for an annual fee of .50% of the Portfolio net asset value, rather
than .80% of net asset value under the subadvisory agreement which was
terminated. In that regard, the advisory fee paid to DMC with respect to the
Lincoln New Pacific Portfolio will be reduced by .30%.
<PAGE>
LINCOLN ENTERPRISE PORTFOLIO: Lynch & Mayer, Inc., which is currently acting as
subadvisor to LIM with respect to the Lincoln Enterprise Portfolio, would act as
subadvisor to DMC for a fee that is the same as that paid under the current
subadvisory agreement, if the new subadvisory agreement is approved by
shareholders of the Lincoln Enterprise Portfolio.
The changes described above, if approved by shareholders, are expected to become
effective on or about May 3, 1996.
SPECIAL EXCHANGE PRIVILEGES. Holders of Class A, B or C shares of the Lincoln
Growth and Income Portfolio, Lincoln Tax-Free Income Portfolio and Lincoln
Cashfund Portfolio (the three Portfolios which are proposed to be liquidated)
will be given the opportunity, upon the redemption of those shares, to purchase
Class A shares of any Delaware Group fund. Delaware Distributors, L.P., will
waive the front-end sales loads upon such purchases of Class A shares. The
redemption of shares will be a taxable transaction.
<PAGE>
LOGO
PROSPECTUS
MARCH 1, 1996
LINCOLN ADVISOR FUNDS, INC.
LINCOLN GROWTH AND INCOME PORTFOLIO
LINCOLN ENTERPRISE PORTFOLIO
LINCOLN U.S. GROWTH PORTFOLIO
LINCOLN WORLD GROWTH PORTFOLIO
LINCOLN NEW PACIFIC PORTFOLIO
LINCOLN GOVERNMENT INCOME PORTFOLIO
LINCOLN CORPORATE INCOME PORTFOLIO
LINCOLN TAX-FREE INCOME PORTFOLIO
LINCOLN CASHFUND PORTFOLIO
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Lincoln Advisor Funds, Inc. (the "Fund") is an open-end management
investment company. The Fund currently issues nine separate series of shares
(EACH REFERRED TO AS A PORTFOLIO OR COLLECTIVELY AS THE PORTFOLIOS) each
representing a separate, diversified portfolio of securities. The Portfolios
are the Lincoln Growth and Income Portfolio, Lincoln Enterprise Portfolio,
Lincoln U.S. Growth Portfolio, Lincoln World Growth Portfolio, Lincoln New
Pacific Portfolio, Lincoln Government Income Portfolio, Lincoln Corporate
Income Portfolio, Lincoln Tax-Free Income Portfolio and Lincoln Cashfund
Portfolio. Each Portfolio has a fundamental investment objective and certain
investment policies which are set forth herein.
THE INVESTMENT OBJECTIVES OF EACH PORTFOLIO ARE AS FOLLOWS:
- ----------------------------------------------------------------------
EQUITY PORTFOLIOS
THE LINCOLN GROWTH AND INCOME PORTFOLIO seeks to provide a combination of
capital appreciation and current income. The Portfolio attempts to achieve
its objective by investing in common stocks, preferred stocks, fixed income
securities, convertible securities and money market instruments.
THE LINCOLN ENTERPRISE PORTFOLIO seeks to provide maximum appreciation of
capital by investing in medium-sized companies which have a dominant position
within their industry, are undervalued, or have potential for growth in
earnings.
THE LINCOLN U.S. GROWTH PORTFOLIO seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry.
THE LINCOLN WORLD GROWTH PORTFOLIO seeks to maximize total return (capital
appreciation and income), principally through investments in an
internationally diversified portfolio of equity securities.
THE LINCOLN NEW PACIFIC PORTFOLIO seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their
principal business activities in the Pacific Basin.
- ----------------------------------------------------------------------
FIXED-INCOME AND MONEY MARKET PORTFOLIOS
THE LINCOLN GOVERNMENT INCOME PORTFOLIO seeks to maximize current income
consistent with preservation of capital. The Portfolio attempts to achieve
this objective by investing primarily in securities issued by the U.S.
Government, its agencies and instrumentalities.
THE LINCOLN CORPORATE INCOME PORTFOLIO seeks to provide high current income
consistent with preservation of capital. The Portfolio attempts to achieve
this objective primarily by investing in a diversified portfolio of
investment-grade fixed income securities issued by U.S. corporations.
Investment-grade fixed income securities are those rated at least Baa by
Moody's Investors Service, Inc. or BBB by Standard & Poor's Corporation
or, if not rated, are of comparable quality in the opinion of the advisor or
sub-advisor.
THE LINCOLN TAX-FREE INCOME PORTFOLIO seeks to provide a high level of
current income that is exempt from federal income taxes. The Portfolio
attempts to achieve this objective by investing in a diversified portfolio of
municipal bonds.
THE LINCOLN CASHFUND PORTFOLIO seeks to provide current income and
preservation of principal. The Portfolio seeks to achieve this objective by
investing primarily in a portfolio of short-term money market instruments
maturing within 13 months of their purchase date.
THE LINCOLN CASHFUND PORTFOLIO INTENDS TO MAINTAIN ITS NET ASSET VALUE AT
$1.00 PER SHARE. AN INVESTMENT IN THE LINCOLN CASHFUND PORTFOLIO IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE
THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE. SEE "NET ASSET VALUE."
This Prospectus sets forth concisely the information about the Fund and the
Portfolios that a prospective investor ought to know before investing.
Additional information about the Fund and the Portfolios has been filed with
the Securities and Exchange Commission in a Statement of Additional
Information dated March 1, 1996 and an Annual Report, dated October 31,
1995, which information is incorporated herein by reference, is legally a
part of this Prospectus, and is available without charge by calling the
Fund's shareholder services agent at 1-800-9ADVISOR (1-800-923-8476).
This Prospectus contains useful information that can help the investor decide
whether each Portfolio's investment objective matches his/her own.
Achievement of a Portfolio's investment objective cannot, of course, be
assured due to the risk of capital loss from fluctuating prices inherent in
any investment in securities. Investments in the Portfolios are neither
insured or guaranteed by any entity. In the opinion of the staff of the
Securities and Exchange Commission (the "SEC") the use of this combined
Prospectus may make each Portfolio liable for misstatements or omissions
pertaining to any of the other Portfolios.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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Prospectus Summary.......................................................................................... 3
Fund Expenses............................................................................................... 6
Financial Highlights........................................................................................ 11
Lincoln Growth and Income Portfolio......................................................................... 11
Lincoln Enterprise Portfolio................................................................................ 11
Lincoln U.S. Growth Portfolio............................................................................... 13
Lincoln World Growth Portfolio.............................................................................. 13
Lincoln New Pacific Portfolio............................................................................... 15
Lincoln Government Income Portfolio......................................................................... 15
Lincoln Corporate Income Portfolio.......................................................................... 17
Lincoln Tax-Free Income Portfolio........................................................................... 17
Lincoln Cashfund Portfolio.................................................................................. 19
The Portfolios' Fundamental Objectives and Other Investment Policies........................................ 20
Management.................................................................................................. 27
Execution of Portfolio Transactions......................................................................... 30
Net Asset Value............................................................................................. 30
How to Purchase Shares...................................................................................... 31
How to Sell Shares.......................................................................................... 36
How to Exchange Shares...................................................................................... 40
Dividends, Distributions and Taxes.......................................................................... 41
Shareholder Services and Information........................................................................ 42
Other Shareholder Matters................................................................................... 43
The Portfolios' Performance................................................................................. 44
General Information......................................................................................... 44
Implementation of Investment Objectives and Policies (Appendix A)...........................................A-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING IN THE BODY OF THE PROSPECTUS. CROSS REFERENCES IN THIS
SUMMARY REFER TO THE HEADINGS FOUND IN THE BODY OF THE PROSPECTUS.
<TABLE>
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Investment Objectives: . . . . . . . . . Each Portfolio's investment objective
is "fundamental" and may be
changed only with the approval of the
holders of a majority of the
outstanding voting securities of
the Portfolio, as defined in the
Investment Company Act of 1940
(the "Investment Company Act").
Other investment policies reflect
current practices of the
Portfolios and may be changed
by the Portfolios without the
approval of shareholders.
Investment Advisor: . . . . . . . . . . . Lincoln Investment Management, Inc.
serves as the Investment Advisor for
each of the Portfolios (the
"Advisor"). See "Management" for
descriptions of sub-advisors for
several of the Portfolios.
Alternative Purchase Plan:. . . . . . . . With the exception of the Lincoln
Cashfund Portfolio, individual
investors may select from three
classes of shares, each with
different expense levels and
with a public offering price
that reflects a different sales
charge. A fourth class of shares
is available only to certain
institutional investors.
Class A:. . . . . . . . . . . . . . . . . Offered at net asset value plus
any applicable sales charge
(expressed as a percentage of
the offering price) and subject
to service and distribution fees
at the rate of 0.35% of the
average daily net asset value
of the Class A shares.
Class B:. . . . . . . . . . . . . . . . . Offered at net asset value and
subject to service and
distribution fees at the rate 1%
of the average daily net assets
of the Class B shares. A
maximum contingent deferred
sales charge (CDSC) of 5% is
imposed on certain redemptions.
The CDSC is reduced as shown
under "How to Sell Shares --
Contingent Deferred Sales
Charge -- Class B Shares".
At the end of the sixth year,
the CDSC no longer applies.
Class B shares automatically
convert to Class A shares upon
termination of the CDSC period.
Class C:. . . . . . . . . . . . . . . . . Offered at net asset value and
subject to service and
distribution fees at the rate of
1% of the average daily net
assets of the Class C shares.
A CDSC of 1% is imposed if
shares are redeemed during the
first 12 months after purchase.
Class D:. . . . . . . . . . . . . . . . . Offered at net asset value to
retirement plans introduced by
persons not associated with
brokers or dealers that are
primarily engaged in the retail
securities business (and
rollover individual retirement
accounts from such plans), as
well as insurance companies
(including both general and
separate accounts), affiliates
of insurance companies and
investment companies
registered under the Investment
Company Act of 1940. The
minimum initial purchase
amount for Class D shares is
$2 million.
</TABLE>
3
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Lincoln Cashfund Portfolio Lincoln Cashfund Portfolio offers
Shares: . . . . . . . . . . . . . . . . two classes of shares: Regular
shares and Class B Exchange
shares. Regular shares are
offered at net asset value
($1.00) and there are no service
or distribution fees. Class B
Exchange shares, which are
issued only upon the exchange
of Class B shares of other
Portfolios, are offered at net
asset value ($1.00) but are
subject to service and
distribution fees of 1% of the
average daily net assets of the
Class B Exchange shares. The
Lincoln Cashfund Portfolio Class
B Exchange shares continue to be
subject to a CDSC, if any.* See
"How to Purchase Shares and "How
to Exchange Shares".
Purchase of Shares:. . . . . . . . . . . Contact a broker-dealer,
Delaware Distributors, L.P.,
(the "Distributor") or the Fund's
shareholder services agent. See "How
to Purchase Shares."
Exchange Privileges:. . . . . . . . . . Shares of one Portfolio may be
exchanged for shares of the
corresponding class of shares
of any other Portfolio at no
additional charge. Holders of
Class B Shares of an Equity or
Fixed-Income Portfolio who
exchange their shares for shares
of the Lincoln Cashfund
Portfolio will receive Class B
Exchange Shares which will
continue to be subject to service
and distribution fees and a
CDSC. See "How to Exchange
Shares."
Dividends, Distributions Dividends are paid monthly on:
and Taxes:. . . . . . . . . . . . . . . Lincoln Government Income
Portfolio
Lincoln Corporate Income
Portfolio
Lincoln Tax-Free Income
Portfolio
Lincoln Cashfund Portfolio
(accrued daily)
Each of the other Portfolios
pays dividends, at least annually.
Dividends are paid from
available net investment income.
Other distributions, if any, are
paid annually from realized net
capital gains. See "Dividends,
Distributions and Taxes."
Reinvestment:. . . . . . . . . . . . . . Distributions may be
automatically reinvested in
Portfolio shares of the same class
of each Portfolio without a sales
charge. Dividends may also be
reinvested in shares of the same
class of a different Portfolio
without a sales charge. See
"Shareholder Services and
Information."
Initial Investment:. . . . . . . . . . . $500 minimum on initial
purchases except for the
Cashfund. Exceptions are:
$250 for spousal IRA accounts,
$100 for the Cashfund, $25 for
investments through the
Automatic Investment Plan and
$2 million for investments in
Class D shares. See "How to
Purchase Shares."
Subsequent Investments:. . . . . . . . . Additional investments can be
made at any time for as little as
$50. For investments through the
Automatic Investment Plan, the
minimum additional investment is
$25.
</TABLE>
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* Class B Exchange shares are offered as a convenience to shareholders. The
period of time during which a shareholder owns these shares is credited
toward calculation of the CDSC, if any, upon redemption.
4
<PAGE>
<TABLE>
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Net Asset Values:. . . . . . . . . . . . Each class of each Portfolio may be
separately quoted in the financial section
of appropriate newspapers. The net asset
values are also available by calling
1-800-9ADVISOR (1-800-923-8476),
toll-free, 24 hours, 7 days a week. See
"Net Asset Value."
Other Shareholder The following services are available
Services: for Classes A, B and C:
-- Purchase by Wire
-- Automatic Investment Plan
-- Telephone Redemption Privilege
-- Systematic Withdrawal Plan
-- 30-day Repurchase Privilege
-- Cross Reinvestment
-- Dollar Cost Averaging Plan
The following services are available
for Class A:
-- Right of Accumulation
-- Concurrent Purchases
-- Letter of Intent
-- Access to service representatives
-- IRA, SEP and Keogh account handling
The following service is available
for Regular shares of the Lincoln
Cashfund Portfolio:
-- Checkwriting
</TABLE>
Delaware Service Company, Inc. serves as the Fund's shareholder
services agent and is located at 1818 Market Street, Philadelphia, PA
19103-3682.
5
<PAGE>
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy or sell
shares of a fund. See "How to Purchase Shares" and "How to Sell Shares" for
an explanation of how and when these charges apply to the Portfolios.
EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
LINCOLN
GROWTH AND LINCOLN LINCOLN LINCOLN LINCOLN
INCOME ENTERPRISE U.S. GROWTH WORLD GROWTH NEW PACIFIC
SHAREHOLDER
TRANSACTION ----------------- ----------------- ------------------- ------------------------ -------------------
EXPENSES A B C D A B C D A B C D A B C D A B C D
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchase (as a
percentage of offering
price)................... 5.5% - - - 5.5% - - - 5.5% - - - 5.5% - - - 5.5% - - -
Maximum Sales Charge or
Contingent Deferred Sales
Charges Imposed on
Reinvested Dividends..... - - - - - - - - - - - - - - - - - - - -
Maximum Contingent
Deferred Sales Charge (as
a percentage of original
purchase price or
redemption proceeds,
whichever is
lower)*..... - 5% 1% - - 5% 1% - - 5% 1% - - 5% 1% - - 5% 1% -
Redemption
Fees.......... - - - - - - - - - - - - - - - - - - - -
Exchange
Fees............. - - - - - - - - - - - - - - - - - - - -
</TABLE>
FIXED-INCOME AND MONEY MARKET PORTFOLIOS
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN
GOVERNMENT CORPORATE LINCOLN CASHFUND
INCOME INCOME TAX-FREE INCOME -----------------
--------------------- ----------------- -------------------------- CLASS B
REGULAR EXCHANGE
--------------
SHAREHOLDER
TRANSACTION
EXPENSES A B C D A B C D A B C D
- -------- - - - - - - - - - - - -
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Maximum Sales
Charge Imposed
on Purchase (as
a percentage of
offering
price).................. 4.5% - - - 4.5% - - - 4.5% - - - - -
Maximum Sales
Charge or
Contingent
Deferred Sales
Charges Imposed
on Reinvested
Dividends..... - - - - - - - - - - - - - -
Maximum
Contingent
Deferred Sales
Charge (as a
percentage of
original purchase
price or redemption
proceeds, whichever
is lower)*..... - 5% 1% - - 5% 1% - - 5% 1% - - 5%
Redemption
Fees........... - - - - - - - - - - - - - -
Exchange
Fees............. - - - - - - - - - - - - - -
</TABLE>
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* The Contingent Deferred Sales Charge on Class B shares declines to 0% after
six years.
6
<PAGE>
ANNUAL FUND OPERATING EXPENSES (AS PERCENTAGE OF DAILY NET ASSETS)
The purpose of the following table is to assist the investor in
understanding the various costs and expenses that will bear directly or
indirectly in owning shares of each Portfolio.
EQUITY PORTFOLIOS
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
LINCOLN GROWTH AND INCOME PORTFOLIO
------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 0.80% 0.80% 0.80% 0.80%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*.................... 0.60 0.60 0.60 0.60
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+..................... 1.75% 2.40% 2.40% 1.40%
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
LINCOLN ENTERPRISE PORTFOLIO
------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 0.80% 0.80% 0.80% 0.80%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*.................... 0.70 0.70 0.70 0.73
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+...................... 1.85% 2.50% 2.50% 1.53%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
LINCOLN U.S. GROWTH PORTFOLIO
-------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 0.70% 0.70% 0.70% 0.70%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*.................... 0.80 0.80 0.80 0.80
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+...................... 1.85% 2.50% 2.50% 1.50%
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
LINCOLN WORLD GROWTH PORTFOLIO
-------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 1.10% 1.10% 1.10% 1.10%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*.................... 0.40 0.40 0.40 0.40
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+...................... 1.85% 2.50% 2.50% 1.50%
------- ------- ------ -------
------- ------- ------ -------
<CAPTION>
LINCOLN NEW PACIFIC PORTFOLIO
-------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 1.10% 1.10% 1.10% 1.10%
12b-1 Fees............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*................... 0.40 0.40 0.40 0.40
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+..................... 1.85% 2.50% 2.50% 1.50%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
7
<PAGE>
FIXED-INCOME PORTFOLIOS AND MONEY MARKET PORTFOLIOS
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
LINCOLN GOVERNMENT INCOME PORTFOLIO
----------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 0.30% 0.30% 0.30% 0.30%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*.................... 0.60 0.60 0.55 0.60
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+...................... 1.25% 1.90% 1.85% 0.90%
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
LINCOLN CORPORATE INCOME PORTFOLIO
-------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 0.30% 0.30% 0.30% 0.30%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*................... 0.60 0.60 0.60 0.60
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+..................... 1.25% 1.90% 1.90% 0.90%
------- ------- ------- -------
------- ------- ------- -------
LINCOLN TAX-FREE INCOME PORTFOLIO
---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management Fees......................... 0.30% 0.30% 0.30% 0.30%
12b-1 Fees.............................. 0.35 1.00 1.00 0.00
Other Expenses (after giving effect
to reimbursements)+*.................... 0.45 0.45 0.45 0.45
------- ------- ------- -------
Total Fund Operating Expenses
(after giving effect to
reimbursements)+...................... 1.10% 1.75% 1.75% 0.75%
------- ------ ------- -------
------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
LINCOLN CASHFUND PORTFOLIO
-----------------------------------------------
REGULAR CLASS B EXCHANGE
-------------- -----------------------------
<S> <C> <C>
Management Fees................................... 0.25% 0.25%
12b-1 Fees........................................ 0.00 1.00
Other Expenses (after giving effect to
reimbursements)+*................................ .85 .85
------- -----
Total Fund Operating Expenses (after
giving effect to
reimbursements)+..................... 1.10% 2.10%
------- -----
------- -----
</TABLE>
- ------------------------
* "Other expenses" are based on expenses incurred by the Fund during the fiscal
year ended October 31, 1995 (except for Class D shares of the Lincoln Tax-
Free Income Portfolio where expenses are based on estimated amounts for the
current fiscal year) and includes Directors' and professional fees, reports to
shareholders, transfer agent, custodian and registration fees.
+ "Other expenses" and "Total Fund Operating Expenses" are net of fee waivers
and expense reimbursements by the Advisor. Absent such fee waivers and expense
reimbursements, total fund operating expenses would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Lincoln Growth and Income
Portfolio..... 2.09% 2.74% 2.74% 1.74%
Lincoln Enterprise Portfolio........... 2.42% 3.07% 3.07% 2.07%
Lincoln U.S. Growth
Portfolio........... 2.18% 2.83% 2.82% 1.83%
Lincoln World Growth
Portfolio.......... 2.96% 3.61% 3.61% 2.61%
Lincoln New Pacific
Portfolio........... 3.73% 4.38% 4.38% 3.38%
Lincoln Government Income
Portfolio..... 2.06% 2.71% 2.70% 1.71%
Lincoln Corporate Income
Portfolio...... 1.87% 2.52% 2.52% 1.52%
Lincoln Tax-Free Income
Portfolio....... 2.22% 2.87% 2.87% --
Lincoln Cashfund Portfolio............ 1.51% -- -- --
</TABLE>
8
<PAGE>
EXAMPLE:
An investor would, directly or indirectly, pay the following expenses on a
hypothetical $1,000 investment in the Portfolios, assuming: (1) expenses as set
forth above under Annual Fund Operating Expenses, (2) maximum initial sales
charges (without regard to any waivers) or the applicable CDSC, (3) a 5% annual
return, and (4) redemption at the end of the period shown.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
------- --------- --------- ---------
<S> <C> <C> <C> <C>
Lincoln Growth and Income Portfolio
Class A......................................... $72 $107 $145 $250
Class B......................................... 74 115 148 242
Class C......................................... 34 75 128 274
Class D......................................... 14 44 77 168
Lincoln Enterprise Portfolio
Class A......................................... $73 $110 $150 $260
Class B......................................... 75 118 153 247
Class C......................................... 35 78 133 284
Class D......................................... 16 48 83 182
Lincoln U.S. Growth Portfolio
Class A......................................... $73 $110 $150 $260
Class B......................................... 75 118 153 247
Class C......................................... 35 78 133 284
Class D......................................... 15 47 82 179
Lincoln World Growth Portfolio
Class A......................................... $73 $110 $150 $260
Class B......................................... 75 118 153 247
Class C......................................... 35 78 133 284
Class D......................................... 15 47 82 179
Lincoln New Pacific Portfolio
Class A......................................... $73 $110 $150 $260
Class B......................................... 75 118 153 247
Class C......................................... 35 78 133 284
Class D......................................... 15 47 82 179
Lincoln Government Income Portfolio
Class A......................................... $57 $83 $111 $190
Class B......................................... 69 100 123 215
Class C......................................... 29 58 100 217
Class D......................................... 9 29 50 111
Lincoln Corporate Income Portfolio
Class A......................................... $57 $83 $111 $190
Class B......................................... 69 100 123 215
Class C......................................... 29 60 103 222
Class D......................................... 9 29 50 111
Lincoln Tax-Free Income Portfolio
Class A......................................... $56 $78 $103 $173
Class B......................................... 68 95 115 206
Class C......................................... 28 55 95 206
Class D......................................... 8 24 42 93
Lincoln Cashfund Portfolio
Regular......................................... $11 $35 $ 61 $134
Class B Exchange................................ 71 106 133 226
</TABLE>
9
<PAGE>
For purposes of the Class B and Class B Exchange shares, you would pay the
following expenses on the same investment, assuming (1) expenses (after giving
effect to waivers and reimbursements) as set forth above under Annual Fund
Operating Expenses, and (2) no redemption.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Lincoln Growth and Income
Portfolio............... $24 $75 $128 $242
Lincoln Enterprise
Portfolio...................... 25 78 133 247
Lincoln U.S. Growth
Portfolio..................... 25 78 133 247
Lincoln World Growth
Portfolio.................... 25 78 133 247
Lincoln New Pacific
Portfolio..................... 25 78 133 247
Lincoln Government Income
Portfolio............... 19 60 103 215
Lincoln Corporate Income
Portfolio................ 19 60 103 215
Lincoln Tax-Free Income
Portfolio................. 18 55 95 206
Lincoln Cashfund Portfolio
Class B
Exchange................................ 21 66 113 226
</TABLE>
The examples of hypothetical investments in each of the Portfolios should
not be considered a representation of future performance or expenses. Actual
expenses may be greater or less than those shown.
For purposes of the Class C shares, you would pay the following expenses on
the same investment, assuming (1) expenses (after giving effect to waivers and
reimbursements) as set forth above under Annual Fund Operating Expenses, and (2)
no redemption.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Lincoln Growth and Income
Portfolio............... $24 $75 $128 274
Lincoln Enterprise
Portfolio...................... 25 78 133 284
Lincoln U.S. Growth
Portfolio..................... 25 78 133 284
Lincoln World Growth
Portfolio.................... 25 78 133 284
Lincoln New Pacific
Portfolio..................... 25 78 133 284
Lincoln Government Income
Portfolio............... 19 58 100 217
Lincoln Corporate Income
Portfolio................ 19 60 103 222
Lincoln Tax-Free Income
Portfolio................. 18 55 95 206
</TABLE>
The examples of hypothetical investments in each of the Portfolios should
not be considered a representation of future performance or expenses. Actual
expenses may be greater or less than those shown.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The table below provides financial highlights of income and capital
changes for one share of each Class outstanding for the fiscal year ended
October 31, 1995 and the period ended October 31, 1994, and has been audited by
Coopers & Lybrand L.L.P., the Fund's independent accountants, whose report is
included in the Statement of Additional Information for the fiscal year ended
October 31, 1995. This information is supplemented by the audited financial
statements and accompanying notes appearing in the Statement of Additional
Information.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.74 $ 10.00 $ 9.49 $ 10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) 0.09 0.05 0.04 0.01
Net realized and
unrealized gain (loss)
on investments 1.71 (0.26) 1.64 (0.49)
------- -------- ------ --------
Total from investment
operations 1.80 (0.21) 1.68 (0.48)
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income (0.07) (0.05) (0.06) (0.03)
From net realized gains (0.25) -- (0.25) --
------- -------- ------ --------
Total distributions (0.32) (0.05) (0.31) (0.03)
------- -------- ------ --------
Net asset value, end of
period $ 11.22 $ 9.74 $10.86 $ 9.49
======= ======== ====== ========
Total Return** 19.13% (2.15%) 18.36% (4.83%)
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $13,297 $10,437 $1,308 $563
Net expenses to average
daily net assets 1.75% 1.75%* 2.40% 2.40%*
Net investment income
(loss) to average
daily net assets 0.88% 0.49%* 0.23% (.14%)*
Portfolio turnover rate 49% 39% 49% 39%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.09% 2.87%* 2.74% 3.53%*
</TABLE>
LINCOLN ENTERPRISE PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.20 $ 10.00 $ 9.81 $ 10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) (0.08) (0.08) (0.12) (0.04)
Net realized and
unrealized gain (loss)
on investments 2.16 (0.71) 2.27 (0.15)
------- -------- ------ --------
Total from investment
operations 2.08 (0.79) 2.15 (0.19)
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income -- (0.01) -- --
From net realized gains -- -- -- --
------- -------- ------ --------
Total distributions 0.00 (0.01) 0.00 0.00
------- -------- ------ --------
Net asset value, end of
period $ 11.28 $ 9.20 $11.96 $ 9.81
======= ======== ====== ========
Total Return** 22.72% (7.91%) 21.92% (1.91%)
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $14,508 $10,579 $1,811 $761
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets (0.83%) (1.01%)* (1.50%) (1.53%)*
Portfolio turnover rate 106% 120% 106% 120%
Commencement of
operations 12/03/93 04/14/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.42% 3.10%* 3.07% 3.76%*
</TABLE>
- -------
* Annualized.
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
- ---------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
- ---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$ 9.96 $ 10.00 $ 9.74 $ 10.42
------ -------- ------ --------
0.04 0.00 0.12 0.05
1.72 (0.02) 1.71 (0.66)
------ -------- ------ --------
1.76 (0.02) 1.83 (0.61)
------ -------- ------ --------
(0.05) (0.02) (0.11) (0.07)
(0.25) -- (0.25) --
------ -------- ------ --------
(0.30) (0.02) (0.36) (0.07)
------ -------- ------ --------
$11.42 $ 9.96 $11.21 $ 9.74
====== ======== ====== ========
18.37% (0.22%) 19.52% (5.93%)
$73 $24 $6,706 $2,620
2.40% 2.40%* 1.40% 1.40%*
0.23% (.08%)* 1.23% 0.91%*
49% 39% 49% 39%
05/11/94 02/03/94
2.74% 3.52%* 1.74% 2.52%*
<CAPTION>
CLASS C CLASS D
- ---------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
- ---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.02 $ 10.00 $ 9.23 $ 10.44
------ -------- ------ --------
(0.15) (0.05) (0.02) (0.02)
2.34 0.07 2.09 (1.19)
------ -------- ------ --------
2.19 0.02 2.07 (1.21)
------ -------- ------ --------
-- -- -- --
-- -- -- --
------ -------- ------ --------
0.00 0.00 0.00 0.00
------ -------- ------ --------
$12.21 $ 10.02 $11.30 $ 9.23
====== ======== ====== ========
21.86% 0.23% 22.43% (11.61%)
$ 58 $ 37 $3,666 $ 234
2.50% 2.50%* 1.53% 1.50%*
(1.49%) (1.53%)* (0.60%) (.63%)*
106% 120% 106% 120%
05/10/94 02/03/94
3.07% 3.75%* 2.07% 2.75%*
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN U.S. GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.21 $10.00 $10.19 $10.00
------- -------- ------- --------
Income from investment
operations:
Net investment income
(loss) (0.09) (0.04) (0.14) (0.03)
Net realized and
unrealized gain (loss)
on investments 2.31 0.26 2.28 0.22
------- -------- ------- --------
Total from investment
operations 2.22 0.22 2.14 0.19
------- -------- ------- --------
Less distributions to
shareholders:
From net investment
income -- (0.01) -- --
From net realized gains -- -- -- --
------- -------- ------- --------
Total distributions 0.00 (0.01) 0.00 0.00
------- -------- ------- --------
Net asset value, end of
period $12.43 $10.21 $12.33 $10.19
======= ======== ======= ========
Total Return** 21.74% 2.18% 21.00% 1.90%
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $13,574 $10,669 $567 $204
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets (0.88%) (0.51%)* (1.57%) (1.26%)*
Portfolio turnover rate 58% 66% 58% 66%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.18% 2.94%* 2.83% 3.60%*
</TABLE>
LINCOLN WORLD GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.00 $10.00 $10.40 $10.00
------- -------- ------- --------
Income from investment
operations:
Net investment income
(loss) 0.01 0.02 (0.02) --
Net realized and
unrealized gain (loss)
on investments 0.40 1.01 0.35 0.43
------- -------- ------- --------
Total from investment
operations 0.41 1.03 0.33 0.43
------- -------- ------- --------
Less distributions to
shareholders:
From net investment
income (0.01) (0.03) (0.02) (0.03)
From net realized gains -- -- -- --
------- -------- ------- --------
Total distributions (0.01) (0.03) (0.02) (0.03)
------- -------- ------- --------
Net asset value, end of
period $11.40 $11.00 $10.71 $10.40
======= ======== ======= ========
Total Return** 3.81% 10.25% 3.19% 4.28%
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $13,018 $11,721 $1,183 $523
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets 0.00% 0.25%* (0.57%) (0.37%)*
Portfolio turnover rate 9% 6% 9% 6%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.96% 3.56%* 3.61% 4.22%*
</TABLE>
* Annualized
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.62 $10.00 $10.23 $10.52
------- -------- ------- --------
(0.10) (0.03) (0.05) (0.01)
2.33 0.65 2.32 (0.28)
------- -------- ------- --------
2.23 0.62 2.27 (0.29)
------- -------- ------- --------
-- -- -- --
-- -- -- --
------- -------- ------- --------
0.00 0.00 0.00 0.00
------- -------- ------- --------
$12.85 $10.62 $12.50 $10.23
======= ======== ======= ========
21.00% 6.17% 22.19% (2.78%)
$27 $5 $4,819 $1,630
2.50% 2.50%* 1.50% 1.50%*
(1.61%) (1.09%)* (0.59%) (0.27%)*
58% 66% 58% 66%
05/23/94 02/03/94
2.82% 3.54%* 1.83% 2.60%*
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.43 $10.00 $11.02 $10.50
------- -------- ------- --------
(0.06) 0.01 0.04 0.04
0.39 0.44 0.41 0.52
------- -------- ------- --------
0.33 0.45 0.45 0.56
------- -------- ------- --------
(0.03) (0.02) (0.03) (0.04)
-- -- -- --
------- -------- ------- --------
(0.03) (0.02) (0.03) (0.04)
------- -------- ------- --------
$10.73 $10.43 $11.44 $11.02
======= ======== ======= ========
3.16% 4.45% 4.22% 5.26%
$43 $38 $161 $63
2.50% 2.50%* 1.50% 1.50%*
(0.62%) 0.16%* 0.40% 0.76%*
9% 6% 9% 6%
05/10/94 02/03/94
3.61% 4.23%* 2.61% 3.21% *
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN NEW PACIFIC PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.44 $10.00 $10.86 $10.00
-------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.02) (0.10) (0.03)
Net realized and
unrealized gain (loss)
on investments (1.39) 0.47 (1.46) 0.89
-------- -------- -------- --------
Total from investment
operations (1.44) 0.45 (1.56) 0.86
-------- -------- -------- --------
Less distributions to
shareholders:
From net investment
income -- (0.01) -- --
From net realized gains (0.29) -- (0.29) --
-------- -------- -------- --------
Total distributions (0.29) (0.01) (0.29) 0.00
-------- -------- -------- --------
Net asset value, end of
period $8.71 $10.44 $9.01 $10.86
======== ======== ======== ========
Total Return** (13.99%) 4.53% (14.56%) 8.58%
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $10,353 $11,333 $573 $431
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets (0.60%) (0.21%)* (1.20%) (0.88%)*
Portfolio turnover rate 163% 104% 163% 104%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 3.73% 3.66%* 4.38% 4.32%*
</TABLE>
LINCOLN GOVERNMENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.15 $10.00 $9.78 $10.00
-------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss) 0.57 0.38 0.57 0.12
Net realized and
unrealized gain (loss)
on investments 0.65 (0.86) 0.65 (0.23)
-------- -------- -------- --------
Total from investment
operations 1.22 (0.48) 1.22 (0.11)
-------- -------- -------- --------
Less distributions to
shareholders:
From net investment
income (0.57) (0.37) (0.75) (0.11)
From net realized gains -- -- -- --
-------- -------- -------- --------
Total distributions (0.57) (0.37) (0.75) (0.11)
-------- -------- -------- --------
Net asset value, end of
period $9.80 $9.15 $10.25 $9.78
======== ======== ======== ========
Total Return** 13.72% (4.93%) 13.09% (1.11%)
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $11,062 $9,658 $299 $239
Net expenses to average
daily net assets 1.25% 1.25%* 1.90% 1.90%*
Net investment income
(loss) to average
daily net assets 6.07% 4.38%* 5.43% 4.87%*
Portfolio turnover rate 227% 366% 227% 366%
Commencement of
operations 12/03/93 07/27/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.06% 2.58%* 2.71% 3.22%*
</TABLE>
* Annualized
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.66 $10.00 $10.48 $11.14
-------- -------- -------- --------
(0.08) (0.02) (0.01) 0.01
(1.46) 0.68 (1.41) (0.67)
-------- -------- -------- --------
(1.54) 0.66 (1.42) (0.66)
-------- -------- -------- --------
-- -- -- --
(0.29) -- (0.29) --
-------- -------- -------- --------
(0.29) 0.00 (0.29) 0.00
-------- -------- -------- --------
$8.83 $10.66 $8.77 $10.48
======== ======== ======== ========
(14.57%) 6.55% (13.65%) (5.98%)
$17 $12 $62 $47
2.50% 2.50%* 1.50% 1.50%*
(1.02%) (0.83%)* (0.16%) 0.23%*
163% 104% 163% 104%
07/07/94 02/03/94
4.38% 4.31%* 3.38% 3.31%*
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$9.79 $10.00 $9.15 $10.00
-------- -------- -------- --------
0.63 0.15 0.69 0.33
0.47 (0.22) 0.54 (0.85)
-------- -------- -------- --------
1.10 (0.07) 1.23 (0.52)
-------- -------- -------- --------
(0.51) (0.14) (0.78) (0.33)
-- -- -- --
-------- -------- -------- --------
(0.51) (0.14) (0.78) (0.33)
-------- -------- -------- --------
$10.38 $9.79 $9.60 $9.15
======== ======== ======== ========
11.59% (0.72%) 14.15% (5.17%)
$15 $49 $979 $353
1.85% 1.90%* 0.90% 0.90%*
4.73% 4.71%* 6.39% 5.57%*
227% 366% 227% 366%
07/07/94 02/03/94
2.70% 3.22%* 1.71% 2.23%*
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN CORPORATE INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $8.80 $10.00 $9.73 $10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) 0.61 0.51 0.66 0.29
Net realized and
unrealized gain (loss)
on investments 0.91 (1.20) 0.91 (0.28)
------- -------- ------ --------
Total from investment
operations 1.52 (0.69) 1.57 0.01
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income (0.56) (0.51) (0.85) (0.28)
From net realized gains -- -- -- --
------- -------- ------ --------
Total distributions (0.56) (0.51) (0.85) (0.28)
------- -------- ------ --------
Net asset value, end of
period $9.76 $8.80 $10.45 $9.73
======= ======== ====== ========
Total Return** 17.71% (7.06%) 17.05% 0.11%
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $11,518 $9,620 $362 $222
Net expenses to average
daily net assets 1.25% 1.25%* 1.90% 1.90%*
Net investment income
(loss) to average
daily net assets 6.64% 6.04%* 5.97% 5.94%*
Portfolio turnover rate 119% 185% 119% 185%
Commencement of
operations 12/03/93 05/11/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 1.87% 2.55%* 2.52% 3.21%*
</TABLE>
LINCOLN TAX-FREE INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $8.93 $10.00 $9.67 $10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) 0.40 0.34 0.43 0.16
Net realized and
unrealized gain (loss)
on investments 0.89 (1.06) 0.88 (0.33)
------- -------- ------ --------
Total from investment
operations 1.29 (0.72) 1.31 (0.17)
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income (0.40) (0.35) (0.56) (0.16)
From net realized gains -- -- -- --
------- -------- ------ --------
Total distributions (0.40) (0.35) (0.56) (0.16)
------- -------- ------ --------
Net asset value, end of
period $9.82 $8.93 $10.42 $9.67
======= ======== ====== ========
Total Return** 14.76% (7.40%) 14.04% (1.73%)
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $10,950 $9,438 $170 $95
Net expenses to average
daily net assets 1.10% 1.10%* 1.75% 1.75%*
Net investment income
(loss) to average
daily net assets 4.29% 3.98%* 3.63% 3.52%*
Portfolio turnover rate 3% 25% 3% 25%
Commencement of
operations 12/03/93 05/04/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.22% 2.66%* 2.87% 3.31%*
</TABLE>
* Annualized
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$9.80 $10.00 $8.84 $9.98
------ -------- ------ --------
0.18 0.08 0.73 0.41
1.33 (0.19) 0.78 (1.12)
------ -------- ------ --------
1.51 (0.11) 1.51 (0.71)
------ -------- ------ --------
(0.87) (0.09) (0.86) (0.43)
-- -- -- --
------ -------- ------ --------
(0.87) (0.09) (0.86) (0.43)
------ -------- ------ --------
$10.44 $9.80 $9.49 $8.84
====== ======== ====== ========
16.23% (1.00%) 18.27% (7.21%)
$5 $9 $3,704 $1,302
1.90% 1.85%* 0.90% 0.90%*
5.75% 5.91%* 6.95% 6.88%*
119% 185% 119% 185%
09/14/94 02/03/94
2.52% 3.17%* 1.52% 2.20%*
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------------------------------
FOR THE YEAR
ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ----------------------
<S> <C>
$9.64 $10.00
------ --------
0.13 0.05
1.10 (0.35)
------ --------
1.23 (0.30)
------ --------
(0.66) (0.06)
-- --
------ --------
(0.66) (0.06)
------ --------
$10.21 $9.64
====== ========
13.40% (3.04%)
$10 $7
1.75% 1.75%*
3.68% 3.50%*
3% 25%
09/14/94
2.87% 3.27%*
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
LINCOLN CASHFUND PORTFOLIO
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
REGULAR SHARES
---------------------------------------
FOR THE YEAR
ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.03
Net realized and unrealized gain
(loss) on investments 0.00 0.00
------- --------
Total from investment operations 0.05 0.03
------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.05) (0.03)
From net realized gains -- --
------- --------
Total distributions (0.05) (0.03)
------- --------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
======= ========
TOTAL RETURN 4.94% 2.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $11,452 $10,897
Net expenses to average daily net
assets 1.10% 1.10%*
Net investment income (loss) to
average daily net assets 4.85% 2.90%*
Commencement of operations 12/03/93
Without the waiver of fees and
reimbursement of expenses by the
advisor, the ratio of net
expenses to average net assets
would have been: 1.51% 2.11%*
</TABLE>
* Annualized
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THE PORTFOLIOS' FUNDAMENTAL OBJECTIVES AND
OTHER INVESTMENT POLICIES
THE EQUITY PORTFOLIOS
LINCOLN GROWTH AND INCOME PORTFOLIO. This Portfolio's fundamental
investment objective is to seek to provide a combination of capital appreciation
and current income by investing in common stocks, preferred stocks, fixed-income
securities, convertible securities and money market investments.
There is no limitation on the percentage of assets invested in various
investment categories (equity securities, debt obligations and money market
instruments) and the Advisor or sub-advisor will determine the specific asset
mix from time to time based on prevailing market conditions. Capital
appreciation and current income will be given equal consideration in determining
the investments to be acquired by the Portfolio. However, the Portfolio does not
necessarily intend to maintain any balance between equity and debt securities.
The equity securities in which the Portfolio will primarily invest are
common stocks of established corporations in any industry, which corporations
have market capitalizations in excess of $200 million and the stock of which is
traded on the New York Stock Exchange, the American Stock Exchange or NASDAQ. 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. The
stock of such corporations must, in the opinion of the Advisor or sub-advisor,
have prospects for price appreciation greater than that of the Standard & Poor's
Corporation ("S&P") 500 Index generally. The Advisor's or sub-advisor's forecast
of price appreciation is based on estimates of future earnings and cash flow,
and the anticipated impact of those estimates on the price of the stock. The
Portfolio may also invest in preferred stocks or debt securities that are either
convertible into common stock or have warrants attached.
The Portfolio will also invest in debt securities which primarily have
ratings at the time of purchase within the four highest categories determined by
Moody's Investors Service, Inc. ("Moody's") or S&P or, if not rated, be of
comparable quality in the opinion of the Advisor or sub-advisor. The Portfolio
may invest up to 15% of its assets in securities having ratings at the time of
purchase lower than Baa by Moody's or BBB by S&P or, if not rated, of comparable
quality in the opinion of the Advisor or sub-advisor. The Portfolio will not
invest in debt securities rated lower than B by Moody's or S&P. Lower-rated or
unrated securities, commonly referred to as "junk bonds," are more likely to
react to developments affecting market and credit risk than are more highly
rated securities, which react primarily to movements in the general level of
interest rates. See "Risk Factors and Special Considerations" for a description
of the risks inherent in such securities and see "Description of Security
Ratings" in the Statement of Additional Information for a description of the
Moody's and S&P ratings. The Portfolio may also invest in U.S. Government
Securities.
The Portfolio may invest up to 15% of its assets in the securities of
foreign issuers.
LINCOLN ENTERPRISE PORTFOLIO. This Portfolio's fundamental investment
objective is to seek to provide maximum appreciation of capital by investing in
medium-sized companies which have a dominant position within their industry, are
undervalued, or have potential for growth in earnings. Currently, medium-sized
companies are considered to have market capitalizations between $250 million and
$5 billion. The Portfolio is unlikely to participate in slow growth industries
such as utilities and is likely to invest frequently in high growth rate
companies in the retail, health care, computer, communication and entertainment
industries. Under normal circumstances, at least 65% of the value of the
Portfolio's assets will be invested in equity securities.
In selecting investments, the Portfolio's Advisor or sub-advisor seeks small
or medium capitalization companies that it believes have earnings that may be
expected to grow faster than the U.S. economy in general. These companies will
typically possess one or more characteristics, including high quality
management, a leading or dominant position in a product and a relatively high
rate of return on invested capital. Income derived from securities of such
companies is only an incidental consideration of the Portfolio.
20
<PAGE>
The Portfolio will primarily invest in common stocks although it may invest
up to 35% of the value of its assets in convertible bonds, convertible preferred
stock, warrants to purchase common stock, futures and options.
The Portfolio may invest up to 15% of its assets in securities of foreign
issuers.
LINCOLN U.S. GROWTH PORTFOLIO. This Portfolio's fundamental investment
objective is to seek to maximize capital appreciation by investing in companies
of all sizes which have low dividend yields, strong balance sheets and high
expected earnings growth rates relative to their industry.
The Advisor or sub-advisor will seek investments in companies of all sizes
that the Advisor or sub-advisor believes have earnings that may be expected to
grow faster than the U.S. economy in general. Such companies may offer the
possibility of accelerated earnings growth because of management changes, new
products or structural changes in the economy. In addition, those companies with
relatively high rates of return on invested capital may be able to finance
future growth from internal sources. Income derived from securities in such
companies will be only an incidental consideration of the Portfolio.
The Portfolio intends to invest primarily in common stocks believed by the
Advisor or sub-advisor to have appreciation potential. However, common stock is
not always the class of security that provides the greatest possibility for
appreciation. The Portfolio may invest up to 35% of its assets in debt
securities, bonds, convertible bonds, preferred stock and convertible preferred
stock. The Portfolio may also invest up to 10% of its assets in securities rated
lower than Baa by Moody's or BBB by S&P if, in the opinion of the Advisor, doing
so would further the Portfolio's objective. Lower-rated or unrated securities,
commonly referred to as "junk bonds," are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates. See "Risk
Factors and Special Considerations" for a description of the risks inherent in
such securities and see "Description of Security Ratings" in the
Statement of Additional Information for a description of the Moody's
and S&P ratings.
The Portfolio may invest up to 20% of its assets in foreign securities.
LINCOLN WORLD GROWTH PORTFOLIO. This Portfolio's fundamental objective is
to seek to maximize total return (capital appreciation and income) by investing
primarily in equity securities of foreign issuers located in countries that the
Fund's Advisor or sub-advisor deems to have attractive investment opportunities.
"Total return" refers to income plus realized and unrealized appreciation of the
securities. Under normal circumstances, the Portfolio will invest at least 65%
of the value of its total assets in securities of issuers located in at least
three countries other than the United States. However, more than 25% of the
Portfolio's total assets may be invested in the securities of issuers located in
the same country.
The Portfolio will emphasize established companies, although it may invest
in companies of varying sizes as measured by assets, sales and capitalization.
The Portfolio may invest in securities of issuers located in a variety of
different foreign regions and countries which includes, but is not limited to,
the following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico,
The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand and The United Kingdom. The relative strength or weakness
of a particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Portfolio invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Portfolio may also invest
in convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Portfolio may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic over-the-
counter markets and may invest in restricted or unlisted securities. In
addition, the Portfolio's investments may include American Depository Receipts
(ADRs), American Depository Shares (ADSs) and securities of
21
<PAGE>
foreign investment funds or trusts to the extent permitted under the Portfolio's
investment restrictions. See "Risk Factors and Special Considerations -- Foreign
Investments" below. For a complete list of the Portfolio's investment
restrictions, see "Investment Restrictions" in the Statement of Additional
Information.
The Portfolio may invest up to 20% of its assets in securities of companies
located in, or governments of, developing countries. For temporary defensive
purposes, the Portfolio may invest a major portion of its assets in securities
of U.S. issuers. In addition, the Portfolio may be invested in short-term debt
instruments to meet anticipated day-to-day operating expenses and liquidity
requirements.
LINCOLN NEW PACIFIC PORTFOLIO. This Portfolio's fundamental investment
objective is to seek to maximize long-term capital appreciation by investing
primarily in equity securities of companies domiciled or having their principal
business activities in countries located in the Pacific Basin.
The Portfolio will invest in companies of varying size, measured by assets,
sales and capitalization. The Portfolio will invest in companies in one or more
of the following Pacific Basin countries:
<TABLE>
<S> <C>
Australia Pakistan
China Philippines
Hong Kong Singapore
India South Korea
Indonesia Sri Lanka
Japan Taiwan
Malaysia Thailand
New Zealand
</TABLE>
The Portfolio may invest in companies located in other countries or regions in
the Pacific Basin as those economies and markets become more accessible. The
Portfolio will invest in other countries or regions only after the decision to
do so is disclosed in an amendment to this Prospectus. Any amendment to this
Prospectus containing such a material change will be delivered to investors.
While the Portfolio will generally have investments in companies located in at
least three different countries or regions, the Portfolio may from time to time
have investments only in one or a few countries or regions.
The Portfolio invests in common stock and may invest in other securities
with equity characteristics, consisting of trust or limited partnership
interests, preferred stock, rights and warrants. The Portfolio may also invest
in convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. The Portfolio may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic over-the-
counter markets and may invest in restricted or unlisted securities.
Under normal circumstances, at least 65% of the Portfolio's assets will be
invested in equity securities of foreign issuers located in the Pacific Basin.
The Portfolio may invest in securities of companies located in, or governments
of, developing countries within the Pacific Basin. The Portfolio may invest up
to 35% of its assets in securities of U.S. issuers. In addition, the Portfolio
may be invested in short-term debt instruments to meet anticipated day-to-day
operating expenses and liquidity requirements.
THE FIXED-INCOME PORTFOLIOS AND MONEY MARKET PORTFOLIOS
LINCOLN GOVERNMENT INCOME PORTFOLIO. This Portfolio's fundamental
investment objective is to seek to maximize current income consistent with the
preservation of capital by investing primarily in securities issued by the U.S.
Government, its agencies and instrumentalities ("U.S. Government Securities").
Under normal conditions, at least 65% of the value of the Portfolio's total
assets will be invested in U.S. Government Securities.
Depending upon prevailing market conditions, the Portfolio may invest in
U.S. Government Securities of varying maturities, ranging up to 40 years. U.S.
Government Securities include certain mortgage-backed securities, such as
Government National Mortgage Association Certificates. See "Mortgage-Backed
Securities" in Appendix A. As the Portfolio invests primarily in U.S. Government
Securities, which are lower-risk
22
<PAGE>
securities, it may not achieve as high a level of income under all market
conditions as would be the case if the Portfolio invested in higher yielding
securities. Up to 35% of the Portfolio's assets may be invested in corporate
bonds of U.S. companies, mortgage-backed securities and asset-backed securities
that are rated at least Aa by Moody's or AA by S&P or, if not rated, are of
comparable quality in the Advisor's or sub-advisor's opinion. See "Description
of Security Ratings" in the Statement of Additional Information.
LINCOLN CORPORATE INCOME PORTFOLIO. This Portfolio's fundamental investment
objective is to seek to provide a high level of current income consistent with
preservation of capital by investing primarily in corporate bonds of U.S.
companies that are rated at least Baa by Moody's or BBB by S&P or, if not rated,
are of comparable quality in the opinion of the Advisor or sub-advisor. See
Description of Security Ratings in the Statement of Additional Information.
Maturities of the corporate bonds held by the Portfolio are expected to
range from seven to forty years, unless the Portfolio's Advisor or sub-advisor
believes that investing in corporate bonds with shorter or longer maturities
would be appropriate in light of prevailing market conditions.
The Portfolio may also invest up to 35% of its assets in preferred stock,
corporate bonds and preferred stock convertible into or that carry the right to
acquire common stock, corporate bonds that are not of investment grade quality,
U.S. Government Securities, various mortgage-backed securities and asset-backed
securities, common stock consistent with the Portfolio's objective, and bonds
issued by foreign governments or foreign corporations, provided that no more
than 10% of the Portfolio's assets will be invested in bonds issued by foreign
governments or foreign corporations and no more than 10% of the Portfolio's
assets will be denominated in any one foreign currency. The Portfolio will not
invest more than 20% of its assets in bonds that are not of investment grade
quality and will not invest in bonds rated below Caa by Moody's or CCC by S&P.
Lower-rated or unrated securities, commonly referred to as "junk bonds," are
more likely to react to developments affecting market and credit risk than are
more highly rated securities, which primarily react to movements in the general
level of interest rates. See "Risk Factors and Special Considerations" for a
description of the risks inherent in such securities and see "Description of
Security Ratings" in the Statement of Additional Information for a
description of the Moody's and S&P ratings.
LINCOLN TAX-FREE INCOME PORTFOLIO. This Portfolio's fundamental investment
objective is to seek to provide a high level of current income that is exempt
from federal income taxes by investing at least 80% of its net assets in
municipal securities, the interest on which is exempt from federal income tax
and not treated as a preference item for individuals for purposes of the federal
alternative minimum tax.
Under normal circumstances, at least 65% of the Portfolio's assets will be
invested in securities rated at least Baa by Moody's or BBB by S&P or, if not
rated, are of a comparable quality in the opinion of the Advisor or sub-advisor.
Up to 35% of the Portfolio's assets may be invested in municipal obligations
rated below investment grade, but rated at least Ba by Moody's or BB by S&P or
having investment characteristics similar to those obligations. Subsequent to
its purchase by the Portfolio, a municipal obligation may be assigned a lower
rating or cease to be rated. Such an event would not require the elimination of
the issue from the Portfolio, but the Advisor will consider such an event in
determining whether the Portfolio should continue to hold the security.
Obligations rated below investment grade typically offer higher yields than
higher rated obligations but involve greater risk. Lower-rated or unrated
securities, commonly referred to as "junk bonds," are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which primarily react to movements in the general level of interest
rates. See "Risk Factors and Special Considerations" for a description of the
risks inherent in such securities and see "Description of Security Ratings"
in the Statement of Additional Information for a description of the
Moody's and S&P ratings.
The Portfolio will not invest more than 25% of its assets in obligations
within a single industry, including revenue bonds payable only from revenues
derived from facilities or revenues within a single industry. The Portfolio does
not intend to invest more than 25% of its assets in obligations of governmental
units or issuers located in the same state, territory or possession of the U.S.
Under normal market conditions, it is anticipated that the Portfolio's weighted
average maturity will range from fifteen to 25 years although the Portfolio may
shorten its weighted average maturity to as little as two years if deemed
appropriate.
23
<PAGE>
The Portfolio may invest up to 10% of its assets in the securities of
foreign issuers.
LINCOLN CASHFUND PORTFOLIO. This Portfolio's fundamental investment
objective is to seek to provide current income and preservation of principal by
investing in high-quality money market instruments.
The Portfolio invests in the following U.S. dollar denominated high-quality,
money market instruments issued by U.S. and foreign financial institutions and
non-financial corporations and by the U.S. government, its agencies and
instrumentalities:
1. Negotiable certificates of deposit, time deposits and bankers'
acceptances of U.S. and foreign banks and thrifts with a Moody's
deposit rating of P1 or minimum long-term ratings of Aa by Moody's
or AA by S&P;
2. Commercial paper (including variable rate demand notes) rated P1 or
A1 by Moody's or S&P, respectively (a maximum of 5% may be held in
P2 or A2 instruments);
3. Short-term corporate obligations with minimum long-term ratings of Aa
by Moody's or AA by S&P;
4. U.S. Government Securities; and
5. Repurchase agreements collateralized by U.S. Government Securities.
The Portfolio follows industry standard guidelines on the quality and
maturity of its investments designed to help maintain a stable $1.00 share
price. The Portfolio does not, however, guarantee a $1.00 share price, and a
significant change in interest rates or a default on an investment could cause
the share price to change.
The Portfolio may invest in U.S. Government Securities without limit and
during normal market conditions will invest at least 25% of its assets in
domestic bank obligations and U.S. denominated securities of foreign banks. The
Lincoln Cashfund Portfolio is generally prevented from investing more than 5% of
its total assets in the securities of any one issuer. However, under a
"three-day safe harbor" exception to Rule 2a-7 of the Investment Company Act the
Portfolio may invest more than 5% of its total assets in the securities of a
single issuer for a maximum of three business days, if the highest quality
standards of the Rule are satisfied, and other conditions are met. This
exception will allow the Advisor to efficiently invest large inflows of cash
into the Portfolio.
CERTAIN INVESTMENT GUIDELINES
ILLIQUID SECURITIES. Up to 10% of the assets of each Portfolio may be
invested in securities that are not readily marketable, including, where
applicable: (1) repurchase agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar days; (3)
certain instruments, futures contracts and options thereon for which there is no
liquid secondary market; (4) certain over-the-counter options, as described in
the Statement of Additional Information; (5) certain variable rate demand notes
having a demand period of more than seven days; and (6) certain Rule 144A
restricted securities (Rule 144A securities for which a dealer or institutional
market exists will not be considered illiquid).
RESTRICTED SECURITIES. The Lincoln Growth and Income, Lincoln Enterprise,
Lincoln U.S. Growth, Lincoln World Growth and Lincoln New Pacific Portfolios may
invest in restricted securities. Restricted securities are securities with legal
or contractual restrictions on resale. Restricted securities eligible for resale
pursuant to Rule144A that have a readily available market will not be considered
illiquid for purposes of the Portfolios' investment restriction concerning
illiquid securities.
OTHER GUIDELINES. In addition, each Portfolio may invest up to 5% of its
assets in the securities of issuers which have been in continuous operation for
less than three years. In the case of the Lincoln Tax-Free Income Portfolio,
this guideline applies only to industrial development revenue bonds where the
private entity on whose credit the security is based directly or indirectly is
less than three years old (including predecessors). Each Portfolio may also
borrow from banks for temporary or other emergency purposes, but not for
investment purposes, in an amount up to one-third of its total assets, and may
pledge its assets to the
24
<PAGE>
same extent in connection with such borrowings. Whenever these borrowings,
including reverse repurchase agreements, exceed 5% of the value of a Portfolio's
total assets, the Portfolio will not purchase any securities. Except for the
limitations on borrowing, the investment guidelines set forth in this paragraph
may be changed at any time without shareholder consent by vote of the Board of
Directors. A complete list of investment restrictions that identifies additional
restrictions that cannot be changed without the approval of a majority of an
affected Portfolio's outstanding shares (as well as other non-fundamental
restrictions) is contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
FIXED-INCOME SECURITIES. The market value of fixed-income obligations held
by the Portfolios and, consequently, the net asset value per share of the
Portfolios investing in fixed-income securities can be expected to vary
inversely to changes in prevailing interest rates. Investors should also
recognize that, in periods of declining interest rates, the yields of the
Fixed-Income Portfolios will tend to be somewhat higher than prevailing market
rates and, in periods of rising interest rates, the Fixed-Income Portfolio's
yields will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to a Fixed-Income Portfolio will likely be invested
in instruments producing lower yields than the balance of assets in the
Portfolio, thereby reducing current yields. In periods of rising interest rates,
the opposite can be expected to occur. In addition, obligations purchased by
certain of the Fixed-Income Portfolios that are rated in the lowest of the top
four ratings (Baa by Moody's or BBB by S&P) are considered to have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade securities. See "Lower-Rated
Securities" herein.
FOREIGN INVESTMENTS. The Lincoln World Growth Portfolio and the Lincoln New
Pacific Portfolio may invest substantially all of their assets in foreign
investments. Certain of the Portfolios may invest the following percentages of
their assets in foreign securities: the Lincoln Growth and Income Portfolio
(15%), the Lincoln Enterprise Portfolio (15%), the Lincoln U.S. Growth Portfolio
(20%), the Lincoln Corporate Income Portfolio (10%) and the Lincoln Tax-Free
Income Portfolio (10%). There are certain risks involved in investing in foreign
securities, including those resulting from fluctuations in currency exchange
rates, devaluation of currencies, future political or economic developments and
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. Although the Portfolios' Advisor or sub-advisors do not
intend to expose the Portfolios to such risks, with respect to certain foreign
countries, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Portfolios, including the withholding of dividends. When the
Portfolios' Advisor or sub-advisor believes that currency in which a portfolio
security or securities is denominated may suffer a decline against the United
States dollar, it may hedge such risk by entering into a forward contract to
sell an amount of foreign currency approximating the value of some or all of the
Portfolios' portfolio securities denominated in such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Portfolios hold various foreign
currencies from time to time, the value of the net assets of the Portfolios as
measured in United States 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. In order to protect against uncertainty in the level of
future foreign currency exchange rates, the Portfolios are authorized to enter
into certain foreign transactions. Investors should be aware that exchange rate
movements can be significant and can endure for long periods of time. The
Investment Advisor and sub-advisors of the Portfolios attempt to manage exchange
rate risk through active currency management.
25
<PAGE>
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 New York Stock Exchange. Accordingly, the Portfolios' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of United States companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of United States issuers, may affect portfolio liquidity. In buying
and selling securities on foreign exchanges, the Portfolios normally pay 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
than in the United States.
The Lincoln World Growth Portfolio and the Lincoln New Pacific Portfolio may
purchase foreign equity and debt securities that are listed on a principal
foreign securities exchange or over-the-counter market, represented by American
Depository Receipts (ADRs) or American Depository Shares (ADSs). An ADR or ADS
facility may be either a "sponsored" or "unsponsored" arrangement. In a
sponsored arrangement, the foreign issuer establishes the facility, pays some or
all the depository's fees, and usually agrees to provide shareholder
communications. In an unsponsored arrangement, the foreign issuer is not
involved and the ADR or ADS holders pay the fees of the depository. Depository
banks arrange unsponsored ADR and ADS facilities, either upon their initiative
or at the urging of large shareholders of or dealers in the foreign securities.
Unsponsored ADRs or ADSs may involve more risk to the Portfolio than
sponsored ADRs or ADSs due to the additional costs involved to the Portfolio,
the relative illiquidity of the issue in U.S. markets, and the possibility of
higher trading costs in the over the counter market as opposed to exchange-based
trading. The Portfolio will take these and other risk considerations into
account before making an investment in an unsponsored ADR or ADS.
Investments in foreign securities offer potential benefits not available
from investments in securities of domestic issuers. Such benefits include the
opportunity to invest in securities that appear to offer greater potential for
long-term capital appreciation than investments in domestic securities, and to
reduce fluctuations in portfolio value by taking advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets.
LOWER-RATED SECURITIES. The following Portfolios may invest the following
percentages of their total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P: Lincoln Growth & Income Portfolio (15%), Lincoln U.S.
Growth Portfolio (10%), Lincoln Corporate Income Portfolio (35%), and Lincoln
Tax-Free Income Portfolio (35%). Prices for securities rated below investment
grade may be affected by legislative and regulatory developments. Securities
rated Ba/BB or lower are commonly referred to as "junk bonds". See "Description
of Security Ratings" in the Statement of Additional Information. As of February
1, 1996, the Lincoln Corporate Income Portfolio held 9.35% of its total assets
in securities rated BBB-, 1.89% of its total assets in securities rated BB and
1.37% of its total assets in securities rated BB-. All such ratings were at the
time of investment in such security.
Securities rated below investment grade as well as unrated securities
usually entail greater risk (including the possibility of default or bankruptcy
of the issuers), and generally involve greater price volatility and risk of
principal and income, and may be less liquid, than securities in higher rated
categories. Both price volatility and illiquidity may make it difficult for the
Portfolio to value certain of these securities at certain times and these
securities may be difficult to sell under certain market conditions. Prices for
securities rated below investment grade may be affected by legislative and
regulatory developments.
BORROWING. Each of the Portfolios may borrow money for temporary or
emergency purposes in amounts not in excess of one-third of each Portfolio's
total assets. If a Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is repaid. If a Fund makes additional
investments while borrowings are outstanding, this may be construed as a form of
leverage. None of the Portfolios, except for the Lincoln Enterprise and Lincoln
U.S. Growth Portfolios, will purchase additional securities when money borrowed
exceeds 5% of the Portfolio's total assets.
SECURITIES LENDING. Each Portfolio may lend securities with a value of up
to one-third of its total assets to broker-dealers, institutions and other
persons as a means of earning additional income. Any such loan shall be
continuously secured by collateral at least equal to 100% of the value of the
security being loaned. If
26
<PAGE>
the collateral is cash, it may be invested in short-term securities, U.S.
Government obligations or certificates of deposit. Each Portfolio will retain
the evidence of ownership of any loaned securities and will continue to be
entitled to the interest or dividends payable on the loaned securities. In
addition, the Portfolio will receive interest on the loan. The loan will be
terminable by the Portfolio at any time and will not be made to affiliates of
the Portfolio, the Advisor or the respective sub-advisor. The Portfolio may pay
reasonable finder's fees to persons unaffiliated with it in connection with the
arrangement of loans.
If the other party to a securities loan becomes bankrupt, a Portfolio could
experience delays in recovering its securities. To the extent that, in the
meantime, the value of securities loans has increased, the Fund could experience
a loss.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes when the
Advisor or sub-advisor determines that market conditions warrant, each Portfolio
may invest up to 100% of its assets in money market instruments. To the extent a
Portfolio is engaged in a temporary defensive position, the Portfolio will not
be pursuing its investment objective. Each Portfolio may also hold a portion of
its assets in cash for liquidity purposes.
PORTFOLIO TURNOVER. The portfolio turnover rates for the Portfolios for the
fiscal year ending October 31, 1995 were as follows: 49% (Lincoln Growth and
Income Portfolio), 106% (Lincoln Enterprise Portfolio), 58% (Lincoln U.S. Growth
Portfolio), 9% (Lincoln World Growth Portfolio), 163% (Lincoln New Pacific
Portfolio), 227% (Lincoln Government Income Portfolio), 119% (Lincoln Corporate
Income Portfolio) and 3% (Lincoln Tax-Free Income Portfolio). High turnover in
any Portfolio could result in additional brokerage commissions to be paid by the
Portfolio. In addition, high portfolio turnover may also mean that a
proportionately greater amount of distributions to shareholders will be taxed as
ordinary income rather than long-term capital gains compared to investment
companies with lower portfolio turnover. See "Dividends, Distributions and
Taxes."
MANAGEMENT
The Fund's Board of Directors has overall responsibility for the operation
of the Fund. Pursuant to such responsibility the Board contracts with various
financial organizations to provide, among other things, day-to-day management
services for the Portfolios.
INVESTMENT ADVISOR
Lincoln Investment Management, Inc. ("LIM") (formerly known as Lincoln
National Investment Management Company), the Advisor to the Portfolios, is
headquartered at 200 East Berry Street, Fort Wayne, Indiana 46802. LIM was
incorporated in Illinois on June 27, 1930, and is a wholly-owned subsidiary of
Lincoln National Corporation. Lincoln National Corporation, whose principal
office is at 200 East Berry Street, Fort Wayne, Indiana 46802, is a
publicly-held holding company organized under Indiana law which, through
subsidiaries, provides, on a national basis, life insurance and annuities,
property-casualty insurance, investment products and related services.
LIM is registered with the SEC as an investment advisor and acts as
investment advisor to several registered investment companies in addition to the
Fund. LIM also provides investment services to Lincoln National Corporation and
its principal subsidiaries and acts as investment advisor to other clients. As
of December 31, 1995, LIM had total assets under management of $38.0 billion.
INVESTMENT ADVISORY AGREEMENT. The Investment Advisory Agreements, dated
October 25, 1993, under which LIM serves as Investment Advisor to each of the
Portfolios, were initially approved by the Board of Directors of the Fund,
including a majority of the Directors who are not parties to the Agreements or
"interested persons" of any such parties (the "Independent Directors"), on
October 1, 1993.
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<PAGE>
For the fiscal year ended October 31, 1995 and for the period ended October
31, 1994, LIM received gross fees before reimbursement in an amount and at a
rate based upon each Portfolio's average daily net assets, under the following
schedule:
<TABLE>
<CAPTION>
Percentage of Average
---------------------
Average Daily Net Assets Amount of Fee
------------------------ -------------
Period Ended Year Ended Period Ended Year Ended
Fund October 31, 1994 October 31, 1995 October 31, 1994 October 31, 1995
- ---- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Lincoln Growth and Income Portfolio................................. .80% .80% $ 84,525 $139,813
Lincoln Enterprise Portfolio........................................ .80% .80% 75,244 116,353
Lincoln U.S. Growth Portfolio....................................... .70% .70% 68,168 105,965
Lincoln World Growth Portfolio...................................... 1.10% 1.10% 111,392 142,529
Lincoln New Pacific Portfolio....................................... 1.10% 1.10% 108,975 119,820
Lincoln Government Income Portfolio................................. .30% .30% 27,383 33,749
Lincoln Corporate Income Portfolio.................................. .30% .30% 28,095 40,247
Lincoln Tax-Free Income Portfolio................................... .30% .30% 26,794 31,052
Lincoln Cashfund Portfolio.......................................... .25% .25% 23,370 27,946
</TABLE>
The advisory fees for the Lincoln Growth and Income, Lincoln Enterprise,
Lincoln World Growth and Lincoln New Pacific Portfolios are higher than those
paid by most mutual funds.
Under the Investment Advisory Agreements, LIM is responsible for the
investment and reinvestment of each Portfolio's assets, subject to the general
supervision of the Fund's Board. LIM performs and bears the costs of research,
statistical analysis and continuous supervision of the Portfolios' investment
portfolios. LIM also furnishes the Portfolios with office space and all
ordinary and necessary office facilities, equipment and personnel for managing
the affairs of the Portfolios. In addition, LIM bears the cost of fees,
salaries or other remuneration of all of the officers and any employees of the
Fund. LIM uses a team of portfolio managers to provide the advisory services
under the Investment Advisory Agreement.
Securities regulations of various states in which the Portfolios intend to
have shareholders may provide that, if expenses borne by a Portfolio in any
fiscal year exceed certain limitations, LIM must reimburse the Fund for any
such excess at least annually and prior to publication of the Fund's annual
report.
The percentage limitation includes the advisory fee but excludes interest,
taxes, a portion of a Portfolio's service and distribution fee, a portion of a
Portfolio's custody fee attributable to investments in foreign securities,
brokerage fees and, where permitted, extraordinary expenses. These expense
limitations may be raised or lowered from time to time. Under present state
regulations, the most restrictive limitation of state securities commissions is:
2 1/2% of the first $30,000,000 of average net assets of a Portfolio, 2% of the
next $70,000,000 of average net assets and 1 1/2% of average net assets in
excess of $100,000,000 during the applicable year. During any year LIM will be
bound by the most stringent applicable requirements of any state in which a
Portfolio has registered its shares for sale.
The Investment Advisory Agreements will continue in effect for a period of
two years from the date of their execution, and will continue annually
thereafter if approved by a vote of a majority of the Independent Directors, at
a meeting called for the purpose of voting on such approval. The Investment
Advisory Agreements may be terminated without penalty at any time (1) on 60
days' written notice, by vote of a majority of the Board of Directors of the
Fund, (2) on 60 days' written notice, by vote a majority of the outstanding
voting securities of the Portfolios, or (3) on 60 days' written notice by LIM.
The Investment Advisory Agreements terminate automatically in the event of
"assignment". The terms "assignment", "majority of outstanding voting
securities" and "interested person" are as defined in the Investment Company
Act.
INVESTMENT SUB-ADVISORS
Pursuant to a sub-advisory agreement with LIM (the "Sub-Advisory
Agreement" or, collectively, the "Sub-Advisory Agreements"), each Portfolio's
sub-advisor participates in the management of its respective Portfolio's assets,
is responsible for the day-to-day investment management of the Portfolio, makes
investment decisions for the Portfolio in accordance with the Portfolio's
investment objective and places orders on behalf of the Portfolio to effect the
investment decisions made. LIM continues to have responsibility for all
investment advisory services in connection with the management of the Portfolios
pursuant to the
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<PAGE>
Investment Advisory Agreement and supervises the sub-advisors' performance of
such services. Each of the sub-advisors uses a team of portfolio managers to
provide the advisory services pursuant to the Sub-Advisory Agreements.
The sub-advisors receive subadvisory fees from the Advisor for their
services calculated in accordance with the schedule set forth below. The
Portfolios do not pay any fees to the sub-advisors.
<TABLE>
<CAPTION>
PORTFOLIO SUB-ADVISOR ANNUAL FEE
- ------------------------------------------ ------------------------------------------- ---------------
<S> <C> <C>
Lincoln Growth and Income Portfolio Beutel, Goodman Capital Management .50%
Lincoln Enterprise Portfolio Lynch & Mayer, Inc .50%
Lincoln U.S. Growth Portfolio Provident Investment Counsel .40%
Lincoln World Growth Portfolio Walter Scott & Partners Limited .80%
Lincoln New Pacific Portfolio John Govett & Company Limited .80%
</TABLE>
The following registered investment advisors act as sub-advisors (the
"Sub-Advisors" or individually the "Sub-Advisor") to LIM with respect to the
management of the assets of the Portfolios as indicated below.
Beutel, Goodman Capital Management, Sub-Advisor to LIM with respect to the
management of the assets of the Lincoln Growth and Income Portfolio, 5847 San
Felipe, Suite 4500, Houston, Texas 77057, provides advice on pension investments
to a number of institutional firms as well as to high net worth individuals; and
had $1.2 billion in assets under management as of December 31, 1995.
Lynch & Mayer, Inc., Sub-Advisor to LIM with respect to management of the
assets of the Lincoln Enterprise Portfolio, 520 Madison Avenue, New York, New
York 10022, provides investment advice to pension funds, foundations,
endowments, trusts and high net worth individuals and families and had assets
under management, as of December 31, 1995, in excess of $6.6 billion.
Provident Investment Counsel, a wholly owned subsidiary of United Asset
Management Corporation, Sub-Advisor to LIM with respect to management of
the assets of the Lincoln U.S. Growth Portfolio, 300 North Lake Avenue,
Penthouse Suite, Pasadena, California 91101-4106, provides investment advice
to pension funds, foundations, endowments and mutual funds and had assets
under management, as of December 31, 1995, of $17.3 billion.
Walter Scott & Partners Limited, Sub-Advisor to LIM with respect to
management of the assets of the Lincoln World Growth Portfolio, Millburn Tower,
Gogar, Edinburgh, Scotland EH12 9BS, provides investment advice to pension funds
and foundations and had assets under management, as of December 31, 1995, in
excess of $2.0 billion.
John Govett & Company Limited, Sub-Advisor to LIM with respect to
management of the assets of the Lincoln New Pacific Portfolio, Shackleton House,
4 Battlebridge Lane, London, England SE1 2HR, provides investment advice to
investment trusts, investment companies, mutual funds and pension funds and had
assets under management, as of December 31, 1995, of $5.1 billion.
While LIM acts as investment advisor for all of the Portfolios, it is
solely responsible for the investment management of the Lincoln Government
Income Portfolio, Lincoln Corporate Income Portfolio, Lincoln Tax-Free Income
Portfolio and Lincoln Cashfund Portfolio.
DISTRIBUTOR
Delaware Distributors, L.P. ("Delaware Distributors" or the "Distributor")
is located at 1818 Market Street, Philadelphia, PA 19103-3682 and serves as
distributor of the Fund shares. Prior to February 25, 1995, LNC Equity Sales
Corporation, another LIM affiliate, served as the Fund's distributor. Delaware
Distributors is an indirect wholly owned subsidiary of Lincoln National
Corporation and an affiliate of LIM. Delaware Distributors is paid an annual
service fee with respect to Class A, Class B and Class C shares of the
Portfolios at the rate of 0.25% of the value of the average daily net assets of
the respective class of each Portfolio. Delaware Distributors is also paid an
annual distribution fee by Class A, Class B and Class C shares at the rate of
0.10%, 0.75% and 0.75%, respectively, of the value of average daily net assets
attributable to those classes of shares. The fees are authorized pursuant to
separate service and distribution plans for each of the Class
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<PAGE>
A, Class B and Class C shares (the "Plans") adopted by the Portfolios pursuant
to Rule 12b-1 under the Investment Company Act and are used by Delaware
Distributors to pay its financial advisors for servicing shareholder accounts
and also to cover expenses primarily intended to result in the sale of those
shares of the Portfolios. These expenses include costs of printing and
distributing the Portfolios' Prospectus, Statement of Additional Information and
sales literature to prospective investors; an allocation of overhead and other
branch office distribution-related expenses; payments to and expenses of
registered representatives and other persons who provide support services in
connection with the distribution of the shares; and accruals for interest on the
amount of the foregoing expenses that exceed distribution fees and, in the case
of Class B shares, the CDSC received by the Distributor. Registered
representatives may receive different levels of compensation for selling one
class of shares over another.
Payments under the Plans are not tied exclusively to the distribution and
shareholder services expenses actually incurred, and the payments may exceed
distribution expenses actually incurred. The Fund's Board of Directors will
evaluate the appropriateness of the Plan and its payment terms on a continuing
basis and in doing so will consider all relevant factors, including expenses,
the amounts received under the Plans and the proceeds of the CDSC.
The National Association of Securities Dealers, Inc. ("NASD") limits the
annual expenditures which each Portfolio may incur under each Plan to 1%
annually of which 0.75% may be used to pay such distribution expenses and 0.25%
may be used to pay shareholder service fees. The NASD rule also limits the
aggregate amount which the Portfolios may pay for such distribution costs to
6.25% of gross share sales from inception of each Plan, plus interest at the
prime rate plus 1% on unpaid amounts thereof (less any CDSCs paid by the
shareholders to the Distributor). The Portfolios will be operated accordingly.
CUSTODIAN AND ADMINISTRATOR
Investors Bank & Trust Company ("Investors Bank") serves as Custodian and
Administrator for each of the Portfolios and, in that capacity, has custody of
the Portfolios' securities and maintains certain financial and accounting books
and records pursuant to an agreement with the Fund. Its mailing address is 89
South Street, Boston, MA 02111. Investors Bank is not involved in the investment
decisions made with respect to the Portfolios.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the Portfolios' securities transactions are placed by the Advisor
or respective sub-advisor. The Advisor and Sub-Advisors strive to obtain the
best available prices in their portfolio transactions, taking into account the
costs and promptness of executions. Subject to the requirement of seeking the
best available prices and execution, the Advisor or a Sub-Advisor may, in
circumstances in which two or more broker-dealers are in a position to offer
comparable prices and execution, give preference to broker-dealers that have
provided investment research, statistical, and other related services to the
Advisor or Sub-Advisor for the benefit of the Portfolios and/or of other
Portfolios served by the Advisor or Sub-Advisor.
An affiliate of the Advisor, such as Lynch & Mayer, Inc. may act as a broker
or futures commission merchant for the Fund, provided that the commissions, fees
or other remuneration it receives are fair and reasonable. See "Execution of
Portfolio Transactions" in the Statement of Additional Information.
NET ASSET VALUE
Each Portfolio's net asset value per share is determined by subtracting its
liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. Net asset value is calculated separately for each
class of shares for each Portfolio at 4:00 P.M., Eastern time.
Each Portfolio will compute its net asset value once daily on the days that
the New York Stock Exchange is open for trading. The New York Stock Exchange is
closed on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
30
<PAGE>
With the exception of the Lincoln Cashfund Portfolio, Portfolio securities
are valued based upon market quotations or, if not readily available, at fair
value as determined in good faith under procedures established by the Fund's
Board of Directors. See "Net Asset Value" in the Statement of Additional
Information.
The Lincoln Cashfund Portfolio determines the value of its portfolio
securities by the amortized cost method. The method involves valuing an
instrument at cost and thereafter assuming a constant amortization to maturity
of any discount or premium regardless of the impact of fluctuating interest
rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. During these periods, the yield to an
existing shareholder may differ somewhat from that which could be obtained from
a similar Portfolio which marks its portfolio securities to market each day.
The Board of Directors has established procedures designed to stabilize, to
the extent reasonably possible, the net asset value of the Lincoln Cashfund
Portfolio at $1.00 per share. The Lincoln Cashfund Portfolio seeks to maintain a
value of $1.00 per share at all times. To achieve this, the Portfolio purchases
only securities with remaining maturities of less than thirteen months and
limits the dollar-weighted average maturity to 90 days or less. The Portfolio
cannot guarantee a $1.00 share price, but the Portfolio's maturity standards and
investments solely in high-quality money market instruments help minimize any
price decreases or increases that might result from rising or declining interest
rates. See "Net Asset Value" in the Statement of Additional Information.
Although the legal rights of Class A, Class B, Class C and Class D shares
are substantially identical, the different expenses borne by each class will
result in different net asset values and dividends. The net asset value of Class
B and Class C shares will generally be lower than Class A shares and the net
asset value of Class A, Class B and Class C shares will generally be lower than
Class D shares as a result of the respective service and distribution fees
charged. It is expected, however, that the net asset value per share of each of
the classes will tend to converge immediately after the recording of dividends
since the dividends will differ by approximately the amount of the distribution
expense accrual differential between the classes.
HOW TO PURCHASE SHARES
An investor may purchase shares of the Portfolios through a registered
broker-dealer that has an agreement with the Fund, the Distributor, or directly
from the Fund through its shareholder services agent. The minimum initial
investment in each Portfolio, except for the Lincoln Cashfund Portfolio, is
$500, or $250 for a spousal IRA or $25 for investments through the Automatic
Investment Plan. The minimum subsequent investment is $50 unless made through
the Automatic Investment Plan, in which case the minimum subsequent investment
is $25. Investors in Class D shares must meet higher minimums and other purchase
requirements. The minimum initial investment for the Lincoln Cashfund Portfolio
is $100. See the Statement of Additional Information.
All minimum investment requirements may be waived for certain retirement and
employee savings plans or custodial accounts where the value of all accounts
under the plan exceeds the minimum. Dividend reinvestments into the same or a
different Portfolio are not subject to the minimum investment requirements.
The purchase price is the next determined net asset value, plus a sales
charge which may be imposed at the time of purchase or on a deferred basis, at
the option of the purchaser, or, in the case of Class C shares, without a sales
charge after the first year but subject to an annual distribution fee. See
"Alternative Purchase Plan" below. See also "Net Asset Value."
SHARE CERTIFICATES
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of the
Class of the Portfolio purchased, without the issuance of a share certificate.
Maintaining shares in uncertificated form minimizes the risk of loss or theft of
a share certificate. A lost, stolen or
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<PAGE>
destroyed certificate cannot be replaced without obtaining a sufficient
indemnity bond. The cost of such a bond, which is generally borne by the
shareholder, can be 2% or more of the value of the lost, stolen or destroyed
certificate. A certificate will be issued if requested in writing by the
shareholder or by his or her broker.
PURCHASE BY CHECK
Investors may also open an account and purchase shares directly through
Shareholder Services by completing and signing the application form included at
the back of this Prospectus. Investors should forward to Shareholder Services
the completed application form, indicating the Portfolio and class of shares
together with a check to cover the purchase, in accordance with the instructions
provided on the application form.
PURCHASE BY WIRE
For an initial purchase of shares of the Portfolios by wire, the investor
must first telephone Delaware Service Company, Inc. ("Delaware Service") at
1-800-923-8476. The following information will be requested: the investor's
name, address, tax identification number, Portfolio election, class of shares
election, dividend distribution election, amount being wired and wiring bank.
Instructions should then be given by the investor to the investor's bank to
transfer funds by wire to CoreStates Bank, N.A., Philadelphia, PA, ABA
#031000011, Account #1409852924, specifying on the wire the account number
assigned by Delaware Service and the investor's name and identifying the
Portfolio and the sales charge alternative (Class A, Class B or Class C shares).
For investments in the Lincoln Cashfund Portfolio, no sales charge alternative
need be specified.
In making a subsequent purchase order by wire, the investor should wire Core
States Bank, N.A. directly and should be sure that the wire specifies the
Portfolio, Class A, Class B, Class C or Class D shares (in the case of
Portfolios other than the Lincoln Cashfund Portfolio) and the investor's name
and individual account number. It is not necessary to call Delaware Service to
make subsequent purchase orders utilizing federal funds.
All orders received before 4:00 P.M. Eastern time on any Business Day will
be executed at net asset value plus sales charge for the applicable class of
shares determined that day. A Business Day is any day Monday through Friday on
which the New York Stock Exchange is open for business. The broker-dealer is
responsible for forwarding purchase orders to Delaware Service prior to the
daily deadline.
ALTERNATIVE PURCHASE PLAN
EQUITY AND FIXED-INCOME PORTFOLIOS. The Fund offers three classes of shares
to the individual investor in the Equity Portfolios and Fixed-Income Portfolios
which allow the investor to choose the most beneficial sales charge structure
for the investor's circumstances. The factors to consider in selecting a sales
charge structure are the amount of the purchase and the length of time the
investor expects to hold the shares and other relevant circumstances. The
investor may purchase shares at the next determined net asset value plus, at the
investor's election, a sales charge which may be imposed either at the time of
purchase (the Class A shares or the initial sales charge alternative) or on a
deferred basis (the Class B shares or the deferred sales charge alternative), or
without a sales charge but subject to an annual distribution fee and a 1.0%
redemption fee during the first year (the Class C shares or the level load
alternative). A fourth class is available to certain institutional investors.
The Fund has received exemptive relief from the Securities and Exchange
Commission to permit the issuance of multiple classes of stock.
Class A shares are subject to an initial sales charge of up to 5.5% of the
offering price on shares of the Equity Portfolios and 4.5% on shares of the
Fixed-Income Portfolios and an annual distribution fee which is currently being
charged at a rate of up to .35% of the average daily net asset value of the
Class A shares. Certain purchasers of Class A shares may qualify for a reduction
or waiver of initial sales charges. See "Initial Sales Charge Alternative --
Class A Shares" and "Reduction and/or Waiver of Initial Sales Charges" below.
32
<PAGE>
Class B shares do not incur a sales charge when they are purchased but are
subject to a contingent deferred sales charge ("CDSC") (declining from 5.0% to
zero of the lesser of the amount invested or the redemption proceeds), which
will be imposed on certain redemptions made within six years of purchase. There
are annual service and distribution fees of up to 1.0% of the average daily net
asset value of the Class B shares. Certain redemptions of Class B shares may
qualify for waiver or reduction of the CDSC. See "How to Sell Shares -- Waiver
of Contingent Deferred Sales Charge."
Class C shares are not subject to an initial sales charge but are subject to
a 1.0% CDSC if redeemed in the first year and annual service and distribution
fees of 1.0% of the average daily net asset value of the Class C shares.
Class D shares are not subject to an initial sales charge, a CDSC or annual
service and distribution fees. The mimimum initial investment for Class D shares
is $2 million. Class D shares are available only to retirement plans introduced
by persons not associated with brokers or dealers that are primarily engaged in
the retail securities business (and rollover individual retirement accounts from
such plans), as well as insurance companies (including both general and separate
accounts), affiliates of insurance companies and investment companies registered
under the Investment Company Act.
The four classes of shares represent an interest in the same portfolio of
investments for each Portfolio and have the same rights, except that each class
bears the separate expenses of its Rule 12b-1 distribution and service plan and
has exclusive voting rights with respect to such plan. The four classes also
have separate exchange privileges. See "How to Exchange Shares" below. The net
income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the service and distribution fee of
each class. Class B and Class C shares bear the expense of a higher service and
distribution fee which will cause the Class B and Class C shares to have a
higher expense ratio and pay lower dividends than the Class A shares.
CONVERSION FEATURE. At the end of the period ending six years after the end
of the calendar month in which the shareholder's purchase order was accepted,
Class B shares will automatically convert into Class A shares and will no longer
incur a higher service and distribution fee. Such conversion will be on the
basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose of the conversion
feature is to reduce the service and distribution fee paid by holders of the
Class B shares that have been outstanding long enough for the Distributor to
have been compensated for distribution expenses incurred in the sale of such
shares.
For purposes of conversion to Class A, Class B shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares in
a shareholder's account will be considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's account (other than those in
the sub-account) convert to Class A, an equal pro-rata portion of the Class B
shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher service and distribution fee and transfer agency costs
with respect to Class B shares does not result in the Portfolio's dividends or
distributions constituting "preferential dividends" under the Internal Revenue
Code, and (ii) the conversion of Class B shares to Class A shares does not
constitute a taxable event under federal income tax law. The conversion of Class
B shares to Class A shares may be suspended if such an opinion is no longer
available at the time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might continue to be
subject to the higher service and distribution fee for an indefinite period
which may extend beyond the period ending six years after the end of the
calendar month in which the shareholder's purchase order was accepted.
The following illustrations are provided to assist the investor in
determining which method of purchase best suits the investor's individual
circumstances:
If he/she qualifies for a reduced sales charge, the investor might elect the
initial sales charge alternative because a similar sales charge reduction is not
available for purchases under the contingent deferred sales charge or level load
alternatives. However, because the initial sales charge is deducted at the time
of purchase, the investor would not have all of his/her money invested
initially.
33
<PAGE>
On the other hand, the investor might determine that it is advantageous to
have all of his or her money invested initially, although it is subject to an
annual service and distribution fee of 1% and, in the case of Class B shares,
for a six-year period, a CDSC of up to 5.0% and, in the case of Class C shares,
for a one-year period, a CDSC of up to 1%. Due to the conversion feature, an
investor who intends to maintain an investment in a Portfolio for more than six
years and does not qualify for a reduced sales charge might consider purchasing
Class B shares. However, this example does not take into account the time value
of money which further reduces the impact of the 1.0% distribution fee on the
investment, fluctuations in the net asset value, or the effect of the return on
the investment over this period of time.
The Lincoln Cashfund Portfolio offers two classes of shares: the Regular
shares and the Class B Exchange shares. Regular shares are offered at net asset
value ($1.00) without a sales charge and are not subject to any service or
distribution fees. Class B Exchange shares are issued only upon the exchange of
shares of Class B shares of any other Portfolio. Such Class B Exchange shares
are sold at net asset value ($1.00) without an initial sales charge but are
subject to service and distribution fees of 1.0% of the average daily net asset
value of the Class B Exchange shares. Such shares are also subject to the same
CDSC as Class B shares, if any. See "How to Exchange Shares."
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined net asset value plus a sales
charge (expressed as a percentage of the offering price) as shown in the
following table:
EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF NET AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ---------------------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C>
Less than $50,000....................... 5.5% 5.82% 5.0%
$50,000 to $99,999...................... 4.5 4.71 4.0
$100,000 to $249,999.................... 3.5 3.63 3.0
$250,000 to $499,999.................... 3.0 3.09 2.5
$500,000 to $999,999.................... 2.0 2.04 1.5
$1,000,000 and above.................... 0.0* 0.00 0.5
</TABLE>
- ------------------------
* A fee of 0.5% will be applied on net asset value purchases of $1,000,000 and
above redeemed during the first year.
FIXED-INCOME PORTFOLIOS
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF NET AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ---------------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C>
Less than $100,000...................... 4.5% 4.71% 4.00%
$100,000 to $249,999.................... 3.5 3.63 3.00
$250,000 to $499,999.................... 2.5 2.56 2.00
$500,000 to $999,999.................... 2.0 2.04 1.50
$1,000,000 and above.................... 0.0* 0.00 0.50
</TABLE>
- ------------------------
* A fee of 0.5% will be applied on net asset value purchases of $1,000,000 and
above redeemed during the first year.
Selling dealers may be deemed to be underwriters, as that term is defined in the
Securities Act of 1933, as amended.
34
<PAGE>
REDUCTION AND/OR WAIVER OF INITIAL SALES CHARGES (CLASS A
SHARES ONLY)
RIGHT OF ACCUMULATION. Pursuant to the right of accumulation (the "Right of
Accumulation"), investors may purchase shares of the Portfolios at the sales
charge applicable to the total of (1) the dollar amount then being purchased
plus (2) the amount equal to the total purchase price of the investor's
concurrent purchases of the other Portfolios plus (3) the current public
offering price of all shares of the Fund already held by the investor. To
receive the Right of Accumulation at the time of purchase investors must give
their brokers, Delaware Service or Delaware Distributors sufficient information
to permit confirmation of qualification. The foregoing Right of Accumulation
does not apply to purchases of Lincoln Cashfund Portfolio shares.
CONCURRENT PURCHASES. To qualify for a reduced sales charge, the investor
may combine concurrent purchases of two or more Portfolios in the Fund, except
direct purchases of the Lincoln Cashfund Portfolio. For example, if the investor
concurrently invests $25,000 in one Portfolio and $25,000 in another, the sales
charge would be reduced to reflect a $50,000 purchase.
LETTER OF INTENT. The investor may reduce sales charges on all investments
by meeting the terms of a letter of intent (a "Letter of Intent"), a nonbinding
commitment to invest a certain amount within a 13 month period. Up to 5% of the
Letter of Intent amount will be held in escrow to cover additional sales charges
which may be due if the investor's total investments over the thirteen month
period are insufficient to qualify for a sales reduction. A Letter of Intent
will cover investments only in the Equity Portfolios and the Fixed-Income
Portfolios.
AUTOMATIC INVESTMENT PLAN
Investors may purchase Class A, Class B or Class C shares of a Portfolio
through an automatic investment plan. Under this plan, an amount
specified by the shareholder of $25 or more on a monthly, quarterly or
semi-annual basis will be sent to Delaware Service from the investor's bank
for investment in a Portfolio. Participants in the automatic investment plan
should not elect to receive dividends or other distributions from the Portfolio
in cash. To participate in the automatic investment plan, investors should
complete the appropriate portion of the application form provided at the end of
this Prospectus. Investors should contact their broker-dealers or Delaware
Service for more information.
WAIVER OF SALES CHARGES
Sales charges do not apply to shares of the Portfolios purchased: (1) by
registered representatives, other employees of broker-dealers their immediate
family members and employees of registered representatives pursuant to a sales
agreement with the Distributor; (2) by a director or officer of a fund managed
or advised by LIM or a director (including a retired director), officer or
employee of Lincoln National Corporation or its subsidiaries or a director,
officer or employee acting as a custodian for a child or a person acting as
trustee of a trust for the sole benefit of a director, officer or employee or
the immediate family member of a director, officer or employee; (3) in accounts
as to which a broker-dealer charges an account management fee, provided the
broker-dealer has an agreement with the Distributor; (4) as part of an employee
benefit plan having more than 100 eligible employees or a minimum of $1,000,000
invested in the Fund, provided that certain other requirements, as explained in
the Statement of Additional Information, are met; (5) with certain redemption
proceeds from other mutual fund complexes on which the investor paid a front-end
sales charge only as part of certain promotional programs established by the
Fund and/or Distributor; (6) by one or more members of a group of at least 1000
persons engaged in a common business, profession, civic or charitable endeavor
or other activity and retirees and immediate family members of such persons
pursuant to a marketing program between the distributor and such group; (7) by
directors, officers, employees and immediate family members of current
sub-advisors to the Portfolio; or (8) by employees and immediate family members
of the current custodian and shareholder services agent.
Immediate family members are defined as the spouse, parents, siblings,
natural or adopted children, mother-in-law, father-in-law, brother-in-law and
sister-in-law of a director, officer or employee. The term "employee" is deemed
to include current and retired employees.
35
<PAGE>
Exemptions must be qualified in advance by the Distributor and must meet all
requirements specified in the Statement of Additional Information. Your
investment professional should call the Distributor or Delaware Service for
more information.
Additional information on waiver of the contingent deferred sales charges on
Class B shares can be found under "How to Sell Shares -- Contingent Deferred
Sales Charge -- Class B Shares."
REALLOWANCE TO BROKERS
From time to time the Distributor may reallow to brokers the full amount of
the sales charge on Class A shares. To the extent that the Distributor reallows
the full amount of the sales charge to brokers, such brokers may be deemed to be
underwriters under the Securities Act of 1933, as amended.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES
The offering price of Class B shares for investors choosing the contingent
deferred sales charge alternative is the net asset value next determined
following receipt of an order by Delaware Service or Delaware Distributors.
Although there is no sales charge imposed at the time of purchase, redemptions
of Class B shares may be subject to a CDSC. See "How to Sell Shares --
Contingent Deferred Sales Charge -- Class B Shares."
LEVEL SALES CHARGE ALTERNATIVE -- CLASS C SHARES
The offering price of Class C shares for investors choosing the level sales
charge alternative is the net asset value next determined following receipt of
an order by Delaware Service. See "Net Asset Value." Although there is no
initial sales charge, the Class C shares are subject to a charge of 1% on
redemptions made in the first 12 months.
CLASS D SHARES -- ELIGIBLE INVESTORS.
Retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business (and
rollover individual retirement accounts from such plans), as well as insurance
companies (including both general and separate accounts), affiliates of
insurance companies and investment companies registered under the Investment
Company Act of 1940, may invest in the Portfolios through purchases of Class D
shares. Class D shares are offered at net asset value to these investors.
Shareholders are not entitled to use the "Lincoln National" name or otherwise
refer to Lincoln National in any materials distributed to third parties,
including participants in these retirement or deferred compensation plans,
without the prior written consent of the Fund.
HOW TO SELL SHARES
As described below, shares of the Portfolios may be redeemed at their net
asset value (subject to any applicable contingent deferred sales charge for
Class B and Class C shares) and redemption proceeds will be sent within seven
days of the execution of a redemption request. Shareholders with brokers that
sell shares may redeem shares through such brokers. If the shares are held in
the broker's "street name," the redemption must be made through the broker.
Other shareholders may redeem shares through Delaware Service. If a
redeeming shareholder owns both Class A and Class B shares of a Portfolio, the
Class A shares will be redeemed first unless the shareholder specifically
requests otherwise. In the case of Lincoln Cashfund Portfolio, the Regular
shares will be redeemed before any Class B Exchange shares are redeemed, unless
otherwise specifically requested.
REDEMPTIONS THROUGH BROKERS
Shareholders may submit redemption requests to brokers that have an
agreement with the Fund ("registered representatives"). Registered
representatives may honor a redemption request either by repurchasing shares
from a redeeming shareholder at the shares' net asset value next computed after
the registered representative receives the request or by forwarding such
requests to Delaware Service (see "Redemptions Through Delaware
Service"). Redemption proceeds (less any applicable contingent deferred sales
charge for Class B and Class C shares) normally will be paid by check or, if
offered by the registered representative, credited to the shareholder's
brokerage account at the election of the shareholder.
36
<PAGE>
Registered representatives may impose a service charge for handling redemption
transactions placed through them and may have other requirements concerning
redemptions. Accordingly, shareholders should contact their registered
representative for more details.
REDEMPTIONS THROUGH DELAWARE SERVICE
Redemption requests may be transmitted to Delaware Service by telephone or
by mail, in accordance with the instructions provided below. All redemptions
will be effected at the net asset value next determined after Delaware Service
has received the request and any required supporting documentation (less any
applicable contingent deferred sales charge for Class B and Class C shares).
Redemption requests received before 4:00 p.m. eastern time on any Business Day
will be effected at the net asset value calculated on that day. Redemption
requests will not require a signature guarantee if the redemption request is for
an amount which is less than $50,000 and the proceeds are to be sent either: (1)
to the redeeming shareholder at the shareholder's address of record as
maintained by Delaware Service, provided the shareholder's address of record has
not been changed within the preceding thirty days; or (2) directly to a
pre-designated bank, savings and loan or credit union account ("Pre-Designated
Account"). ALL OTHER REDEMPTION REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE
GUARANTEE OF THE REDEEMING SHAREHOLDER'S SIGNATURE. A signature guarantee can be
obtained from any bank, U.S. trust company, a member firm of a U.S. stock
exchange or a foreign branch of any of the foregoing or other eligible guarantor
institution. A notary public is not an acceptable guarantor. A shareholder
uncertain about the Funds' signature guarantee requirement should contact
Delaware Service.
Shareholders may qualify to have redemption proceeds sent to a
Pre-Designated Account by completing the appropriate section of the Account
Application. Shareholders with Pre-Designated Accounts should request that
redemption proceeds be sent either by bank wire or by check. The minimum
redemption amount for a bank wire is $5,000. Shareholders requesting a bank wire
should allow two business days from the time the redemption request is effected
for the proceeds to be deposited in the shareholder's Pre-Designated Account.
See "How to Sell Shares -- Other Important Redemption Information." Shareholders
may change their Pre-Designated Accounts only by a letter of instruction to
Delaware Service containing all account signatures, each of which must be
guaranteed. Delaware Service currently does not charge a bank wire service fee
on each wire redemption sent, but reserves the right to do so in the future.
TELEPHONE REDEMPTION PRIVILEGE
You may request the Telephone Redemption Privilege by telephone either (i)
by completing the appropriate section of the application form or (ii) by
signature guaranteed written request. A signature guarantee must be from an
eligible guarantor institution approved by Delaware Service. Signature
guarantees in proper form generally will be accepted from domestic banks, a
member of a national securities exchange, credit unions and savings and loan
associations, as well as from participants in the Securities Transfer Agents
Medallion Program ("STAMP"). If you have any questions with respect to signature
guarantees, please call Delaware Service.
Once the privilege is instituted, you may call Delaware Service at the
number provided on the back cover of this Prospectus. All calls will be
recorded. Delaware Service will act on instructions that it reasonably believes
to be genuine. The proceeds of the redemption will only be mailed to the address
of record with the Fund, provided that your account registration has not changed
in the last 30 days. The Fund reserves the right to refuse a telephone
redemption and may limit the amount and frequency. The Telephone Redemption
Privilege may be modified or terminated at any time by the Fund. Neither the
Fund nor Delaware Service will be liable for following instructions that they
reasonably believe to be genuine. It is the Fund's policy to provide a written
confirmation statement of all telephone transactions to shareholders at their
address of record within 3 business days after the telephone transaction. You
should verify the accuracy of telephone transactions immediately upon receipt of
your confirmation statement. As a result of this policy, you will bear the risk
of loss in the event of a fraudulent telephone exchange (or redemption
transaction). If it is determined that the Fund has not followed reasonable
procedures in effecting telephone transactions, the Fund may be held liable for
related losses.
37
<PAGE>
REDEMPTIONS BY MAIL
Redemption requests should be mailed directly to Delaware Service at the
address provided on the back cover of this Prospectus. Requests for payment of
redemption proceeds to a party other than the registered account owner(s) and/or
requests that redemption proceeds be mailed to an address other than the
shareholder's address of record require a signature guarantee. In addition, if
the shareholder's address of record has been changed within the preceding thirty
days or if the redemption proceeds exceed $50,000, a signature guarantee is
required. Redemptions of shares for which certificates have been issued must be
accompanied by properly endorsed share certificates.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders owning shares with a value of $10,000 or more may participate
in the Systematic Withdrawal Plan. A participating shareholder will receive
proceeds from monthly, quarterly or annual redemptions of Fund shares with
respect to Class A, Class B or Class C shares. Contingent deferred sales charges
may be imposed on certain redemptions of Class B shares made under the
Systematic Withdrawal Plan. The minimum periodic amount is $50. To participate
in the Systematic Withdrawal Plan, investors should complete the appropriate
portion of the Application. Investors should contact their brokers or
Delaware Service for more information. With respect to Class A and Class B
shares, participation in the Systematic Withdrawal Plan concurrent with initial
purchases of Class A shares of the Fund may be disadvantageous to investors
because of the sales charges or CDSC involved and possible tax implications. In
addition, shareholders who participate in the Systematic Withdrawal Plan should
elect to reinvest dividends or other distributions in additional Portfolio
shares. Shareholders may not elect systematic withdrawal privileges if they hold
certificates.
CHECKWRITING
Shareholders may redeem Regular shares of the Lincoln Cashfund Portfolio by
writing checks, a supply of which may be obtained through Delaware Service,
against their Lincoln Cashfund Portfolio accounts (checkwriting is not available
with respect to Class B Exchange shares). The minimum check amount is $250. When
the check is presented to Delaware Service for payment, Delaware Service
will cause the Lincoln Cashfund Portfolio to redeem a sufficient number of
shares to cover the amount of the check. This procedure enables the shareholder
to continue receiving dividends on those shares until such time as the check is
presented to Delaware Service for payment. Canceled checks are not returned;
however, shareholders may obtain photocopies of their canceled checks upon
request. Delaware Service reserves the right to charge for this service. If
a shareholder does not own sufficient shares of the Lincoln Cashfund Portfolio
to cover a check, the check will be returned to the payee marked "not sufficient
funds." Checks written in amounts less than $250 also will be returned. The
Lincoln Cashfund Portfolio reserves the right not to honor check redemption
requests if the shares to be redeemed have been purchased by check within
fifteen days prior to the date the redemption request was received by
Delaware Service. Shares for which stock certificates have been issued may
not be redeemed by check. The Lincoln Cashfund Portfolio and Delaware
Service reserve the right to terminate or modify the checkwriting service at
any time or to impose a service charge in connection with it.
Because the aggregate amount of shares owned by a shareholder is likely to
change each day, shareholders should not attempt to redeem all shares held in
their accounts by using the checkwriting procedure. Charges may be imposed in
the future for checkwriting.
30-DAY REPURCHASE PRIVILEGE
If an investor redeems shares in a Portfolio and has not previously
exercised the repurchase privilege, the investor may reinvest any portion or all
of the proceeds of such redemption in shares of the same Portfolio at the net
asset value next determined after the order is received, which must be within 30
days after the date of the redemption. No sales charge will apply to such
repurchases. The investor will receive pro rata credit for any CDSC paid in
connection with the redemption of Class B and Class C shares (or Class B
Exchange shares in the case of the Lincoln Cashfund Portfolio). The investor
must notify Delaware Service, either directly or through a registered
broker-dealer, at the time the repurchase privilege is exercised, that the
investor is entitled to a net asset value purchase or credit for the CDSC
previously paid.
38
<PAGE>
Exercise of the repurchase privilege will generally not affect federal income
tax treatment of any gain realized upon redemption. If the redemption results in
a loss, some or all of the loss, depending on the amount reinvested, will not be
allowed for federal income tax purposes.
OTHER IMPORTANT REDEMPTION INFORMATION
A request for redemption will not be processed until all of the necessary
documentation has been received in good order. A shareholder in doubt about what
documents are required should contact his or her broker-dealer or Delaware
Service.
Except in extraordinary circumstances and as permitted under the Investment
Company Act, payment for shares redeemed by telephone or by mail will be made
promptly after receipt of a redemption request, if in good order, but not later
than seven days after the date the request is executed. Requests for redemption
which are subject to any special conditions or which specify a future or past
effective date cannot be accepted.
If Delaware Service is requested to redeem shares for which a Portfolio
has not yet received good payment, the Portfolio may delay payment of redemption
proceeds until it has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check, it can take up to
fifteen business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
Each Portfolio may involuntarily redeem the shares of any shareholder whose
account is reduced to less than $500 in net asset value through redemptions or
other action by the shareholder. Notice will be given to the shareholder at
least 60 days prior to the date fixed for such redemption, during which time the
shareholder may increase his or her holdings to an aggregate amount of $500 or
more (with a minimum purchase of $50 or more).
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES
If the investor elects to purchase shares without an initial sales charge
(Class B), a CDSC (declining from 5.0% to zero) will be imposed at the time of
redemption. The CDSC will be deducted from the redemption proceeds and reduce
the amount paid to the investor.
For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares. The CDSC will be imposed on any redemption which reduces
the current value of the investor's Class B shares to an amount which is lower
than the amount originally purchased by the investor for the purchase of Class B
shares during the preceding six years.
A CDSC will be applied on the original purchase price or the current value
of the shares being redeemed, whichever is less. Increases in the value of the
investor's shares or shares purchased through reinvestment of dividends or
distributions are not subject to a CDSC. The amount of any CDSC will be paid to
and retained by the Distributor. See "Management -- Distributor" and "Waiver of
Contingent Deferred Sales Charge" below.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of
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determining the number of years from the time of any payment for the purchase of
shares, all payments during a month will be aggregated and deemed to have been
made on the last day of the month. The following table sets forth the rate of
the CDSC.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLARS INVESTED OR
YEAR SINCE PURCHASE PAYMENT MADE REDEMPTION PROCEEDS
- ---------------------------------------------------------- ----------------------------
<S> <C>
First..................................................... 5.0%
Second.................................................... 4.0%
Third..................................................... 4.0%
Fourth.................................................... 3.0%
Fifth..................................................... 2.0%
Sixth..................................................... 1.0%
Seventh................................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the cost of shares purchased six
years or more prior to the redemption; and finally, of amounts representing the
cost of shares held for the longest period of time within the applicable
six-year period.
For example, assume an investor purchased 100 Class B shares at $10 per
share for a cost of $1,000. Subsequently, the shareholder acquired 15 additional
shares through dividend reinvestment. During the second year after the purchase
the investor decided to redeem $500 of his/her investment. Assuming at the time
of the redemption a net asset value of $11 per share, the value of the
investor's shares would be $1,265 (115 shares at $11 per share). The CDSC would
not be applied to the value of the reinvested dividend shares or the appreciated
value of the purchased shares. Therefore, the CDSC would be charged on 30.45
shares, purchased at $10 per share, at a rate of 4.0% (the applicable rate in
the second year after purchase) for a total CDSC of $12.18.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC may be waived in the
case of a redemption following the death or complete disability of a shareholder
if the redemption is made within one year of death or initial determination of
disability. The waiver is available for total or partial redemptions of shares
owned by a person, either individually or in joint tenancy (with rights or
survivorship), at the time of death or initial determination of disability.
The CDSC will also be waived in the case of a total or partial redemption in
connection with certain required distributions made without penalty under the
Internal Revenue Code from a tax-deferred retirement plan or Section 403(b)
custodial account. These distributions include a lump-sum or other distribution
after retirement, or for an IRA or Section 403(b) custodial account, after
attaining age 70 1/2, a tax-free return of an excess contribution or plan
distribution following the death or total and permanent disability of the
shareholder. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from service. In the
case of a 401(k) plan, the CDSC will also be waived upon the redemption of
shares purchased with amounts used to repay loans made from the account to the
participant. See "Purchase and Redemption of Fund Shares -- Waiver of the
Contingent Deferred Sales Charge -- Class B Shares" in the Statement of
Additional Information.
Investors must notify Delaware Service either directly or through an
approved broker-dealer at the time of redemption, that they are entitled to
waiver of the CDSC. The waiver will be granted subject to confirmation of
entitlement.
HOW TO EXCHANGE SHARES
As shareholders of the Fund, investors have an exchange privilege with
certain other Portfolios, subject to the minimum investment requirements of such
Portfolios. Class A, Class B, Class C and Class D shares of
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the Equity Portfolios and the Fixed-Income Portfolios may be exchanged for Class
A, Class B, Class C and Class D shares, respectively, of another Equity or
Fixed-Income Portfolio on the basis of the relative net asset value. Class A
exchanges between Portfolios that have different front-end sales charges will be
assessed the sales charge differential.
Exchanges from Portfolios may also be made into the Lincoln Cashfund
Portfolio. In the case where Class A shares of a Portfolio are exchanged for
Regular class shares of the Lincoln Cashfund Portfolio, those shares may
subsequently be exchanged for Class A shares of another Portfolio without
incurring an initial sales charge. Class B shares may be exchanged into Class B
Exchange shares of the Lincoln Cashfund Portfolio. A shareholder's holding
period of Class B Exchange shares would be counted for purposes of calculating
the applicable CDSC to which that shareholder's redemption would be subject. A
shareholder would be assessed a CDSC, if applicable, upon redemption of the
Class B Exchange shares, but no CDSC will be imposed upon the exchange out of
the Lincoln Cashfund Portfolio into Class B shares of another Portfolio.
Exchanges of Class C shares will be treated the same as exchanges of Class A
shares into or out of Regular shares of the Lincoln Cashfund Portfolio. However,
if shares originally purchased through Class C are redeemed in the first 12
months, they will be subject to a CDSC of 1%.
An exchange will be treated as a redemption and purchase for tax purposes.
See "Purchase and Redemption of Shares -- Exchange Privilege" in the Statement
of Additional Information.
A shareholder may give exchange instructions to the shareholder's
broker-dealer or Delaware Service by telephone at the number provided on the
back cover of this Prospectus. Exchange orders will be accepted by telephone
provided that the exchange involves only uncertificated shares on deposit in the
shareholder's account or for which certificates previously have been deposited.
All exchanges received by Delaware Service prior to 4:00 P.M. Eastern time will
be made on the basis of the relative net asset value of the two Portfolios next
determined after the request is received in good order. The exchange privilege
is available only in states where the exchange may legally be made.
Investors may also exchange shares by mail by writing to the address
provided on the back page of this Prospectus. In periods of severe market or
economic conditions the telephone exchange of shares may be difficult to
implement and the investor should make exchanges by mail. The exchange privilege
may be modified or terminated at any time on sixty days' notice to shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fixed-Income Portfolios and the Lincoln Cashfund Portfolio accrue
dividends from net investment income and usually distribute such accrued
dividends to shareholders monthly. The Lincoln Cashfund Portfolio accrues
dividends daily. The Equity Portfolios declare dividends from net investment
income and usually distribute such accrued dividends to shareholders at least
annually. All capital gains, if any, are distributed annually, usually in
December. When a capital gain dividend is declared, the net asset value per
share is reduced by the amount of the dividend. Investors considering buying
shares of one of the Portfolios just prior to a record date for a taxable
dividend or capital gain distribution should be aware that, regardless of
whether the price of the Portfolio shares to be purchased reflects the amount of
the forthcoming dividend or distribution payment, any such payment will be a
taxable dividend or distribution payment.
The Fund has qualified and intends to remain qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). In any fiscal year in which the Fund so qualifies and distributes to
shareholders its net investment income and net realized capital gains, the Fund
will be relieved of federal income tax. It is the Fund's policy to distribute to
the shareholders all of its net investment income and capital gains realized
during each fiscal year.
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Under current law for each of the Portfolios, dividends paid from net
investment income and distributions of net realized short-term capital gains are
taxable to shareholders as ordinary income, regardless of how long shareholders
have held their Fund shares or whether such dividends and distributions are
received in cash or reinvested in additional Fund shares. Distributions of net
realized long-term capital gains will be taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held Fund shares and
whether such distributions are received in cash or are reinvested in additional
Fund shares. The per share dividends and distributions on Class A shares will be
higher than the per share dividends and distributions on Class B and Class C
shares as a result of lower distribution fees applicable to Class A shares.
Furthermore, as a general rule, a shareholder's gain or loss on a sale or
redemption of Fund shares will be a long-term capital gain or loss if the
shareholder has held the shares for more than one year and will be a short-term
capital gain or loss if the shareholder has held the shares for one year or
less. Some of the Portfolios' dividends declared from net investment income may
qualify for the federal dividends-received deduction for corporations. The
investor will be notified each year as to the amount and federal tax status of
all dividends and capital gains paid during the prior year. Such dividends and
capital gains may also be subject to state or local taxes.
Distributions of tax-exempt income are not subject to federal income taxes,
except for the possible applicability of the alternative minimum tax. However,
distributions may be subject to state and local income taxes. A portion of each
Portfolio's income, including income from repurchase agreements and gains from
options and futures transactions may be taxable to shareholders as ordinary
income. Long-term capital gains from options and futures transactions may be
taxable to shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable as long term capital gains, regardless of the
length of time a shareholder has owned shares. Short-term capital gains and
other taxable income distributions are taxable as ordinary income. Distributions
of tax-exempt income are taken into consideration in computing the portion, if
any, of social security and railroad retirement benefits subject to federal and,
in some cases, state taxes.
If an investor has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Fund that the taxpayer identification number listed on the investor's account is
incorrect according to their records or that the investor is subject to backup
withholding, federal law generally requires the Fund to withhold 31% from any
dividends and/or redemptions (including exchange redemptions). Amounts withheld
are applied to the investor's federal tax liability; a refund may be obtained
from the Internal Revenue Service if withholding results in overpayment of
taxes. Federal law also requires the Fund to withhold 30% or the applicable tax
treaty rate from dividends paid to certain nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.
Certain Portfolios may be required to pay withholding and other taxes
imposed by foreign countries in connection with their investments outside the
U.S. generally at rates from 10% to 40%, which would reduce these Portfolios'
investment income.
Certain income received by the Lincoln World Growth and Lincoln New Pacific
Portfolios may be subject to foreign taxes. If more than 50% of the value of the
Portfolio's total assets at the close of any taxable year consists of securities
of foreign corporations, the Portfolio may elect to treat any foreign taxes paid
by it as paid by its shareholders. If a Portfolio makes this election, its
shareholders will generally be required to include in income their respective
pro rata positions in computing their taxable income or, alternatively, to claim
foreign tax credits (subject, in either case, to certain limitations). Each year
that a Portfolio makes such an election, it will report to its shareholders the
amount per share of foreign taxes it has elected to have treated as paid by its
shareholders.
SHAREHOLDER SERVICES AND INFORMATION
Shareholders are encouraged to place purchase, exchange and redemption
orders through their broker-dealers. Shareholders also may place such orders
directly through Delaware Distributors or through Delaware Service in accordance
with this Prospectus. See "How to Purchase Shares," "How to Exchange Shares,"
"How to Sell Shares" and "Dividends, Distributions and Taxes" for more
information.
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<PAGE>
The following shareholder services are described elsewhere in this
Prospectus: Purchase by Wire, Right of Accumulation, Concurrent Purchases,
Letter of Intent, Automatic Investment Plan, Telephone Redemption Privilege,
Systematic Withdrawal Plan, Checkwriting and 30-day Repurchase Privilege.
In addition to these privileges, shareholders of the Fund can take advantage of
the following services and privileges:
AUTOMATIC REINVESTMENT OF DIVIDENDS. Investors' dividends and capital
gain distributions of each Portfolio are automatically reinvested in full and
fractional shares of the Portfolio at net asset value without a sales charge
unless indicated otherwise on the account application. Changes to initial
elections must be directed to Delaware Service in writing or by telephone not
less than 5 full business days prior to the record date.
CROSS REINVESTMENT. The investor may cross-reinvest dividends and/or
capital gain distributions paid by one Portfolio into another Portfolio in
the Fund, subject to conditions outlined in the Statement of Additional
Information. Generally, to use this service the account value in the
distributing Portfolio must equal at least $10,000.
DOLLAR COST AVERAGING PLAN. The owner of $10,000 or more of the shares
of a Portfolio may authorize the monthly exchange of a specified amount into
another Portfolio. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting Delaware
Service for appropriate forms. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the
Fund. Exchanges are subject to terms and conditions as described herein and
in the Statement of Additional Information. This privilege may not be used
for the exchange of shares held in certificated form.
TAX DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from the Distributor, an
approved broker-dealer or Delaware Service. If you are considering
adopting such a plan, you should consult with your own legal or tax advisor
with respect to the establishment and maintenance of such a plan.
REPORTS TO SHAREHOLDERS. The Fund will send annual and semi-annual
reports to shareholders. The financial statements appearing in annual
reports are audited by independent accountants. In order to reduce duplicate
mailing and printing expenses, the Fund will provide one annual and
semi-annual shareholder report and annual prospectus per household. You may
request additional copies of such reports by calling 1-800-9ADVISOR
(1-800-923-8476) or by writing to the Fund c/o Delaware Group, 1818
Market Street, Philadelphia, PA 19103-3682.
For additional information regarding the services and privileges described
above, see the Statement of Additional Information.
OTHER SHAREHOLDER MATTERS
All shares of the Fund have equal voting rights and are entitled to one vote
per share with proportional voting for fractional shares. As permitted by
Maryland law, there will normally be no meetings of shareholders for the purpose
of electing Directors unless and until such time as fewer than a majority of the
Directors holding office have been elected by shareholders. At that time, the
Directors in office will call a shareholders meeting for election of Directors.
Shareholders have certain rights, including the right to call a meeting upon a
vote of 10% of the Fund's outstanding shares for the purpose of voting on the
removal of one or more Directors or to transact any other business. The shares
do not have cumulative voting rights. Accordingly, the holders of a majority of
the shares voting for the election of directors can elect all the Directors.
Shares of the Fund, when issued, will be fully paid and non-assessable.
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<PAGE>
In matters which only affect a particular Portfolio, the matter shall have
been effectively acted upon by a majority vote of that Portfolio even though:
(1) the matter has not been approved by a majority vote of any other Portfolio;
or (2) the matter has not been approved by a majority vote of the Fund.
Initial investments into the Fund were made by American States Insurance
Company ("ASI") and Lincoln National Life Insurance Company ("LNLIC"), both
affiliates of the Advisor. As of February 1, 1996, ASI held 73% of the
outstanding Class A shares of Enterprise, 90% of the outstanding Class A shares
of U.S. Growth, and 97% of the outstanding Class A shares of Tax-Free Income
Portfolios; LNLIC held 84% of the outstanding Class A shares of Growth and
Income, 86% of the outstanding Class A shares of World Growth, 84% of the
outstanding Class A shares of New Pacific, 98% of the outstanding Class A shares
of Government Income, 95% of the outstanding Class A shares of Corporate Income,
and 32% of the outstanding Class A shares of Cashfund Portfolios. In addition,
LIM held 100% of the outstanding Class D shares of World Growth, 100% of the
outstanding Class D shares of New Pacific, 100% of the Class D shares of
Government Income and 62% of the Class D shares of the Tax-Free Income
Portfolios.
THE PORTFOLIOS' PERFORMANCE
From time to time, each Portfolio may advertise its "average annual total
return" over various periods of time for each class. Total return figures show
the average percentage change in value of an investment in the class from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the shares and assume that any income,
dividends and/or capital gains distributions made by a Portfolio during the
period were reinvested in shares of the same class. Class A total return figures
include the maximum initial sales charge and Class B and Class C total return
figures include any applicable CDSC. These figures also take into account the
service and distribution fees, if any, payable with respect to the respective
classes.
In reports or other communications to shareholders and in advertising
material performance of the classes may be compared with that of other mutual
funds or classes of shares of other funds as listed in the rankings prepared by
Lipper Analytical Services, Inc. or similar independent services that monitor
the performance of mutual funds, or other industry or financial publications
such as BARRON'S, BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES INC., FORBES,
FORTUNE, INSTITUTIONAL INVESTOR, INVESTORS DAILY, PENSIONS & INVESTMENTS, USA
TODAY, FINANCIAL SERVICES WEEK, FINANCIAL WORLD, INVESTMENT DEALERS' DIGEST,
MUTUAL FUND FORECASTER, PERSONAL FINANCE, SMART MONEY, PERSONAL INVESTING NEWS,
YOUR MONEY, BLOOMBERG MAGAZINE, KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY,
MORNINGSTAR MUTUAL FUND VALUES, THE NEW YORK TIMES, and THE WALL STREET JOURNAL.
Total return figures are based on historical earnings and are not intended to
indicate future performance. The Statement of Additional Information contains a
further description of methods used to determine performance. Performance
figures may be obtained from the shareholders services representative or a
registered representative.
GENERAL INFORMATION
SHAREHOLDER SERVICES
Shareholder servicing, reporting and general shareholder services functions
for the Fund are performed by Delaware Service Company, Inc., which maintains
its offices at 1818 Market Street, Philadelphia, PA 19103-3682. You may
telephone Delaware Service at 1-800-9ADVISOR (1-800-923-8476).
INDEPENDENT ACCOUNTANTS
The Fund's independent accountants are Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. conducts an
annual audit of each Portfolio and consults with the Fund and each Portfolio as
to matters of accounting, regulatory filings and federal and state income
taxation.
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APPENDIX A
IMPLEMENTATION OF INVESTMENT OBJECTIVES AND POLICIES
In attempting to achieve their investment objectives and policies, the
Portfolios may employ, among others, one or more of the strategies set forth
below.
CONVERTIBLE SECURITIES
The Portfolios, other than the Lincoln Tax-Free Income Portfolio and the
Lincoln Cashfund Portfolio, may invest in securities that either have warrants
or rights attached or are otherwise convertible into other or additional
securities. A convertible security is typically a fixed-income security (a bond
or preferred stock) that may be converted at a stated price within a specified
period of time into a specified number of shares of common stock of the same or
a different issuer. Convertible securities are generally senior to common stocks
in a corporation's capital structure but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar non-convertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in capital appreciation attendant upon a market price advance in the
common stock underlying the convertible security. In general, the market value
of a convertible security is at least the higher of its "investment value"
(I.E., its value as a fixed-income security) or its "conversion value" (I.E.,
its value upon conversion into its underlying common stock). While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same issuer.
U.S. GOVERNMENT SECURITIES
All of the Portfolios may invest in securities of the U.S. Government.
Securities guaranteed by the U.S. Government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and bonds) and (2) federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates and Federal Housing Administration debentures). For
these securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. Government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity are deemed to be free of
credit risk for the life of the investment.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
MORTGAGE-BACKED SECURITIES
The Lincoln Corporate Income, Lincoln Government Income and Lincoln Tax-Free
Income Portfolios may invest in various types of mortgage-backed securities.
Mortgage-backed securities may be issued by governmental agencies (such as the
Government National Mortgage Association ("GNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"), by the Federal National Mortgage Association
("FNMA")), which is a federally chartered and privately-owned corporation, or by
private financial institutions such as commercial banks, savings and loan
associations, mortgage bankers and securities broker-dealers (or separate trusts
or affiliates of such institutions established to issue these securities).
Most mortgage-backed securities, including the securities issued by GNMA,
FHLMC and FNMA, are so-called "pass-through" securities representing interests
in a pool of underlying mortgage loans, on which the regular interest and
principal payments (including any prepayments) are passed through to the holder
of the securities. Although the mortgage loans in a pool will have stated
maturities of up to 30 years, due to both normal principal repayment and
prepayments, the average effective maturities of these securities will vary and
will tend to be shorter than those of the underlying mortgages. Due to the
prepayment feature and the
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need to reinvest prepayments of principal at current market rates, these
securities can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interest rates. Like other
fixed-income investments, the value of mortgage-related securities will tend to
rise when interest rates fall and to fall when interest rates rise. Their value
may also change due to changes in the market's perception of the
creditworthiness of the entity that issues or guarantees them. For additional
information regarding mortgage-backed securities, see the Statement of
Additional Information.
U.S. Government securities may be acquired by the Portfolios in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book-entry
records of the Federal Reserve Banks.
In addition, the Portfolios may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("TRs"), ("TIGRs") and "Certificates of Accrual on
Treasury Securities" ("CATS"), and may not be deemed U.S. Government securities.
The Portfolios may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as government trust certificates.
The U.S. Government securities in which the Portfolios invest do not, in
general, have as high a yield as more speculative securities or securities not
supported by the U.S. Government or its agencies or instrumentalities. When
interest rates increase, the value of debt securities and shares of the
Portfolios can be expected to decline.
ASSET-BACKED SECURITIES
The Lincoln Government Income and Lincoln Corporate Income Portfolios may
purchase asset-backed securities, which represent a participation in, or are
secured by and payable from, a stream of payments generated by particular
assets, most often a pool of assets similar to one another. Assets generating
such payments will consist of motor vehicle installment purchase obligations,
credit card receivables, other financial receivables and home equity loans. See
the Statement of Additional Information.
REPURCHASE AGREEMENTS
The Portfolios may enter into repurchase agreements, under which a Portfolio
buys a security (typically a U.S. Government security or other money market
security) and obtains a simultaneous commitment from the seller to repurchase
the security at a specified time and price. The seller must maintain with the
Fund's Custodian collateral equal to at least 100% of the repurchase price
including accrued interest, as monitored daily by the Advisor and/or
Sub-Advisor. A Portfolio only will enter into repurchase agreements involving
securities in which it could otherwise invest and with banks, brokers or dealers
deemed by the Board of Directors to be creditworthy. If the seller under the
repurchase agreement defaults, the Portfolio may incur a loss if the value of
the collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by the Portfolio may be delayed or limited.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS
All of the Portfolios may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment agreements (transactions
whereby the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). The transactions may involve either
corporate, municipal or government securities. A Portfolio as a purchaser
assumes the risk of any decline in value of the
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security beginning on the date of the agreement or purchase. The Portfolios may
invest in when-issued securities in order to take advantage of securities that
may be especially under or over valued when trading on a when-issued basis.
Each Portfolio will segregate liquid assets such as cash, U.S. Government
securities or other appropriate high grade debt obligations in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent a
Portfolio's aggregate commitments under these transactions exceed its holdings
of cash and securities that do not fluctuate in value (such as money market
instruments), the Portfolio temporarily will be in a leveraged position (i.e.,
it will have an amount greater than its net assets subject to market risk).
Should market values of a Portfolio's portfolio securities decline while the
Fund is in a leveraged position, greater depreciation of its net assets would
likely occur than were it not in such a position. The Portfolios will not borrow
money to settle these transactions and, therefore, will liquidate other
portfolio securities in advance of settlement if necessary to generate
additional cash to meet their obligations thereunder.
MONEY MARKET INSTRUMENTS
With the exception of the Lincoln Cashfund Portfolio, all of the Portfolios
may invest in money market instruments without limit for temporary or defensive
purposes. These are shorter-term debt securities generally maturing in one year
or less which include (1) commercial paper (short-term notes up to 9 months
issued by corporations or governmental bodies), (2) commercial bank obligations
(certificates of deposit (interest-bearing time deposits), bankers' acceptances
(time drafts on a commercial bank where the bank accepts an irrevocable
obligation to pay at maturity), and documented discount notes (corporate
promissory discount notes accompanied by a commercial bank guarantee to pay at
maturity)), (3) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less), (4) variable rate demand notes,
short-term tax-exempt obligations and (5) savings association obligations
(certificates of deposit issued by mutual savings banks or savings and loan
associations). Although certain floating or variable rate obligations
(securities which have a coupon rate that changes at least annually and
generally more frequently) have maturities in excess of one year, they are also
considered to be short-term debt securities. In the case of Lincoln Tax-Free
Income Portfolio, the Portfolio may invest in tax-free cash equivalents, such as
floating or variable rate demand notes, tax-exempt commercial paper and general
obligation and revenue notes or in taxable cash equivalents, such as
certificates of deposit, bankers acceptances and time deposits or other
short-term taxable investments such as repurchase agreements.
STRATEGIC TRANSACTIONS
GENERAL. The Portfolios (other than the Lincoln Cashfund Portfolio) may,
but are not required to, utilize various other investment strategies as
described below to hedge various market risks (such as interest rates, currency
exchange rates, and broad or specific equity or fixed-income market movements),
to manage the effective maturity or duration of fixed income securities in the
Fund's portfolio or to enhance potential gain. Such strategies are generally
accepted as modern portfolio management and are regularly utilized by many
mutual funds and other institutional investors. Techniques and instruments may
change over time as new instruments and strategies are developed or regulatory
changes occur. In the course of pursuing these investment strategies, the
Portfolio may purchase and sell derivative securities. In particular, the
Portfolios may purchase and sell exchange-listed and over-the-counter put and
call options on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options thereon,
enter into various interest rate transactions such as swaps, caps, floors or
collars, and enter into various currency transactions such as currency forward
contracts, currency futures contracts, currency swaps or options on currencies
or currency futures (collectively, all the above are called "Strategic
Transactions"). Strategic Transactions may be used to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Portfolio's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed income
securities in a Portfolio, or to establish a position in the derivatives markets
as a temporary substitute for purchasing or selling particular securities. Any
or all of these investment techniques may be used at any time and there is no
particular strategy that dictates the use of one technique rather than
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another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of a Portfolio to utilize these
Strategic Transactions successfully will depend on the Advisor's or
Sub-Advisor's ability to predict pertinent market movements, which cannot be
assured. The Portfolios will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or portfolio
management purposes and not for speculative purposes. Additional information
relating to certain financial instruments or strategies is set forth below. In
addition, see "Special Risks of Strategic Transactions" below for a discussion
of certain risks.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. A Portfolio will not enter
into any futures contract or option on a futures contract if, as a result, the
sum of initial margin deposits on futures contracts and related options and
premiums paid for options on futures contracts the Portfolios have purchased,
after taking into account unrealized profits and losses on such contracts, would
exceed 5% of the Portfolios' net asset value without reference to the definition
of "bona fide hedging transactions and positions" under the Commodity Exchange
Act, as amended, or unless the futures contract is covered by cash equivalent
set-asides equal to the total contract value.
In addition to the above limitations, each Portfolio will not (a) sell
futures contracts, purchase put options or write call options if, as a result,
more than 25% of a Portfolio's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or write put
options if, as a result, a Portfolio's total obligations upon settlement or
exercise of purchased futures contracts and written put options would exceed 25%
of its total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by a Portfolio would exceed
5% of the Portfolio's total assets. These limitations do not apply to options
attached to or acquired or traded together with their underlying securities, and
do not apply to securities that incorporate features similar to options.
The limitations on the Portfolios' investments in futures contracts and
options, and the Portfolios' policies regarding futures contracts and options
discussed elsewhere are not fundamental policies and may be changed as
regulatory agencies permit.
OPTIONS TRANSACTIONS. The Portfolios may purchase and write (i.e., sell)
put and call options on securities and currencies that are traded on national
securities exchanges or in the over-the-counter market to enhance income or to
hedge their portfolios. A call option gives the purchaser, in exchange for a
premium paid, the right for a specified period of time to purchase securities or
currencies subject to the option at a specified price (the exercise price or
strike price). When a Portfolio writes a call option, the Portfolio gives up the
potential for gain on the underlying securities in excess of the exercise price
of the option.
A put option gives the purchaser, in return for a premium, the right for a
specified period of time to sell the securities or currencies subject to the
option to the writer of the put at the specified exercise price. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities underlying the option at the exercise
price. A Portfolio might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
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The Portfolios will write only "covered" options. An option is covered if a
Portfolio owns an offsetting position in the underlying security or maintains
cash, U.S. Government securities or other high-grade debt obligations with a
value sufficient at all times to cover its obligations. See the Statement of
Additional Information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Portfolios (other than the
Lincoln Tax-Free Income Portfolio and the Lincoln Cashfund Portfolio) may enter
into forward foreign currency exchange contracts to protect the value of their
portfolios against future changes in the level of currency exchange rates. The
Portfolios may enter into such contracts on a spot (i.e., cash) basis at the
rate then prevailing in the currency exchange market or on a forward basis, by
entering into a forward contract to purchase or sell currency at a future date.
A Portfolio's dealings in forward contracts will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging
generally arises in connection with the purchase or sale of its portfolio
securities and accruals of interest or dividends receivable and Portfolio
expenses. Position hedging generally arises with respect of existing portfolio
security or currency positions.
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolios may purchase and sell
financial futures contracts and options thereon which are exchange-listed or
over-the-counter for certain hedging, return enhancement and risk management
purposes in accordance with regulations of the CFTC. These futures contracts and
related options will be on interest-bearing securities, financial indices and
interest rate indices. A financial futures contract is an agreement to purchase
or sell an agreed amount of securities at a set price for delivery in the
future.
A Portfolio may not purchase or sell futures contracts and related options
if immediately thereafter the sum of the amount of initial margin deposits on
the Portfolio's existing futures and options on futures and premiums paid on
such related options would exceed 5% of the market value of the Portfolio's
total assets. In addition, the value of all futures contracts sold will not
exceed the total market value of the Portfolio.
SWAP AGREEMENTS. The Portfolios may enter into interest rate swaps,
currency swaps, and other types of swap agreements such as caps, collars and
floors. In an interest rate swap, one party agrees to make regular payments of a
floating rate times a "notional" principal amount in return for payments of a
fixed rate times the same amount. Swaps may also depend on other prices or rates
such as the value of an index or mortgage prepayment rates.
Swap agreements usually involve a small investment of cash relative to the
magnitude of risk assumed. As a result, swaps can be very volatile and may
substantially impact a Portfolio's performance. Swap agreements are also subject
to the risk of a counterpart's ability to perform (i.e., creditworthiness). A
Portfolio may also suffer loses if it is unable to terminate swap agreements or
reduce exposure through offsetting transactions in a timely manner.
SPECIAL RISKS OF STRATEGIC TRANSACTIONS. Participation in the options or
futures markets and in currency exchange transactions involves investment risks
and transaction costs to which a Portfolio would not be subject absent the use
of these Strategic Transactions. If the Advisor's and/or sub-advisor's
prediction of movements in the direction of the securities, foreign currency and
interest rate markets are inaccurate, the adverse consequences to a Portfolio
may leave the Portfolio in a worse position than if such Strategic Transactions
were not used. Risks inherent in the use of options, foreign current and futures
contracts and options on futures contracts include (1) dependence on the
Advisor's and/or sub-advisor's ability to predict current movements in the
direction of interest rates, securities prices and currency markets; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of securities being hedged; (3) the
fact that skills need to use these strategies are different from those needed to
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences; and (6)
the possible inability of a Portfolio to purchase or sell a portfolio security
at a time that otherwise would be favorable for it to do so, or the possible
need for a Fund to sell a portfolio security at a disadvantageous time, due to
the need for a Portfolio to maintain "cover" or to segregate securities in
connection with Strategic Transactions. Although the use of futures contracts
and options transactions for hedging should tend to minimize the risk of loss
due to a decline in the value of the hedged position, at the
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same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchase of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Portfolios may use and some of their risks are
described more fully in the Statement of Additional Information. See the
Statement of Additional Information.
Each Portfolio's ability to engage in Strategic Transactions is limited by
the requirements of the Internal Revenue Code of 1986, as amended, for
qualification as a regulated investment company. See the Statement of Additional
Information.
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LINCOLN ADVISOR FUNDS, INC.
200 East Berry Street - Fort Wayne, Indiana 46802
STATEMENT OF ADDITIONAL INFORMATION __________________
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of the Lincoln Advisor Funds,
Inc. (the "Fund"), dated March 1, 1996, as amended or supplemented from time to
time, and should be read in conjunction with the Fund's Prospectus. The Fund's
Prospectus may be obtained by calling the Fund's shareholder services
representative at 1-800-9ADVISOR (1-800-923-8476). This Statement of Additional
Information, although not in itself a prospectus, is incorporated by reference
into the Prospectus in its entirety.
CONTENTS
Investment Objectives and Policies ........................................ 1
Investment Restrictions ................................................... 23
Management ................................................................ 25
Dividends, Distributions and Taxes ........................................ 38
Purchase and Redemption of Shares ......................................... 44
Execution of Portfolio Transactions ....................................... 47
Calculation of Performance Data ........................................... 49
Net Asset Value ........................................................... 52
Shareholder Services ...................................................... 54
General Information ....................................................... 55
Appendix A - Description of Security Ratings .............................. A-1
Financial Statements ...................................................... 58
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund is an open-end, diversified management investment company
consisting of nine separate Portfolios (each a "Portfolio" and collectively the
"Portfolios"): the Lincoln Growth and Income Portfolio, the Lincoln Enterprise
Portfolio, the Lincoln U.S. Growth Portfolio, the Lincoln World Growth
Portfolio, the Lincoln New Pacific Portfolio, the Lincoln Government Income
Portfolio, the Lincoln Corporate Income Portfolio, the Lincoln Tax-Free Income
Portfolio and the Lincoln Cashfund Portfolio. This Statement of Additional
Information is applicable to all of the Portfolios. Lincoln Investment
Management, Inc. (the "Investment Advisor") serves as the Investment Advisor to
the Fund. Beutel, Goodman Capital Management serves as the Sub-Advisor for the
Lincoln Growth and Income Portfolio; Lynch & Mayer, Inc. serves as the
Sub-Advisor for the Lincoln Enterprise Portfolio; Provident Investment Counsel,
a wholly owned subsidiary of United Asset Management Corporation, serves as the
Sub-Advisor for the Lincoln U.S. Growth Portfolio; Walter Scott & Partners
Limited serves as the Sub-Advisor for the Lincoln World Growth Portfolio; and
John Govett & Co. Limited, a majority owned indirect subsidiary of the AIB Group
of Companies, serves as the Sub-Advisor for the Lincoln New Pacific Portfolio.
Each of the foregoing Sub-Advisors are referred to herein as a "Sub-Advisor" or
collectively as "Sub-Advisors".
The Prospectus discusses the Portfolios' investment objectives and the
policies followed to achieve those objectives. The following discussion
supplements the description of the Portfolios' investment objectives and
policies in the Prospectus. Capitalized terms that are not defined herein are
defined in the Fund's Prospectus.
LOWER-RATED DEBT SECURITIES
Each of the Portfolios, except for the Lincoln Government Income
Portfolio and the Lincoln Cashfund Portfolio, may purchase lower-rated debt
securities which are securities that are rated lower than Baa by Moody's
Investors Service, Inc. ("Moody's") or lower than BBB by Standard & Poor's
Corporation ("S&P"). These securities are often considered to be speculative and
involve significantly higher risk of default on the payment of principal and
interest or are more likely to experience significant price fluctuation due to
changes in the issuer's creditworthiness. Market prices of these securities may
fluctuate more than higher-rated debt securities and may decline significantly
in periods of general economic difficulty which may follow periods of rising
interest rates. While the market for high yield corporate debt securities has
been in existence for many years and has weathered previous economic downturns,
the market in recent years has experienced a dramatic increase in the
large-scale use of such securities to fund highly leveraged corporate
acquisitions and restructurings. Accordingly, past experience may not provide an
accurate indication of future performance of the high yield bond market,
especially during periods of economic recession. See "Description of Security
Ratings" herein.
The market for lower-rated securities may be less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. If market quotations are not available, these securities
will be valued in accordance with procedures established by the Board of
Directors, including the use of outside pricing services. Judgment plays a
greater role in valuing high yield corporate debt securities than is the case
for securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services used by a Portfolio to value
its portfolio securities and the Portfolio's ability to dispose of these
lower-rated debt securities.
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Since the risk of default is higher for lower-quality securities, the
Investment Advisor's and/or applicable Sub-Advisor's research and credit
analysis is an integral part of managing any securities of this type held by a
Portfolio. In considering investments for a Portfolio, the Investment Advisor
and /or Sub-Advisor, if any, will attempt to identify those issuers of
high-yielding securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. The
Investment Advisor's and/or Sub-Advisor's analysis focuses on relative values
based on such factors as interest or dividend coverage, asset coverage, earnings
prospects, and the experience and managerial strength of the issuer. There can
be no assurance that such analysis will prove accurate.
A Portfolio may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of shareholders.
MORTGAGE-BACKED SECURITIES
Each Portfolio may invest in mortgage-related securities including those
representing an undivided ownership interest in a pool of mortgages.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES. Certificates
issued by the Government National Mortgage Association ("GNMA") are
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations, and are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A pool of these
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. The timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
Principal is paid back monthly by the borrower over the term of the
loan. Investment of prepayments may occur at higher or lower rates than the
anticipated yield on the certificates. Due to the prepayment feature and the
need to reinvest prepayments of principal at current market rates, GNMA
certificates can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interest rates. GNMA
certificates typically appreciate or decline in market value during periods of
declining or rising interest rates, respectively. Due to the regular repayment
of principal and the prepayment feature, the effective maturities of mortgage
pass-through securities are shorter than stated maturities, will vary based on
market conditions and cannot be predicted in advance. The effective maturities
of newly-issued GNMA certificates backed by relatively new loans at or near the
prevailing interest rates are generally assumed to range between approximately 9
and 12 years.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS. The Federal National
Mortgage Association ("FNMA"), a federally chartered and privately-owned
corporation, issues pass-through securities representing interests in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. Government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the U.S. Government, issues participation
certificates which represent an interest in a pool of conventional mortgage
loans. FHLMC guarantees the timely payment of interest and the
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ultimate collection of principal, and maintains reserves to protect holders
against losses due to default, but the certificates are not backed by the full
faith and credit of the U.S. Government.
As is the case with GNMA certificates, the actual maturity of and
realized yield on particular FNMA and FHLMC pass-through securities will vary
based on the prepayments of the underlying pool of mortgages and cannot be
predicted.
OTHER MORTGAGE-BACKED SECURITIES. The Lincoln Government Income, Lincoln
Corporate Income and Lincoln Tax-Free Income Portfolios may invest in
mortgage-backed securities issued by financial institutions such as commercial
banks, savings and loan associations, mortgage bankers and securities
broker-dealers (or separate trusts or affiliates of such institutions
established to issue these securities). These securities include mortgage
pass-through certificates, collateralized mortgage obligations ("CMOs") (which
include real estate mortgage investment conduits as authorized under the
Internal Revenue Code of 1986) or mortgage-backed bonds. Each class of bonds in
a CMO series may have a different maturity than the other classes of bonds in
the series and may bear a different coupon. The different maturities occur
because payments of principal, both regular principal payments as well as any
prepayments are passed through first to the holders of the class with the
shortest maturity until it is completely retired. Thereafter, principal payments
are passed through to the next class of bonds in the series, until all the
classes have been paid off. As a result, an acceleration in the rate of
prepayments may also be associated with declining interest rates, shortening the
expected life of each class, with the greatest cash flow impact on those classes
with the shortest maturities. Should the rate of prepayments slow down, as may
happen in times of rising interest rates, the expected life of each class
lengthens, again with the greatest cash flow impact on those classes with the
shortest maturities. In the case of some CMO series, each class may receive a
different proportion of the monthly interest and principal repayments on the
underlying collateral. In these series the classes have proportionally greater
interests in principal repayments generally and would be more affected by a
change in the rate of prepayments although the percentage impact on those
classes consisting mostly of interest payments could be greater.
ASSET-BACKED SECURITIES. The Lincoln Government Income and Lincoln
Corporate Income Portfolios may invest in bonds or notes backed by loan paper or
accounts receivable originated by banks, credit card companies, or other
providers of credit. These securities are often "enhanced" by a bank letter of
credit or by insurance coverage provided by an institution other than the
issuer; such an enhancement typically covers only a portion of the par value
until exhausted. Generally, the originator of the loan or accounts receivable
paper sells it to a specially created trust, which repackages it as securities
with a term of five years or less. Examples of these types of securities include
"certificates for automobile receivables" (commonly referred to as "CARs") and
bonds backed by credit card loan receivables (commonly referred to as "plastic
bonds"). The loans underlying these securities are subject to prepayments which
can decrease maturities and returns. The values of these securities are
ultimately dependent upon payment of the underlying loans by individuals, and
the holders generally have no recourse against the originator of the loans.
Holders of these securities may experience losses or delays in payment if the
original payments of principal and interest are not made to the trust with
respect to the underlying loans. The values of these securities also may
fluctuate due to changes in the market perception of the creditworthiness of the
servicing agent for the loan pool, the originator of the loan, or the financial
institution providing the credit enhancement.
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FOREIGN INVESTMENTS
The Lincoln World Growth and Lincoln New Pacific Portfolios may invest
substantially all of their assets in foreign investments. Certain of the
Portfolios may invest the following percentages of their assets in foreign
securities: the Lincoln Growth and Income Portfolio (15%), the Lincoln
Enterprise Portfolio (15%), the Lincoln U.S. Growth Portfolio (20%) and the
Lincoln Tax-Free Income Portfolio (10%). Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, are generally higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Investment Advisor or
Sub-Advisor will be able to anticipate or counter these potential events.
The considerations noted above generally are intensified for investments
in developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
The Portfolios may invest in foreign securities that impose restrictions
on transfer within the United States or to U.S. persons. Although securities
subject to transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to such
restrictions.
American Depository Receipts and European Depository Receipts ("ADRs"
and "EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies.
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The Lincoln Cashfund Portfolio may invest in certificates of deposit
which are issued or guaranteed by banks, including foreign banks. The term
"certificate of deposit" includes both Eurodollar certificates of deposit, for
which there is generally a market, and Eurodollar time deposits, for which there
is generally not a market. Eurodollars are U.S. dollars deposited in branches of
banks outside the United States.
MORTGAGE DOLLAR ROLLS
Each Portfolio may enter into mortgage "dollar rolls" in which the
Portfolio sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. Dollar roll transactions
consist of the sale by a Portfolio of mortgage-backed securities, together with
a commitment to purchase similar, but not necessarily identical, securities at a
future date. Any difference between the sale price and the purchase price is
netted against the interest income foregone on the securities to arrive at an
implied borrowing (reverse repurchase) rate. Alternatively, the sale and
purchase transactions which constitute the dollar roll can be executed at the
same price, with the Portfolio being paid a fee as consideration for entering
into the commitment to purchase. Dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm commitment agreement by the
Portfolio to buy a security. If the broker-dealer to whom the Portfolio sells
the security becomes insolvent, the Portfolio's right to purchase or repurchase
the security may be restricted; the value of the security may change adversely
over the term of the dollar roll; the security that the Portfolio is required to
repurchase may be worth less than the security that the Portfolio originally
held, and the return earned by the Portfolio with the proceeds of a dollar roll
may not exceed transaction costs. The Portfolio will place U.S. Government or
other liquid, high quality assets in a segregated account in an amount
sufficient to cover its repurchase obligation.
OPTIONS ON FOREIGN AND U.S. CURRENCIES AND SECURITIES
The Portfolios, except for the Lincoln Cashfund Portfolio, may purchase
and sell (write) put and call options on securities, although the present intent
is to write only covered call options. These covered call options must remain
covered so long as a Portfolio is obligated as a writer. A call option written
by a Portfolio is "covered" if the Portfolio owns the security underlying the
option or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by the Fund's Custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if a Portfolio
holds on a share-for-share basis a call on the same security as the call written
where the exercise price of the call held is equal to or less than the exercise
price of the call written or greater than the exercise price of the call written
if the difference is maintained by the Portfolio in cash, treasury bills or
other high grade, short-term debt obligations in a segregated account with the
Fund's Custodian. The premium paid by the purchaser of an option will reflect,
among other things, the relationship of the exercise price to the market price
and volatility of the underlying security, the remaining term of the option,
supply and demand and interest rates.
If the writer of an option wishes to terminate the obligation, he or she
may effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option
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may liquidate his or her position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing purchase or a
closing sale transaction can be effected. To secure the obligation to deliver
the underlying security in the case of a call option, the writer of the option
(whether an exchange-traded option or a NASDAQ option) is required to pledge for
the benefit of the broker the underlying security or other assets in accordance
with the rules of The Options Clearing Corporation (OCC), the Chicago Board of
Trade and the Chicago Mercantile Exchange, institutions which interpose
themselves between buyers and sellers of options. Technically, each of these
institutions assumes the other side of every purchase and sale transaction on an
exchange and, by doing so, guarantees the transaction.
An option position may be closed out only on an exchange, board of trade
or other trading facility which provides a secondary market for an option of the
same series. Although a Portfolio will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange or other trading
facility will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Portfolio would have to exercise its options
in order to realize any profit and would incur brokerage commissions upon the
exercise of call options and upon the subsequent disposition of underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities for the exercise of put options. If a Portfolio as a
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. However, the OCC, based on forecasts provided by the U.S. exchanges,
believes that its facilities are adequate to handle the volume of reasonably
anticipated options transactions, and such exchanges have advised such clearing
corporation that they believe their facilities will also be adequate to handle
reasonably anticipated volume.
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OPTIONS ON STOCK INDICES
Options on stock indices are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple (the "multiplier").
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in cash.
The multiplier for an index option performs a function similar to the
unit of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Except as described below, a Portfolio will write call options on
indices only if on such date it holds a portfolio of securities at least equal
to the value of the index times the multiplier times the number of contracts.
When a Portfolio writes a call option on a broadly-based stock market index, the
Portfolio will segregate or put into escrow with the Fund's Custodian, or pledge
to a broker as collateral for the option, cash, cash equivalents or at least one
"qualified security" with a market value at the time the option is written of
not less than 100% of the current index value times the multiplier times the
number of contracts. A Portfolio will write call options on broadly-based stock
market indices only if at the time of writing it holds a diversified portfolio
of stocks.
If a Portfolio has written an option on an industry or market segment
index, it will so segregate or put into escrow with the Fund's Custodian, or
pledge to a broker as collateral for the option, at least ten "qualified
securities," which are stocks of an issuer in such industry or market segment,
with a market value at the time the option is written of not less than 100% of
the current index value times the multiplier times the number of contracts. Such
stocks will include stocks which represent at least 50% of the Portfolio's
holdings in that industry or market segment. No individual security will
represent more than 15% of the amount so segregated, pledged or escrowed in the
case of broadly-based stock market index options or 25% of such amount in the
case of industry or market segment index options.
If at the close of business, the market value of such qualified
securities so segregated, escrowed or pledged falls below 100% of the current
index value times the multiplier times the number of contracts, a Portfolio will
segregate, escrow or pledge an amount in cash, Treasury bills or other high
grade short-term debt obligations equal in value to the difference. In addition,
when a Portfolio writes a call on an index which is in-the-money at the time the
call is written, the Portfolio will segregate with the Fund's Custodian or
pledge to the broker as collateral, cash, U.S. Government or other high grade
short-term debt obligations equal in value to the amount by which the call is
in-the-money times the multiplier times the number of contracts. Any amount
segregated pursuant to the foregoing sentence may be applied to the Portfolio's
obligation to segregate additional amounts in the event that the market value of
the qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts. However, if a Portfolio holds a call
on the same index as the call written where the exercise price of the call held
is equal to or less than the exercise price of the call written or greater than
the exercise price of the call written if the difference is maintained by the
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Portfolio in cash, Treasury bills or other high grade short-term debt
obligations in a segregated account with the Fund's Custodian, it will not be
subject to the requirements described in this paragraph.
RISKS OF OPTIONS ON STOCK INDICES. Index prices may be distorted if
trading of certain securities included in the index is interrupted. Trading in
the index options also may be interrupted in certain circumstances, such as if
trading were halted in a substantial number of securities included in the index.
If this occurred, a Portfolio would not be able to close out options which it
had purchased or written and, if restrictions on exercise were imposed, may be
unable to exercise an option it holds, which could result in substantial losses
to the Portfolio. It is the Portfolios' policy to purchase or write options only
on indices which include a number of securities sufficient to minimize the
likelihood of a trading halt in the index.
SPECIAL RISKS OF WRITING CALLS ON STOCK INDICES. Unless a Portfolio has
other liquid assets which are sufficient to satisfy the exercise of a call, the
Portfolio would be required to liquidate portfolio securities in order to
satisfy the exercise. Because an exercise must be settled within hours after
receiving the notice of exercise, if a Portfolio fails to anticipate an exercise
it may have to borrow from a bank (in amounts not exceeding 20% of the value of
the Portfolio's total assets) pending settlement of the sale of securities in
its portfolio and would incur interest charges thereon.
When a Portfolio has written a call, there is also a risk that the
market may decline between the time the Portfolio has a call exercised against
it, at a price which is fixed as of the closing level of the index on the date
of exercise, and the time the Portfolio is able to sell securities in its
portfolio. As with stock options, a Portfolio will not learn that an index
option has been exercised until the day following the exercise date. Unlike a
call on stock where the Portfolio would be able to deliver the underlying
securities in settlement, the Portfolio may have to sell part of its portfolio
in order to make settlement in cash, and the price of such securities might
decline before they can be sold. This timing risk makes certain strategies
involving more than one option substantially more risky with index options than
with stock options. For example, even if an index call which a Portfolio has
written is "covered" by an index call held by the Portfolio with the same strike
price, the Portfolio will bear the risk that the level of the index may decline
between the close of trading on the date the exercise notice is filed with the
clearing corporation and the close of trading on the date the Portfolio
exercises the call it holds or the time the Portfolio sells the call, which in
either case would occur no earlier than the day following the day the exercise
notice was filed.
OVER-THE-COUNTER OPTIONS AND ILLIQUID SECURITIES. As indicated in the
Prospectus, all Portfolios may deal in over-the-counter ("OTC") options. The
Portfolios understand the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The Portfolios, the
Investment Advisor, and the Sub-Advisors disagree with this position and have
found the dealers with which they engage in OTC options transactions generally
agreeable to and capable of entering into closing transactions. As also
indicated in the Prospectus, the Portfolios have adopted procedures for engaging
in OTC options for the purpose of reducing any potential adverse impact of such
transactions upon the liquidity of each Portfolio's portfolio.
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As part of these procedures the Portfolios will engage in OTC options
transactions only with primary dealers that have been specifically approved by
the Board of Directors of the Fund. The Fund and the Investment Advisor and/or
Sub-Advisors believe that the approved dealers should be agreeable and able to
enter into closing transactions if necessary and, therefore, present minimal
credit risks to the Portfolios. The Portfolios anticipate entering into written
agreements with those dealers to whom the Portfolios may sell OTC options,
pursuant to which the Portfolios would have the absolute right to repurchase the
OTC options from such dealers at any time at a price determined pursuant to a
formula set forth in certain no action letters published by the SEC staff. A
Portfolio will not engage in OTC options transactions if the amount invested by
the Portfolio in OTC options plus, with respect to OTC options written by the
Portfolio, the amounts required to be treated as illiquid pursuant to the terms
of such letters (and the value of the assets used as cover with respect to OTC
option sales which are not within the scope of such letters), plus the amount
invested by the Portfolio in illiquid securities, would exceed 15% of the
Portfolio's total assets. OTC options on securities other than U.S. Government
securities may not be within the scope of such letters and, accordingly, the
amount invested by a Portfolio in OTC options on such other securities and the
value of the assets used as cover with respect to OTC option sales regarding
such non-U.S. Government securities will be treated as illiquid and subject to
the 15% limitation on the Portfolio's assets that may be invested in illiquid
securities. See "Illiquid Investments" herein.
FUTURES CONTRACTS AND OPTIONS THEREON
A futures contract is an agreement in which the writer (or seller) of
the contract agrees to deliver to the buyer an amount of cash or securities
equal to a specific dollar amount times the difference between the value of a
specific fixed-income security or index at the close of the last trading day of
the contract and the price at which the agreement is made. No physical delivery
of the underlying securities is made. When the futures contract is entered into,
each party deposits with a broker or in a segregated custodial account
approximately 5% of the contract amount, called the "initial margin." Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying security or index fluctuates, making
the long and short positions in the futures contracts more or less valuable, a
process known as "marking to market." In the case of options on futures
contracts, the holder of the option pays a premium and receives the right, upon
exercise of the option at a specified price during the option period, to assume
a position in the futures contract (a long position if the option is a call and
a short position if the option is a put). If the option is exercised by the
holder before the last trading day during the option period, the option writer
delivers the futures position, as well as any balance in the writer's futures
margin account. If it is exercised on the last trading day, the option writer
delivers to the option holder cash in an amount equal to the difference between
the option exercise price and the closing level of the relevant security or
index on the date the option expires.
Each Portfolio, except the Lincoln Cashfund Portfolio, intends to engage
in futures contracts and options thereon as a hedge against changes, resulting
from market conditions, in the value of securities which are held by the
Portfolio or which the Portfolio intends to purchase, in accordance with the
rules and regulations of the Commodity Futures Trading Commission ("CFTC").
Additionally, the Portfolios, except for the Lincoln Cashfund Portfolio, may
write options on futures contracts to realize through the receipt of premium
income a greater return than would be realized in a Portfolio's portfolio
securities alone.
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RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. There are several risks in
connection with the use of futures contracts as a hedging device. Successful use
of futures contracts by a Portfolio is subject to the ability of the Portfolio's
Investment Advisor or Sub-Advisor to correctly predict movements in the
direction of interest rates or changes in market conditions. These predictions
involve skills and techniques that may be different from those involved in the
management of the portfolio being hedged. In addition, there can be no assurance
that there will be a correlation between movements in the price of the
underlying index or securities and movements in the price of the securities
which are the subject of the hedge. A decision of whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected trends
in interest rates.
Although certain Portfolios will purchase or sell futures contracts only
on exchanges where there appears to be an adequate secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular contract or at any particular time. Accordingly, there can be no
assurance that it will be possible, at any particular time, to close a futures
position. In the event a Portfolio could not close a futures position and the
value of such position declined, the Portfolio would be required to continue to
make daily cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such securities will not
be sold until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. However, there is no guarantee that the
price movements of the securities will, in fact, correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.
The hours of trading of futures contracts may not conform to the hours
during which a Portfolio may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be reflected
in the futures market.
FOREIGN CURRENCY TRANSACTIONS. The Lincoln Growth and Income Portfolio,
the Lincoln Enterprise Portfolio, the Lincoln U.S. Growth Portfolio, the Lincoln
World Growth Portfolio, the Lincoln New Pacific Portfolio and the Lincoln
Corporate Income Portfolio may hold foreign currency deposits from time to time
and may convert dollars and foreign currencies in the foreign exchange markets.
Currency conversion involves dealer spreads and other costs, although
commissions usually are not charged. Currencies may be exchanged on a spot
(i.e., cash) basis, or by entering into forward contracts to purchase or sell
foreign currencies at a future date and price. Forward contracts generally are
traded in an interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated currency
exchange.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Portfolios' dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect to specific
receivables or payables of a Portfolio generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Portfolio expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency. A Portfolio may not position hedge with respect to a
particular currency for an amount greater than the aggregate market value
(determined at the time of making any sale of a forward contract) of securities
held in its portfolio denominated or quoted in, or currently convertible into,
such currency.
When a Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when a Portfolio anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Portfolio may desire to "lock in" the U.S. dollar price of
the security or the U.S. dollar equivalent of such dividend or interest payment
as the case may be. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, a Portfolio will be able to protect itself against
a possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
Additionally, when the Investment Advisor and/or applicable Sub-Advisor
believes that the currency of a particular foreign country may suffer a
substantial decline against the U.S. dollar, a Portfolio may enter into a
forward contract for a fixed amount of dollars, to sell the amount of foreign
currency approximating the value of some or all of the securities of the
Portfolio denominated in such foreign currency.
The Portfolios may use currency forward contracts to manage currency
risks and to facilitate transactions in foreign securities. The following
discussion summarizes the principal currency management strategies involving
forward contracts that could be used by these Portfolios.
In connection with purchases and sales of securities denominated in
foreign currencies, a Portfolio may enter into currency forward contracts to fix
a definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge". The Investment Advisor and/or Sub-Advisors expect to enter
into settlement hedges in the normal course of managing the Portfolios' foreign
investments. The Portfolios could also enter into forward contracts to purchase
or sell a foreign currency in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific investments
have not yet been selected by the Investment Advisor and/or Sub-Advisor.
The Portfolios may also use forward contracts to hedge against a decline
in the value of existing investments denominated in foreign currency. For
example, if a Portfolio owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for U.S.
dollars to hedge against possible declines in the pound's value. Such a hedge
(sometimes referred to as a "position hedge") would tend to offset both positive
and negative currency
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<PAGE>
fluctuations, but would not offset changes in security values caused by other
factors. The Portfolio could also hedge the position by selling another currency
expected to perform similarly to the pound sterling -- for example, by entering
into a forward contract to sell Deutschemarks or European Currency Units in
return for U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge", could offer advantages in terms of cost, yield, or efficiency, but
generally will not hedge currency exposure as effectively as a simple hedge into
U.S. dollars. Proxy hedges may result in losses if the currency used to hedge
does not perform similarly to the currency in which the hedged securities are
denominated.
Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodian account to
cover currency forward contracts. As required by SEC guidelines, the Lincoln
Growth and Income Portfolio, the Lincoln Enterprise Portfolio, the Lincoln U.S.
Growth Portfolio, the Lincoln World Growth Portfolio, the Lincoln New Pacific
Portfolio and the Lincoln Corporate Income Portfolio will segregate assets to
cover currency forward contracts, if any, whose purpose is essentially
speculative. The Portfolios will not segregate assets to cover forward
contracts, including settlement hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the Investment
Advisor's and/or Sub-Advisors' skill in analyzing and predicting currency
values. Forward contracts may substantially change the Portfolios' investment
exposure to changes in currency exchange rates, and could result in losses to
the Portfolios if currencies do not perform as the Investment Advisor and/or
Sub-Advisors anticipate. For example, if a currency's value rose at a time when
the Investment Advisor and/or applicable Sub-Advisor had hedged a Portfolio by
selling that currency in exchange for dollars, the Portfolio would be unable to
participate in the currency's appreciation. If the Investment Advisor and/or
applicable Sub-Advisor hedges currency exposure through proxy hedges, a
Portfolio could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if the
Investment Advisor and/or Sub-Advisor increases a Portfolio's exposure to a
foreign currency, and that currency's value declines, the Portfolio will realize
a loss. There is no assurance that the Investment Advisor's and/or Sub-Advisors'
use of forward currency contracts will be advantageous to the Portfolios or that
it will hedge at an appropriate time.
FOREIGN CURRENCY OPTIONS
The Lincoln Growth and Income Portfolio, the Lincoln Enterprise
Portfolio, the Lincoln U.S. Growth Portfolio, the Lincoln World Growth
Portfolio, the Lincoln New Pacific Portfolio and the Lincoln Corporate Income
Portfolio may purchase U.S. exchange-listed call and put options on foreign
currencies. Such options on foreign currencies operate similarly to options on
securities. Options on foreign currencies are affected by all of those factors
which influence foreign exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealer or other market sources be firm or
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revised on a timely basis. Available quotation information is generally
representative of very large transactions in the interbank market and thus may
not reflect relatively smaller transactions (less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are closed
while the markets for the underlying currencies remain open, significant price
and rate movements may take place in the underlying markets that cannot be
reflected in the options market.
FOREIGN CURRENCY CONVERSION
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Lincoln Growth and Income
Portfolio, the Lincoln Enterprise Portfolio, the Lincoln U.S. Growth Portfolio,
the Lincoln World Growth Portfolio, the Lincoln New Pacific Portfolio and the
Lincoln Corporate Income Portfolio at one rate, while offering a lesser rate of
exchange should those Portfolios desire to resell that currency to the dealer.
COMBINED TRANSACTIONS
Each Portfolio, except for the Lincoln Cashfund Portfolio, may enter
into multiple transactions, including multiple options transactions, multiple
futures transactions, multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and any combination of
futures, options, currency and interest rate transactions ("component"
transactions), instead of a single transaction, as part of a single or combined
strategy when, in the opinion of the Investment Advisor and/or Sub-Advisor, it
is in the best interests of the Portfolio to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered into based on
the Investment Advisor's and/or Sub-Advisor's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Each Portfolio, except for the Lincoln Cashfund Portfolio, may enter
interest rate, currency and index swaps and the purchase or sale of related
caps, floors and collars. The Portfolios expect to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio, to protect against currency fluctuations, as a duration
management technique or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolios
intend to use these transactions as hedges and not speculative investments and
will not sell interest rate caps or floors where it does not own securities or
other instruments providing the income stream the Portfolio may be obligated to
pay. Interest rate swaps involve the exchange by the Portfolio with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to a
nominal amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined
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interest rate or amount. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
A Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the
Investment Advisor and the Portfolio believe such obligations do not constitute
senior securities under the Investment Company Act and, accordingly, will not
treat them as being subject to its borrowing restrictions. A Portfolio will not
enter into any swap, cap, floor or collar transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of the
counterparty, combined with any credit enhancements, is rated at least A by S&P
or Moody's or is determined to be of equivalent credit quality by the Investment
Advisor and/or Sub-Advisor. If there is a default by the counterparty, the
Portfolio may have contractual remedies pursuant to the agreements related to
the transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agent utilizing standardized swap documentation. As a result, the swap market
has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
EURODOLLAR INSTRUMENTS
The Portfolios (other than the Lincoln Tax-Free Income Portfolio and
the Lincoln Cashfund Portfolio) may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. A
Portfolio might use Eurodollar futures contracts and options thereon to hedge
against changes in LIBOR, to which many interest rate swaps and fixed income
instruments are linked.
LENDING OF PORTFOLIO SECURITIES
As discussed in the Prospectus, each Portfolio has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, may not exceed one-third of a
Portfolio's total assets. A Portfolio may not lend its portfolio securities to
Lincoln National Corporation or its affiliates unless it has applied for and
received specific authority from the SEC. Loans of securities by the Portfolios
will be collateralized by cash, letters of credit or U.S. Government securities,
which will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. From time to time, a Portfolio
may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party, which is
unaffiliated with the Fund or with Lincoln National Corporation, and which is
acting as a "finder".
In lending its portfolio securities, a Portfolio can increase its income
by continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term
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instruments or obtaining yield in the form of interest paid by the borrower when
government securities are used as collateral. Requirements of the SEC, which may
be subject to future modifications, currently provide that the following
conditions must be met whenever portfolio securities are loaned: (a) the
Portfolio must receive at least 102% cash collateral or equivalent securities
from the borrower; (b) the borrower must increase such collateral whenever the
market value of the loaned securities rises above the level of such collateral;
(c) the Portfolio must be able to terminate the loan at any time; (d) the
Portfolio must receive reasonable interest on the loan, as well as an amount
equal to any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (f) voting rights on
the loaned securities may pass to the borrower; however, if a material event
adversely affecting the investment occurs, the Fund's Board of Directors must
terminate the loan and regain the right to vote the securities. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially.
WHEN-ISSUED SECURITIES
As discussed in the Prospectus, the Portfolios may purchase securities
on a "when-issued" basis. When a Portfolio agrees to purchase securities, the
Portfolio's Custodian will set aside cash or liquid portfolio securities equal
to the amount of the commitment in a separate account. Normally, the Custodian
will set aside portfolio securities to satisfy a purchase commitment. In such a
case, a Portfolio may be required subsequently to place additional assets in the
separate account in order to assure that the value of the account remains equal
to the amount of the Portfolio's commitment. It may be expected that a
Portfolio's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. No Portfolio intends to purchase "when-issued" securities for speculative
purposes but only in furtherance of its investment objective. Because a
Portfolio will set aside cash or liquid portfolio securities to satisfy its
purchase commitments in the manner described, the Portfolio's liquidity and the
ability of the Investment Advisor or Sub-Advisor to manage the Portfolio might
be affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its assets.
When a Portfolio engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Portfolio's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous.
MONEY MARKET INSTRUMENTS
With regard to the Lincoln Cashfund Portfolio, investments will be
limited to those obligations which, at the time of purchase, (i) possess one of
the two highest short-term ratings from a nationally recognized statistical
rating organization ("NRSRO") in the case of single-rated securities; or (ii)
possess, in the case of multiple-rated securities, one of the two highest
short-term ratings by at least two NRSROs or (iii) do not possess a rating
(i.e., are unrated) but are determined by the Investment Advisor to be of
comparable quality to the rated instruments eligible for purchase by the
Portfolio under the guidelines adopted by the Board of Directors (collectively,
"Eligible Securities"). A security that has not received a rating will be deemed
to possess the rating assigned to an outstanding class of the issuer's
short-term debt obligations if determined by the Investment Advisor to be
comparable in priority and security to the obligation selected for purchase by
the Lincoln Cashfund Portfolio.
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A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, are
determined by the Investment Advisor to be of comparable quality; provided,
however, that where the demand feature would be readily exercisable in the event
of a default in payment of principal or interest on the underlying security, the
obligation may be acquired based on the rating possessed by the demand feature
or, if the demand feature does not possess a rating, a determination of
comparable quality by the Investment Advisor. A security which at the time of
issuance had a maturity exceeding 397 days but, at the time of purchase, has a
remaining maturity of 397 days or less, is not considered an Eligible Security
if it does not possess a high quality rating and the long-term rating, if any,
is not within the two highest rating categories.
Eligible Securities include First Tier Securities and Second Tier
Securities. First Tier Securities include those that possess a rating in the
highest category in the case of a single-rated security or at least two ratings
in the highest rating category in the case of multiple-rated securities or, if
the securities do not possess a rating, are determined to be of comparable
quality by the Advisor pursuant to the guidelines adopted by the Board of
Directors. Second Tier Securities are all other Eligible Securities.
The Lincoln Cashfund Portfolio will not invest more than 5% of its total
assets in the First Tier Securities of any one issuer, except that the Portfolio
may invest more than 5% of its total assets in the First Tier Securities of a
single issuer for a period of up to three business days. In addition, the
Portfolio may not invest more than 5% of its total assets in Second Tier
Securities, with investment in the Second Tier Securities of any one issuer
further limited to the greater of 1% of the Portfolio's total assets or $1.0
million. If a percentage limitation is satisfied at the time of purchase, a
later increase in such percentage resulting from a change in the Portfolio's net
asset value or a subsequent change in a security's qualification as a First Tier
or Second Tier Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of the Portfolio's assets that may
be invested in obligations issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities and repurchase agreements fully collateralized by
such obligations.
Under the guidelines adopted by the Fund's Board of Directors and in
accordance with Rule 2a-7 under the Investment Company Act, the Investment
Advisor and/or Sub-Advisor, if any, may be required to promptly dispose of an
obligation held in the Portfolio's portfolio in the event of certain
developments that indicate a diminishment of the instrument's credit quality,
such as where an NRSRO downgrades an obligation below the second highest rating
category, or in the event of a default relating to the financial condition of
the issuer.
The Appendix to this Statement of Additional Information identifies each
NRSRO which may be utilized by the Investment Advisor with regard to portfolio
investments for the Portfolio and provides a description of relevant ratings
assigned by each such NRSRO. A rating by an NRSRO may be utilized only where the
NRSRO is neither controlling, controlled by, or under common control with the
issuer of, or any issuer, guarantor, or provider of credit support for, the
instrument.
The Lincoln Cashfund Portfolio may invest, and each of the other
Portfolios may invest for defensive purposes, in corporate and government bonds
and notes and money market instruments. Money market instruments in which the
Portfolios may invest include U.S. Government securities; certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the U.S. and subsidiaries located in
Canada), domestic branches of
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foreign banks, savings and loan associations and similar institutions; high
grade commercial paper; and repurchase agreements with respect to the foregoing
types of instruments. The following is a more detailed description of such money
market instruments.
BANK OBLIGATIONS
Certificates of deposit ("CDs") are short-term negotiable obligations of
commercial banks; time deposits ("TDs") are non-negotiable deposits maintained
in banking institutions for specified periods of time at stated interest rates;
and bankers' acceptances are time drafts drawn on commercial banks by borrowers
usually in connection with international transactions.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and government
regulation. Such obligations are subject to different risks than are those of
domestic banks or domestic branches of foreign banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign branches of domestic banks are not necessarily subject to the
same or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of domestic
banks are guaranteed as to repayment of principal and interest (but not as to
sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation as
well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is located if the branch is
licensed in that state. In addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may or may
not be required to: (a) pledge to the regulator by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (b) maintain assets within the state in an amount equal
to a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state. The
deposits of state branches may not necessarily be insured by the FDIC. In
addition, there may be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks or by domestic branches of
foreign banks, the Investment Advisor and/or Sub-Advisors will carefully
evaluate such investments on a case-by-case basis.
Savings and loan associations whose CDs may be purchased by the
Portfolios are supervised by the Office of Thrift Supervision and are insured by
the Savings Association Insurance Fund, which is administered by the FDIC and is
backed by the full faith and credit of the U.S. Government. As a result, such
savings and loan associations are subject to regulation and examination.
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REVERSE REPURCHASE AGREEMENTS
All Portfolios are authorized to enter into reverse repurchase
agreements. A reverse repurchase agreement is the sale of a security by a
Portfolio and its agreement to repurchase the security at a specified time and
price. A Portfolio will maintain in a segregated account with the Fund's
Custodian cash, cash equivalents or U.S. Government securities in an amount
sufficient to cover its obligations under reverse repurchase agreements with
broker-dealers (but no collateral is required on reverse repurchase agreements
with banks). Under the Investment Company Act, reverse repurchase agreements may
be considered borrowings by a Portfolio; accordingly, each Portfolio will limit
its investments in reverse repurchase agreements, together with any other
borrowings, to no more than one-third of its total assets. The use of reverse
repurchase agreements by a Portfolio creates leverage which increases the
Portfolio's investment risk. If the income and gains on securities purchased
with the proceeds of reverse repurchase agreements exceed the costs of the
agreements, a Portfolio's earnings or net asset value will increase faster than
otherwise would be the case; conversely, if the income and gains fail to exceed
the costs, earnings or net asset value would decline faster than otherwise would
be the case.
"ROLL" TRANSACTIONS
Each Portfolio may engage in "roll" transactions. A "roll" transaction
is the sale of securities together with a commitment (for which a Portfolio may
receive a fee) to purchase similar, but not identical, securities at a future
date. Under the Investment Company Act, these transactions may be considered
borrowings by the Portfolios; accordingly, each Portfolio will limit its use of
these transactions, together with any other borrowings, to no more than
one-third of its total assets. The Portfolios will segregate liquid assets such
as cash, U.S. Government securities or other high grade debt obligations in an
amount sufficient to meet their payment obligations in these transactions.
Although these transactions will not be entered into for leveraging purposes, to
the extent a Portfolio's aggregate commitments under these transactions exceed
its holdings of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the Portfolio temporarily will be in a
leveraged position (i.e., it will have an amount greater than its net assets
subject to market risk). Should the market value of a Portfolio's portfolio
securities decline while the Portfolio is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. As a Portfolio's aggregate commitments under these transactions
increase, the opportunity for leverage similarly increases.
REPURCHASE AGREEMENTS
The Portfolios may additionally engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, a Portfolio
would acquire an underlying debt obligation for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during the Portfolio's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Portfolio's holding period. The Portfolios will enter
into repurchase agreements with respect to their portfolio securities with
member banks of the Federal Reserve System or primary government securities
dealers recognized by the Federal Reserve Bank of New York. Under each
repurchase agreement, the selling institution will be required to maintain the
value of the securities subject to the repurchase agreement at not less than
their repurchase price, including accrued interest earned on the underlying
securities.
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Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon a Portfolio's ability to dispose of the underlying securities.
The Investment Advisor and/or Sub-Advisors, acting under the supervision of the
Fund's Board of Directors, review the creditworthiness of those banks and
dealers with which the Portfolios enter into repurchase agreements to evaluate
these risks, and monitors on an ongoing basis the value of the securities
subject to repurchase agreements to ensure that the collateral is maintained at
the required level.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Directors, the Investment Advisor
and/or Sub-Advisors determine the liquidity of the Portfolios' securities and
monitors trading activity in illiquid securities. In determining the liquidity
of a Portfolio's securities, the Investment Advisor and/or Sub-Advisors may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment). Securities currently considered by the
Portfolio to be illiquid include repurchase agreements not entitling the holder
to payments of principal and interest within seven days, loans and other direct
debt instruments, over-the-counter options, non-government stripped fixed-rate
mortgage-backed securities, and certain restricted securities and
government-stripped fixed-rate mortgage backed securities determined by the
Investment Advisor and/or Sub-Advisors to be illiquid. Rule 144A securities for
which a market exists will not be considered illiquid securities. In the absence
of market quotations, illiquid securities are priced at fair value as determined
in good faith by the Pricing Committee of the Board of Directors.
VARIABLE AND FLOATING RATE NOTES
Variable rate master demand notes, in which the Portfolios may invest,
are unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. A Portfolio will not invest over 5% of its assets in variable
rate master demand notes. Because master demand notes are direct lending
arrangements between a Portfolio and the issuer, they are not normally traded.
Although there is no secondary market in the notes, a Portfolio may demand
payment of principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial, and other
business concerns) must satisfy the same criteria as set forth above for
commercial paper. In determining average weighted portfolio maturity, a variable
amount master demand note will be deemed to have a maturity equal to the period
of time remaining until the principal amount can be recovered from the issuer
through demand.
A variable rate note is one whose terms provide for the adjustment of
its interest rate on set dates and which, upon such adjustment, can reasonably
be expected to have a market value that approximates its par value. A floating
rate note is one whose terms provide for the adjustment of its interest rate
whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated
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by credit rating agencies; however, unrated variable and floating rate notes
purchased by a Portfolio will be determined by the Portfolio's Investment
Advisor and/or Sub-Advisor, if any, under guidelines established by the Fund's
Board of Directors to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Portfolio's investment policies. In
making such determinations, the Investment Advisor and/or Sub-Advisor, if any,
will consider the earning power, cash flow and other liquidity ratios of the
issuers of such notes (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Portfolio, the
Portfolio may re-sell the note at any time to a third party. The absence of such
an active secondary market, however, could make it difficult for the Portfolio
to dispose of the variable or floating rate note involved in the event the
issuer of the note defaulted on its payment obligations, and the Portfolio
could, for this or other reasons, suffer a loss to the extent of the default.
Variable or floating rate notes may be secured by bank letters of credit.
With respect to the Lincoln Cashfund Portfolio, variable or floating
rate notes with stated maturities of more than 397 days may be deemed to have
shorter maturities as follows:
(1) A note that is issued or guaranteed by the United
States Government or any agency thereof which has a variable
rate of interest readjusted no less frequently than 397 days
will be deemed by a Portfolio to have a maturity equal to the
period remaining until the next readjustment of the interest
rate.
(2) A variable rate note, the principal amount of which
is scheduled on the face of the instrument to be paid in one
year or less, will be deemed by a Portfolio to have a maturity
equal to the period remaining until the next readjustment of the
interest rate.
(3) A variable rate note that is subject to a demand
feature will be deemed by a Portfolio to have a maturity equal
to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.
(4) A floating rate note that is subject to a demand
feature will be deemed by a Portfolio to have a maturity equal
to the period remaining until the principal amount can be
recovered through demand.
As used above, a note is "subject to a demand feature" where the
Portfolio is entitled to receive the principal amount of the note either at any
time on no more than thirty days' notice or at specified intervals not exceeding
one year and upon no more than 30 days notice.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceed 10% of the Portfolio's total assets only if such
notes are subject to a demand feature that will permit the Portfolio to demand
payment of the Principal within seven days after demand by the Portfolio. If not
rated, such instruments must be found by the Portfolio's Investment Advisor
and/or Sub-Advisor, if any, under guidelines established by the Fund's Board of
Directors, to be of comparable quality to instruments that are rated high
quality. A rating may be
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relied upon only if it is provided by a nationally recognized statistical rating
organization that is not affiliated with the issuer or guarantor of the
instruments. For a description of the rating symbols of S&P and Moody's used in
this paragraph, see the Appendix. The Portfolio may also invest in Canadian
Commercial Paper which is commercial paper issued by a Canadian corporation or a
Canadian counterpart of a U.S. corporation and in Europaper which is U.S. dollar
denominated commercial paper of a foreign issuer.
MUNICIPAL SECURITIES
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "private activity
bonds" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
intercity rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation. Certain debt obligations known as "industrial development
bonds" under prior federal tax law may have been issued by or on behalf of
public authorities to obtain funds to provide certain privately-operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to finance the construction, improvement, equipment or
repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law. The Lincoln Tax-Free Income
Portfolio may not be a desirable investment for "substantial users" of
facilities financed by private activity bonds or industrial development bonds or
for "related persons" of "substantial users". See "Additional Tax Information
Concerning the Lincoln Tax-Free Income Portfolio."
The Lincoln Tax-Free Income Portfolio may also acquire "moral
obligation" issues, which are normally issued by special purpose authorities,
and other tax-exempt investments including pollution control bonds and
tax-exempt commercial paper. The Portfolio may purchase short-term tax-exempt
General Obligations Notes, Tax Anticipation Notes, Bond Anticipation Notes,
Revenue Anticipation Notes, Project Notes, and other forms of short-term
tax-exempt loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements, or
other revenues. Project Notes are issued by a state or local housing agency and
are sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligations with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
The Lincoln Tax-Free Income Portfolio may invest in Municipal Securities
either by purchasing them directly or by purchasing certificates of accrual or
similar instruments evidencing direct ownership of interest payments or
principal payments, or both, on Municipal Securities, provided that,
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in the opinion of counsel to the initial seller of each such certificate or
instrument, any discount accruing on such certificate or instrument that is
purchased at a yield not greater than the coupon rate of interest on the related
Municipal Securities will to the same extent as interest on such Municipal
Securities be exempt from federal income tax and state income tax (where
applicable) and not treated as a preference item for individuals for purposes of
the federal alternative minimum tax. The Portfolio may also invest in Municipal
Securities by purchasing from banks participation interests in all or part of
specific holdings of Municipal Securities. Such participation may be backed in
whole or in part by an irrevocable letter of credit or guarantee of the selling
bank. The selling bank may receive a fee from a Portfolio in connection with the
arrangement. The Portfolio will not purchase participation interests unless it
receives an opinion of counsel or a ruling of the Internal Revenue Service that
interest earned by it on Municipal Securities in which it holds such
participation interest is exempt from federal income tax and state income tax
(where applicable) and not treated as a preference item for individuals for
purposes of the federal alternative minimum tax.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations with a class of
securities registered under the Securities Exchange Act of 1934.
PUTS
The Lincoln Tax-Free Income Portfolio may acquire "puts" with respect to
Municipal Securities held in its portfolio. A put is a right to sell a specified
security (or securities) within a specified period of time at a specified
exercise price. The Portfolio may sell, transfer, or assign a put only in
conjunction with the sale, transfer, or assignment of the underlying security or
securities.
The amount payable to the Lincoln Tax-Free Income Portfolio upon its
exercise of a "put" is normally (i) the Portfolio's acquisition cost of the
Municipal Securities (excluding any accrued interest which the Portfolio paid on
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Portfolio owned the securities,
plus (ii) all interest accrued on the securities since the last interest payment
date during that period.
Puts may be used to facilitate the reinvestment of the Portfolio's
assets at a rate of return more favorable than that of the underlying security.
Puts may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of the Portfolio's assets. See "Variable and Floating Rate
Notes" and "Net Asset Value."
PORTFOLIO TURNOVER
While the Portfolios do not intend to trade in securities for short-term
profits, securities may be sold without regard to the amount of time they have
been held by a Portfolio when warranted by the circumstances. A Portfolio's
portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities for a year by the monthly average value of
portfolio securities for that year. Securities with remaining maturities of one
year or less at the date of acquisition are excluded from the calculation. A
portfolio turnover rate of 100% would occur, for example, if all the securities
in the Portfolio's portfolio were replaced once during a period of one year. A
high rate of portfolio turnover in any year may increase brokerage commissions
paid and could result in high amounts of realized investment gain subject to the
payment of taxes by shareholders.
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INVESTMENT RESTRICTIONS
Each Portfolio has adopted policies and investment restrictions. The
investment restrictions numbered 1 through 9 may not be changed without a
majority vote of its outstanding shares, and are considered fundamental. Such
majority is defined in the Investment Company Act as the vote of the lesser of
(i) 67% or more of the outstanding voting securities present at a meeting, if
the holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations expressed in the following investment restrictions
are measured immediately after and giving effect to the relevant transaction.
Investment restrictions numbered 10 through 12 may be changed by the vote of a
majority of the Board of Directors.
Each Portfolio normally may not:
1. Purchase any security (other than obligations of the
U.S. Government, its agencies or instrumentalities) if as a
result, with respect to 75% of the Portfolio's total assets,
more than 5% of the Portfolio's assets (determined at the time
of investment) would then be invested in securities of a single
issuer;
2. Purchase any securities (other than obligations of
the U.S. Government, its agencies and instrumentalities) if as a
result 25% or more of the value of the Portfolio's total assets
(determined at the time of investment) would be invested in the
securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is
no limitation with respect to money market instruments of
domestic banks, U.S. branches of foreign banks that are subject
to the same regulations as U.S. banks and foreign branches of
domestic banks (provided that the domestic bank is
unconditionally liable in the event of the failure of the
foreign branch to make payment on its instruments for any
reason). Foreign governments, including agencies and
instrumentalities thereof, and each of the electric utility,
natural gas distribution, natural gas pipeline, combined
electric and natural gas utility, and telephone industries shall
be considered as a separate industry for this purpose;
3. Buy or sell real estate, interests in real estate or
commodities or commodity contracts; however, the Portfolio may
invest in debt securities secured by real estate or interests
therein, or issued by companies which invest in real estate or
interests therein, including real estate investment trusts, and
may purchase or sell currencies (including forward currency
contracts) and financial futures contracts and options thereon;
4. Engage in the business of underwriting securities of
other issuers, except to the extent that the disposal of an
investment position may technically cause the Fund to be
considered an underwriter as that term is defined under the
Securities Act of 1933, as amended;
5. Make loans in an aggregate amount in excess of
one-third of the Portfolio's total assets, taken at the time any
loan is made, provided that entering into certain repurchase
agreements and purchasing debt securities shall not be deemed
loans for the purposes of this restriction;
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6. Make short sales of securities or maintain a short
position if, when added together, more than 25% of the value of
the Portfolio's net assets would be (i) deposited as collateral
for the obligation to replace securities borrowed to effect
short sales and (ii) allocated to segregated accounts in
connection with short sales;
7. Borrow money, except from banks for temporary or
emergency purposes not in excess of one-third of the value of
the Portfolio's assets, and except that the Portfolio may enter
into reverse repurchase agreements and engage in "roll"
transactions, provided that reverse repurchase agreements,
"roll" transactions and any other transactions constituting
borrowing by the Portfolio may not exceed one-third of the
Portfolio's total assets. Notwithstanding the above, Lincoln
Cashfund Portfolio will not borrow money in excess of 5% (taken
at the lower of cost or current value) of its total assets (not
including amounts borrowed), will not purchase equity securities
or rights or warrants to acquire equity securities, and will not
write or purchase options;
8. Invest in securities of other investment companies
except as may be acquired as part of a merger, consolidation,
reorganization or acquisition of assets and except that each of
the Portfolios other than the Lincoln Cashfund Portfolio may
invest up to 5% of its total assets in the securities of any one
investment company, but may not own more than 3% of the
securities of any investment company or invest more than 10% of
its total assets in the securities of other investment
companies;
9. Make investments for the purpose of exercising
control or management;
10. Invest in securities of any issuer if, to the
knowledge of the Portfolio, any officer or director of the Fund
or the Investment Advisor or the Fund's Sub-Advisor owns more
than 1/2 of 1% of the outstanding securities of such issuer, and
such officers and directors who own more than 1/2 of 1% own in
the aggregate more than 5% of the outstanding securities of such
issuer;
11. Purchase any security if as a result the Portfolio
would then have more than 5% of its total assets (determined at
the time of investment) invested in securities of companies
(including predecessors) less than three years old. In the case
of the Lincoln Tax-Free Income Portfolio, the Portfolio will not
purchase any security if as a result the Portfolio would then
have more than 5% of its total assets (determined at the time of
investment) invested in industrial development revenue bonds
when the private entity on whose credit the security is based
directly or indirectly is less than three years old (including
predecessors); or
12. Purchase illiquid securities or other securities
that are not readily marketable if more than 10% of the total
assets of the Portfolio would be invested in such securities,
which include: (1) repurchase agreements with maturities greater
than seven calendar days; (2) to the extent a liquid secondary
market does not exist for the instruments, futures contracts and
options thereon; (3) over-the-counter options; (4) variable rate
demand notes with a demand period of more than seven days; (5)
time deposits maturing in more than seven calendar days; (6)
certain Rule 144A restricted securities; and (7) foreign
securities not traded on a recognized domestic or foreign
exchange, to the extent a liquid secondary market does not exist
for such instruments.
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In order to comply with certain state "blue sky" restrictions, each
Portfolio will not as a matter of operating policy:
1. Invest in oil, gas and mineral leases or programs;
2. Purchase warrants if as a result the Portfolio would
then have more than 5% of its net assets (determined at the time
of investment) invested in warrants. Warrants will be valued at
the lower of cost or market and investment in warrants which are
not listed on the New York Stock Exchange or American Stock
Exchange will be limited to 2% of the Fund's net assets
(determined at the time of investment). For the purpose of this
limitation, warrants acquired in units or attached to securities
are deemed to be without value;
3. In connection with investment restriction number
eight above, invest in securities issued by other investment
companies without waiving the advisory fee on that portion of
its assets invested in such securities; or
4. Purchase puts, calls, straddles, spreads, and any
combination thereof if by reason thereof the value of its
aggregate investment in such classes of securities will exceed
5% of its total assets.
MANAGEMENT
Directors and Officers
*PRISCILLA S. BROWN (37), President (6/94 - present) (formerly Vice President
9/93 - 6/94) and Director (8/93 present) of the Fund. President and Director
(6/94 - present) of LNC Equity Sales Corporation. Formerly Vice President (3/91
- - 6/94) of Lincoln Investment Management, Inc.
RICHARD M. BURRIDGE (65), Director (9/93 - present) of the Fund. Director (since
1972); President (since March 1986) of The Burridge Group, Inc. (investment
management); Director of Computer Access International, Inc., Cincinnati
Financial Corporation, Lincoln National Convertible Securities Fund, Inc.,
Lincoln National Income Fund, Inc. and St. Joseph Light and Power Company;
Chairman of the Board of Fort Dearborn Income Securities, Inc.
JORGE G. CASTRO (37), Director (9/93 - present) of the Fund. Principal (since
1990) of CIC Asset Management, Inc. (investment management); Trustee (since
1993) of Milton Academy.
ADELA CEPEDA (36), Director (9/93 - present) of the Fund. Founder and Managing
Director of Abacus Financial Group, Inc. (since 1991).
ROGER J. DESHAIES (44), Director (9/93 - present) of the Fund. Director (since
1992); Senior Vice President-Finance (1990-present) of Parkview Memorial
Hospital, Fort Wayne, Indiana.
- ----------------------
* "Interested" Director as defined in the Investment Company Act.
-25-
<PAGE>
CHARLES G. FREUND (70), Director (9/93 - present) of the Fund. Director (since
1972); Chairman of the Board (July 1987-April 1989 and since July 1989)
(previously, Chairman of the Executive Committee (July 1987-July 1989)) of First
National Bank of Lincolnshire; Director of Lincoln National Convertible
Securities Fund, Inc., and Mathers Fund, Inc.
*PHILIP L. HOLSTEIN (41), Director (9/93 - present) of the Fund. President
(since 1982) of The Holstein Company, Inc. (financial services); Vice President
(since 1992) of The Morgan Financial Group, Inc.; Registered PrincipalSales
Coordinator (since 1985) of LNC Equity Sales Corporation; Agent (since 1982) of
Lincoln National Life Insurance Company.
*H. THOMAS MCMEEKIN (42), Director (6/94 - present) of the Fund. President (5/94
- - present) and Director (5/91 present), Lincoln Investment Management, Inc.;
Executive Vice President (5/94 - present), (formerly Senior Vice President 11/92
- - 5/94) Lincoln National Corporation; President (5/94 - present) and Director
(5/90 - present), Lincoln Convertible Securities Fund, Inc. and Lincoln National
Income Fund, Inc.
BARBARA A. PECK (46), Director (9/93 - present) of the Fund. Assistant Dean of
Academic Administration for the College of Business Administration at the
University of Illinois at Chicago ("UIC") (since May 1993); lecturer in
Accounting Department of the College of Business Administration at UIC (since
August 1991); accounting lecturer at Northwestern University's University
College (since June 1990).
The officers conduct and supervise the daily business operations of the
Portfolios, while the Directors, in addition to their functions set forth under
"Management" in the Prospectus, review such actions and decide on general
policy.
Pursuant to the Investment Advisory Agreement with the Fund, the
Investment Advisor pays compensation of officers and employees of the Fund as
well as the fees and expenses of all Directors of the Fund who are affiliated
persons of the Investment Advisor.
The Fund pays each of its Directors who is not an affiliated person of
the Fund estimated annual compensation of $13,000 in addition to certain
out-of-pocket expenses.
Mmes. Cepeda and Peck and Messrs. Burridge, Castro, Deshaies and Freund
serve as members of the Fund's Audit Committee which is comprised of Directors
who are not interested persons of the Fund. Mr. Freund is the Chairperson of the
Audit Committee. The committee will meet at least annually with each Portfolio's
independent accountants and officers to review distribution activities and Rule
12b-1 expenditures, accounting principles used by each Portfolio and the
adequacy of each Portfolio's internal controls.
The Investment/Pricing Committee performs interim functions for the
Board of Directors including dividend declaration and portfolio pricing matters.
Members are Mmes. Cepeda and Peck and Messrs. Burridge, Castro, Deshaies and
Freund. Mr. Burridge is the Chairperson of the Investment/Pricing Committee.
- ----------------------
* "Interested" Director as defined in the Investment Company Act.
-26-
<PAGE>
Responsibilities of the Nominating Committee of the Fund include
recommending a slate of Directors; preparing for and recommending replacements
for any vacancies in Directors' positions; and initial review of policy issues
regarding the size, composition and compensation of the Board. Members of the
Nominating Committee are Mmes. Cepeda and Peck and Messrs. Burridge, Castro,
Deshaies and Freund. Ms. Cepeda is the Chairperson of the Nominating Committee.
Officers
<TABLE>
<S> <C>
Priscilla S. Brown President
JoAnn E. Becker Vice President
David A. Berry Vice President
Dennis A. Blume Vice President
Steven R. Brody Vice President, Treasurer and Chief Financial Officer
Ann L. Warner Vice President
C. Suzanne Womack Secretary
David G. Humes Assistant Vice President and Chief Accounting Officer
Brian S. Becher Assistant Secretary
Robert K. Gongwer Assistant Secretary
Kharis K. Roach Assistant Secretary
Cynthia A. Rose Assistant Secretary
Walter W. Bonham, Jr. Assistant Treasurer
Eldon J. Summers Assistant Treasurer
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 1, 1996, the officers and Directors of the Funds, as a group,
owned less than 1% of the outstanding shares of each Fund.
Listed below are the shareholders of record who held 25% or more of the
outstanding shares of each Class as of February 1, 1996.
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln Growth and Income Portfolio Lincoln National Life Insurance Co. 83.73
(Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln Growth and Income None
Portfolio (Class B)
Lincoln Growth and Income None
Portfolio (Class C)
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln Growth and Income Federated Life Insurance Co. 100.00
Portfolio (Class D) Attn.: Tom Koch
121 E. Park Sq.
Owatonna, MN 55060
Lincoln Enterprise Portfolio American States Insurance Co. 73.41
(Class A) Attn.: Corporate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46207
Lincoln Enterprise Portfolio None
(Class B)
Lincoln Enterprise Portfolio John Robertson Plumbing Inc. 41.54
(Class C) PO Box 118
Burlington, KY 41005
Lincoln Enterprise Portfolio NBD Bank 100.00
(Class D) Trst Motor Wheel Corp.
Box 771072
Detroit, MI 48277-1072
Lincoln U.S. Growth Portfolio (Class A) American States Insurance Co. 89.62
Attn.: Corporate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46207
Lincoln U.S. Growth Portfolio None
(Class B)
Lincoln U.S. Growth Portfolio None
(Class C)
Lincoln U.S. Growth Portfolio (Class D) Federated Life Insurance Co. 100.00
Attn.: Tom Koch
121 E. Park Sq.
Owatonna, MN 55060
Lincoln World Growth Portfolio (Class A) Lincoln National Life Insurance Co. 85.63
1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln World Growth Portfolio (Class B) None
Lincoln World Growth Portfolio (Class C) None
Lincoln World Growth Portfolio (Class D) Lincoln Investment Management, Inc. 100.00
1300 South Clinton St.
Fort Wayne, IN 46801
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- -------------------------------- ------------
<S> <C> <C>
Lincoln New Pacific Portfolio (Class A) Lincoln National Life Insurance Co. 84.26
1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln New Pacific Portfolio (Class B) None
Lincoln New Pacific Portfolio (Class C) NFSC FBO 27.73
Chester M. Boltwood
Karen A. Boltwood
828 Cobblestone Circle
Modesto, CA 95355
Lincoln New Pacific Portfolio (Class D) Lincoln Investment Management, Inc. 100.00
1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln Government Income Portfolio Lincoln National Life Insurance Co. 98.28
(Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln Government Income Portfolio NFSC/FMTC IRA Rollover 72.81
(Class B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Lincoln Government Income Portfolio Willard Shivley 68.26
(Class C) Carolyn Shivley
6649 E. 150 North St.
Columbia City, IN 46725
Lincoln Government Income Portfolio Lincoln Investment Management, Inc. 100.00
(Class D) 1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln Corporate Income Portfolio (Class Lincoln National Life Insurance Co. 94.88
A) 1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln Corporate Income Portfolio (Class NFSC/FMTC IRA Rollover 61.50
B) FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Lincoln Corporate Income Portfolio (Class Willard Shivley 94.99
C) Carolyn Shivley
6649 E. 150 North St.
Columbia City, IN 46725
Lincoln Corporate Income Portfolio (Class Federated Life Insurance Co. 100.00
D) Attn.: Tom Koch
121 E. Park Square
Owatonna, MN 55060
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln Tax-Free Income American States Insurance Co. 97.14
Portfolio (Class A) Attn.: Cooperate Accounting P/C
David Rogers
500 North Meridian St.
Indianapolis, IN 46207
Lincoln Tax-Free Income Portfolio (Class Jean Stone 38.40
B) 1360 Summitridge Place
Beverly Hills, CA 90210
Lincoln Tax-Free Income Portfolio (Class Lincoln Investment Management, Inc. 61.85
C) 1300 South Clinton St.
Fort Wayne, IN 46801
Lincoln Tax-Free Income Portfolio (Class None
D)
Lincoln Cashfund Portfolio Lincoln National Life Insurance Co. 31.66
(Class A) 1300 South Clinton St.
Fort Wayne, IN 46801
</TABLE>
Listed below are the shareholders who held at least 5% but less than
25% of the outstanding shares of each Class as of February 1, 1996.
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln Growth and Income Portfolio (Class A) None
Lincoln Growth and Income Portfolio (Class B) NFSC FMTC IRA Rollover 24.06
FBO Lawrence B. Silver
Harrisburg, PA 17110
NFSC FMTC IRA Rollover 10.07
FBO Albert L. Wedner
7453 Light House Point
Pittsburgh, PA 15221
Marlin and Jeanne Drake 6.40
11595 N. Meridian St. Suite 250
Carmel, IN 46032
Carl W. Niderwimmer 5.13
301 NW 73rd Terrace
Gladstone, MD 64118
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln Growth and Income Portfolio NFSC FBO 21.71
(Class C) Robert F. Bossi and
Francene M. Bossi
401 Key West Dr.
Charlottesville, VA 22901
NFSC 15.98
FBO Patricia A. Godfrey
1822 6th Ave West
Bradenton, FL 34202
NFSC 8.51
FBO John A. Storey
4699 Sandpiper LN
Hoover, AL 35244
NFSC 7.22
FBO Garold A. Nest
Harrisville, MO 64701
NFS FBO 7.15
Chester M. Boltwood
Karen A. Boltwood
828 Cobbelstone Circle
Modestor, CA 95355
Fred and Teresa Farah 6.01
1204 Chamberlain
Memphis, TN 38119
Lincoln Growth and Income Portfolio (Class D) None
Lincoln Enterprise Portfolio (Class A) None
Lincoln Enterprise Portfolio (Class B) Marlin and Jeanne Drake 17.36
11595 N. Meridian St. Suite 250
Carmel, IN 46032
NFSC FBO, NFSC/FMTC IRA 7.41
FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Lincoln Enterprise Portfolio (Class C) Marlin and Jeanne Drake 14.70
11595 N. Meridian St. Suite 250
Carmel, IN 46032
NFSC 10.46
FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Paul E. Moberg 6.28
62 Hall Rd.
Hampton, VA 23664
Lincoln Enterprise Portfolio (Class D) None
Lincoln U.S. Growth Portfolio (Class A) None
Lincoln U.S. Growth Portfolio (Class B) NFSC FMTC IRA Rollover 19.71
FBO Lawrence B. Silver
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
Marlin and Jeanne Drake 17.40
11595 N. Meridian St. Suite 250
Carmel, IN 46032
Marlene M. Clark 8.50
1536 Kensington Ln
Lancaster, OH 43130
LR Brown 5.83
1201 Winner Ave.
Huntsville, AL 35805
Lincoln U.S. Growth Portfolio (Class C) NFSC 14.12
FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
NFSC FBO 12.60
Lionel R. & Anne L. Felteau
1578 Greyson Ridge
Marietta, GA 30062
Senen S. Santos 11.13
Cust. Imelda May Cardona
2109 Charlemagne Ave.
Long Beach, CA 90615
Paul E. Moberg 10.79
62 Hall Rd.
Hampton, VA 23664
Susan W. Horne 8.64
2412 Catherine Drive
Burlington, NC 27215
Marlin and Jeanne Drake 6.43
11595 N. Meridian St. Suite 250
Carmel, IN 46032
Lincoln U.S. Growth Portfolio (Class D) None
Lincoln World Growth Portfolio (Class A) None
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln World Growth Portfolio (Class B) NFSC FBO, NFSC/FMTC IRA 12.27
FBO Lawrence B. Silver, MD
1800 Linglestown Road, Suite 404
Harrisburg, PA 17110
Carl W. Niederwimmer 6.92
201 NW 73rd Terrace
Gladstone, MD 64118
NFSC FBO 5.08
Joan Miller
4917 Waterfowl Way
Rockville, MD 20853
Lincoln World Growth Portfolio (Class C) NFSC FBO 24.72
John Robertston
Trst John Robertson Plumbing Inc.
PO Box 118
Burlington, KY 41005
NFSC FBO 23.47
Chester M. Boltwood
Karen A. Boltwood
828 Cobblestone Circle
Modesto, CA 95355
NFSC 10.33
FBO Garold A. Nest
105-B Westwall Street
Harrisonville, MO 64701
Paul E. Moberg 7.90
62 Hall Rd.
Hampton, VA 23664
Susan W. Horne 6.73
2412 Catherine Dr.
Burlington, NC 27215
Eileen Shiman 6.00
3625 Yale Drive
Santa Rosa, CA 95405
Lincoln World Growth Portfolio (Class D) None
Lincoln Government Income Portfolio None
(Class A)
Lincoln Government Income Portfolio Irene E. Hall 8.26
(Class B) 5503 Monticello Ave.
Dallas, TX 75206
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
NFSC FBO 5.14
Geraldine W. Nixon
1577 Galor Circle
Smyrna, GA 30080
Lincoln Government Income Portfolio William H. Lambert 16.63
(Class C) 7775 Chaple Ridge
Memphis, TN 38018
Eileen Shiman 14.99
3625 Yale Drive
Santa Rosa, CA 95405
Lincoln Government Income Portfolio None
(Class D)
Lincoln Tax-Free Portfolio (Class A) None
Lincoln Tax-Free Portfolio (Class B) NFSC FBO 14.02
Geraldine W. Nixon
1577 Gaylor Circle
Smyrna, GA 30080
NFSC FBO 10.94
Rand H. Seaman
PO Box 4129
Danbury, CT 06813
NFSC 10.73
FBO Carrie A. Magee
671 Metairie Dr., Apt. M
Greenwood, IN 46143
NFSC FBO 6.06
Rita J. Obringer
910 Powers Street
New Haven, IN 36203
George A. Ford 5.89
Lorraine B. Ford
Trustee Ford Family Trust
3411 Van Buren Avenue
Ogden, UT 84403
Clayton L. McKendree 5.45
Stacey G. McKendree
4051 Ortega Forest Drive
Jacksonville, FL 32210
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C> <C>
Lincoln Tax-Free Income Portfolio NFSC FBO 23.32
(Class C) Leonel R. Felteau
Anne L. Felteau
1578 Greyson Ridge
Marietta, GA 30062
NFSC FBO 14.83
Ella D. McClinca
254 S. 400 E
Kaysville, UT 84037
Lincoln Tax-Free Income Portfolio None
(Class D)
Lincoln New Pacific Portfolio (Class A) None
Lincoln New Pacific Portfolio NFSC 22.88
(Class B) FBO Lawrence B. Silver
1800 Linglestown Rd. Suite 404
Harrisburg, PA 17110
Kenneth D. Willis, MD 8.78
1506 Olive Drive
Huntsville, AL 35801
Lincoln New Pacific Portfolio NFSC
(Class C) FBO Garold A. Nest 20.66
105-B Westwall St.
Harrisonville, MO 64701
Paul E. Moberg 20.60
52 Hull Road
Hampton, VA 23664
Charles H. Stevens 6.73
2413 Jenan Road
Virginia Beach, VA 23454
Edward K. Robinson 5.34
Dianne McKenzie
11999 W. Florida
Boise, ID 83709
Lincoln New Pacific Portfolio None
(Class D)
Lincoln Corporate Income Portfolio (Class A) None
Lincoln Corporate Income Portfolio (Class B) None
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO NAME AND ADDRESS OF SHAREHOLDER PERCENT HELD
- --------- ------------------------------- ------------
<S> <C>
Lincoln Corporate Income Portfolio (Class C) None
Lincoln Corporate Income Portfolio (Class D) None
Lincoln Cashfund Portfolio (Classes A, B) None
</TABLE>
INVESTMENT ADVISOR
The investment advisor to all of the Portfolios is Lincoln Investment
Management, Inc. ("LIM" or the "Investment Advisor" formerly Lincoln National
Investment Management Company), 200 East Berry Street, Fort Wayne, Indiana
46802. LIM was incorporated in Illinois in 1930 and is a wholly-owned subsidiary
of Lincoln National Corporation. Lincoln National Corporation, whose principal
office is located at 1300 South Clinton Street, Fort Wayne, Indiana, is a
publicly-held holding company organized under Indiana law which, through
subsidiaries, provides, on a national basis, life insurance and annuities,
property-casualty insurance and related services. LIM, a registered investment
advisor, receives advisory fees monthly based upon each Portfolio's average
daily net assets. See "Management-Investment Advisor" in the Prospectus. The
total gross fees (before reimbursement) paid to the Investment Advisor for the
fiscal year ended October 31, 1995 and the period ended October 31, 1994, were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
FUND OCTOBER 31, 1995 OCTOBER 31, 1994
<S> <C> <C>
Lincoln Growth and Income Portfolio $139,813 $ 84,525
Lincoln Enterprise Portfolio 116,353 75,244
Lincoln U.S. Growth Portfolio 105,965 68,168
Lincoln World Growth Portfolio 142,529 111,392
Lincoln New Pacific Portfolio 119,820 108,975
Lincoln Government Income Portfolio 33,749 27,383
Lincoln Corporate Income Portfolio 40,247 28,095
Lincoln Tax-Free Income Portfolio 31,052 26,794
Lincoln Cashfund Portfolio 27,946 23,370
</TABLE>
As of December 31, 1995, LIM managed an aggregate of $38 billion in
assets, including those of other clients.
The Investment Advisor also serves as investment advisor to the
following registered investment companies: Lincoln National Bond Fund, Inc.,
Lincoln National Growth Fund, Inc., Lincoln National Income Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money Market Fund, Inc., Lincoln
National Putnam Master Fund, Inc., Lincoln National Social Awareness Fund, Inc.,
Lincoln National Special Opportunities Fund, Inc., Lincoln National Convertible
Securities Fund, Inc. and Lincoln National International Fund, Inc.
While LIM acts as investment advisor for all of the Portfolios, it is solely
responsible for the investment management of the Lincoln Government Income
Portfolio, Lincoln Corporate Income Portfolio, Lincoln Tax-Free Income Portfolio
and Lincoln Cashfund Portfolio.
-36-
<PAGE>
SUB-ADVISORS
The following registered investment advisors serve as Sub-Advisors to
the Portfolios indicated: Beutel, Goodman Capital Management serves as
Sub-Advisor to the Lincoln Growth and Income Portfolio; Lynch & Mayer, Inc.
serves as Sub-Advisor to the Lincoln Enterprise Portfolio; Provident Investment
Counsel serves as Sub-Advisor to the Lincoln U.S. Growth Portfolio; Walter Scott
& Partners Limited serves as Sub-Advisor of the Lincoln World Growth Portfolio
and John Govett & Company Limited serves as Sub-Advisor of the Lincoln New
Pacific Portfolio.
Beutel, Goodman Capital Management. Beutel, Goodman and Company Ltd. was
formed in 1967 and is currently one of the largest investment advisory firms in
Canada. The firm manages pension investments for a number of fortune 500
companies with Canadian plans. In 1980, the firm established Beutel, Goodman
Capital Management, its U.S. affiliate, which manages assets in excess of $1.2
billion.
Lynch & Mayer, Inc. Dennis Lynch and Eldon Mayer established Lynch &
Mayer, Inc. in 1976. Currently the firm manages $6.6 billion in assets for
pension funds, foundations, endowments, trusts and high net worth individuals
and families. The firm also manages a closed-end convertible security fund which
is traded on the New York Stock Exchange. Lynch & Mayer's investment expertise
is in equities and convertible securities.
Provident Investment Counsel. Provident Investment Counsel evolved from
a predecessor firm founded in 1951. In February 1995 Provident Investment
Counsel was acquired by United Asset Management Corporation, a financial
services holding company. For the first twenty years of its history, the firm
managed primarily taxable accounts. Since the seventies, the firm has sought
non-taxable assets and today approximately 96% of its $17.3 billion of assets
under management are non-taxed.
Walter Scott & Partners Limited. Walter Scott & Partners Limited was
founded in 1983. The firm is an investment advisor registered with the
Securities and Exchange Commission. The firm's area of expertise is in providing
both international and global management of equity securities. The firm manages
money for pension funds and foundations of over $2.0 billion for investors in
the United Kingdom and United States.
John Govett & Co. Limited. The London-based investment management firm of
John Govett & Co. Limited was established in 1920. In December, 1995, John
Govett & Co. Limited was acquired by John Govett Holdings Limited, a majority
owned subsidiary of the AIB Group of Companies, and since such date has acted as
sub-advisor to the Lincoln New Pacific Portfolio without compensation. John
Govett & Co. Limited manages assets of over $5.1 billion for investment trusts,
investment companies, mutual funds and pension funds. The firm has other
investment offices in Singapore and San Francisco.
CUSTODIAN AND ADMINISTRATOR
Investors Bank & Trust Company ("Investors Bank"), 89 South Street,
Boston, MA 02111, serves as Custodian and Administrator for each of the
Portfolios. The Fund has entered into separate custodian and administration
agreements with Investors Bank. As Custodian, Investors Bank segregates and
maintains assets and accounts for the Portfolios. As Administrator, Investors
Bank administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office
-37-
<PAGE>
facilities, maintains certain records and supplies ordinary clerical,
bookkeeping and recordkeeping services. See "Management-Custodian and
Administrator" in the Prospectus for further information.
DISTRIBUTOR
Delaware Distributors, L.P., 1818 Market Street, Philadelphia, PA
19103-3682, serves as Distributor of the shares of each of the Portfolios. See
"Management - Distributor" in the Prospectus for further information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
TAX INFORMATION CONCERNING ALL PORTFOLIOS OF THE FUND
It is the policy of each Portfolio of the Fund to meet the requirements
necessary to qualify as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). By following such
policy, each Portfolio expects to eliminate or reduce to a nominal amount the
federal income taxes to which it may be subject.
In order to qualify as a regulated investment company, each Portfolio
must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payment with respect to securities loans, and gains from
the sale or other disposition of stock or securities, foreign currencies or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in stock, securities or
currencies, (2) derive less than 30% of its gross income from the sale or other
disposition of stock, securities, options, futures, forward contracts, and
certain foreign currencies (or options, futures, or forward contracts on foreign
currencies) held for less than three months, and (3) diversify its holdings so
that at the end of each quarter of its taxable year (i) at least 50% of the
market value of the Portfolio's assets is represented by cash or cash items
(including receivables), United States Government securities, securities of
other regulated investment companies, and other securities limited, in respect
of any one issuer, to an amount not greater than 5% of the value of the
Portfolio's assets at the date of purchase and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than United States
Government securities or the securities of other regulated investment companies)
or of two or more issuers that the Fund controls and that are engaged in the
same, similar or related trades or businesses. These requirements may restrict
the degree to which the Fund may engage in short-term trading and limit the
range of the Fund's investments. If a Portfolio qualifies as a regulated
investment company, it will not be subject to federal income tax on the part of
its income distributed to shareholders, provided the Portfolio distributes at
least 90% of its net investment income (including short-term capital gains)
other than long-term capital gains in each year. Each Portfolio intends to make
sufficient distributions to shareholders to meet this requirement.
The Code imposes a non-deductible excise tax on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
"ordinary income" (as defined) for the calendar year plus 98% of their "capital
gain net income" (as defined) for the 1-year period ending on October 31 of such
calendar year plus 100% of the prior calendar year's undistributed income (if
any). The balance, if any, of such income must be distributed during the next
calendar year. For the foregoing purposes, a Portfolio is treated as having
distributed any amount on which it is subject to income tax for any
-38-
<PAGE>
taxable year ending in such calendar year. If distributions during a calendar
year are less than the required amount, that particular Portfolio will be
subject to a non-deductible excise tax equal to 4% of the deficiency.
Shareholders of the Portfolios will generally pay federal income tax on
distributions received from the Funds except in the case of dividends from net
investment income paid by the Lincoln Tax-Free Income Portfolio as discussed
below. Dividends that are attributable to a Portfolio's taxable net investment
income will be taxed as ordinary income. Distributions of net capital gain that
are designated by a Portfolio as capital gain dividends will generally be
taxable as long-term capital gain. Distributions in excess of a Portfolio's
current and accumulated earnings and profits will be treated by shareholders
receiving such distributions as a return of capital; a return of capital is
taxable to shareholder as capital gain to the extent that it exceeds such
shareholder's basis in its shares in the Portfolio. Shareholders not subject to
tax on their income generally will not be required to pay tax on amounts
distributed to them. Such shareholders will include qualified retirement plans.
Certain investments and hedging activities of the Portfolios, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, foreign currencies, and foreign securities will be subject
to special tax rules. See "Option Transactions," "Straddles" and "Wash Sales"
herein. In a given case, these rules may accelerate income to the Portfolio,
defer losses to the Portfolio, cause adjustments in the holding periods of the
Portfolio's securities, convert short-term capital losses into long-term capital
losses, or otherwise affect the character of the Portfolio's income. These rules
could therefore affect the amount, timing and character of distributions to
shareholders. The Portfolio will endeavor to make any available elections
pertaining to such transactions in a manner believed to be in the best interest
of the Portfolio.
Certain securities purchased by the Portfolios (such as STRIPS, CUBES,
TRs, TIGRs and CATS), are sold at original issue discount and do not make
periodic cash interest payments. A Portfolio will be required to include as part
of its current income the imputed interest on such obligations even though the
Portfolio has not received any interest payments on such obligations during that
period. Because a Portfolio distributes all of its net investment income to its
shareholders (including such imputed interest), the Portfolio may have to sell
securities in order to generate the cash necessary for the required
distributions. Such sales may occur at a time when the Investment Advisor would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
The Portfolio will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any shareholder who has provided either an incorrect tax
identification number or no number at all, or who is subject to withholding by
the Internal Revenue Service for failure to properly include on his tax return
payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the shareholder's ultimate U.S. tax liability.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of a Portfolio of the
Fund. Further tax information regarding the Lincoln Tax-Free Income Portfolio
and the Lincoln World Growth and Lincoln New Pacific Portfolios are included in
following sections of this Statement of Additional Information. No attempt is
made to present a detailed explanation of the federal income tax treatment of
each Portfolio or its shareholders, and this discussion is not intended as a
substitute for careful tax planning. Accordingly, prospective
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purchasers of shares of a Portfolio are urged to consult their tax advisors with
specific reference to their own tax situation, including the potential
application of state and local taxes.
The foregoing discussion and the discussion below regarding the Lincoln
Tax-Free Income Portfolio and the Lincoln World Growth and Lincoln New Pacific
Portfolios are based on tax laws and regulations which are in effect on the date
of this Statement of Additional Information; such laws and regulations may be
changed by legislative or administrative action, and such changes may be
retroactive.
ADDITIONAL TAX INFORMATION CONCERNING THE LINCOLN TAX-FREE INCOME PORTFOLIO
The Code permits a regulated investment company which has invested, at
the close of each quarter of its taxable year, at least 50% of its assets in
tax-free Municipal Securities and other securities exempt from the regular
federal income tax to pay exempt-interest dividends to its shareholders. As
discussed below, exempt-interest dividends are generally not subject to federal
income tax.
The policy of the Lincoln Tax-Free Income Portfolio is to distribute
each year as exempt-interest dividends substantially all the Portfolio's net
exempt interest income. An exempt-interest dividend is any dividend or part
thereof (other than a capital gain dividend) paid by the Lincoln Tax-Free Income
Portfolio and designated as an exempt-interest dividend in a written notice
mailed to shareholders after the close of the Portfolio's taxable year, which
does not exceed, in the aggregate, the net interest income from Municipal
Securities and other securities exempt from regular federal income tax received
by the Portfolio during the taxable year. The percentage of the total dividends
paid for any taxable year which qualifies as federal exempt-interest dividends
will be the same for all shareholders receiving dividends from the Portfolio
during such year, regardless of the period for which the shares were held.
Exempt-interest dividends may be treated by the Portfolio's shareholders
as items of interest excludable from their gross income under Section 103(a)(1)
of the Code. However, each shareholder is advised to consult his or her tax
advisor with respect to whether exempt-interest dividends would retain the
exclusion under Section 103(a)(1) if such shareholder were treated as a
"substantial user" or a "related person" to such user under Section 147(a) with
respect to facilities financed through any of the tax-exempt obligations held by
the Portfolio. "Substantial user" is defined under U.S. Treasury Regulations to
include a non-exempt person who regularly uses a part of such facilities in his
trade or business and (a)(i) whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities or (ii) who occupies more than
5% of the usable area of the facility or (b) for whom such facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" includes certain related natural persons, affiliated corporations,
partners and partnerships.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in alternative minimum taxable
income for purposes of determining liability (if any) for the alternative
minimum tax for individuals and corporations. In the case of corporations, all
tax-exempt interest dividends will be taken into account in determining adjusted
current earnings for the purpose of computing the alternative minimum tax
imposed on corporations (as defined for federal income tax purposes).
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The Lincoln Tax-Free Income Portfolio may acquire rights regarding
specified portfolio securities under puts. See "Puts." The policy of the
Portfolio is to limit its acquisition of puts to those under which the Portfolio
will be treated for federal income tax purposes as the owner of the Municipal
Securities acquired subject to the put and the interest on the Municipal
Securities will be tax-exempt to the Portfolio. Although the Internal Revenue
Service has issued a published ruling that provides some guidance regarding the
tax consequences of the purchase of puts, there is currently no guidance
available from the Internal Revenue Service that definitively establishes the
tax consequences of many of the types of puts that the Portfolio could acquire
under the Investment Company Act. Therefore, although the Portfolio will only
acquire a put after concluding that it will have the tax consequences described
above, the Internal Revenue Service could reach a different conclusion from that
of the Portfolio.
If for any taxable year the Portfolio does not qualify for the special
tax treatment afforded regulated investment companies, all of its taxable income
would be subject to tax at regular corporate rates (without any deduction for
distributions to shareholders), and Municipal Securities interest income,
although not taxable to the Portfolio, would be taxable to shareholders when
distributed as dividends.
The foregoing is only a summary of some of the important tax
considerations generally affecting purchasers of shares of the Lincoln Tax-Free
Income Portfolio.
Additional tax information concerning all Portfolios is contained in the
immediately preceding section of this Statement of Additional Information. No
attempt is made to present a detailed explanation of the federal income tax
treatment of the Lincoln Tax-Free Income Portfolio or its shareholders, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective purchasers of shares of the Portfolio are urged to
consult their tax advisors with specific reference to their own tax situation,
including the potential application of state and local taxes.
ADDITIONAL TAX INFORMATION CONCERNING THE LINCOLN WORLD GROWTH AND LINCOLN NEW
PACIFIC PORTFOLIOS
Gain or loss on the sale or other disposition of foreign currency by the
Lincoln World Growth and Lincoln New Pacific Portfolios on a spot (or cash)
basis will result in ordinary gain or loss for federal income tax purposes.
Gains from foreign currencies (including foreign currency options,
foreign currency futures and foreign currency forward contracts) will constitute
qualifying income for purposes of the 90% test. However, future Treasury
regulations may exclude from qualifying income foreign currency gains not
directly related to a Portfolio's business of investing in stock or securities
(and may further define those foreign currency transactions that are not
directly related).
Investment by a Portfolio in certain "passive foreign investment
companies" could subject the Portfolio to U.S. federal income tax or other
charge on distributions received from, or the sale of its investment in, such a
company, which tax cannot be eliminated by making distributions to shareholders.
If the Portfolios elect to treat a passive foreign investment company as a
"qualified electing fund", different rules would apply, although the Portfolios
do not expect to be in the position to make such elections.
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FOREIGN TAX CREDIT
Shareholders of the Lincoln World Growth and Lincoln New Pacific
Portfolios who are U.S. citizens may be able to claim a foreign tax credit or
deduction on their U.S. income tax returns with respect to foreign taxes paid by
the Portfolios. Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to his
or her total foreign source taxable income. For this purpose, the source of a
Portfolio's income flows through to its shareholders. A Portfolio's gains from
the sale of securities generally will be treated as derived from U.S. sources
and certain currency fluctuation gains, including fluctuation gains from foreign
currency denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. With limited exceptions, the
foreign tax credit is allowed to offset only 90% of the alternative minimum tax
imposed on corporations and individuals. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate share of the foreign taxes paid by a Portfolio.
The foregoing is only a general description of the treatment of foreign
withholding or other foreign taxes under the U.S. federal income tax laws.
Because the availability of a credit or deduction depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisors.
TAXATION OF SHAREHOLDERS
Gain or loss on the sale of a security generally will be long-term
capital gain or loss if the Portfolio has held the securities for more than one
year. Gain or loss on the sale of securities held for not more than one year
will be short-term. If one of the Portfolios acquires a debt security at a
substantial discount, a portion of any gain upon the sale or redemption will be
taxed as ordinary income, rather than capital gain to the extent it reflects
accrued market discount. Alternatively, this discount may be accredited as
ordinary income on a daily basis rather than recognized at disposition.
Dividends of net investment income and distributions of net realized
short-term capital gains will be taxable to shareholders as ordinary income for
federal income tax purposes, whether received in cash or reinvested in
additional shares. Dividends received by corporate shareholders will qualify for
the dividends-received deduction only to the extent that each of the Equity
Portfolios designates the amount distributed as a dividend and the amount so
designated does not exceed the aggregate amount of dividends received by the
Portfolio from domestic corporations for the taxable year. The federal
dividends-received deduction for corporate shareholders may be further reduced
or disallowed if the shares with respect to which dividends are received are
treated as debt-financed or are deemed to have been held for less than 46 days.
Foreign countries may impose withholding and other taxes on dividends
and interest paid to the Portfolios with respect to investments in foreign
securities. However, certain foreign countries have entered into tax conventions
with the U.S. to reduce or eliminate such taxes.
Distributions of long-term capital gains will be taxable to shareholders
as such, whether paid in cash or reinvested in additional shares and regardless
of the length of time that the shareholder has held his or her interest in one
of the Portfolios. If a shareholder receives a distribution taxable as long-term
capital gain with respect to his or her investment in a Portfolio and redeems or
exchanges the shares before he or she has held them for more than six months,
any loss on the redemption or
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exchange that is less than or equal to the amount of the distribution will be
treated as a long-term capital loss.
If a shareholder (a) incurs a sales charge or in acquiring or redeeming
shares of one of the Portfolios, (b) disposes of those shares and acquires
within 90 days after the original acquisition or (c) acquires within 90 days of
the redemption those shares in a mutual fund for which the otherwise applicable
sales charge is reduced by reason of reinvestment right (i.e., an exchange
privilege), the original sales charge increases the shareholder's tax basis in
the original shares only to the extent the other applicable sales charge for the
second acquisition is not reduced. The portion of the original sales charge that
does not increase the shareholder's tax basis in the original shares would be
treated as incurred with respect to the second acquisition and, as a general
rule, would increase the shareholder's tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition of the newly acquired
or redeemed shares made within 90 days of the second acquisition. This provision
prevents a shareholder from immediately deducting the sales charge by shifting
his or her investment in a family of mutual funds.
Investors considering buying shares of one of the Portfolios just prior
to a record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Portfolio shares to be
purchased reflects the amount of the forthcoming dividend or distribution
payment, any such payment will be a taxable dividend or distribution payment.
This is of particular concern for investors in the Equity Portfolios since these
Portfolios may make distributions on an annual basis.
OPTIONS TRANSACTIONS
The tax consequences of options transactions entered into by the
Portfolios will vary depending on the nature of the underlying security and
whether the "straddle" rules, discussed separately below, apply to the
transaction. When a Portfolio writes a call or put option on a debt security, it
will receive a premium that will, subject to the "section 1256 contract" and
straddle rules discussed below, be treated as follows for tax purposes. If the
option expires unexercised, or if a Portfolio entered into a closing purchase
transaction, the Portfolio will realize a gain (or loss if the cost of the
closing purchase transaction exceeds the amount of the premium) without regard
to any unrealized gain or loss on the underlying security. Any such gain or loss
will be short-term capital gain or loss, except that any loss on a "qualified"
covered call option not treated as part of a straddle may be treated as
long-term capital loss. If a call option written by a Portfolio is exercised,
the Portfolio will recognize a capital gain or loss from the sale of the
underlying security, and will treat the premium as additional sales proceeds.
Whether the gain or loss will be long-term or short-term will depend on the
holding period of the underlying security. If a put option written by a
Portfolio is exercised, the amount of the premium will reduce the tax basis of
the security the Portfolio then purchases.
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STRADDLES
The Code contains rules applicable to "straddles", that is, "offsetting
positions in actively traded personal property." Such personal property includes
offsetting puts of the same class, section 1256 contracts or other investment
contracts. Where applicable, the straddle rules generally override the other
provisions of the Code. In general, investment positions will be offsetting if
there is a substantial diminution in the risk of loss from holding one position
by reason of holding one or more other positions (although certain covered call
options would not be treated as part of a straddle). The Portfolios, except for
Lincoln Cashfund Portfolio, are authorized to enter into covered call and
covered put positions. Depending on what other investments are held by a
Portfolio, at the time it enters into one of the above transactions, the
Portfolio may create a straddle for purposes of the Code.
WASH SALES
"Wash sale" rules will apply to prevent the recognition of loss with
respect to a position where an identical or substantially identical position has
been acquired thirty days prior to or thirty days after the date of the loss.
The foregoing is only a summary of certain federal tax considerations
generally affecting the Portfolios and their shareholders and is not intended as
a substitute for careful tax planning. Shareholders are urged to consult their
tax advisors with specific reference to their own tax situations, including
their state and local tax liabilities.
PURCHASE AND REDEMPTION OF SHARES
The Portfolios (other than the Lincoln Cashfund Portfolio) issue the
following classes of shares: Class A shares are sold to investors choosing the
initial sales charge alternative, Class B shares are sold to investors choosing
the deferred sales charge alternative, Class C shares are sold to investors
choosing the annual distribution fee alternative and Class D shares are sold to
investors choosing the no sales charge alternative and are only available to
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business (and rollover
individual retirement accounts from such plans), as well as insurance companies
(including both general and separate accounts), affiliates of insurance
companies and investment companies registered under the Investment Company Act
of 1940. The Lincoln Tax-Free Income Portfolio does not presently intend to
offer Class D shares. The four classes of shares bear their own expenses under
the Plan of Distribution and have separate exchange privileges. See
"Distributor" and "Exchange Privileges."
Each Portfolio offers its shares to the public on a continuous basis.
Under the current distribution arrangements between the Fund and the
Distributor, the public offering price per Class A share of a Portfolio is the
net asset value per share at the time of purchase plus a maximum sales charge of
5.5% on Equity Portfolios and 4.5% on Fixed-Income Portfolios. The public
offering price per Class B share, Class C share and Class D share is equal to
the net asset value per share at the time of purchase.
The Lincoln Cashfund Portfolio offers two classes of shares: Regular
Shares and Class B Exchange Shares. The Regular shares are offered and sold at
the net asset value ($1.00) without a
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sales charge and without any service or distribution fees. The Class B Exchange
Shares, which are issued only upon the exchange of shares of Class B of any
other Portfolio, are subject to the applicable CDSC, if any, upon redemption and
are charged service and distribution fees of 1% on the net asset value of the
shares.
The Fund has received exemptive relief from the Securities and Exchange
Commission relating to multiple classes of stock. In addition, the Fund has made
the filings required to sell multiple classes of stock in the following states:
Arizona, Iowa, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nebraska,
New Mexico, North Dakota, New Hampshire, Puerto Rico, South Dakota, Tennessee,
Texas, Vermont, Washington, West Virginia and Wisconsin.
REDUCTION AND WAIVER OF INITIAL SALES CHARGE--CLASS A SHARES
Sales charges do not apply to shares of the Portfolios purchased: (1) by
registered representatives, immediate family members and other employees of
broker/dealers having agreements with the Distributor; (2) by a director or
officer of a fund managed or advised by LIM or a director (including a retired
director), officer or employee of Lincoln National Corporation or its
subsidiaries or a director, officer or employee acting as a custodian for a
child or a person acting as trustee of a trust for the sole benefit of a
director, officer or employee or the immediate family member of a director,
officer or employee; (3) in accounts as to which a broker-dealer charges an
account management fee, provided the broker-dealer has an agreement with the
Distributor; (4) as part of an employee benefit plan having more than 100
eligible employees or a minimum of $1,000,000 invested in the Fund, provided
that certain other requirements, as explained in the Statement of Additional
Information, are met; (5) with certain redemption proceeds from other mutual
fund complexes on which the investor paid a front-end sales charge only as part
of certain promotional programs established by the Fund and/or Distributor; (6)
by one or more members of a group of at least 1,000 persons engaged in a common
business, profession, civic or charitable endeavor or other activity and
retirees and immediate family members of such persons pursuant to a marketing
program between the Distributor and such group; (7) by directors, officers,
employees and immediate family members of current sub-advisors to the
Portfolios; or (8) by employees and immediate family members of the current
custodian and shareholder services agent.
Immediate family members are defined as the spouse, parents, siblings,
natural or adopted children, mother-in-law, father-in-law, brother-in-law and
sister-in-law of a director, officer or employee. The term "employee" is deemed
to include current and retired employees.
Exemptions must be qualified in advance by the distributor and employee
benefit plan investors must meet all requirements specified in the Statement of
Additional Information. Your investment professional should call the distributor
or shareholder services for more information.
Additional information on waiver of the contingent deferred sales
charges on Class B shares can be found in the Prospectus.
Combined Purchase and Cumulative Purchase Privilege. If an investor or
eligible group of related investors purchases Class A shares of a Portfolio
concurrently with Class A shares of other Portfolios of the Fund, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of breakpoints under "Purchase of
Shares--Initial Sales Charge Alternative--Class A Shares" in the Prospectus.
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An eligible group of related Fund investors includes any combination of
the following:
(a) an individual;
(b) the individual's spouse, their children, their
parents, their mother-in-law, father-in-law,
brother-in-law and sister-in-law;
(c) the individual's Individual Retirement Account
(IRA);
(d) any company controlled by the individual (a person,
entity or group that holds 25% or more of the
outstanding voting securities of a corporation will
be deemed to control the corporation, and a
partnership will be deemed to be controlled by each
of its general partners);
(e) a trust created by the individual, the
beneficiaries of which are the individual, his or
her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to
Minors Act account created by the individual or the
individual's spouse; and
(g) one or more employee benefit plans of a company
controlled by an individual.
In addition, an eligible group of related Fund investors may include the
following:
(h) any employer (or group of related employers) and
one or more qualified retirement plans of such
employer or employers (an employer controlling,
controlled by or under comment control with another
employer is deemed related to that employer).
The Combined Purchase and Cumulative Purchase Privilege does not apply
to individual participants described above under "Retirement and Group Plans."
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any Portfolio may exchange all or
part of their shares for shares of the same class of the other Portfolios of the
Fund or for shares of the Lincoln Cashfund Portfolio on the basis of relative
net asset value per share at the time of exchange as follows:
(i) Class A shares of any Portfolio purchased with a
sales charge may be exchanged for Class A shares of any of the
other Portfolios, and the sales charge differential, if any,
will be applied. Class A shares of any Portfolio may be
exchanged without a sales charge for shares of the Portfolios
that are offered without a sales charge. Class A shares of any
Portfolio purchased without a sales charge may be exchanged for
shares sold with a sales charge, and the appropriate sales
charge differential will be applied.
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(ii) Class A shares of any Portfolio acquired by a
previous exchange of shares purchased with a sales charge may be
exchanged for Class A shares of any of the other Portfolios and
the sales charge differential, if any, will be applied.
(iii) Class B shares of any Portfolio may be exchanged
without a sales charge. For purposes of calculating contingent
deferred sales charge rates and conversion periods, Class B
shares of a Portfolio exchanged for Class B shares of another
Portfolio will be deemed to have been held since the date the
shares being exchanged were purchased. This includes Class B
shares of the Lincoln Cashfund Portfolio.
(iv) Class C shares of any Portfolio may be exchanged
without a sales charge.
The exchange privilege enables shareholders to acquire shares of the
same class in a Portfolio with different investment objectives when they believe
a shift between Portfolios is an appropriate investment decision. This privilege
is available to shareholders residing in any state in which the Portfolio shares
being acquired may legally be sold. Prior to any exchange, the investor should
obtain and review a copy of the current Prospectus for information on the
Portfolio into which an exchange is being considered.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value and, subject to any applicable contingent deferred sales charge, the
proceeds are immediately invested, at a price as described above, in shares of
the Portfolio being acquired. The Fund reserves the right to reject any exchange
request. The exchange privilege may be modified or terminated at any time after
notice to shareholders.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Advisor and the Sub-Advisors (collectively referred to as
the "Advisor" in this section) are responsible for decisions to buy and sell
securities and futures and options thereon for each Portfolio, the selection of
brokers, dealers and futures commission merchants to effect the transactions and
the negotiation of brokerage commissions. Purchases and sales of securities on a
securities exchange are effected through brokers who charge a commission for
their services. Broker-dealers may also receive commissions in connection with
options and futures transactions including the purchase and sale of underlying
securities upon the exercise of options. Orders may be directed to any broker or
futures commission merchant.
In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid.
In placing orders for portfolio securities for each Portfolio, the
Advisor is required to give primary consideration to obtaining the most
favorable price and efficient execution. The Advisor
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seeks to effect each transaction at a price and commission, if any, that
provides the most favorable total costs or proceeds reasonably attainable in the
circumstances. Within the framework of this policy, the Advisor will consider
the research and investment services provided by brokers, dealers or futures
commission merchants who effect or are parties to portfolio transactions of the
Fund (including each of the Portfolios), the Advisor or the Advisor's other
clients. Such research and investment services are those which brokerage houses
customarily provide to institutional investors and include statistical and
economic data and research reports on particular companies and industries. Such
services are used by the Advisor in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Fund may be used in managing other investment accounts.
Conversely, brokers, dealers or futures commission merchants furnishing such
services may be selected for the execution of transactions of such other
accounts, whose aggregate assets are far larger than the Fund and the services
furnished by such brokers, dealers or futures commission merchants may be used
by the Advisor in providing investment management for the Fund. Commission rates
are established pursuant to negotiations with the broker based on the quality
and quantity of execution services provided by the broker, dealer or futures
commission merchant in the light of generally prevailing rates. The Advisor's
policy is to pay higher commissions to brokers for particular transactions than
might be charged if a different broker had been selected, on occasions when, in
the Advisor's opinion, this policy furthers the objective of obtaining best
price and execution. The Advisor is authorized to pay higher commissions on
brokerage transactions for the Fund to brokers in order to secure the research
and investment services described above, subject to review by the Fund's Board
of Directors from time to time as to the extent and continuation of this
practice. The allocation of orders among brokers and the commission rates paid
are reviewed periodically.
Subject to the above considerations, an affiliate of the Advisor may act
as a securities broker or futures commission merchant for the Fund. In order for
an affiliate of the Advisor to effect any portfolio transactions for the Fund,
the commissions, fees or other remuneration received by the affiliate must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers or futures commission merchants in connection with comparable
transactions involving similar securities or futures being purchased or sold on
an exchange or board of trade during a comparable period of time. This standard
would allow an affiliate of the Advisor to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker or futures
commission merchant in a commensurate arm's-length transaction. Furthermore, the
Trustees of the Fund, including a majority of the Trustees who are not
"interested" persons, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to an affiliate of
the Advisor are consistent with the foregoing standard. In accordance with
Section 11(a) under the Securities Exchange Act of 1934, an affiliate of the
Advisor may not retain compensation for effecting transactions on a national
securities exchange for the Fund unless the Fund has expressly authorized the
retention of such compensation in a written contract executed by the Fund and
such affiliate. Section 11(a) provides that an affiliate of the Advisor must
furnish to the Fund at least annually a statement setting forth the total amount
of all compensation retained by the affiliate from transactions effected for the
Fund during the applicable period. Brokerage and futures transactions with an
affiliate of the Advisor are also subject to such fiduciary standards as may be
imposed by applicable law. No such trades have been made through affiliates to
date.
Brokerage commissions for the Portfolios for the fiscal year ended October
31, 1995 and the period ended October 31, 1994, respectively, were as follows:
Lincoln Growth and Income Portfolio $32,115 and $33,085; Lincoln Enterprise
Portfolio $42,482 and $35,533 ; Lincoln U.S. Growth Portfolio $23,709 and
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$27,955; Lincoln World Growth Portfolio $12,019 and $31,838; and Lincoln New
Pacific Portfolio $187,987 and $142,441. The other Portfolios did not incur
brokerage commissions in either year.
CALCULATION OF PERFORMANCE DATA
With respect to the Lincoln Cashfund Portfolio, the yield will be
computed by determining the percentage net change, excluding capital changes, in
the value of one share of the particular class of the Portfolio over the base
period, and multiplying the net change by 365/7 (or approximately 52 weeks). The
effective yield of each class of the Portfolio will represent a compounding of
the yield by adding 1 to the number representing the percentage change in value
of the investment during the base period, raising the same to a power equal to
365/7, and subtracting 1 from the result.
Performance information for all of the other Portfolios showing the
Portfolio's total return and/or 30-day yield with respect to a particular class
may be presented from time to time in advertising and sales literature. A 30-day
yield is calculated by dividing the net investment income per share earned
during the 30-day base period by the maximum offering price per share earned
during the 30-day base period by the maximum offering price per share on the
last day of the period, according to the following formula.
30-day yield = 2[( a-b + 1)6 - 1]
cd
"a" represents dividends and interest earned during the 30-day base period; "b"
represents expenses accrued to a particular class for the 30-day base period
(net of reimbursements); "c" represents the average daily number of shares of a
particular class outstanding during the 30-day base period that were entitled to
receive dividends; and "d" represents the maximum offering price per share of a
particular class on the last day of the 30-day base period.
From time to time the tax equivalent 30-day yield of a particular class
of the Lincoln Tax-Free Income Portfolio may be presented in advertising and
sales literature. The tax equivalent 30-day yield will be computed by dividing
that portion of the Portfolio's yield (relating to a particular class) which is
tax-exempt by one minus a stated income tax rate and adding the product of the
portion, if any, of the yield of the Portfolio (relating to the particular
class) that is not tax-exempt.
The performance of the Portfolios will fluctuate from time to time and
is not necessarily representative of future results. Accordingly, a Portfolio's
performance may not provide a good comparison for other investments that pay a
fixed rate of return for a stated period of time. Performance is a function of a
Portfolio's quality, composition and maturity, as well as the expenses allocated
to the Fund.
The Lincoln Cashfund Portfolio may quote actual total return performance
in advertising and other types of literature compared to indices or averages of
alternative financial products available to prospective investors. The
performance comparisons may include the average return of various bank
instruments, some of which may carry certain return guarantees offered by
leading banks and thrifts, as
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<PAGE>
monitored by the Bank Rate Monitor, and those of corporate and government
security price indices of various durations prepared by Shearson Lehman Brothers
and Salomon Brothers, Inc. These indices are not managed for any investment
goals.
The Lincoln Cashfund Portfolio may also use comparative performance
information computed by and available from certain industry and general market
research and publications, such as Lipper Analytical Services, Inc.
Each of the Portfolios, except the Lincoln Cashfund Portfolio, will
prepare total return information. These returns are computed by assuming a
hypothetical initial payment of $1,000. It is then assumed that all of the
dividends and distributions paid by each Portfolio over the relevant time
periods were reinvested. It is then assumed that at the end of the periods, the
entire amount was redeemed and any applicable contingent deferred sales charge
paid upon redemption was deducted from the redeemed amount. The average annual
total return is then determined by calculating the annual rate required for the
initial payment to grow to the amount which would have been received upon
redemption. Total return does not take into account any federal or state income
taxes that may be payable upon redemption.
Total return is computed according to the following formula:
P(1+T)n=ERV
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods at the end
of the 1, 5 or 10 year periods (or fractional portion thereof).
</TABLE>
Statistical and performance information compiled and maintained by CDA
Technologies, Inc. and Interactive Data Corporation may also be used. CDA is a
performance evaluation service that maintains a statistical data base of
performance, as reported by a diverse universe of independently-managed mutual
funds. Interactive Data Corporation is a statistical access service that
maintains a data base of various industry indicators, such as historical and
current price/earning information and individual stock and fixed income price
and return information.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. Also current rate information on municipal
debt obligations of various durations, as reported daily by the Bond Buyer, may
also be used. The Bond Buyer is published daily and is an industry-accepted
source for current municipal bond market information.
Comparative information on the Consumer Price Index may also be
included. This Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return on
investment. From time to time, the Portfolios may quote actual total return
performance in advertising and other types of literature compared to results
reported by the Dow Jones Industrial Average.
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<PAGE>
The Dow Jones Industrial Average is an industry-accepted unmanaged index
of generally conservative securities used for measuring general market
performance. The performance reported will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The index does
not take into account any brokerage commissions or other fees. Comparative
information on the Consumer Price Index may also be included.
The MSCI EAFE index is the industry standard performance benchmark for
international equity investment. The index is market weighted and represents
approximately 60% of the aggregate market value of the stock exchanges that are
included. The index consists of 1,112 companies with a market capitalization of
$5,259 billion. The following countries are constituents: Austria, Belgium,
Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain,
Sweden, Switzerland, United Kingdom, Australia, Hong Kong, Japan, Malaysia, New
Zealand and Singapore.
The Portfolios may also promote the yield and/or total return
performance and use comparative performance information computed by and
available from certain industry and general market research and publications,
such as Lipper Analytical Services, Inc.
PERFORMANCE INFORMATION FOR PERIODS ENDED OCTOBER 31, 1995
Set forth below is total return information for Class A shares of the
Lincoln Growth and Income Portfolio, Lincoln Enterprise Portfolio, Lincoln U.S.
Growth Portfolio, Lincoln World Growth Portfolio and Lincoln New Pacific
Portfolio for the one-year and since inception* periods ended October 31, 1995,
yield for the Lincoln Government Income Portfolio, Lincoln Corporate Income
Portfolio and Lincoln Tax-Free Income Portfolio for the 30-day period ended
October 31, 1995 and yield and effective yield information for the Lincoln
Cashfund Portfolio for the seven-day period ended October 31, 1995.
Total Return for Periods Ended October 31, 1995
Class A Shares (assumes maximum sales load is deducted)
(Unaudited)
<TABLE>
<CAPTION>
FUND 1-YEAR PERIOD SINCE INCEPTION*
<S> <C> <C>
Lincoln Growth and Income Portfolio 12.54% 5.23%
Lincoln Enterprise Portfolio 15.91% 3.48%
Lincoln U.S. Growth Portfolio 15.09% 8.85%
Lincoln World Growth Portfolio (1.90)% 4.18%
Lincoln New Pacific Portfolio (18.74)% (8.18)%
</TABLE>
*Class A shares of all Portfolios listed above began operations on December 3,
1993. Total return for Class B, C and D shares may differ due to different
expense structures and sales load and CDSC options.
Yield for the 30-Day Period Ended October 31, 1995 (Unaudited)
Fund Yield
Lincoln Government Income Portfolio 4.63%
Lincoln Corporate Income Portfolio 5.19%
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<PAGE>
Lincoln Tax-Free Income Portfolio 3.70%
Yield and Effective Yield for the Lincoln Cashfund Portfolio
for the Seven-Day Period Ended October 31, 1995
(Unaudited)
Yield 4.71%
Effective Yield 4.82%
NET ASSET VALUE
The net asset value per share of a Portfolio is the net worth of such
Portfolio (assets including securities at value minus liabilities) divided by
the number of shares of such Portfolio outstanding. The Fund will compute the
net asset value of each such Portfolio once daily at the times indicated in the
Prospectus, on days the New York Stock Exchange is open for trading, except on
days on which no orders to purchase, sell or redeem shares of the Fund have been
received or on days on which changes in the value of a Portfolio's portfolio
securities do not effect net asset value. The New York Stock Exchange is closed
on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The value of equity securities, other than options listed on national securities
exchanges, is based on the last sale on national securities exchanges as of the
close of the New York Stock Exchange (which is currently 4:00 P.M., or later for
certain trading, New York time), or, in the absence of recorded sales, at the
average of readily available closing bid and asked prices on such exchanges or
over-the-counter. If no quotations are available, securities will be valued at
fair value as determined in good faith by the Board of Directors. Options on
stocks and stock indices traded on national securities exchanges are valued as
of the close of options trading on such exchanges (which is currently 4:10 P.M.,
New York time), and stock index futures and options thereon, which are traded on
commodities exchanges or boards of trade, are valued at their last sale price as
of the close of such commodities exchanges (which is currently 4:15 P.M., New
York time) or, if there was no sale on the applicable securities exchange,
commodities exchange or board of trade on such day, at the average of quoted bid
and asked prices as of the close of such exchange or board of trade. Short-term
investments which mature in 60 days or less are valued at amortized cost on the
60th day prior to maturity, if their original term to maturity when acquired by
a Portfolio was more than 60 days, unless this is determined not to represent
fair value by the Board of Directors. Securities or other assets for which
reliable market quotations are not readily available are valued by the
Investment Advisor in good faith at fair value in accordance with procedures
adopted by the Fund's Board of Directors on the basis of the following factors:
cost of the security, transactions in comparable securities, relationships among
various securities and such other factors as may be determined by the Investment
Advisor to materially affect the value of the security.
Bonds for which market quotations are readily available are valued at
their bid quotations. Securities for which market quotations are not readily
available are valued at fair value in accordance with procedures adopted by the
Board of Directors. Under these procedures the Portfolio values municipal
securities on the basis of valuations provided by a pricing service which uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining value. The Directors believe that
-52-
<PAGE>
reliable market quotations are generally not readily available for purposes of
valuing tax-exempt securities. As a result, depending on the particular
tax-exempt securities owned by a Portfolio, it is likely that most of the
valuations for such securities will be based upon fair value determined under
the foregoing procedures. Short-term investments which mature in less than 60
days are valued at amortized cost on the 60th day prior to maturity, if their
original term to maturity when acquired by a Portfolio was more than 60 days,
unless this is determined not to represent fair value by the Directors.
The Lincoln Cashfund Portfolio uses the amortized cost method to
determine the value of its portfolio securities in accordance with regulations
of the SEC. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity. The
method does not take into account unrealized capital gains and losses which may
result from the effect of fluctuating interest rates on the market value of the
security.
With respect to the Lincoln Cashfund Portfolio, the Directors have
determined to maintain a dollar-weighted average portfolio maturity of 90 days
or less, to purchase instruments having remaining maturities of thirteen months
or less and to invest only in securities determined by the Investment Advisor
under the supervision of the Board of Directors to present minimal credit risks
and to be of "eligible quality" in accordance with regulations of the SEC. The
Board of Directors has adopted procedures designed to stabilize, to the extent
reasonably possible, the Lincoln Cashfund Portfolio's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures will
include review of the Lincoln Cashfund Portfolio's holdings by the Board of
Directors, at such intervals as they may deem appropriate, to determine whether
the Lincoln Cashfund Portfolio's net asset value calculated by using available
market quotations deviates from $1.00 per share based on amortized cost. The
extent of any deviation will be examined by the Board of Directors. If such
deviation exceeds 1/2 of 1%, the Board of Directors will promptly consider what
action, if any, will be initiated. In the event the Board of Directors
determines that a deviation exists which may result in material dilution or
other unfair results to prospective investors or existing shareholders, the
Directors will take such corrective action as they consider necessary and
appropriate, including the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity, the
withholding of dividends, redemptions of shares in kind, or the use of available
market quotations to establish a net asset value per share.
Because the New York Stock Exchange or the national securities exchanges
on which stock options are traded have adopted different trading hours on either
a permanent or temporary basis, the Board of Directors of the Fund may
reconsider the time at which net asset value is computed. In addition, a
Portfolio may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Although the legal rights of Class A, Class B, Class C and Class D
shares are substantially identical, the different expenses borne by each class
will result in different net asset values and dividends. The net asset value of
Class B and Class C shares will generally be lower than Class A shares and the
net asset value of Class A, Class B and Class C shares will generally be lower
than Class D shares as a result of the respective service and distribution fees
charged. It is expected, however, that the net asset value per share of each of
the classes will tend to converge immediately after the recording of dividends
since the dividends will differ by approximately the amount of the distribution
expense accrual differential between the classes.
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<PAGE>
SHAREHOLDER SERVICES
Upon the initial purchase of shares of any Portfolio, a Shareholder
Investment Account is established for each investor under which a record of the
shares held is maintained by Delaware Service Company, Inc. ("Delaware
Service"). If a share certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares and may be
redeposited in the Account at any time. There is no charge to the investor for
issuance of a certificate. Whenever a transaction takes place in the Shareholder
Investment Account, the shareholder will be mailed a statement showing the
transaction and the status of the Account.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Unless indicated otherwise on the account application, investors'
dividends and capital gains distributions are automatically reinvested in full
and fractional shares of the applicable Portfolio at net asset value without a
sales charge. Changes to initial dividend elections must be directed to Delaware
Service in writing or by telephone not less than 5 full business days prior to
the record date. In the case of recently purchased shares for which registration
instructions have not been received, cash payment will be made directly to the
dealer. Any shareholder who received a cash payment representing a dividend or
distribution may reinvest such dividend or distribution at net asset value by
returning the check or the proceeds to Delaware Service within 30 days after the
payment date. The investment will be made at the net asset value per share next
determined after receipt of the check or proceeds by Delaware Service.
TAX-DEFERRED RETIREMENT PLANS
Various qualified retirement plans, including a 401(k) plan,
self-directed individual retirement accounts and "tax-deferred accounts" under
Section 403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, and the administration, custodial fees and other
details are available from the Distributor or Delaware Service.
AUTOMATIC INVESTMENT PLAN
Under the Automatic Investment Plan, an investor may arrange to have a
fixed amount automatically invested in Class A, Class B or Class C shares of a
Portfolio monthly, quarterly or semi-annually by authorizing his or her bank
account to be debited to invest specified dollar amounts in shares of the
Portfolio. The investor's bank must be a member of the Automatic Clearing House
System. Further information about this plan and an application form can be
obtained from Delaware Service.
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<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
A withdrawal plan is available for shareholders having Class A, Class B
or Class C shares of any Portfolio who maintain a minimum balance of $10,000.
The plan provides for monthly or quarterly checks in any amount, but not less
than $50 (which amount is not necessarily recommended). To the extent such
withdrawals exceed the current net assets value of reinvested dividends, they
may be subject to the contingent deferred sales charge. See "Redemption of
Shares -- Contingent Deferred Sales Charge -- Class B Shares" in the Prospectus.
Dividends and distributions on shares held under this plan are invested
in additional full and fractional shares at net asset value. See "Shareholder
Investment Account -- Automatic Reinvestment of Dividends and Distributions."
Delaware Service acts as agent for the shareholder in redeeming sufficient full
and fractional shares to provide the amount of the periodic withdrawal payment.
The plan may be terminated at any time, and the Distributor reserves the right
to initiate a fee per withdrawal, upon 30 days' written notice to the
shareholder.
Withdrawal payments should not be considered as dividends, yield or
income. If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the sales charge applicable to (i) the purchase of Class
A shares and (ii) the withdrawal of Class B shares. Each shareholder should
consult his or her own tax advisor with regard to the tax consequences of the
plan.
GENERAL INFORMATION
The Fund was incorporated under the laws of Maryland on August 12, 1993.
The Fund and all Portfolios therein shall continue perpetually subject to the
provisions in the Articles of Incorporation concerning termination by action of
the shareholders or by the Directors by written notice to the shareholders.
The authorized capital of the Fund consists of 810,000,000 shares of
Common Stock, $.01 par value, issued in separate series. Each Portfolio, for
federal income tax purposes, will constitute a separate entity which will be
governed by the provisions of the Articles of Incorporation. All shares of any
Portfolio issued and outstanding will be fully paid and non-assessable by the
Fund. The assets of the Fund received for the issue or sale of the shares of
each Portfolio and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors of such Portfolio, are specially allocated to
such Portfolio and constitute the underlying assets of such Portfolio. The
underlying assets of each Portfolio are segregated on the books of account, and
are to be charged with the liabilities in respect to such Portfolio and with a
share of the general liabilities incurred by each Portfolio of the Fund. General
liabilities of the Fund include, without limitation, director's fees,
professional expenses and printing expenses. Under no circumstances would the
assets of a Portfolio be used to meet liabilities which are not otherwise
properly chargeable to it. Expenses with respect to any two or more Portfolios
are to be allocated in proportion to the net asset value of the respective
Portfolio except where allocations of direct expenses can otherwise be fairly
made. The officers of the Fund, subject to
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<PAGE>
the general supervision of the Board of Directors, have the power to determine
which liabilities are allocable to a given Portfolio or which are general or
allocable to two or more Portfolios. Upon redemption of shares of a Portfolio,
the shareholder will receive proceeds solely of the assets of such Portfolio. In
the event of the dissolution or liquidation of the Fund, the holders of the
shares of any Portfolio are entitled to receive as a class the underlying assets
of such Portfolio available for distribution to shareholders.
Shares of the Fund entitle their holders to one vote per share. However,
on any matter submitted to a vote of the shareholders, all shares then entitled
to vote will be voted by individual Portfolios, unless otherwise required by the
Investment Company Act (in which case all shares will be voted in the
aggregate). For example, a change in investment policy for a Portfolio would be
voted upon only by shareholders of the Portfolio involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each Portfolio. Approval by the shareholders of one Portfolio is
effective as to that Portfolio whether or not enough votes are received from the
shareholders of the other Portfolios to approve the proposals as to those
Portfolios.
Rule 18f-2 under the Investment Company Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Fund shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each Portfolio affected by the matter. For purposes of
determining whether the approval of a majority of the outstanding shares of a
Portfolio will be required in connection with a matter, a Portfolio will be
deemed to be affected by a matter unless it is clear that the interests of each
Portfolio in the matter are identical, or that the matter does not affect any
interest of the Fund. Under Rule 18f-2, the approval of an investment advisory
agreement or any change in investment policy would be effectively acted upon
with respect to a Portfolio and/or class only if approved by a majority of the
outstanding shares of such Portfolio and/or class. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of directors may be
effectively acted upon by shareholders of the Fund voting without regard to the
separate Portfolios and/or class.
Pursuant to the Articles of Incorporation, the Directors may authorized
the creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios with distinct investment
objectives and policies and share purchase, redemption and net asset valuation
procedures) and additional classes of shares within any Portfolio (which would
be used to distinguish among the rights of different categories of shareholders
as might be required by future regulations or other unforeseen circumstances)
with such preferences, privileges, limitations and voting and dividend rights as
the Directors may determine. All consideration received by the Fund for shares
of any additional series or class, and all assets in which such consideration is
invested, would belong to that series or class (subject only to the rights of
creditors of such series or class) and would be subject to the liabilities
related thereto. Pursuant to the Investment Company Act, shareholders of any
additional series or class of shares would normally have to approve the adoption
of any advisory contract relating to such series or class and of any changes in
the investment policies related thereto.
The Fund does not intend to hold shareholders' meetings unless otherwise
required by law. The Fund will not be required to hold meetings of shareholders
unless the election of directors is required to be acted on by shareholders
under the Investment Company Act. Shareholders have certain rights, including
the right to call a meeting upon a vote of 10% of the Fund's outstanding shares
for the purpose of voting on the removal of one or more directors or to transact
any other business.
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<PAGE>
TRANSFER AND DIVIDEND DISBURSING AGENT
Delaware Service Company, Inc. ("Delaware Service") serves as the
Transfer and Dividend Disbursing Agent of the Fund. Its mailing address is 1818
Market Street, Philadelphia, PA 19103-3682. Delaware Service provides customary
transfer agency services to the Fund including the handling of shareholder
communications, the processing of shareholders transactions, the maintenance of
shareholder account records, payment of dividends and distributions and related
functions. Delaware Service is an indirect wholly owned subsidiary of Lincoln
National Corporation and an affiliate of the Investment Advisor and the
Distributor.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. serve as the Fund's independent accountants and
in that capacity audits the Fund's annual financial statements.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not
contain all of the information set forth in the Registration Statement the Fund
has filed with the SEC. The complete Registration Statement may be obtained from
the SEC upon payment of the fee prescribed by the rules and regulations of the
SEC.
FINANCIAL STATEMENTS AND REPORTS
Shareholders will receive unaudited semi-annual reports and annual
reports audited by independent public accountants.
INVESTMENT ADVISOR
Lincoln Investment Management, Inc. ("LIM")
INVESTMENT SUB-ADVISORS
Beutel, Goodman Capital Management (Lincoln Growth and Income
Portfolio), Provident Investment Counsel (Lincoln U.S. Growth Portfolio), Lynch
& Mayer, Inc. (Lincoln Enterprise Portfolio), Walter Scott & Partners Limited
(Lincoln World Growth Portfolio), John Govett & Company Limited (Lincoln New
Pacific Portfolio)
DISTRIBUTOR
Delaware Distributors, L.P. (the "Distributor")
ADMINISTRATOR AND CUSTODIAN
Investors Bank & Trust Company ("Investors Bank")
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APPENDIX A
DESCRIPTION OF SECURITY RATINGS
MOODY'S INVESTORS SERVICE
BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
A-1
<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
SHORT-TERM DEBT RATINGS
Moody's short term debt ratings are opinions of the ability of issuers to
repay punctually senior obligations which have an original maturity not
exceeding one year.
P-1: Issuers rated "PRIME-1" or "P-1" (or supporting institutions) have
superior ability for repayment of senior short term debt obligations.
P-2: Issuers rated "PRIME-2" or "P-2" (or supporting institutions) have
a strong ability for repayment of senior short term debt obligations.
P-3: Issuers rated "PRIME-3" or "P-3" (or supporting institutions) have
an acceptable ability for repayment of senior short term debt obligations.
MUNICIPAL NOTE RATINGS
Issuers or the features associated with Moody's MIG or VMIG ratings are
identified by date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings. Each rating
designation is unique with no implication as to any other similar issue of the
same obligor. MIG ratings terminate at the retirement of the obligation while
VMIG rating expiration will be a function of each issue's specific structural or
credit features.
MIG 1/VMIG 1: This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support, or demonstrated broad-
based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All
security elements are accounted for but there is
lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to
be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection
commonly regarded as required of an investment
security is present and although not distinctly or
predominantly speculative, there is specific risk.
A-2
<PAGE>
STANDARD & POOR'S CORPORATION
BOND RATINGS
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC and CC: Debt rated BB, B, CCC or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C: This rating is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. A plus (+) designation is
applied only to those issues rated A-1 which possess an overwhelming degree of
safety.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
A-3
<PAGE>
MUNICIPAL NOTE RATINGS
A Standard & Poor's municipal note rating reflects the liquidity concerns
and market access risks unique to notes. Notes due in 3 years or less will
likely receive a note rating. Notes maturing beyond 3 years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment:
Amortization schedule (the larger the final maturity relative
to other maturities, the more likely it will be treated as a note).
Source of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be treated as a
note).
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
A-4
<PAGE>
[LOGO OF LINCOLN LINCOLN
ADVISOR FUNDS ADVISOR
APPEARS HERE] FUNDS
ANNUAL REPORT
OCTOBER 31, 1995
LINCOLN GROWTH AND INCOME PORTFOLIO
LINCOLN ENTERPRISE PORTFOLIO
LINCOLN U.S. GROWTH PORTFOLIO
LINCOLN WORLD GROWTH PORTFOLIO
LINCOLN NEW PACIFIC PORTFOLIO
LINCOLN GOVERNMENT INCOME PORTFOLIO
LINCOLN CORPORATE INCOME PORTFOLIO
LINCOLN TAX-FREE INCOME PORTFOLIO
LINCOLN CASHFUND PORTFOLIO
SECURITIES DISTRIBUTED BY DELAWARE DISTRIBUTORS L.P.,
PHILADELPHIA, PENNSYLVANIA
<PAGE>
[LOGO OF LINCOLN ADVISOR LINCOLN
FUNDS APPEARS HERE] ADVISOR
FUNDS
A LETTER FROM THE PRESIDENT
November 21, 1995
Dear Shareholder:
The fiscal year ended October 31, 1995 was a very rewarding one for investors
in U.S. stocks and bonds as interest rates fell dramatically and corporate
earnings for many domestic and multinational businesses grew substantially
despite a slowdown in U.S. economic growth.
The Standard & Poor's 500 Index climbed +26.4% during this 12-month period
while the Merrill Lynch Corporate-Government-Mortgage Bond Index advanced
+15.8%. Both Indices are broad, unmanaged measures of their respective markets.
Our domestically oriented Lincoln Advisor Funds successfully participated in
this rally, which marked a stunning turnaround from 1994, when the Federal
Reserve Board rapidly raised short-term interest rates, resulting in a flat
stock market, and the worst bond market in nearly 70 years.
Total return from capital appreciation and reinvested dividends for the Lincoln
Advisor Funds for the 12 months ended October 31, 1995 based on Class A net
asset value, are shown in the table below.
<TABLE>
<CAPTION>
TOTAL RETURN FOR CLASS A SHARES
FOR THE 12 MONTHS ENDED
OCTOBER 31, 1995 AT NET ASSET VALUE
<S> <C>
Lincoln Growth & Income Portfolio 19.13%
Lincoln Enterprise Portfolio 22.72%
Lincoln U.S. Growth Portfolio 21.74%
Lincoln World Growth Portfolio 3.81%
Lincoln New Pacific Portfolio (13.99)%
Lincoln Government Income Portfolio 13.72%
Lincoln Corporate Income Portfolio 17.71%
Lincoln Tax-Free Income Portfolio 14.76%
Lincoln Cashfund Portfolio 4.94%
</TABLE>
Total return as shown above assumes reinvestment of dividends and
capital gains, and excludes the effect of the front-end sales load.
Complete performance information for the past fiscal year and for each
Portfolio's lifetime can be found inside in the report on each
respective Portfolio.
In the U.S., we are encouraged by the recent pause in the stock market's
stellar rise because it has reduced what, in our opinion, have been speculative
excesses in some industry groups, especially technology. Positive long-term
economic trends that bode well for 1996 include low inflation, declining
interest rates, increased business productivity and a U.S. dollar valuation
that favors exporters.
As you read this report, you'll see what steps the Funds' managers took during
the year to position their particular portfolio for a U.S. economy
characterized by modest growth as well as this past summer's reversal in the
Federal Reserve's interest rate policy.
Our international Funds' managers adjusted their portfolios to reflect
worldwide economic conditions that were generally not as favorable as
conditions in the U.S. You'll see in the report how these Funds' performance
was affected by the changing value of the dollar in relation to other
currencies and the financial circumstances of regions such as the Far East.
We believe the long-term outlook for financial markets both here and abroad is
bright and we hope to merit your continued confidence. We will strive to help
you meet the long-term investing goals you have developed with the help of your
financial advisor.
Sincerely,
Priscilla S. Brown, President
Lincoln Advisor Funds
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL INFORMATION: PAGE
Management, Discussion & Analysis.......................................... 2
Portfolios of Investments
Lincoln Growth and Income Portfolio...................................... 19
Lincoln Enterprise Portfolio............................................. 22
Lincoln U.S. Growth Portfolio............................................ 26
Lincoln World Growth Portfolio........................................... 29
Lincoln New Pacific Portfolio............................................ 33
Lincoln Government Income Portfolio...................................... 40
Lincoln Corporate Income Portfolio....................................... 42
Lincoln Tax-Free Income Portfolio........................................ 45
Lincoln Cashfund Portfolio............................................... 48
Statements of Assets and Liabilities....................................... 50
Statements of Operations................................................... 52
Statements of Changes in Net Assets........................................ 54
Financial Highlights....................................................... 58
Notes to Financial Statements.............................................. 68
</TABLE>
This annual report is for the information of Lincoln Advisor Funds'
shareholders. Summary investment results are documented in the current
Statement of Additional Information. The figures in this report represent
past results. The return and principal value of an investment in the Fund
will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
1
<PAGE>
LINCOLN GROWTH AND INCOME PORTFOLIO
Managed by Beutel, Goodman Capital Management
This Portfolio seeks to provide capital appreciation and current income by
investing in stocks, fixed-income securities, convertible bonds and money
market instruments.
The Lincoln Growth & Income Portfolio generated a total return of +19.13%
(capital change plus income based on Class A net asset value) for the 12 months
ended October 31 using a strategy of investing in established companies that
are refocusing operations in ways we believe may add value to their stocks.
We sought companies that paid above-average dividends, and we achieved success
investing in banks, insurance companies, and conglomerates such as ITT Corp.,
which announced in June that it would split up its insurance, automotive and
hotel businesses. Its stock rose more than 40% in the past year.
As can be the case with any portfolio, some investments have yet to bear fruit.
The price of gold stagnated during the fiscal year, and consequently our
investment in Newmont Mining Co., a gold producer, did not rise in price as
much as stocks in other industries, even though the company's earnings doubled
during the fiscal year.
Your Fund participated in the technology stock rally in the past year through
selected investments in semiconductor and personal computer makers such as
Intel and Compaq. Technology stocks were 10% of net assets as of October 31.
Intel was the Fund's best performer, with a substantial price increase during
the fiscal year.
Our performance was not as strong as that of the unmanaged Standard & Poor's
500 Index during the year in part because, compared to the Index, your Fund's
portfolio was underweighted in consumer growth stocks.
In the coming months, we expect to add more companies with higher market
capitalizations to the portfolio at what we believe to be attractive prices.
The focus will be on companies that, in our opinion, have the potential to
perform well should U.S. economic growth slow.
2
<PAGE>
Comparison of a $10,000 Investment
Lincoln Growth & Income Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln Growth & Standard & Poor's
Income Portfolio 500 Index
---------------- -----------------
<S> <C> <C>
12/3/93 $ 9,451 $10,000
12/31/93 $ 9,537 $10,168
3/31/94 $ 9,329 $ 9,783
6/30/94 $ 9,044 $ 9,824
9/30/94 $ 9,513 $10,303
12/31/94 $ 8,849 $10,301
3/31/95 $ 9,763 $11,303
6/30/95 $10,770 $12,381
9/30/95 $11,148 $13,364
10/31/95 $11,023 $13,315
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 5.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the S&P
500 Index is an unmanaged hypothetical portfolio that does not
reflect the "real world" costs of buying and selling stocks or bonds
and operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A December 3, 1993 +10.23% +5.23% +12.54%
B March 29, 1994 +8.68% +5.36% +13.36%
C May 5, 1994 +18.13% +11.94% +17.37%
D February 3, 1994 +12.46% +6.96% +19.52%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results assume reinvestment of any dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Standard & Poor's 500 Index +26.44%
Lipper Growth and Income Fund Average (483 Funds) +20.23%
</TABLE>
3
<PAGE>
LINCOLN ENTERPRISE PORTFOLIO
Managed by Lynch & Mayer
This Portfolio seeks to maximize capital appreciation by investing in medium-
sized companies which have a dominant position within their industry, are
undervalued, or have potential for growth in earnings.
In the 12 months ended October 31, the Lincoln Enterprise Portfolio was
generally invested in the right place at the right time. Our selection of
medium-size technology and financial stocks turned out to be strong performers
during the past year, helping your Fund generate a total return of +22.72%
(capital change plus income based on Class A net asset value).
For the fiscal year, we outperformed the Standard & Poor's Mid-Cap Index, an
unmanaged broad-based measure of 400 mid-size company stocks that rose +21.21%.
Your Fund's performance was aided by stocks such as Tektronix Inc., which makes
electronic test equipment and computer graphics. Tektronix was the Fund's
largest holding, and its price rose more than 60% during the past year.
We sold some of our basic materials and cyclical consumer stock selections such
as Sunbeam Oster, which did not meet our expectations in the past year. We
attribute the relative performance of these sectors to a slowdown in U.S.
economic growth, which affected industries such as construction and autos, and
to relatively stagnant wage incomes, which hindered consumer spending and
affected retailers' earnings.
In our opinion, we are in the midst of a multi-year cycle of out performance by
mid-cap stocks relative to large capitalization companies. We will continue to
search for companies that exhibit early indications of positive fundamental
change.
Your Fund's management believes that the price-to-earnings ratio of the stocks
in your Fund's portfolio has the potential to expand as long as interest rates
remain low and profit growth from a diverse range of industries continues to
accelerate.
As of October 31, the average market capitalization of companies whose stocks
are included in the Fund was $1.8 billion. Approximately 97% of the Fund's net
assets were invested in stocks, with the balance in options and cash.
4
<PAGE>
Comparison of a $10,000 Investment
Lincoln Enterprise Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln Enterprise S&P Mid-Cap
Portfolio 400 Index
------------------ -----------
<S> <C> <C>
12/3/93 $ 9,451 $10,000
12/31/93 $ 9,503 $10,499
3/31/94 $ 9,002 $10,100
6/30/94 $ 7,782 $ 9,731
9/30/94 $ 8,587 $10,390
12/31/94 $ 8,491 $10,122
3/31/95 $ 9,191 $10,941
6/30/95 $ 9,769 $11,906
9/30/95 $10,857 $13,068
10/31/95 $10,677 $12,732
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 5.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the S&P
400 Index is an unmanaged hypothetical portfolio that does not
reflect the "real world" costs of buying and selling stocks or bonds
and operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A December 3, 1993 +6.76% +3.48% +15.91%
B March 29, 1994 +14.82% +9.32% +15.82%
C May 5, 1994 +22.10% +14.45% +20.86%
D February 3, 1994 +8.24% +4.64% +22.43%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results assume reinvestment of any dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Standard & Poor's Mid-Cap 400 Index +21.21%
Lipper Mid-Cap Fund Average (121 Funds) +23.91%
</TABLE>
5
<PAGE>
LINCOLN U.S. GROWTH PORTFOLIO
Managed by Provident Investment Counsel
This Portfolio seeks to maximize capital appreciation by investing in companies
with low dividend yields, strong balance sheets and high expected earnings
growth relative to their industry.
Growth stocks, after two years of being out of favor, made a strong comeback in
the 12 months that ended October 31. The Lincoln U.S. Growth Portfolio- -whose
largest holdings were technology related companies- - generated a total return
of +21.74% (capital change plus income based on Class A net asset value) in the
past year.
The unmanaged Standard & Poor's 500 Index rose +26.44% and our peers, as
represented by the Lipper Growth Fund Average, rose +22.14%. The Fund had
outperformed the Lipper average through September 30. However, the sharp, and
we believe temporary, weakness in technology stocks during October negatively
affected our year-end results.
Our largest holdings include Motorola, Microsoft Corp., Intel Corp. and Texas
Instruments--technology leaders that we believe have bright long-term prospects
as the use of desktop computers and cellular communications with sophisticated
software become widespread worldwide. Even with this past year's gains, we
believe the market is still in the early stages of a two to three year cycle of
favorable performance for many types of growth stocks. In our opinion, stock
prices still remain attractive relative to growth stocks' high rate of earnings
growth.
Your Fund's performance also was favorably affected by the performance of our
holdings in financial and health care stocks, selected telecommunications
stocks such as LM Ericsson and Nokia Corp. and in Capital Cities/ABC Inc.,
which this year agreed to be acquired by the Walt Disney Co.
We look for companies that we believe can be highly profitable even during a
difficult economic environment, firms whose growth comes from selling more
products rather than price increases or internal cost-cutting. Our philosophy
is that businesses with high market share and strong earnings growth will
generate rewarding long-term returns.
As of October 31, more than 99% of the Fund's net assets were invested in
stocks with an average market capitalization of $13 billion. The balance of net
assets was in cash.
6
<PAGE>
Comparison of a $10,000 Investment
Lincoln US Growth Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln US Standard & Poor's
Growth Portfolio 500 Index
---------------- -----------------
<S> <C> <C>
12/3/93 $ 9,451 $10,000
12/31/93 $ 9,490 $10,168
3/31/94 $ 9,111 $ 9,783
6/30/94 $ 8,770 $ 9,824
9/30/94 $ 9,367 $10,303
12/31/94 $ 9,206 $10,301
3/31/95 $ 9,679 $11,303
6/30/95 $10,730 $12,381
9/30/95 $11,873 $13,364
10/31/95 $11,760 $13,315
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 5.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the S&P
500 Index is an unmanaged hypothetical portfolio that does not
reflect the "real world" costs of buying and selling stocks or bonds
and operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS ESTABLISHED ON (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- -------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A December 3, 1993 +17.60% +8.85% +15.09%
B March 29, 1994 +18.27% +11.15% +14.95%
C May 5, 1994 +28.50% +18.97% +20.00%
D February 3, 1994 +18.82% +10.39% +22.19%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results include reinvestment of any dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Standard & Poor's 500 Index +26.44%
Lipper Growth Fund Average (643 Funds) +22.14%
</TABLE>
7
<PAGE>
LINCOLN WORLD GROWTH PORTFOLIO
Managed by Walter Scott & Partners
This Portfolio seeks to maximize total return through investments in an
internationally diversified mix of equity securities.
In a difficult year for many international stock markets, the Lincoln World
Growth Portfolio's total return of +3.81% (capital change plus income based on
Class A net asset value) in the 12 months ended October 31 was significantly
better than the negative return provided by the average peer fund. Returns of
major foreign markets were generally weak, as measured by the Morgan Stanley
Europe Asia Far East Index (EAFE), which had a return of -0.37%.
While a single digit return may not seem impressive relative to the performance
of U.S. stocks in the past year, keep in mind that the behavior of
international stock markets has historically had little correlation to what
happens on Wall Street and is affected by currency fluctuations as well as
different economic conditions and political circumstances.
We are pleased to report that your Fund achieved its results even with 33% of
the Fund's net assets invested in Japanese stocks, where the benchmark Nikkei
Index fell 11% in the 12 months ended October 31.
Your Fund's performance was aided by price gains from Japanese technology
companies such as Advantest and Tokyo Electron, both semiconductor companies
whose stock has appreciated more than 70% from the prices your Fund paid. In
Europe, the Fund benefited from gains in major holdings such as Wolford AG, an
Austrian hosiery and bodysuit maker and PolyGram NV, a Dutch company that owns
U.S. music labels such as Motown and Mercury.
Lincoln World Growth Portfolio focuses on established overseas markets, and
generally avoids more volatile emerging markets. Almost half of net assets were
invested in Western Europe as of October 31. Slightly more than 8% of net
assets were invested in U.S. companies at year's end.
In recent months, your Fund has been benefiting from the declining value of the
Japanese yen, primarily due to a successful currency hedging strategy we
employed this past spring. We believe our equity holdings in Japan are well-
positioned to benefit from increased exports should the yen drop further.
8
<PAGE>
Comparison of a $10,000 Investment
Lincoln World Growth Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln World Growth Portfolio Morgan Stanley EAFE
------------------------------ -------------------
<S> <C> <C>
12/03/93 $ 9,451 $10,000
12/31/93 $ 9,380 $10,724
3/31/94 $ 9,930 $11,106
6/30/94 $10,213 $11,681
9/30/94 $10,350 $11,700
12/31/94 $ 9,738 $11,589
3/31/95 $ 9,938 $11,813
6/30/95 $10,301 $11,909
9/30/95 $11,118 $12,415
10/31/95 $10,814 $12,085
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 5.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the Morgan
Stanley Europe Asia Far East (EAFE) Index is a hypothetical
portfolio that does not reflect the "real world" cost of buying and
selling stocks or bonds and operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A December 3, 1993 +8.14% +4.18% -1.90%
B March 29, 1994 +3.28% +2.04% -1.97%
C May 5, 1994 +7.75% +5.18% +2.16%
D February 3, 1994 +9.65% +5.42% +4.22%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results assume reinvestment of any dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Morgan Stanley Europe Asia Far East (EAFE) Index -0.37%
Lipper International Fund Average (288 Funds) -1.09%
</TABLE>
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
Managed by John Govett & Co.
This Portfolio seeks long-term capital appreciation by investing primarily in
companies that are located in or have their principal business in the Pacific
Basin.
While we believe the Pacific Rim may enjoy rapid long-term economic growth that
should eventually reward patient investors, the Lincoln New Pacific Portfolio's
total return of -13.99% (capital change plus income based on Class A net asset
value) for the 12 months ended October 31 was disappointing.
Such results clearly illustrate the highly volatile nature of emerging markets
like Malaysia, Thailand, Indonesia and the Philippines, where approximately 24%
of the Fund's net assets are invested. In addition, nearly 20% of net assets
were invested in Japanese stocks, where the benchmark Nikkei Index provided a
total return of -11% in the past year.
Some of our individual stock holdings did quite well. Our largest holding,
China Hong Kong Photo Products Ltd., distributors of Fuji brand film in China,
rose 117% in value in the 12 months ended October 31. But your Fund's
participation in such gains did not offset setbacks in other areas.
Jardine Strategic Holdings, a multinational conglomerate with Asian interests
in autos, food, retailing and real estate, the Fund's second largest holding,
lost 18.7% of its value in the past year. Two of the Fund's other top 10
holdings--a Thai bank and a Philippine property company--also suffered double
digit declines in share value.
Stock markets in developing nations such as Malaysia and Thailand were weakened
by rising interest rates that resulted from government efforts to reduce
inflation. Tighter credit also negatively affected growth.
We believe our long-term investment strategy- -to select industries and
companies based on earnings growth and overall economic trends- -is sound.
Investing in emerging markets involves special risks which result from
differences in the regulation of financial data and reporting, currency
fluctuations, and political and economic systems that tend to be less stable
than those in the U.S.
In our opinion, these risks are manageable and worth taking because of the
region's potential for greater rewards. Japan, meanwhile, remains the region's
dominant economy, and political and business leaders are making strides that,
we believe, will resolve financial problems that have tempered growth. In the
months ahead, we are likely to focus on Korea and Taiwan, two markets we
believe have good potential prospects and somewhat more established patterns of
growth.
10
<PAGE>
Comparison of a $10,000 Investment
Lincoln New Pacific Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln New Pacific Portfolio Morgan Stanley Pacific Index
----------------------------- ----------------------------
<S> <C> <C>
12/03/93 $ 9,451 $10,000
12/31/93 $10,227 $10,699
3/31/94 $ 8,969 $11,574
6/30/94 $ 9,233 $12,772
9/30/94 $10,160 $12,402
12/31/94 $ 9,051 $12,093
3/31/95 $ 8,330 $11,903
6/30/95 $ 8,602 $11,414
9/30/95 $ 8,759 $11,891
10/31/95 $ 8,496 $11,314
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 5.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the Morgan
Stanley Pacific Index is a hypothetical portfolio that does not
reflect the "real world" cost of buying and selling stock or bonds
and operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<C> <S> <C> <C> <C>
A December 3, 1993 -15.05% -8.18% -18.74%
B March 29, 1994 -10.93% -7.00% -18.84%
C May 5, 1994 -9.02% -6.91% -15.43%
D February 3, 1994 -18.85% -11.28% -13.65%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results include reinvestment of any dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Morgan Stanley Pacific Index -11.03%
Lipper Pacific Region Fund Average (39 Funds) -9.48%
</TABLE>
<PAGE>
LINCOLN GOVERNMENT INCOME PORTFOLIO
Managed by Lincoln Investment Management Inc.
This Portfolio seeks to maximize current income consistent with preservation of
capital by investing in securities issued by the U.S. government, its agencies
and instrumentalities.
Significantly lower interest rates during 1995 and a change in Federal Reserve
Board policy helped Lincoln Government Income Portfolio more than recover from
1994's weak bond market. The Portfolio posted a positive return of +13.72%
(capital change plus income based on Class A net asset value) for the 12 months
ended October 31.
During the previous fiscal year, your Fund focused on a mix of short and long-
term maturity bonds. We invested approximately 55% of net assets in U.S.
Treasury Notes, with the balance in a broad mix of government agency, corporate
and mortgage securities issued by organizations such as the Federal National
Mortgage Association (Fannie Mae) and the Student Loan Marketing Association
(Sallie Mae).
The Fund sought high current income consistent with preservation of principal
by investing in segments of the bond market that we believed offered the most
attractive risk/reward relationship. We monitored the slowdown in U.S. economic
growth during the fiscal year and increased the portfolio's average maturity
and duration early in the year in anticipation of lower interest rates.
As of October 31, your Fund's portfolio had an average overall quality of AAA,
the highest available, an average effective maturity of 10.4 years and an
effective duration of 5.4 years. Duration is the most common measure of a
bond's sensitivity to interest rates. It indicates the approximate percentage
of change in a bond's price given a 1% change in interest rates.
Total return was slightly less than the Lehman Brothers Government Bond Index,
a broad unmanaged measure of the bond market, and the Lipper General U.S.
Government Bond Fund Average because early in the year we reduced your Fund's
investments in mortgages, modestly reducing income. We believed more homeowners
would refinance at lower rates as interest rates fell. We were a little early
since a major pickup in refinancing--and thus a drop in the value of mortgage
securities--did not begin until this past fall. Although our timing was
slightly off, which lowered this year's results, we believe that in the months
ahead our strategy can help preserve principal.
12
<PAGE>
Comparison of a $10,000 Investment
Lincoln Government Income Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln Government Lehman Brothers
Income Portfolio Government Bond Index
------------------ ---------------------
<S> <C> <C>
12/03/93 $ 9,551 $10,000
12/31/93 $ 9,518 $10,039
1/31/94 $ 9,633 $10,177
2/28/94 $ 9,441 $ 9,961
3/31/94 $ 9,220 $ 9,737
4/31/94 $ 9,133 $ 9,660
5/31/94 $ 9,123 $ 9,647
6/30/94 $ 9,104 $ 9,625
10/31/94 $ 9,084 $ 9,658
11/30/94 $ 9,055 $ 9,641
12/31/94 $ 9,113 $ 9,700
1/30/95 $ 9,270 $ 9,880
2/28/95 $ 9,463 $10,092
3/31/95 $ 9,501 $10,156
4/30/95 $ 9,612 $10,289
5/31/95 $ 9,983 $10,704
6/30/95 $10,052 $10,786
7/31/95 $10,004 $10,746
8/30/95 $10,112 $10,873
9/30/95 $10,183 $10,977
10/31/95 $10,330 $11,144
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 4.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the Lehman
Brothers Index is a hypothetical portfolio that does not reflect the
"real world" cost of buying and selling stocks or bonds and
operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<C> <S> <C> <C> <C>
A December 3, 1993 +3.30% +1.71% +8.61%
B March 29, 1994 +7.32% +5.74% +7.43%
C May 5, 1994 +10.80% +8.08% +10.59%
D February 3, 1994 +8.23% +4.64% +14.15%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results include reinvestment of dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Lehman Brothers Government Bond Index +15.38%
Lipper General U.S. Government Bond Fund Average
(185 Funds) +14.70%
</TABLE>
<PAGE>
LINCOLN CORPORATE INCOME PORTFOLIO
Managed by Lincoln Investment Management Inc.
This Portfolio seeks to provide high current income consistent with
preservation of capital by investing in a diversified mix of investment-grade
fixed income securities issued by U.S. corporations.
Lincoln Corporate Income Portfolio benefited from substantially lower interest
rates in 1995 as the U.S. economy slowed. Your Fund generated a total return of
+17.71% (capital change plus income based on Class A net asset value) for the
12 months ended October 31.
This gain more than erased last fiscal year's decline in share value and was
the product of a sharp turnaround from 1994's bond market, which was negatively
affected by the Federal Reserve Board's decision to sharply increase short-term
interest rates.
In the past year, your Fund relied on a mix of bonds with short and long-term
maturities issued by companies in a broad array of industries to achieve a
strong total return with a primary emphasis on high current income.
Investments in bond issues such as those of Delta Airlines--which appreciated
sharply as the airline business recovered--helped your Fund outperform both its
peers and the unmanaged Lehman Brothers Corporate Bond Index before accounting
for sales charges.
As of October 31, your Fund's portfolio had an average overall quality of A, a
high grade rating, an average effective maturity of 10.4 years, and an
effective duration of 6.0 years. Duration is the most common measure of a
bond's sensitivity to interest rates. It indicates the approximate percentage
of change in a bond's price given a 1% change in interest rates. Our average
effective maturity was also about 2.5 months longer than that of the Lehman
Brothers Index.
At year's end, the portfolio's biggest single industry concentration was in the
finance and banking sector, amounting to approximately 14% of net assets. In
most industries, we focused on a combination of A and BBB bonds, which provide
a higher level of income than AAA bonds while maintaining an investment grade
level of credit risk. At all times, we invest at least 65% of the portfolio's
assets in corporate bonds rated BBB or better.
14
<PAGE>
Comparison of a $10,000 Investment
Lincoln Corporate Income Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln Corporate Lehman Brothers
Income Portfolio Corporate Bond Index
----------------- --------------------
<S> <C> <C>
12/03/93 $ 9,551 $10,000
12/31/93 $ 9,503 $10,062
1/31/94 $ 9,638 $10,222
2/28/94 $ 9,407 $10,028
3/31/94 $ 9,088 $ 9,787
4/30/94 $ 8,991 $ 9,708
5/31/94 $ 8,937 $ 9,713
6/30/94 $ 8,898 $ 9,712
7/31/94 $ 9,070 $ 9,901
8/30/84 $ 9,070 $ 9,942
9/30/94 $ 8,895 $ 9,812
10/31/94 $ 8,880 $ 9,798
11/30/94 $ 8,859 $ 9,750
12/31/94 $ 8,924 $ 9,797
1/31/95 $ 9,094 $ 9,985
2/28/95 $ 9,324 $10,224
3/31/95 $ 9,410 $10,319
4/30/95 $ 9,540 $10,478
5/31/95 $10,010 $10,879
6/30/95 $10,107 $10,967
7/31/95 $10,025 $10,953
8/31/95 $10,175 $11,089
9/30/95 $10,292 $11,192
10/31/95 $10,453 $11,324
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 4.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B, C and D
could be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, the Lehman
Brothers Corporate Bond Index is a hypothetical portfolio that does
not reflect the "real world" cost of buying and selling stock or
bonds and operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A December 3, 1993 +4.53% +2.34% +12.48%
B March 29, 1994 +12.46% +8.28% +11.20%
C May 5, 1994 +15.09% +13.22% +15.23%
D February 3, 1994 +9.69% +5.44% +18.27%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results include reinvestment of dividends and
capital gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Lehman Brothers Corporate Bond Index +15.55%
Lipper Corporate BBB Bond Fund Average (87 Funds) +16.45%
</TABLE>
15
<PAGE>
LINCOLN TAX-FREE INCOME PORTFOLIO
Managed by Lincoln Investment Management Inc.
This Portfolio seeks to provide a high level of current income exempt from
federal income taxes by investing in a diversified mix of municipal bonds.
Despite the uncertainty generated by the debate over federal tax reform this
past spring and its implications for the value of municipal bonds, Lincoln Tax-
Free Income Portfolio generated a strong positive total return of +14.76%
(capital change plus income based on Class A net asset value) for the 12 months
ended October 31.
This gain reflects the fact that interest rates have dropped sharply in the
past year, allowing bonds to recover from capital losses that occurred last
year, when interest rates rose sharply.
In the past year, your Fund has been emphasizing revenue bonds issued by
essential services such as utilities across the United States. These bonds
offered higher yields than were available from comparable general obligation
municipal bonds. Your Fund has also been modestly extending the average
maturity of the portfolio to capture higher yields.
As of October 31, your Fund's portfolio had an average overall quality of AA1--
a high rating--an effective maturity of 8.3 years and an effective duration of
8 years. Duration is the most common measure of a bond's sensitivity to
interest rates. It indicates the approximate percentage of change in a bond's
price given a 1% change in interest rates.
For municipal bonds, tax policy changes in Washington have been a perennial
concern since the 1970s. With the change in leadership in Congress, there have
been a number of proposals to change or eliminate taxation of investment
income. Whether a consensus can be reached on such a change--and whether that
consensus will have any lasting impact on bond values--remains to be seen.
Whatever happens, municipal governments will still need private investors, and
therefore must offer competitive interest rates to fund operations, refinance
debt or make capital improvements.
Last year we compared your Fund's performance to the Lehman Brothers 20-Year
Municipal Bond Index. We have also included the Lehman Brothers Municipal Bond
Index in the chart this year because it has a shorter effective maturity that
more closely reflects the average effective maturity of your Fund's portfolio.
16
<PAGE>
Comparison of a $10,000 Investment
Lincoln Tax-Free Income Portfolio
Class A Shares
TOTAL LIFETIME RETURN
DECEMBER 3, 1993 THROUGH OCTOBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lincoln Tax-Free Lehman Bros. Lehman Bros. 20 Yr.
Income Portfolio Municipal Bond Index Municipal Bond Index
---------------- -------------------- --------------------
<S> <C> <C> <C>
12/03/93 $ 9,551 $10,000 $10,000
12/31/93 $ 9,628 $10,211 $10,241
1/31/94 $ 9,714 $10,327 $10,370
2/28/94 $ 9,397 $10,060 $10,062
3/31/94 $ 8,921 $ 9,650 $ 9,532
4/30/94 $ 9,013 $ 9,733 $ 9,610
5/31/94 $ 9,056 $ 9,817 $ 9,723
6/30/94 $ 8,993 $ 9,757 $ 9,626
7/31/94 $ 9,169 $ 9,936 $ 9,847
8/31/94 $ 9,198 $ 9,971 $ 9,874
9/30/94 $ 9,031 $ 9,824 $ 9,677
10/31/94 $ 8,848 $ 9,649 $ 9,421
11/30/94 $ 8,685 $ 9,475 $ 9,201
12/31/94 $ 8,895 $ 9,683 $ 9,490
1/31/95 $ 9,161 $ 9,960 $ 9,861
2/28/95 $ 9,452 $10,250 $10,219
3/31/95 $ 9,526 $10,368 $10,336
4/30/95 $ 9,529 $10,380 $10,334
5/31/95 $ 9,861 $10,711 $10,724
6/30/95 $ 9,731 $10,618 $10,558
7/31/95 $ 9,815 $10,719 $10,613
8/31/95 $ 9,941 $10,855 $10,759
9/30/95 $ 9,995 $10,923 $10,844
10/31/95 $10,154 $11,082 $11,075
</TABLE>
The above graph depicts the returns of Class A shares only, includes
the effect of the maximum 4.5% sales charge and assumes reinvestment
of dividends and capital gains. Performance of Class B and C could
be greater or less than Class A based on differences in sales
charges and fees among the Classes. Unlike the Portfolio, both the
Lehman Brothers Municipal Bond Index and the Lehman Brothers 20-yr
Municipal Bond Index are hypothetical portfolios that do not reflect
the "real world" cost of buying and selling stocks or bonds and
operating a mutual fund.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A December 3, 1993 +1.54% +0.80% +9.60%
B March 29, 1994 +7.63% +5.03% +8.34%
C May 5, 1994 +9.99% +8.78% +12.40%
</TABLE>
Results include the effect of applicable sales charges and fees,
which differ for each Class. Past performance is not a guarantee of
future results. Results assume reinvestment of dividends and capital
gains. Return and share value fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
COMPARATIVE INDEX RETURNS FOR THE YEAR ENDED OCTOBER 31
<TABLE>
<S> <C>
Lehman Brothers Municipal Bond Index +14.44%
Lehman Brothers 20-Year Municipal Bond Index +17.56%
Lipper General Municipal Bond Fund Average (236 Funds) +13.73%
</TABLE>
17
<PAGE>
LINCOLN CASHFUND PORTFOLIO
Managed by Lincoln Investment Management Inc.
Falling interest rates since the spring of 1995, while beneficial to long-term
investments such as stocks and bonds, have had a negative effect on the current
yield of short-term investments such as the Lincoln Cashfund Portfolio.
For the 12 months ended October 31, your Fund provided a total return of 4.94%,
all of which was derived from income from short-term securities such as
certificates of deposit, high quality commercial paper issued by established
businesses and bankers acceptances.
Your total return in fiscal 1995 was more than 2 percentage points higher than
the consumer price index for the preceding 12 months. This is important because
it means that the money you've set aside for near-term and emergency needs and
for future investment is not losing ground to inflation. As of October 31, your
Fund's annualized seven-day yield was 4.82%.
Your Fund sought to enhance yield by increasing the average maturity of the
portfolio from 25 days as of October 31, 1994 to 82 days as of October 31,
1995. The Securities and Exchange Commission limits the average maturity of a
money market fund to 90 days or less.
In the coming months we anticipate increasing the percentage of your Fund's net
assets which are invested in high quality commercial paper and fixed-rate
securities. We expect to reduce the amount of net assets invested in floating
rate notes--debt securities whose income is determined by the movement of
interest rates. This strategy reflects our expectation that the Federal Reserve
Board will further ease interest rates.
TOTAL RETURN THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
LIFETIME
-------------------------
CLASS DATE ESTABLISHED (CUMULATIVE) (ANNUALIZED) ONE YEAR
----- ---------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
A* December 3, 1993 +7.70% +3.96% +4.94%
</TABLE>
Past performance is not a guarantee of future results. An investment in a money
market fund is neither insured nor guaranteed by the U.S. Government. Yield and
return fluctuate with changing interest rates and are not guaranteed.
THE GOAL OF A MONEY MARKET FUND IS TO MAINTAIN A CONSTANT SHARE PRICE OF $1.
HOWEVER, THERE IS NO GUARANTEE THIS GOAL WILL BE MET. THE FIGURES IN THIS
REPORT REPRESENT PAST RESULTS.
*Also known as "Regular Shares"
18
<PAGE>
LINCOLN GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- -----------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS--NOTES A AND B
EQUITIES
AUTOMOTIVE
Ford Motor Company.............. 17,700 $ 508,875
General Motors.................. 14,700 643,125
United Technologies............. 4,800 426,000
-----------
1,578,000 7.4%
-----------
BANKING
Bankers Trust New York Corpora-
tion........................... 7,600 484,500
Mellon Bank Corporation......... 19,050 954,881
-----------
1,439,381 6.7%
-----------
CHEMICALS
Great Lakes Chemical............ 9,400 630,975 3.0%
-----------
COMPUTERS & SOFTWARE
Compaq Computer *............... 14,000 780,500
International Business Machines
Corporation.................... 5,500 534,875
-----------
1,315,375 6.2%
-----------
CONGLOMERATES
ITT Corporation................. 6,400 784,000 3.7%
-----------
CONSUMER PRODUCTS & SERVICES
Dial Corporation................ 14,600 355,875
Fruit of the Loom, Inc. *....... 38,200 663,725
Toys R Us Inc. *................ 19,800 433,125
Tyco Toys, Inc.*................ 47,100 259,050
-----------
1,711,775 8.0%
-----------
ELECTRONICS
Intel Corporation............... 14,000 978,250 4.6%
-----------
ENERGY
Amerada Hess Corporation........ 13,700 618,211
Camco........................... 21,200 484,950
Equitable Resources, Inc........ 15,000 438,750
Kerr--McGee Corporation......... 14,400 793,800
Louisiana Land & Exploration.... 12,300 435,113
Tosco Corporation............... 10,458 360,801
-----------
3,131,625 14.5%
-----------
FINANCE
Beneficial Corporation.......... 15,100 739,900 3.5%
-----------
FOOD & BEVERAGE
Philip Morris Companies, Inc.*.. 7,100 599,950 2.8%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
LINCOLN GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HEALTH CARE
Beverly Enterprises.......... 11,700 $ 596,700
Tenet Healthcare
Corporation*................ 39,400 704,275
-----------
1,300,975 6.1%
-----------
INSURANCE
Partnerre Holdings, Ltd...... 15,400 410,025
Paul Revere Corporation...... 25,000 506,250
-----------
916,275 4.3%
-----------
MEDICAL SUPPLIES
Bard C.R..................... 16,400 463,300 2.2%
-----------
METALS & MINING
Newmont Mining............... 18,267 689,579
Trinity Industries........... 24,600 728,775
-----------
1,418,354 6.6%
-----------
PLASTICS
The Geon Company............. 20,900 519,888 2.4%
-----------
PRINTING & PAPER
Champion International....... 15,400 823,900
Weyerhauser Company.......... 18,500 816,313
-----------
1,640,213 7.6%
-----------
RETAIL
Federated Department
Stores*..................... 4,100 104,038
May Department Stores........ 9,200 361,100
-----------
465,138 2.2%
-----------
TELECOMMUNICATIONS
GTE Corporation.............. 17,200 709,500 3.3%
-----------
TRANSPORTATION
Alexander & Baldwin, Inc..... 11,000 253,000 1.2%
---------------------
TOTAL EQUITIES (Cost
$18,864,948) 20,595,874 96.3%
---------------------
CONVERTIBLE BOND
CONSUMER PRODUCTS & SERVICES
Service Corp. International
(convertible to 48.216 shrs
common stk).................. 6.50% 09/01/01 $260,000 483,600 2.3%
---------------------
TOTAL CONVERTIBLE BOND (Cost
$358,800) 483,600 2.3%
---------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
LINCOLN GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- ----------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache
Repurchase Agreement,
dated 10/31/95, due
11/01/95, with a
maturity value of
$1,537,899 and an
effective yield of
5.42%, collateralized
by U.S. Government and
Agency Obligation
Securities with rates
ranging from 5.38% to
5.57% and maturity
dates ranging from
02/01/96 to 08/15/97,
with an aggregate
market value of
$1,568,462............. $1,537,671 $ 1,537,671 7.2%
----------------------
TOTAL INVESTMENTS (Cost
$20,761,419**) 22,617,145 105.8%
Excess of Liabilities
over Other Assets (1,233,407) (5.8)%
----------------------
NET ASSETS $21,383,738 100.0%
======================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
** Aggregate cost for Federal tax purposes (Note D).
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
LINCOLN ENTERPRISE PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS--NOTES A AND B
EQUITIES
ADVERTISING
Omnicom Group................ 5,000 $ 319,375 1.6%
-----------
BANKING
Corestates Financial Corpora-
tion........................ 4,400 160,050
First USA, Inc............... 6,100 280,600
-----------
440,650 2.2%
-----------
CAPITAL GOODS
Harnischfeger Industries..... 13,800 434,700 2.2%
-----------
CHEMICALS
FMC Corporation *............ 2,800 200,550 1.0%
-----------
COMMERCIAL SERVICES
Accustaff, Inc. *............ 9,000 400,500 2.0%
-----------
COMPUTERS & SOFTWARE
Adobe Systems, Inc........... 3,700 210,900
America Online, Inc. *....... 2,800 224,000
CBT Group *.................. 4,400 198,550
DST Systems, Inc. *.......... 3,500 73,500
MEMC Electronic Materials *.. 5,300 169,600
Parametric Technology Corpo-
ration *.................... 4,500 300,938
Symantec *................... 9,300 226,106
-----------
1,403,594 7.0%
-----------
CONSUMER PRODUCTS & SERVICES
Clorox Company............... 3,600 258,300 1.3%
-----------
ELECTRONICS
Altera Corporation *......... 2,400 145,200
Itron, Inc. *................ 6,500 188,500
UCAR International, Inc. *... 8,100 230,850
-----------
564,550 2.8%
-----------
ENERGY
Halliburton Company.......... 9,600 398,400
Reading & Bates Corporation
*........................... 34,300 394,450
-----------
792,850 4.0%
-----------
ENTERTAINMENT
Regal Cinemas *.............. 5,400 211,950
Station Casinos, Inc. *...... 19,100 248,300
-----------
460,250 2.3%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
LINCOLN ENTERPRISE PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- ------------------------------------------------------------
<S> <C> <C> <C>
FINANCE
Greentree Financial Corpo-
ration.................... 11,000 $ 292,875
TCF Financial Corporation.. 5,700 334,875
United Cos Financial Corpo-
ration.................... 9,000 254,250
-----------
882,000 4.4%
-----------
FOOD & BEVERAGE
Coca Cola Enterprises,
Inc....................... 19,000 505,875 2.5%
-----------
HEALTH CARE
Healthsouth
Rehabilitation *.......... 15,500 404,938
Sola International *....... 9,100 222,950
St. Jude Medical, Inc. *... 5,100 271,575
-----------
899,463 4.5%
-----------
INSURANCE
MBIA, Inc.................. 5,600 389,900
MGIC Investment Company.... 7,100 403,813
Partnerre Holdings, Ltd.... 6,900 183,713
TIG Holdings, Inc.......... 18,400 466,900
Unum Corporation........... 4,000 210,500
-----------
1,654,826 8.2%
-----------
MANUFACTURING
American Standard
Companies *............... 6,700 179,225
Oakley, Inc. *............. 6,000 207,000
-----------
386,225 1.9%
-----------
MEDICAL SUPPLIES
Biomet, Inc. *............. 17,900 297,588 1.5%
-----------
NATURAL RESOURCES
Apache Corporation......... 4,900 124,950
Potash Corporation of Sas-
katchewan................. 6,000 417,750
Triton Energy
Corporation *............. 9,700 452,263
-----------
994,963 5.0%
-----------
OFFICE EQUIPMENT & SUPPLIES
Danka Business Systems
PLC....................... 9,800 328,300
Officemax, Inc. *.......... 8,500 210,375
-----------
538,675 2.7%
-----------
OIL & GAS EQUIPMENT
Arethusa (Off--Shore)
Ltd....................... 8,500 164,688
BJ Services Company *...... 14,200 333,700
Ensco International,
Inc. *.................... 17,600 297,000
-----------
795,388 4.0%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
LINCOLN ENTERPRISE PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------
<S> <C> <C> <C>
PHARMACEUTICALS
Alpharma, Inc. ........ 10,400 $ 249,600
Biochem Pharmaceuti-
cals, Inc. *.......... 12,700 485,775
Biogen, Inc. *......... 3,400 208,250
Teva Pharmaceutical.... 7,100 278,675
-----------
1,222,300 6.1%
-----------
PRINTING & PAPER
Scholastic
Corporation *......... 6,500 401,375 2.0%
-----------
RETAIL
Claire's Stores, Inc... 9,900 194,288
Intimate Brands, Inc... 13,400 224,450
Staples, Inc........... 9,650 256,931
Sunglass Hut, Inc. *... 10,600 288,850
-----------
964,519 4.8%
-----------
TECHNOLOGY
Cadence Design Systems,
Inc. *................ 13,050 420,863
Cognex Corporation *... 4,400 262,900
Filenet Corporation *.. 7,400 335,775
General Instrument Cor-
poration *............ 8,100 153,900
Glenayre Technologies,
Inc. *................ 2,900 186,325
Liposome Company,
Inc. *................ 25,200 387,450
Qualcom, Inc. *........ 8,700 334,950
Softkey International,
Inc. *................ 6,300 198,450
Tektronix, Inc. ....... 10,400 616,200
-----------
2,896,813 14.4%
-----------
TELECOMMUNICATIONS
LCI International,
Inc. *................ 11,200 201,600
Octel Communication *.. 6,900 235,458
-----------
437,058 2.2%
-----------
TEXTILES
Tommy Hilfiger Corpora-
tion *................ 15,900 606,188
West Point Stevens *... 16,700 352,788
-----------
958,976 4.8%
-----------
TRANSPORTATION
Atlas Air, Inc. *...... 3,000 44,625
Fritz Companies,
Inc. *................ 9,800 343,000
-----------
387,625 1.9%
---------------------
TOTAL EQUITIES (Cost
$16,304,554) 19,498,988 97.3%
---------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
LINCOLN ENTERPRISE PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION DATE CONTRACTS AMOUNT FAIR VALUE NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PURCHASED PUT OPTION
OPTION
Morgan Stanley Emerging
Growth Index, Strike
Price $2.98............ 01/05/96 29,772 $ 99,438 0.5%
---------------------
TOTAL PURCHASED PUT OPTION (Cost $160,173) 99,438 0.5%
---------------------
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase Agreement, dated
10/31/95, due 11/01/95, with a maturity value
of $371,001 and an effective yield of 5.42%,
collateralized by a U.S. Government Agency
Obligation Security with a rate of 5.67% and
a maturity date of 04/11/96 with a market
value of $378,374............................ $370,946 $ 370,946 1.8%
---------------------
TOTAL INVESTMENTS (Cost
$16,835,673**) 19,969,372 99.6%
Excess of Other Assets
over Liabilities 73,833 0.4%
---------------------
NET ASSETS $20,043,205 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
** Aggregate cost for Federal tax purposes (Note D).
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
LINCOLN U.S. GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS--NOTES A AND B
EQUITIES
AEROSPACE
Boeing Company................................ 1,700 $ 111,563 0.6%
-----------
AUTOMOTIVE
Autozone, Inc. *.............................. 7,000 173,250 0.9%
-----------
COMPUTERS & SOFTWARE
3 COM Corporation............................. 6,200 291,400
Cabletron Systems, Inc. *..................... 3,550 279,119
Ceridian Corporation *........................ 1,800 78,300
Cirrus Logic, Inc. *.......................... 2,900 122,163
Cisco Systems, Inc. *......................... 6,000 465,000
Computer Associates International, Inc. ...... 7,950 437,250
Computer Sciences Corporation *............... 4,600 307,625
Hewlett-Packard, Inc. ........................ 5,900 546,488
Informix Corporation.......................... 10,800 314,550
Microsoft Corporation *....................... 8,100 810,000
Oracle Systems Corporation *.................. 14,600 636,925
-----------
4,288,820 22.6%
-----------
CONSUMER PRODUCTS & SERVICES
CUC International, Inc. *..................... 2,800 96,950
Gillette Company.............................. 4,400 212,850
-----------
309,800 1.6%
-----------
ELECTRONICS
Analog Devices, Inc. *........................ 7,700 278,163
Intel Corporation............................. 12,800 894,400
LSI Logic Company *........................... 5,000 235,625
SGS--Thomson Microelectric *.................. 3,000 135,750
Texas Instruments............................. 7,200 491,400
Tyco Lab...................................... 4,100 249,075
Xilinx, Inc. *................................ 4,000 184,000
-----------
2,468,413 13.0%
-----------
ENERGY
Enron......................................... 10,400 357,500 1.9%
-----------
FINANCE
Federal Home Loan Mortgage Corporation........ 2,200 152,350
Federal National Mortgage Financial Service... 5,100 534,863
First Data Corporation........................ 15,244 1,007,983
First USA, Inc................................ 6,600 303,600
MBNA Corporation.............................. 12,000 442,500
-----------
2,441,296 12.9%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
LINCOLN U.S. GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE
Cardinal Health, Inc. ......................... 2,400 $ 123,300
Healthsouth Rehabilitation *................... 3,700 96,663
Medtronic, Inc................................. 8,800 508,200
Oxford Health Plans *.......................... 2,400 187,800
St. Jude Medical, Inc. *....................... 3,900 207,675
United Healthcare Corporation.................. 4,000 212,500
-----------
1,336,138 7.0%
-----------
INSURANCE
American International Group................... 1,950 164,531
MGIC Investment Company........................ 4,600 261,625
The PMI Group, Inc............................. 1,900 91,200
-----------
517,356 2.7%
-----------
LODGING & RESTAURANTS
HFS, Inc. *.................................... 4,800 294,000
McDonalds Corporation.......................... 2,000 82,000
-----------
376,000 2.0%
-----------
MANUFACTURING
American Standard Companies *.................. 4,700 125,725
Applied Materials, Inc. *...................... 8,600 431,075
-----------
556,800 2.9%
-----------
MEDIA
British Sky Broadcasting....................... 9,000 321,750
Capital Cities / ABC, Inc...................... 3,200 379,600
-----------
701,350 3.7%
-----------
MISCELLANEOUS
Air Products & Chemicals....................... 1,200 61,950
Circus Circus Enterprises *.................... 2,400 63,900
-----------
125,850 0.7%
-----------
OFFICE EQUIPMENT & SUPPLIES
Alco Standard Corporation...................... 1,600 141,600
Office Depot *................................. 13,150 376,419
-----------
518,019 2.7%
-----------
PHARMACEUTICALS
Amgen, Inc. *.................................. 3,800 182,400
Merck & Co, Inc................................ 4,700 270,250
Pfizer, Inc.................................... 11,600 665,546
-----------
1,118,196 5.9%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
LINCOLN U.S. GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICES
Automatic Data Processing, Inc............... 2,600 $ 185,900
Loewen Group, Inc............................ 7,000 280,328
Paychex, Inc................................. 2,400 104,100
-----------
570,328 3.0%
-----------
TECHNOLOGY
Glenayre Technologies, Inc. *................ 2,700 173,475 0.9%
-----------
TELECOMMUNICATIONS
ADC Telecommunications, Inc. *............... 2,400 96,000
Andrew Corporation *......................... 4,450 188,013
Ericsson (L M) Telephone ADR................. 34,300 732,624
Motorola, Inc................................ 8,500 557,813
Nokia Corporation............................ 12,200 680,150
U. S. Robotics Corporation................... 2,400 222,000
-----------
2,476,600 13.0%
-----------
TRANSPORTATION
Fritz Companies, Inc. *...................... 2,800 98,000 0.5%
-----------
UTILITIES
Frontier Corporation......................... 7,400 199,800 1.1%
----------------------
TOTAL EQUITIES (Cost $13,881,484) 18,918,554 99.6%
----------------------
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase Agreement, dated
10/31/95, due 11/01/95, with a maturity value
of $146,030 and an effective yield of 5.42%,
collateralized by a U.S. Government Agency
Obligation Security with a rate of 5.67% and
a maturity date of 04/11/96 with a market
value of $148,932............................ $146,008 146,008 0.8%
----------------------
TOTAL INVESTMENTS (Cost $14,027,492**) 19,064,562 100.4%
Excess of Liabilities over Other Assets (77,274) (0.4)%
----------------------
NET ASSETS $18,987,288 100.0%
======================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
** Aggregate cost for Federal tax purposes (Note D).
ADR American Depository Receipt
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
LINCOLN WORLD GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS--NOTES A AND B
EQUITIES
BUILDING SUPPLIES
Castorama Dubois Investissem................... 2,246 $ 364,713
Cermex SA...................................... 3,544 169,598
Dyckerhoff AG Preferred Shares................. 752 183,864
Heidelberger Zement German..................... 330 206,404
Higashi Nihon House *.......................... 4,000 53,597
Kampa Haus..................................... 5,256 208,828
Nippon Kanzai.................................. 7,200 204,215
Redland, PLC................................... 35,519 195,702
RMC Group, PLC................................. 16,000 258,399
Westag and Getalit............................. 750 221,223
-----------
2,066,543 14.3%
-----------
CONGLOMERATES
Jardine Matheson Holdings...................... 23,156 141,252
Sophus Berendsen, Class B...................... 2,600 285,134
Swire Pacific, Ltd., B......................... 213,500 258,187
-----------
684,573 4.8%
-----------
CONSUMER PRODUCTS & SERVICES
Brioche Pasquier............................... 2,000 263,336
SEB Group...................................... 2,465 298,818
Secom Company, Ltd............................. 4,000 260,551
Shimano, Inc................................... 8,000 143,968
Sony Corporation............................... 4,000 179,960
-----------
1,146,633 8.0%
-----------
ELECTRONICS
Advantest Corporation.......................... 8,000 453,812
Fanuc Company.................................. 6,000 259,964
Kyocera Corporation............................ 4,000 327,840
Rohm Company................................... 6,000 362,658
Tokyo Electron, Ltd............................ 8,000 347,401
-----------
1,751,675 12.1%
-----------
ENERGY
Saga Petroleum, A Free......................... 21,700 271,904 1.9%
-----------
ENTERTAINMENT
Polygram....................................... 5,250 327,647 2.3%
-----------
FARM EQUIPMENT
Kubota Corporation............................. 30,000 186,024 1.3%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
LINCOLN WORLD GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
FOOD & BEVERAGE
Docks De France............................... 1,800 $ 274,230
Embotelladora Andina SA, ADR.................. 10,300 342,475
Koninklijke Ahold NV.......................... 9,338 333,692
-----------
950,397 6.6%
-----------
FURNITURE
AFG Arbonia--Forster Holdings................. 200 234,145
Daiwa Rakuda Industry Company, Ltd............ 10,000 143,772
Moebel Walther................................ 625 275,418
Shimachu...................................... 8,000 211,257
-----------
864,592 6.0%
-----------
MANUFACTURING
Bien--Haus AG *............................... 600 174,846
Daifuku Company, Ltd.......................... 20,000 238,642
Fuji Machine Manufacturing.................... 11,000 414,201
Futaba Industrial............................. 13,000 195,804
Gea AG........................................ 500 190,128
NSC (N. Schlumberger)......................... 1,100 211,058
-----------
1,424,679 9.9%
-----------
MARINE SERVICES
IHC Caland N.V................................ 10,000 284,483 2.0%
-----------
NATURAL RESOURCES
Ampolex, Ltd. *............................... 84,000 166,366 1.2%
-----------
PHARMACEUTICALS
Gehe AG (new shares) *........................ 175 83,212
Gehe AG (ordinary shares)..................... 700 343,793
Sankyo Company, Ltd........................... 9,900 217,859
-----------
644,864 4.5%
-----------
RETAIL
Familymart.................................... 3,960 166,928
Ito-Yokado, Ltd............................... 6,000 328,036
Levi Strauss Japan............................ 4,000 60,834
Spar Handles.................................. 900 194,463
-----------
750,261 5.2%
-----------
TELECOMMUNICATIONS
Cable & Wireless *............................ 37,553 245,794
Ericsson (L M) Telephone--B (new shares) *.... 1,600 33,983
Ericsson (L M) Telephone (ordinary shares).... 16,000 339,833
-----------
619,610 4.3%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
LINCOLN WORLD GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
EXPIRATION PRINCIPAL PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION DATE AMOUNT AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TEXTILES
Wolford, AG *................................. 4,000 $ 537,509 3.7%
-----------
TRANSPORTATION
Sembawang Shipyard............................ 30,000 145,435
Sime Darby, Ltd............................... 100,000 109,937
-----------
255,372 1.8%
-----------
UTILITIES
China Light and Power Company................. 48,000 255,778 1.8%
---------------------
TOTAL EQUITIES (Cost $11,959,339) 13,188,910 91.7%
---------------------
RIGHTS
RMC Group, PLC, Rights........................ 4,000 4,522 0.0%
---------------------
TOTAL RIGHTS (Cost $38,255) 4,522 0.0%
---------------------
PURCHASED CURRENCY PUT OPTIONS
CURRENCY OPTIONS
Deutsche Mark, Strike
Price $1.385........... 04/25/96 $2,000,000 82,000
Japanese Yen, Strike
Price $83.73........... 04/23/96 3,700,000 666,000
Japanese Yen, Strike
Price $88.35........... 07/18/96 800,000 107,680
-----------
TOTAL PURCHASED CURRENCY PUT OPTIONS (Cost
$269,620) 855,680 5.9%
---------------------
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase Agreement, dated
10/31/95, due 11/01/95, with a maturity value
of $334,438 and an effective yield of 5.42%,
collateralized by a U.S. Government Agency
Obligation Security with a rate of 5.67% and a
maturity date of 04/11/96 with a market value
of $341,084................................... 334,388 334,388 2.3%
---------------------
TOTAL INVESTMENTS (Cost $12,601,602**) 14,383,500 99.9%
Excess of Other Assets over Liabilities 20,649 0.1%
---------------------
NET ASSETS $14,404,149 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
** Aggregate cost for Federal tax purposes (Note D).
ADR American Depository Receipt
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
LINCOLN WORLD GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
At October 31, 1995, geographic concentration of the Fund's investments was as
follows:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE OF
SECTOR NET ASSETS
-------- -------------
<S> <C>
Japan 33.0%
Germany 14.5
France 11.0
United States 8.3
Netherlands 6.6
Great Britain 4.9
Hong Kong 4.3
Austria 3.7
Sweden 2.6
Chile 2.4
Singapore 2.0
Denmark 2.0
Norway 1.9
Switzerland 1.6
Australia 1.1
----
99.9%
====
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS--NOTES A AND B
EQUITIES
AIRLINES
Korean Air *...................... 1,800 $ 63,282 0.6%
----------
AUTOMOTIVE
PT Astra International *.......... 55,000 110,193
Swedish Motors.................... 28,000 124,617
----------
234,810 2.1%
----------
BANKING
Cho Hung Bank..................... 8,200 108,240
Commonwealth Bank Of Australia.... 18,000 137,115
First Bangkok City Bank........... 150,000 131,135
Guoco Group, Ltd. *............... 40,000 185,212
HSBC Holdings, PLC................ 8,400 122,224
Overseas Chinese Banking
Corporation...................... 12,000 140,977
Panin Bank........................ 78,750 86,688
Security Bank Corporation *....... 62,000 114,418
Thai Military Bank................ 50,000 171,866
----------
1,197,875 10.9%
----------
BUILDING SUPPLIES
Asia Cement Corporation, GDR *.... 3,740 62,178
Hyundai Engineering &
Construction..................... 2,435 128,568
Komatsu, Ltd. .................... 13,000 101,716
Kurimoto.......................... 10,000 101,716
Maeda Road Construction Company... 5,000 89,491
Pohang Iron & Steel Company....... 700 60,929
----------
544,598 4.9%
----------
CHEMICALS
Kansai Paint...................... 23,000 99,878
Metacorp Berhad................... 30,333 76,996
Nippon Shokubai K.K. Company...... 13,000 113,409
Toray Industries, Inc............. 17,000 106,245
----------
396,528 3.7%
----------
COMPUTERS & SOFTWARE
Creative Technology, Ltd. *....... 8,000 95,000
Koekisha Company, Ltd. ........... 1,000 38,144
----------
133,144 1.2%
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------
<S> <C> <C> <C>
CONGLOMERATES
China Resources Enterprises... 300,000 $ 132,894
Jardine Matheson Holdings..... 28,000 170,800
Jardine Strategic Holdings,
Ltd. ........................ 69,375 186,619
Loxely Company, Ltd. ......... 5,000 95,371
Multi-Purpose Holdings........ 96,000 128,453
Westmont Industries Berhad.... 17,000 58,874
----------
773,011 7.0%
----------
CONSTRUCTION
Taisei Corporation............ 17,000 101,589
Walker Corporation, Ltd. ..... 120,000 42,049
----------
143,638 1.3%
----------
ELECTRONICS
Amcol Holdings, Ltd. ......... 20,000 44,161
Casio Computer Company,
Ltd. *....................... 11,000 96,288
Furukawa Electric Co., Ltd. .. 24,000 107,741
Goldstar Company *............ 408 5,967
Guangdong Electric Power,
B *.......................... 210,000 118,965
K.R. Precision Public Co.
Ltd.--Foreign *.............. 16,000 115,717
Samsung Electronics 144A
Ordinary Shares *............ 109 23,933
Samsung Electronics 144A,
GDR *........................ 116 12,760
Samsung Electronics, GDR *.... 534 35,378
Samsung Electronics, Preferred
Stock *...................... 1,071 130,314
Shanghai Shangling Electric
Apparatus Co. ............... 129,000 111,585
----------
802,809 7.3%
----------
ENERGY
HKR International, Ltd. ...... 176,000 152,515
Southern Petro Chemical,
GDR *........................ 7,000 63,000
----------
215,515 2.0%
----------
ENGINEERING
International Engineering
Company...................... 4,000 19,074
Time Engineering.............. 32,000 81,858
----------
100,932 0.9%
----------
ENTERTAINMENT
Magnum Corporation *.......... 70,000 119,008 1.1%
----------
FINANCE
Finance One Public Co.,
Ltd. ........................ 25,000 140,076
Gadek Berhad.................. 15,500 84,789
Hutchison Whampoa, Ltd. ...... 27,000 148,764
Krungthai Thanakit PLC--
Foreign *.................... 45,000 126,963
Manhattan Card Company,
Ltd. ........................ 159,000 67,863
Promise Company, Ltd. ........ 2,400 94,596
----------
663,051 6.0%
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------
<S> <C> <C> <C>
FOOD & BEVERAGE
Chosun Brewery Company *........... 2,415 $ 87,744
Mos Food Services.................. 3,300 82,625
----------
170,369 1.5%
----------
HEALTH CARE
NIC Corporation.................... 600 8,568
Shimadzo Corporation............... 18,000 99,995
----------
108,563 1.0%
----------
INDUSTRIAL
New World Infrastructure, Ltd. *... 80 141
Tung Ho Steel 144A, GDR *.......... 4,924 52,933
----------
53,074 0.5%
----------
INSURANCE
First Capital Corporation.......... 40,000 108,139
Malaysia Assurance Alliance........ 44,000 178,355
----------
286,494 2.6%
----------
LODGING & RESTAURANTS
AAPC, Ltd. ........................ 200,000 115,786
Faber Group Bhd *.................. 130,000 110,508
Shangri-La Asia, Ltd. ............. 119,000 131,595
----------
357,889 3.3%
----------
MANUFACTURING
CESC Limited, GDR *................ 18,000 54,900
Kahma Company, Ltd. ............... 2,860 48,112
----------
103,012 0.9%
----------
METALS & MINING
Odin Mining Investment Company *... 300,000 72,187
Pt Supreme Cable Manufacturing..... 18,000 44,386
Sammi Steel Corporation *.......... 10,450 103,933
Sumitomo Metal Industries *........ 34,000 92,112
UMW Holdings Berhad................ 12,533 29,840
----------
342,458 3.1%
----------
MISCELLANEOUS
Kemayan Corporation *.............. 10,000 13,381
MC Packaging, Ltd. ................ 103,000 43,962
----------
57,343 0.5%
----------
NATURAL RESOURCES
Kamei.............................. 8,000 89,198 0.8%
----------
OFFICE EQUIPMENT & SUPPLIES
Acma, Ltd. ........................ 28,800 93,758 0.9%
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------------
<S> <C> <C> <C>
PHOTOGRAPHY
China-Hong Kong Photo Products.......... 472,000 $ 216,718
Olympus Optical......................... 14,000 130,764
----------
347,482 3.2%
----------
PLASTICS
Thai Modern Plastic Industry............ 91,900 96,319 0.9%
----------
PRINTING & PAPER
Asia Securities Printing Company........ 100 3,717
Picop Resources......................... 125,000 40,850
Sumitomo Forestry *..................... 8,000 112,671
----------
157,238 1.4%
----------
REAL ESTATE
Fil--Estate Land *...................... 132,000 100,318
Henderson Land Development.............. 12,000 71,860
Mitsubishi Estate Company, Ltd. ........ 9,000 95,946
New World Development................... 28,000 109,006
Singapore Land.......................... 15,000 83,864
----------
460,994 4.2%
----------
RETAIL
Itochu Corporation...................... 20,000 118,539
Shinsegae Department Store.............. 400 36,594
----------
155,133 1.4%
----------
SERVICES
L.G. Information & Communication *...... 1,500 118,212 1.1%
----------
TELECOMMUNICATIONS
Nippon Telegraph and Telephone
Corporation............................ 14 114,881
Pakistan Telecommunications, GDR *...... 231 22,061
----------
136,942 1.2%
----------
TEXTILES
Onward Kashiyama Co., Ltd. ............. 8,000 110,323
Saha Union Corporation, Ltd. ........... 120,000 132,327
Yizheng Chemical Fibre Company.......... 432,000 125,716
----------
368,366 3.3%
----------
TRANSPORTATION
Continental Mariner Investment.......... 350,000 36,215
Keppel Corporation, Ltd. ............... 21,000 172,399
----------
208,614 1.9%
----------
UTILITIES
Korea Electric Power Corporation........ 2,200 90,570 0.8%
-------------------
TOTAL EQUITIES (Cost $10,095,495) 9,190,229 83.5%
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONVERTIBLE BONDS
ELECTRONICS
United Micro Electronics
(convertible to 547.3469
shrs common stk).......... 1.25% 06/08/04 $ 38,000 $ 51,680 0.5%
----------
FINANCE
MBL International Finance
(convertible to 45.4546
shrs common stk).......... 3.00% 11/30/02 100,000 103,630 0.9%
----------
FOOD & BEVERAGE
President Enterprises
(convertible to 9482.1492
shrs common stk).......... 0.00% 07/22/01 80,000 98,400 0.9%
----------
MISCELLANEOUS
Acer, Inc. (convertible to
13,597.25 shrs common
stk)...................... 4.00% 06/10/01 10,000 30,500
Essar Gujarat, Ltd.
(convertible to 2615.5564
shrs common stk).......... 5.50% 08/05/98 50,000 49,500
----------
80,000 0.7%
----------
TRANSPORTATION
Yang Ming Marine
(convertible to 865.3276
shrs common stk).......... 2.00% 10/06/01 49,000 52,371 0.5%
-------------------
TOTAL CONVERTIBLE BONDS
(Cost $373,789) 386,081 3.5%
-------------------
WARRANTS
WARRANTS
Daewoo Corporation, Warrants, 01/08/96... 11 3,300
Jardine Strategic Holdings, Ltd.,
Warrants, 05/02/98...................... 6,375 1,689
Keihin Electric Express Railway,
Warrants, 09/11/99...................... 20 11,500
Salomon Brothers, Warrants, 01/18/96..... 26,000 1,313
UMW Holdings Berhad, Warrants 01/26/00... 6,533 4,461
Worldwide Holdings Berhad, Warrants,
09/22/99................................ 21,000 9,174
----------
TOTAL WARRANTS (Cost
$112,256) 31,437 0.3%
-------------------
INVESTMENT COMPANIES
China North Industries Investment, Ltd.
*....................................... 125,000 109,375
R.O.C. Taiwan Fund *..................... 19,000 182,875
Taipei Fund-UTS, Class B *............... 20 144,000
Taiwan Fund Inc. *....................... 6,000 131,250
----------
TOTAL INVESTMENT COMPANIES (Cost
$633,000) 567,500 5.2%
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase Agreement,
dated 10/31/95, due 11/01/95, with a maturity
value of $553,258 and an effective yield of
5.42%, collateralized by U.S. Government and
Agency Obligation Securities with rates
ranging from 5.67% to 8.625% and maturity
dates ranging from 04/11/96 to 11/15/29,
with an aggregate market value of $564,254.... $553,176 $ 553,176 5.0%
---------------------
TOTAL INVESTMENTS (Cost $11,767,716 **) 10,728,423 97.5%
Excess of Other Assets over Liabilities 277,993 2.5%
---------------------
NET ASSETS $11,006,416 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
** Aggregate cost for Federal tax purposes (Note D).
GDR Global Depository Receipt
144A Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
LINCOLN NEW PACIFIC PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
At October 31, 1995, geographic concentration of the Fund's investments was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY SECTOR NET ASSETS
--------------- -------------
<S> <C>
Japan 19.7%
Hong Kong 14.6
Thailand 10.5
South Korea 9.2
Singapore 8.9
United States 8.8
Malaysia 8.1
Taiwan 4.5
China 4.2
Australia 2.7
Philippines 2.3
Indonesia 2.2
India 1.6
Pakistan 0.2
----
TOTAL 97.5%
====
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
LINCOLN GOVERNMENT INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS--NOTES A AND B
GOVERNMENT AND AGENCY OBLIGATIONS
U.S. TREASURY
U.S. Treasury Note.......... 7.500% 05/15/02 $2,200,000 $ 2,390,102
U.S. Treasury Note.......... 5.125% 11/30/98 750,000 737,580
U.S. Treasury Note.......... 7.875% 11/15/04 1,450,000 1,634,194
U.S. Treasury Note.......... 6.875% 08/31/99 250,000 259,180
U.S. Treasury Note.......... 6.500% 04/30/99 1,000,000 1,023,279
U.S. Treasury Principal
Strip...................... 0.000% 05/15/19 3,000,000 638,880
-----------
6,683,215 54.1%
-----------
OTHER
Tennessee Valley Authority
Principal Strips........... 0.000% 11/01/00 1,000,000 741,350 6.0%
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
Federal National Mortgage
Association................ 6.000% 03/01/09 906,806 884,979
Federal National Mortgage
Association................ 7.000% 10/01/25 500,000 495,625
FNMA Multi-family Mortgage.. 7.150% 10/01/15 250,000 250,010
-----------
1,630,614 13.2%
-----------
FEDERAL HOME LOAN
Federal Home Loan Mortgage
Corporation................ 7.300% 12/01/12 298,323 308,205
Federal Home Loan Mortgage
Corporation................ 7.500% 11/15/23 500,000 528,125
--------------------
836,330 6.8%
--------------------
TOTAL GOVERNMENT AND AGENCY OBLIGATIONS (Cost
$9,757,316) 9,891,509 80.1%
--------------------
CORPORATE BONDS
FINANCE
Associates Corp. of North
America.................... 9.125% 04/01/00 400,000 442,072 3.5%
-----------
CONSUMER PRODUCTS & SERVICES
Wal-Mart Stores, Inc........ 7.500% 05/15/04 400,000 426,636 3.5%
--------------------
TOTAL CORPORATE BONDS (Cost $852,548) 868,708 7.0%
--------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
LINCOLN GOVERNMENT INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION AMOUNT FAIR VALUE NET ASSETS
- ------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase
Agreement, dated 10/31/95, due
11/01/95, with a maturity value
of $1,298,815 and an effective
yield of 5.42%, collateralized
by U.S. Government and Agency
Obligation Securities with
rates ranging from 5.57% to
11.63% and maturity dates
ranging from 11/15/95 to
02/01/96, with an aggregate
market value of $1,323,811...... $1,297,822 $ 1,297,822 10.5%
---------------------
TOTAL INVESTMENTS (Cost
$11,907,686**) 12,058,039 97.6%
Excess of Other Assets over
Liabilities 296,938 2.4%
---------------------
NET ASSETS $12,354,977 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
**Aggregate cost for Federal tax purposes (Note D).
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
LINCOLN CORPORATE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS--NOTES A AND B
CORPORATE BONDS
AIRLINES
Delta Airlines............. 8.250% 12/27/07 $ 250,000 $ 275,630
United Air Lines, Inc. .... 9.210% 01/21/17 450,000 481,842
-----------
757,472 4.9%
-----------
AUTOMOTIVE
Chrysler Finance
Corporation............... 9.500% 12/15/99 400,000 443,572
Ford Motor Credit
Corporation............... 7.250% 05/15/99 340,000 350,472
-----------
794,044 5.1%
-----------
BANKING
Chase Manhattan
Corporation............... 6.500% 01/15/09 250,000 239,688
First Bank Systems, Inc. .. 6.875% 09/15/07 250,000 251,857
NationsBank Corporation.... 6.625% 01/15/98 220,000 222,547
-----------
714,092 4.6%
-----------
BUILDING SUPPLIES
Georgia Pacific............ 9.125% 07/01/22 400,000 441,236
John Deere Credit
Corporation............... 8.625% 08/01/19 100,000 115,576
-----------
556,812 3.6%
-----------
CHEMICALS
Dow Capital................ 9.000% 05/15/10 155,000 184,884 1.2%
-----------
CONGLOMERATES
General Electric Capital
Corporation............... 8.750% 05/21/07 400,000 470,863 3.0%
-----------
CONSUMER PRODUCTS &
SERVICES
Nabisco, Inc. ............. 7.550% 06/15/15 250,000 251,569
Service Corporation
International............. 8.375% 12/15/04 250,000 279,926
-----------
531,495 3.4%
-----------
ENERGY
Pennzoil Company........... 10.125% 11/15/09 290,000 360,817
Phillips Petroleum......... 9.180% 09/15/21 250,000 283,465
Tenneco Credit............. 9.625% 08/15/01 250,000 285,655
-----------
929,937 6.0%
-----------
FINANCE
American Express Company... 8.500% 08/15/01 200,000 221,026
CIT Group Holdings......... 5.650% 11/15/95 200,000 199,986
First Security
Corporation............... 7.000% 07/15/05 250,000 252,818
Heller Financial
Corporation............... 5.625% 03/15/00 100,000 96,924
International Lease
Finance................... 8.250% 01/15/00 250,000 267,513
Lehman Brothers Holding
Company................... 8.875% 03/02/02 300,000 330,623
Smith Barney Holdings...... 7.875% 10/01/99 100,000 105,169
-----------
1,474,059 9.4%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
LINCOLN CORPORATE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOOD & BEVERAGE
Coca Cola Enterprises,
Inc. ..................... 8.000% 01/04/05 $ 200,000 $ 223,234
Conagra, Inc. ............. 9.875% 11/15/05 250,000 307,150
PepsiCo, Inc. ............. 7.875% 08/15/96 360,000 365,780
-----------
896,164 5.7%
-----------
INDUSTRIAL
Archer Daniels............. 8.875% 04/15/11 250,000 300,737
Inco, Ltd. ................ 9.600% 06/15/22 100,000 111,058
Viacom International....... 8.750% 05/15/01 100,000 104,125
-----------
515,920 3.3%
-----------
INSURANCE
Transamerica Finance
Corporation............... 0.000% 03/15/99 150,000 152,866
Travelers, Inc. ........... 8.625% 02/01/07 120,000 137,234
-----------
290,100 1.9%
-----------
LODGING & RESTAURANTS
Hilton Hotels.............. 7.700% 07/15/02 250,000 257,015 1.6%
-----------
MANUFACTURING
Cyprus Amax Minerals
Company................... 7.375% 05/15/07 250,000 258,183 1.7%
-----------
METALS & MINING
Newmont Gold Company....... 8.910% 01/05/09 100,000 108,214 0.7%
-----------
NATURAL RESOURCES
Noranda, Inc. ............. 8.125% 06/15/04 200,000 217,690 1.4%
-----------
RETAIL
Federated Department
Stores.................... 10.000% 02/15/01 100,000 107,250
Sears Roebuck & Company.... 9.050% 02/06/12 500,000 587,133
-----------
694,383 4.5%
-----------
TELECOMMUNICATIONS
AT&T Capital Corporation... 7.470% 05/11/05 250,000 262,972
GTE Corporation............ 9.375% 12/01/00 100,000 112,830
GTE Hawaii................. 7.000% 02/01/06 400,000 406,990
-----------
782,792 5.0%
-----------
TRANSPORTATION
Burlington Northern
Railroad Company.......... 6.940% 01/02/14 250,000 249,115
Federal Express
Corporation............... 9.650% 06/15/12 250,000 300,347
-----------
549,462 3.5%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
LINCOLN CORPORATE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILITIES
Carolina Power & Light..... 9.000% 04/01/22 $ 250,000 $ 266,094
Great Lakes Power, Inc. ... 9.000% 08/01/04 100,000 109,499
Long Island Lighting
Company................... 9.625% 07/01/24 200,000 204,122
Old Dominion Electric
Corporation............... 8.760% 12/01/22 400,000 451,698
Pennsylvania Power &
Light..................... 7.700% 10/01/09 200,000 219,041
Texas Gas Transmission..... 8.625% 04/01/04 100,000 112,133
Texas Utilities............ 7.375% 11/01/99 450,000 465,041
Utilicorp United, Inc. .... 8.450% 11/15/99 100,000 106,447
Virginia Electric & Power
Company................... 6.000% 08/01/02 200,000 195,636
-----------
2,129,711 13.6%
---------------------
TOTAL CORPORATE BONDS (Cost $12,568,713) 13,113,292 84.1%
---------------------
GOVERNMENT AND AGENCY OBLI-
GATIONS
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
Federal National Mortgage
Association............... 7.000% 10/16/25 500,000 495,625
FNMA Multi-family
Mortgage.................. 7.150% 10/01/15 250,000 250,007
-----------
745,632 4.8%
-----------
U.S. TREASURY
U.S. Treasury Strip........ 0.000% 05/15/19 2,000,000 425,918 2.7%
---------------------
TOTAL GOVERNMENT AND AGENCY OBLIGATIONS (Cost $1,158,792) 1,171,550 7.5%
---------------------
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase Agreement, dated 10/31/95, due
11/01/95, with a maturity value of $1,006,494 and an
effective yield of 5.42%, collateralized by U.S. Government
and Agency Obligation Securities with rates ranging from
8.625% to 11.625% and maturity dates ranging from 11/15/95
to 11/15/29, with an aggregate market value of
$1,026,497..................................................... 1,006,345 1,006,345 6.5%
---------------------
TOTAL INVESTMENTS (Cost
$14,733,850**) 15,291,187 98.1%
Excess of Other Assets over
Liabilities 296,671 1.9%
---------------------
NET ASSETS $15,587,858 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
**Aggregate cost for Federal tax purposes (Note D).
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
LINCOLN TAX-FREE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS--NOTES A AND B
MUNICIPAL BONDS
ALABAMA
Alabama State Public School &
College Authority........... 4.500% 08/01/06 $400,000 $ 385,000 3.5%
-----------
CALIFORNIA
San Diego County, California
Water Authority (FGIC)...... 5.300% 05/01/02 400,000 416,500 3.7%
-----------
CONNECTICUT
Connecticut State, Series A,
G.O......................... 5.400% 03/15/08 100,000 101,500
Connecticut State, Series B,
G.O......................... 5.100% 10/01/07 100,000 99,250
-----------
200,750 1.8%
-----------
DISTRICT OF COLUMBIA
District of Columbia, G.O.
Refunding, Bonds Series A-1,
(MBIA)...................... 6.000% 06/01/11 400,000 406,000 3.6%
-----------
FLORIDA
Florida State Municipal Power
Authority (AMBAC)........... 5.100% 10/01/14 300,000 280,875
Jacksonville, Florida
Electrical Authority........ 5.200% 10/01/12 300,000 285,750
-----------
566,625 5.2%
-----------
GEORGIA
De Kalb County, Georgia,
Water and Sewer, (AMBAC).... 5.125% 10/01/14 250,000 239,688
Georgia Municipal Electric
Power Authority............. 6.000% 01/01/06 400,000 430,500
-----------
670,188 6.0%
-----------
HAWAII
Honolulu, Hawaii City &
County (PRE-RE)............. 6.700% 08/01/08 400,000 448,000 4.0%
-----------
ILLINOIS
Alton, Illinois Health
Facilities.................. 7.200% 02/15/21 400,000 455,500
Chicago, Illinois, Park
District G.O................ 6.100% 11/15/05 100,000 108,625
Illinois Health Facilities
Authority (MBIA)............ 6.250% 08/15/13 100,000 106,500
-----------
670,625 6.0%
-----------
INDIANA
Indianapolis, Indiana
Utilities District (FGIC)... 5.000% 06/01/06 400,000 400,000
Lawrence, Indiana Central
High School Building
(MBIA)...................... 5.200% 07/01/08 400,000 389,498
Perry, Indiana, Multi-School
Building.................... 4.600% 07/15/02 400,000 395,000
-----------
1,184,498 10.6%
-----------
MAINE
Cumberland County, Maine G.O.
(PRE-RE).................... 6.400% 02/01/02 250,000 274,688 2.5%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
LINCOLN TAX-FREE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MASSACHUSETTS
Chelsea, Massachusetts,
School Improvement (AMBAC).. 5.600% 06/15/05 $100,000 $105,000
Massachusetts Water Resource
Authority................... 5.500% 11/01/15 400,000 388,000
State of Massachusetts, G.O.,
Series C (PRE-RE)........... 7.000% 12/01/10 300,000 335,250
-----------
828,250 7.4%
-----------
MICHIGAN
Michigan Municipal Bond
Authority................... 5.400% 10/01/14 400,000 389,500
Michigan Public Power
Agency...................... 5.500% 01/01/13 400,000 392,500
-----------
782,000 7.0%
-----------
MINNESOTA
Minneapolis, MN General
Obligation Note............. 3.900% 12/01/97 100,000 99,875 0.9%
-----------
NEVADA
Clark County, Nevada, School
District (FGIC)............. 6.375% 06/15/05 100,000 110,375
Nevada Municipal Bonds....... 5.000% 07/01/98 100,000 101,875
-----------
212,250 1.9%
-----------
NEW HAMPSHIRE
New Hampshire State Turnpike
Systems (PRE-RE)............ 7.400% 04/01/20 230,000 260,763 2.3%
-----------
NEW YORK
New York State Local
Assistance Corporation...... 6.000% 04/01/14 400,000 416,500
New York State Urban
Development (AMBAC)......... 5.100% 01/01/08 400,000 394,500
-----------
811,000 7.3%
-----------
OHIO
Columbus, Ohio General
Obligation Bond............. 4.200% 09/15/97 100,000 100,250 0.9%
-----------
SOUTH CAROLINA
Charleston, South Carolina,
Certificates of
Participation, (AMBAC)...... 5.000% 09/01/15 300,000 273,000 2.5%
-----------
TEXAS
Austin, Texas Hotel Occupancy
Tax (AMBAC)................. 5.125% 11/15/14 400,000 374,500
Bexar, Texas Metropolitan
Waterworks.................. 5.100% 05/01/05 100,000 101,250
Harris County, Texas, Toll
Road Revenue Bonds (FGIC)... 5.000% 08/15/16 300,000 277,125
-----------
752,875 6.8%
-----------
VIRGINIA
Fairfax County, Virginia,
Water Authority............. 5.750% 04/01/14 400,000 400,500 3.6%
-----------
WASHINGTON
Washington State Motor
Vehicle Fuel................ 5.450% 09/01/07 100,000 102,000
Washington State Public Power
Supply...................... 5.375% 07/01/15 300,000 275,250
-----------
377,250 3.4%
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
LINCOLN TAX-FREE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WISCONSIN
Wisconsin Clean Water......... 5.300% 06/01/12 $400,000 $ 388,500 3.5%
---------------------
TOTAL MUNICIPAL BONDS (Cost
$10,642,590) 10,509,387 94.4%
---------------------
SHORT-TERM INVESTMENT
REPURCHASE AGREEMENT
Prudential-Bache Repurchase Agreement, dated
10/31/95, due 11/01/95, with a maturity value
of $425,694 and an effective yield of 5.42%,
collateralized by a U.S. Government Agency
Obligation Security with a rate of 5.67% and
a maturity date of 04/11/96 with a market
value of $434,154............................. 425,631 425,631 3.8%
---------------------
TOTAL INVESTMENTS (Cost $11,068,221**) 10,935,018 98.2%
Excess of Other Assets over Liabilities 195,072 1.8%
---------------------
NET ASSETS $11,130,090 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
** Aggregate cost for Federal Tax Purposes (Note D).
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guaranty Insurance Corporation
G.O. General Obligations
MBIA Municipal Bond Insurance Association
PRE-RE Pre-refunded with U.S. Treasuries
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
LINCOLN CASHFUND PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR/SHARE MARKET OR PERCENT OF
DESCRIPTION RATE DATE AMOUNT FAIR VALUE NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS--NOTES A AND B
COMMERCIAL PAPER
AT & T....................... 5.650% 11/14/95 $ 565,000 $ 563,847
Daimler Benz, N.A............ 5.690% 12/20/95 572,000 567,570
Donnelly RR & Sons........... 5.700% 12/07/95 400,000 397,720
Merrill Lynch & Company...... 5.870% 11/01/95 1,586,000 1,586,000
Merrill Lynch & Company...... 5.600% 11/07/95 525,000 524,510
Metropolitan Life Funding.... 5.710% 11/13/95 570,000 568,915
Southwestern Bell Capital
Corporation................. 5.640% 03/25/96 570,000 557,052
Weyerhauser Company.......... 5.800% 11/02/95 570,000 569,908
-----------
TOTAL COMMERCIAL PAPER (Cost $5,335,522) 5,335,522 46.6%
---------------------
CORPORATE BONDS
Harris Trust & Savings....... 6.120% 08/29/96 500,000 500,000
Morgan Guaranty Trust of New
York........................ 6.000% 10/11/96 570,000 570,000
-----------
TOTAL CORPORATE BONDS (Cost $1,070,000) 1,070,000 9.3%
---------------------
FLOATING RATE NOTES
Boatmens Bank of South
Missouri.................... 5.875% 02/14/96 558,000 557,973
Caterpiller Financial
Services.................... 5.810% 07/25/96 565,000 565,000
Comerica Bank................ 5.560% 11/22/95 545,000 544,973
First Bank of South Dakota... 5.855% 05/06/96 565,000 564,944
PHH Corporation.............. 5.840% 08/21/96 565,000 564,824
Toyota Motor Credit.......... 5.600% 01/12/96 545,000 545,000
-----------
TOTAL FLOATING RATE NOTES (Cost $3,342,714) 3,342,714 29.2%
---------------------
GOVERNMENT AND AGENCY
OBLIGATIONS
Federal Home Loan Bank....... 5.610% 09/20/96 1,000,000 998,987
U. S. Treasury Bill.......... 6.610% 02/08/96 700,000 687,276
-----------
TOTAL GOVERNMENT AND AGENCY OBLIGATIONS (Cost
$1,686,263) 1,686,263 14.7%
---------------------
TOTAL INVESTMENTS (Cost $11,434,499**) 11,434,499 99.8%
Excess of Other Assets over
Liabilities 17,524 0.2%
---------------------
NET ASSETS $11,452,023 100.0%
=====================
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
**Aggregate cost for Federal tax purposes (Note D).
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
[THIS PAGE LEFT INTENTIONALLY BLANK]
49
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN LINCOLN
GROWTH AND INCOME ENTERPRISE U.S. GROWTH WORLD GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Notes A & B) $22,617,145 $19,969,372 $19,064,562 $14,383,500
Foreign currency, at
value -- -- -- 13,029
Cash -- -- -- --
Receivable from:
Securities sold 101,193 139,467 -- --
Open Forward Currency
Contracts (Note G) -- -- -- --
Fund shares sold 42,676 126,218 24,465 21,685
Dividends and interest 38,476 6,786 10,425 53,379
Advisor -- -- -- --
Deferred organization
expense 6,430 6,371 4,935 6,159
----------- ----------- ----------- -----------
Total assets 22,805,920 20,248,214 19,104,387 14,477,752
----------- ----------- ----------- -----------
LIABILITIES:
Payable for:
Securities purchased 1,261,464 104,111 -- --
Fund shares redeemed 18,726 3,334 497 1,504
Distributions declared 342 -- -- --
Directors' fees and
expenses 2,054 2,054 2,054 2,054
Affiliates:
Advisor 86,560 40,625 63,298 5,772
Service and
distribution fees 14,928 17,056 13,224 14,430
Accrued expenses and
other liabilities 38,108 37,829 38,026 49,843
----------- ----------- ----------- -----------
Total Liabilities 1,422,182 205,009 117,099 73,603
----------- ----------- ----------- -----------
NET ASSETS: $21,383,738 $20,043,205 $18,987,288 $14,404,149
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Paid-in capital $19,095,891 $17,573,452 $15,192,613 $12,819,006
Undistributed net
investment income
(loss) or
distributions in
excess of net
investment income 20,387 -- -- 28,952
Accumulated net
realized gain (loss)
on investments and
foreign currency
transactions 411,734 (663,946) (1,242,395) (226,230)
Net unrealized
appreciation
(depreciation) on
investments, forward
currency contracts,
foreign currency and
other assets 1,855,726 3,133,699 5,037,070 1,782,421
----------- ----------- ----------- -----------
NET ASSETS: $21,383,738 $20,043,205 $18,987,288 $14,404,149
=========== =========== =========== ===========
CLASS A $13,297,253 $14,507,841 $13,573,827 $13,017,521
=========== =========== =========== ===========
CLASS B $ 1,307,566 $ 1,811,208 $ 566,975 $ 1,182,741
=========== =========== =========== ===========
CLASS C $ 73,181 $ 58,186 $ 27,138 $ 42,905
=========== =========== =========== ===========
CLASS D $ 6,705,738 $ 3,665,970 $ 4,819,348 $ 160,982
=========== =========== =========== ===========
SHARES OUTSTANDING:
CLASS A 1,185,195 1,285,890 1,092,021 1,141,508
=========== =========== =========== ===========
CLASS B 120,358 151,465 45,992 110,409
=========== =========== =========== ===========
CLASS C 6,406 4,767 2,113 3,999
=========== =========== =========== ===========
CLASS D 597,948 324,385 385,639 14,072
=========== =========== =========== ===========
CLASS A SHARES
Net asset value and
redemption price per
share $ 11.22 $ 11.28 $ 12.43 $ 11.40
=========== =========== =========== ===========
Maximum sales charge 5.50% 5.50% 5.50% 5.50%
Maximum offering price
per share $ 11.87 $ 11.94 $ 13.15 $ 12.06
=========== =========== =========== ===========
CLASS B SHARES
Net asset value and
offering price* $ 10.86 $ 11.96 $ 12.33 $ 10.71
=========== =========== =========== ===========
CLASS C SHARES
Net asset value and
offering price* $ 11.42 $ 12.21 $ 12.85 $ 10.73
=========== =========== =========== ===========
CLASS D SHARES
Net asset value,
offering price and
redemption price per
share $ 11.21 $ 11.30 $ 12.50 $ 11.44
=========== =========== =========== ===========
Cost of investments $20,761,419 $16,835,673 $14,027,492 $12,601,602
Cost of foreign currency -- -- -- $ 12,505
</TABLE>
*Redemption price per
share is equal to net
asset value less any
applicable contingent
deferred sales
charge.
The accompanying notes are an
50
<PAGE>
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN LINCOLN LINCOLN
NEW PACIFIC GOVERNMENT INCOME CORPORATE INCOME TAX-FREE INCOME CASHFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ----------------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
$10,728,423 $12,058,039 $15,291,187 $10,935,018 $11,434,499
346,436 -- -- -- --
-- 32,500 -- -- --
54,415 816,440 -- -- --
13,060 -- -- -- --
2,136 1,992 9,509 1,251 1,280
24,554 179,202 299,076 160,202 32,590
77,923 50,866 35,974 77,759 11,147
5,833 6,550 6,278 6,460 6,087
- ----------- ----------- ----------- ----------- -----------
11,252,780 13,145,589 15,642,024 11,180,690 11,485,603
- ----------- ----------- ----------- ----------- -----------
180,125 741,350 -- -- --
-- 3,026 4,582 -- 1,363
-- 412 842 456 711
2,054 2,054 2,054 2,137 2,301
-- -- -- -- --
10,974 10,253 10,651 9,801 --
53,211 33,517 36,037 38,206 29,205
- ----------- ----------- ----------- ----------- -----------
246,364 790,612 54,166 50,600 33,580
- ----------- ----------- ----------- ----------- -----------
$11,006,416 $12,354,977 $15,587,858 $11,130,090 $11,452,023
=========== =========== =========== =========== ===========
$12,546,983 $12,486,146 $15,567,374 $11,264,858 $11,452,023
(9,219) 5,468 2,057 (1,565) --
(507,330) (286,990) (538,910) -- --
(1,024,018) 150,353 557,337 (133,203) --
- ----------- ----------- ----------- ----------- -----------
$11,006,416 $12,354,977 $15,587,858 $11,130,090 $11,452,023
=========== =========== =========== =========== ===========
$10,353,101 $11,061,948 $11,517,879 $10,949,759 $11,452,023
=========== =========== =========== =========== ===========
$ 573,331 $ 299,270 $ 361,777 $ 169,947 --
=========== =========== =========== =========== ===========
$ 17,490 $ 14,696 $ 4,677 $ 10,384
=========== =========== =========== ===========
$ 62,494 $ 979,063 $ 3,703,525 --
=========== =========== =========== ===========
1,188,455 1,128,893 1,180,087 1,115,574 11,452,023
=========== =========== =========== =========== ===========
63,648 29,209 34,619 16,308 --
=========== =========== =========== =========== ===========
1,980 1,416 448 1,017
=========== =========== =========== ===========
7,126 101,971 390,199 --
=========== =========== =========== ===========
$ 8.71 $ 9.80 $ 9.76 $ 9.82 $ 1.00
=========== =========== =========== =========== ===========
5.50% 4.50% 4.50% 4.50%
$ 9.22 $ 10.26 $ 10.22 $ 10.28
=========== =========== =========== ===========
$ 9.01 $ 10.25 $ 10.45 $ 10.42
=========== =========== =========== ===========
$ 8.83 $ 10.38 $ 10.44 $ 10.21
=========== =========== =========== ===========
$ 8.77 $ 9.60 $ 9.49 --
=========== =========== =========== ===========
$11,767,716 $11,907,686 $14,733,850 $11,068,221 $11,434,499
$ 331,161 -- -- -- --
</TABLE>
integral part of the financial statements.
51
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN LINCOLN
GROWTH AND INCOME ENTERPRISE U.S. GROWTH WORLD GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 118,967 $ 61,213 $ 38,522 $ 31,824
Dividends (Note 1) 340,478 85,318 105,990 208,492
---------- ---------- ---------- ---------
Total investment in-
come 459,445 146,531 144,512 240,316
---------- ---------- ---------- ---------
EXPENSES (NOTE A):
Investment Advisory
fees (Note C) 139,813 116,353 105,965 142,529
Custody and adminis-
tration fees 72,494 92,461 76,881 97,930
Audit fees 14,400 14,400 16,400 20,600
Registration and fil-
ing fees 38,486 37,948 37,760 37,326
Transfer agency fees 17,398 17,398 17,398 17,398
Directors' fees and
expenses 8,233 8,232 8,232 8,232
Amortization of organ-
ization costs (Note
F) 5,386 5,446 5,446 5,446
Other 1,379 1,652 1,653 1,655
Fees waived and
expenses reimbursed
by the Advisor
(Note C) (53,253) (75,728) (42,667) (136,758)
---------- ---------- ---------- ---------
244,336 218,162 227,068 194,358
Distribution and serv-
ice fees (Note C):
Class A Shares 41,382 42,883 40,509 41,866
Class B Shares 9,710 12,474 3,983 8,469
Class C Shares 426 486 127 408
---------- ---------- ---------- ---------
Net expenses 295,854 274,005 271,687 245,101
---------- ---------- ---------- ---------
NET INVESTMENT INCOME
(LOSS) 163,591 (127,474) (127,175) (4,785)
---------- ---------- ---------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain
(loss) on:
Investment transac-
tions 425,374 952,012 (476,502) (109,077)
Foreign currency
transactions -- -- -- 53,067
---------- ---------- ---------- ---------
Net realized gain
(loss) 425,374 952,012 (476,502) (56,010)
---------- ---------- ---------- ---------
Net change in
unrealized apprecia-
tion (depreciation)
on:
Investments 2,538,893 2,165,537 3,893,441 651,911
Foreign currency and
other assets -- -- -- (20,353)
---------- ---------- ---------- ---------
NET UNREALIZED APPRECI-
ATION (DEPRECIATION)
DURING THE PERIOD 2,538,893 2,165,537 3,893,441 631,558
---------- ---------- ---------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS) 2,964,267 3,117,549 3,416,939 575,548
---------- ---------- ---------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS RESULT-
ING FROM OPERATIONS $3,127,858 $2,990,075 $3,289,764 $ 570,763
========== ========== ========== =========
NOTE 1: NET OF FOREIGN
TAXES WITHHELD OF: -- -- -- $ 27,176
</TABLE>
The accompanying notes are an
52
<PAGE>
<TABLE>
<CAPTION>
LINCOLN
LINCOLN LINCOLN LINCOLN TAX- LINCOLN
NEW PACIFIC GOVERNMENT INCOME CORPORATE INCOME FREE INCOME CASHFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ----------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
$ 25,014 $ 823,203 $1,056,815 $ 557,939 $665,485
111,412 -- -- -- --
- ----------- ---------- ---------- ---------- --------
136,426 823,203 1,056,815 557,939 665,485
- ----------- ---------- ---------- ---------- --------
119,820 33,749 40,247 31,052 27,946
150,831 68,583 71,679 69,228 66,697
20,600 13,400 14,400 16,500 11,300
37,156 37,395 37,892 36,931 23,375
17,398 17,398 17,398 17,398 17,398
8,232 8,232 8,232 8,232 8,232
5,446 5,446 5,446 5,446 5,446
1,653 1,658 1,658 1,657 1,663
(197,745) (84,614) (76,211) (108,813) (39,094)
- ----------- ---------- ---------- ---------- --------
163,391 101,247 120,741 77,631 122,963
35,982 36,161 36,880 35,745 --
5,374 2,650 2,991 1,255 --
159 74 53 123 --
- ----------- ---------- ---------- ---------- --------
204,906 140,132 160,665 114,754 122,963
- ----------- ---------- ---------- ---------- --------
(68,480) 683,071 896,150 443,185 542,522
- ----------- ---------- ---------- ---------- --------
(470,965) 315,265 104,351 -- --
82,356 -- -- -- --
- ----------- ---------- ---------- ---------- --------
(388,609) 315,265 104,351 -- --
- ----------- ---------- ---------- ---------- --------
(1,244,822) 453,575 1,219,589 977,524 --
12,967 -- -- -- --
- ----------- ---------- ---------- ---------- --------
(1,231,855) 453,575 1,219,589 977,524 --
- ----------- ---------- ---------- ---------- --------
(1,620,464) 768,840 1,323,940 977,524 --
- ----------- ---------- ---------- ---------- --------
$(1,688,944) $1,451,911 $2,220,090 $1,420,709 $542,522
=========== ========== ========== ========== ========
$ 80,877 -- -- -- --
</TABLE>
integral part of the financial statements.
53
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN LINCOLN
GROWTH AND INCOME ENTERPRISE U.S. GROWTH WORLD GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) $ 163,591 $ (127,474) $ (127,175) $ (4,785)
Net realized gain (loss) on
investments and foreign currency
transactions 425,374 952,012 (476,502) (56,010)
Net change in unrealized appreciation
(depreciation) on investments,
foreign currency and other assets 2,538,893 2,165,537 3,893,441 631,558
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 3,127,858 2,990,075 3,289,764 570,763
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE A):
From net investment income*:
CLASS A (82,711) -- -- (9,506)
CLASS B (4,970) -- -- (1,209)
CLASS C (191) -- -- (104)
CLASS D (55,332) -- -- (263)
From short-term capital gains:
CLASS A (267,001) -- -- --
CLASS B (19,100) -- -- --
CLASS C (653) -- -- --
CLASS D (81,783) -- -- --
NET FUND SHARE TRANSACTIONS (NOTE E):
CLASS A 1,108,608 1,331,853 488,757 799,587
CLASS B 600,728 780,768 268,431 605,810
CLASS C 43,004 10,081 18,772 2,337
CLASS D 3,371,526 3,318,688 2,411,031 89,271
----------- ----------- ----------- -----------
TOTAL CHANGE IN NET ASSETS 7,739,983 8,431,465 6,476,755 2,056,686
NET ASSETS:
Beginning of period 13,643,755 11,611,740 12,510,533 12,347,463
----------- ----------- ----------- -----------
End of period (including
undistributed net investment income
disclosed below **) $21,383,738 $20,043,205 $18,987,288 $14,404,149
=========== =========== =========== ===========
*Including distributions in excess of
net investment income of: -- -- -- --
**Undistributed net investment income
(loss): 20,387 -- -- 28,952
</TABLE>
The accompanying notes are an
54
<PAGE>
<TABLE>
<CAPTION>
LINCOLN
LINCOLN LINCOLN LINCOLN TAX- LINCOLN
NEW PACIFIC GOVERNMENT INCOME CORPORATE INCOME FREE INCOME CASHFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ----------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
$ (68,480) $ 683,071 $ 896,150 $ 443,185 $ 542,522
(388,609) 315,265 104,351 -- --
(1,231,855) 453,575 1,219,589 977,524 --
- ----------- ----------- ----------- ----------- -----------
(1,688,944) 1,451,911 2,220,090 1,420,709 542,522
- ----------- ----------- ----------- ----------- -----------
-- (620,799) (633,907) (437,188) (542,522)
-- (19,661) (24,234) (6,574) --
-- (224) (604) (988) --
-- (51,430) (236,120) -- --
(316,289) -- -- -- --
(15,095) -- -- -- --
(342) -- -- -- --
(1,631) -- -- -- --
941,615 689,590 802,327 545,752 555,106
231,878 46,580 115,759 64,485 --
6,813 (35,204) (5,334) 2,272 --
23,103 593,422 2,194,396 -- --
- ----------- ----------- ----------- ----------- -----------
(818,892) 2,054,185 4,432,373 1,588,468 555,106
11,825,308 10,300,792 11,155,485 9,541,622 10,896,917
- ----------- ----------- ----------- ----------- -----------
$11,006,416 $12,354,977 $15,587,858 $11,130,090 $11,452,023
=========== =========== =========== =========== ===========
-- -- -- (1,565) --
(9,219) 5,468 2,057 -- --
</TABLE>
integral part of the financial statements.
55
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 3, 1993 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31,
1994
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN LINCOLN
GROWTH AND INCOME ENTERPRISE U.S. GROWTH WORLD GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) $55,239 ($96,231) ($48,908) $24,104
Net realized gain (loss) on
investment transactions and foreign
currency transactions 366,879 (1,615,958) (765,893) (117,654)
Net change in unrealized appreciation
(depreciation) on investments,
foreign currency and other assets (683,167) 968,162 1,143,629 1,150,863
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations (261,049) (744,027) 328,828 1,057,313
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE A):
From net investment income*:
CLASS A (52,553) (5,017) (10,026) (31,036)
CLASS B (901) -- -- (644)
CLASS C (44) -- -- (16)
CLASS D (13,722) -- -- (154)
NET FUND SHARE TRANSACTIONS (NOTE E):
CLASS A 10,707,842 11,364,722 10,432,432 10,690,388
CLASS B 567,722 714,807 193,916 518,236
CLASS C 24,220 36,372 4,860 38,387
CLASS D 2,659,240 231,883 1,547,523 61,989
----------- ----------- ----------- -----------
TOTAL CHANGE IN NET ASSETS 13,630,755 11,598,740 12,497,533 12,334,463
NET ASSETS:
Beginning of period 13,000 13,000 13,000 13,000
----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income disclosed below**) $13,643,755 $11,611,740 $12,510,533 $12,347,463
=========== =========== =========== ===========
*Including distributions in excess of
net investment income of: ($11,981) ($5,017) ($10,026) ($7,747)
**Undistributed net investment income: -- -- -- --
</TABLE>
The accompanying notes are an
56
<PAGE>
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN LINCOLN LINCOLN
NEW PACIFIC GOVERNMENT INCOME CORPORATE INCOME TAX-FREE INCOME CASHFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ----------------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
($21,131) $401,834 $569,199 $354,978 $271,189
305,061 (602,768) (643,261) -- --
207,837 (303,222) (662,252) (1,110,727) --
- ----------- ----------- ----------- ---------- -----------
491,767 (504,156) (736,314) (755,749) 271,189
- ----------- ----------- ----------- ---------- -----------
(10,033) (376,003) (531,367) (355,455) (271,189)
-- (2,509) (3,088) (1,109) --
-- (709) (92) (45) --
-- (7,589) (33,880) -- --
10,855,398 10,518,370 10,853,543 10,532,695 10,883,917
416,363 246,538 230,877 100,785 --
12,436 50,709 10,006 7,500 --
46,377 363,141 1,352,800 -- --
- ----------- ----------- ----------- ---------- -----------
11,812,308 10,287,792 11,142,485 9,528,622 10,883,917
13,000 13,000 13,000 13,000 13,000
- ----------- ----------- ----------- ---------- -----------
$11,825,308 $10,300,792 $11,155,485 $9,541,622 $10,896,917
=========== =========== =========== ========== ===========
($10,033) -- -- ($1,630) --
-- $15,024 $772 -- --
</TABLE>
integral part of the financial statements.
57
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.74 $ 10.00 $ 9.49 $ 10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) 0.09 0.05 0.04 0.01
Net realized and
unrealized gain (loss)
on investments 1.71 (0.26) 1.64 (0.49)
------- -------- ------ --------
Total from investment
operations 1.80 (0.21) 1.68 (0.48)
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income (0.07) (0.05) (0.06) (0.03)
From net realized gains (0.25) -- (0.25) --
------- -------- ------ --------
Total distributions (0.32) (0.05) (0.31) (0.03)
------- -------- ------ --------
Net asset value, end of
period $ 11.22 $ 9.74 $10.86 $ 9.49
======= ======== ====== ========
Total Return** 19.13% (2.15%) 18.36% (4.83%)
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $13,297 $10,437 $1,308 $563
Net expenses to average
daily net assets 1.75% 1.75%* 2.40% 2.40%*
Net investment income
(loss) to average
daily net assets 0.88% 0.49%* 0.23% (.14%)*
Portfolio turnover rate 49% 39% 49% 39%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.09% 2.87%* 2.74% 3.53%*
</TABLE>
LINCOLN ENTERPRISE PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.20 $ 10.00 $ 9.81 $ 10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) (0.08) (0.08) (0.12) (0.04)
Net realized and
unrealized gain (loss)
on investments 2.16 (0.71) 2.27 (0.15)
------- -------- ------ --------
Total from investment
operations 2.08 (0.79) 2.15 (0.19)
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income -- (0.01) -- --
From net realized gains -- -- -- --
------- -------- ------ --------
Total distributions 0.00 (0.01) 0.00 0.00
------- -------- ------ --------
Net asset value, end of
period $ 11.28 $ 9.20 $11.96 $ 9.81
======= ======== ====== ========
Total Return** 22.72% (7.91%) 21.92% (1.91%)
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $14,508 $10,579 $1,811 $761
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets (0.83%) (1.01%)* (1.50%) (1.53%)*
Portfolio turnover rate 106% 120% 106% 120%
Commencement of
operations 12/03/93 04/14/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.42% 3.10%* 3.07% 3.76%*
</TABLE>
- -------
* Annualized.
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
- ---------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
- ---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$ 9.96 $ 10.00 $ 9.74 $ 10.42
------ -------- ------ --------
0.04 0.00 0.12 0.05
1.72 (0.02) 1.71 (0.66)
------ -------- ------ --------
1.76 (0.02) 1.83 (0.61)
------ -------- ------ --------
(0.05) (0.02) (0.11) (0.07)
(0.25) -- (0.25) --
------ -------- ------ --------
(0.30) (0.02) (0.36) (0.07)
------ -------- ------ --------
$11.42 $ 9.96 $11.21 $ 9.74
====== ======== ====== ========
18.37% (0.22%) 19.52% (5.93%)
$73 $24 $6,706 $2,620
2.40% 2.40%* 1.40% 1.40%*
0.23% (.08%)* 1.23% 0.91%*
49% 39% 49% 39%
05/11/94 02/03/94
2.74% 3.52%* 1.74% 2.52%*
<CAPTION>
CLASS C CLASS D
- ---------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
- ---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.02 $ 10.00 $ 9.23 $ 10.44
------ -------- ------ --------
(0.15) (0.05) (0.02) (0.02)
2.34 0.07 2.09 (1.19)
------ -------- ------ --------
2.19 0.02 2.07 (1.21)
------ -------- ------ --------
-- -- -- --
-- -- -- --
------ -------- ------ --------
0.00 0.00 0.00 0.00
------ -------- ------ --------
$12.21 $ 10.02 $11.30 $ 9.23
====== ======== ====== ========
21.86% 0.23% 22.43% (11.61%)
$ 58 $ 37 $3,666 $ 234
2.50% 2.50%* 1.53% 1.50%*
(1.49%) (1.53%)* (0.60%) (.63%)*
106% 120% 106% 120%
05/10/94 02/03/94
3.07% 3.75%* 2.07% 2.75%*
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN U.S. GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.21 $10.00 $10.19 $10.00
------- -------- ------- --------
Income from investment
operations:
Net investment income
(loss) (0.09) (0.04) (0.14) (0.03)
Net realized and
unrealized gain (loss)
on investments 2.31 0.26 2.28 0.22
------- -------- ------- --------
Total from investment
operations 2.22 0.22 2.14 0.19
------- -------- ------- --------
Less distributions to
shareholders:
From net investment
income -- (0.01) -- --
From net realized gains -- -- -- --
------- -------- ------- --------
Total distributions 0.00 (0.01) 0.00 0.00
------- -------- ------- --------
Net asset value, end of
period $12.43 $10.21 $12.33 $10.19
======= ======== ======= ========
Total Return** 21.74% 2.18% 21.00% 1.90%
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $13,574 $10,669 $567 $204
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets (0.88%) (0.51%)* (1.57%) (1.26%)*
Portfolio turnover rate 58% 66% 58% 66%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.18% 2.94%* 2.83% 3.60%*
</TABLE>
LINCOLN WORLD GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.00 $10.00 $10.40 $10.00
------- -------- ------- --------
Income from investment
operations:
Net investment income
(loss) 0.01 0.02 (0.02) --
Net realized and
unrealized gain (loss)
on investments 0.40 1.01 0.35 0.43
------- -------- ------- --------
Total from investment
operations 0.41 1.03 0.33 0.43
------- -------- ------- --------
Less distributions to
shareholders:
From net investment
income (0.01) (0.03) (0.02) (0.03)
From net realized gains -- -- -- --
------- -------- ------- --------
Total distributions (0.01) (0.03) (0.02) (0.03)
------- -------- ------- --------
Net asset value, end of
period $11.40 $11.00 $10.71 $10.40
======= ======== ======= ========
Total Return** 3.81% 10.25% 3.19% 4.28%
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $13,018 $11,721 $1,183 $523
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets 0.00% 0.25%* (0.57%) (0.37%)*
Portfolio turnover rate 9% 6% 9% 6%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.96% 3.56%* 3.61% 4.22%*
</TABLE>
* Annualized
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.62 $10.00 $10.23 $10.52
------- -------- ------- --------
(0.10) (0.03) (0.05) (0.01)
2.33 0.65 2.32 (0.28)
------- -------- ------- --------
2.23 0.62 2.27 (0.29)
------- -------- ------- --------
-- -- -- --
-- -- -- --
------- -------- ------- --------
0.00 0.00 0.00 0.00
------- -------- ------- --------
$12.85 $10.62 $12.50 $10.23
======= ======== ======= ========
21.00% 6.17% 22.19% (2.78%)
$27 $5 $4,819 $1,630
2.50% 2.50%* 1.50% 1.50%*
(1.61%) (1.09%)* (0.59%) (0.27%)*
58% 66% 58% 66%
05/23/94 02/03/94
2.82% 3.54%* 1.83% 2.60%*
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.43 $10.00 $11.02 $10.50
------- -------- ------- --------
(0.06) 0.01 0.04 0.04
0.39 0.44 0.41 0.52
------- -------- ------- --------
0.33 0.45 0.45 0.56
------- -------- ------- --------
(0.03) (0.02) (0.03) (0.04)
-- -- -- --
------- -------- ------- --------
(0.03) (0.02) (0.03) (0.04)
------- -------- ------- --------
$10.73 $10.43 $11.44 $11.02
======= ======== ======= ========
3.16% 4.45% 4.22% 5.26%
$43 $38 $161 $63
2.50% 2.50%* 1.50% 1.50%*
(0.62%) 0.16%* 0.40% 0.76%*
9% 6% 9% 6%
05/10/94 02/03/94
3.61% 4.23%* 2.61% 3.21% *
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN NEW PACIFIC PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.44 $10.00 $10.86 $10.00
-------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.02) (0.10) (0.03)
Net realized and
unrealized gain (loss)
on investments (1.39) 0.47 (1.46) 0.89
-------- -------- -------- --------
Total from investment
operations (1.44) 0.45 (1.56) 0.86
-------- -------- -------- --------
Less distributions to
shareholders:
From net investment
income -- (0.01) -- --
From net realized gains (0.29) -- (0.29) --
-------- -------- -------- --------
Total distributions (0.29) (0.01) (0.29) 0.00
-------- -------- -------- --------
Net asset value, end of
period $8.71 $10.44 $9.01 $10.86
======== ======== ======== ========
Total Return** (13.99%) 4.53% (14.56%) 8.58%
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $10,353 $11,333 $573 $431
Net expenses to average
daily net assets 1.85% 1.85%* 2.50% 2.50%*
Net investment income
(loss) to average
daily net assets (0.60%) (0.21%)* (1.20%) (0.88%)*
Portfolio turnover rate 163% 104% 163% 104%
Commencement of
operations 12/03/93 03/29/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 3.73% 3.66%* 4.38% 4.32%*
</TABLE>
LINCOLN GOVERNMENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.15 $10.00 $9.78 $10.00
-------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss) 0.57 0.38 0.57 0.12
Net realized and
unrealized gain (loss)
on investments 0.65 (0.86) 0.65 (0.23)
-------- -------- -------- --------
Total from investment
operations 1.22 (0.48) 1.22 (0.11)
-------- -------- -------- --------
Less distributions to
shareholders:
From net investment
income (0.57) (0.37) (0.75) (0.11)
From net realized gains -- -- -- --
-------- -------- -------- --------
Total distributions (0.57) (0.37) (0.75) (0.11)
-------- -------- -------- --------
Net asset value, end of
period $9.80 $9.15 $10.25 $9.78
======== ======== ======== ========
Total Return** 13.72% (4.93%) 13.09% (1.11%)
Ratios / Supplemental
Data:
Net assets, end of
period (000's) $11,062 $9,658 $299 $239
Net expenses to average
daily net assets 1.25% 1.25%* 1.90% 1.90%*
Net investment income
(loss) to average
daily net assets 6.07% 4.38%* 5.43% 4.87%*
Portfolio turnover rate 227% 366% 227% 366%
Commencement of
operations 12/03/93 07/27/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.06% 2.58%* 2.71% 3.22%*
</TABLE>
* Annualized
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$10.66 $10.00 $10.48 $11.14
-------- -------- -------- --------
(0.08) (0.02) (0.01) 0.01
(1.46) 0.68 (1.41) (0.67)
-------- -------- -------- --------
(1.54) 0.66 (1.42) (0.66)
-------- -------- -------- --------
-- -- -- --
(0.29) -- (0.29) --
-------- -------- -------- --------
(0.29) 0.00 (0.29) 0.00
-------- -------- -------- --------
$8.83 $10.66 $8.77 $10.48
======== ======== ======== ========
(14.57%) 6.55% (13.65%) (5.98%)
$17 $12 $62 $47
2.50% 2.50%* 1.50% 1.50%*
(1.02%) (0.83%)* (0.16%) 0.23%*
163% 104% 163% 104%
07/07/94 02/03/94
4.38% 4.31%* 3.38% 3.31%*
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$9.79 $10.00 $9.15 $10.00
-------- -------- -------- --------
0.63 0.15 0.69 0.33
0.47 (0.22) 0.54 (0.85)
-------- -------- -------- --------
1.10 (0.07) 1.23 (0.52)
-------- -------- -------- --------
(0.51) (0.14) (0.78) (0.33)
-- -- -- --
-------- -------- -------- --------
(0.51) (0.14) (0.78) (0.33)
-------- -------- -------- --------
$10.38 $9.79 $9.60 $9.15
======== ======== ======== ========
11.59% (0.72%) 14.15% (5.17%)
$15 $49 $979 $353
1.85% 1.90%* 0.90% 0.90%*
4.73% 4.71%* 6.39% 5.57%*
227% 366% 227% 366%
07/07/94 02/03/94
2.70% 3.22%* 1.71% 2.23%*
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LINCOLN CORPORATE INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $8.80 $10.00 $9.73 $10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) 0.61 0.51 0.66 0.29
Net realized and
unrealized gain (loss)
on investments 0.91 (1.20) 0.91 (0.28)
------- -------- ------ --------
Total from investment
operations 1.52 (0.69) 1.57 0.01
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income (0.56) (0.51) (0.85) (0.28)
From net realized gains -- -- -- --
------- -------- ------ --------
Total distributions (0.56) (0.51) (0.85) (0.28)
------- -------- ------ --------
Net asset value, end of
period $9.76 $8.80 $10.45 $9.73
======= ======== ====== ========
Total Return** 17.71% (7.06%) 17.05% 0.11%
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $11,518 $9,620 $362 $222
Net expenses to average
daily net assets 1.25% 1.25%* 1.90% 1.90%*
Net investment income
(loss) to average
daily net assets 6.64% 6.04%* 5.97% 5.94%*
Portfolio turnover rate 119% 185% 119% 185%
Commencement of
operations 12/03/93 05/11/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 1.87% 2.55%* 2.52% 3.21%*
</TABLE>
LINCOLN TAX-FREE INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $8.93 $10.00 $9.67 $10.00
------- -------- ------ --------
Income from investment
operations:
Net investment income
(loss) 0.40 0.34 0.43 0.16
Net realized and
unrealized gain (loss)
on investments 0.89 (1.06) 0.88 (0.33)
------- -------- ------ --------
Total from investment
operations 1.29 (0.72) 1.31 (0.17)
------- -------- ------ --------
Less distributions to
shareholders:
From net investment
income (0.40) (0.35) (0.56) (0.16)
From net realized gains -- -- -- --
------- -------- ------ --------
Total distributions (0.40) (0.35) (0.56) (0.16)
------- -------- ------ --------
Net asset value, end of
period $9.82 $8.93 $10.42 $9.67
======= ======== ====== ========
Total Return** 14.76% (7.40%) 14.04% (1.73%)
Ratios/Supplemental
Data:
Net assets, end of
period (000's) $10,950 $9,438 $170 $95
Net expenses to average
daily net assets 1.10% 1.10%* 1.75% 1.75%*
Net investment income
(loss) to average
daily net assets 4.29% 3.98%* 3.63% 3.52%*
Portfolio turnover rate 3% 25% 3% 25%
Commencement of
operations 12/03/93 05/04/94
Without the waiver of
fees and reimbursement
of expenses by the
advisor, the ratio of
net expenses to
average net assets
would have been: 2.22% 2.66%* 2.87% 3.31%*
</TABLE>
* Annualized
** Total return calculations exclude front end sales load.
The accompanying notes are an
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994 OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C>
$9.80 $10.00 $8.84 $9.98
------ -------- ------ --------
0.18 0.08 0.73 0.41
1.33 (0.19) 0.78 (1.12)
------ -------- ------ --------
1.51 (0.11) 1.51 (0.71)
------ -------- ------ --------
(0.87) (0.09) (0.86) (0.43)
-- -- -- --
------ -------- ------ --------
(0.87) (0.09) (0.86) (0.43)
------ -------- ------ --------
$10.44 $9.80 $9.49 $8.84
====== ======== ====== ========
16.23% (1.00%) 18.27% (7.21%)
$5 $9 $3,704 $1,302
1.90% 1.85%* 0.90% 0.90%*
5.75% 5.91%* 6.95% 6.88%*
119% 185% 119% 185%
09/14/94 02/03/94
2.52% 3.17%* 1.52% 2.20%*
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------------------------------
FOR THE YEAR
ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ----------------------
<S> <C>
$9.64 $10.00
------ --------
0.13 0.05
1.10 (0.35)
------ --------
1.23 (0.30)
------ --------
(0.66) (0.06)
-- --
------ --------
(0.66) (0.06)
------ --------
$10.21 $9.64
====== ========
13.40% (3.04%)
$10 $7
1.75% 1.75%*
3.68% 3.50%*
3% 25%
09/14/94
2.87% 3.27%*
</TABLE>
integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
LINCOLN CASHFUND PORTFOLIO
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
REGULAR SHARES
---------------------------------------
FOR THE YEAR
ENDED FOR THE PERIOD
OCTOBER 31, 1995 ENDED OCTOBER 31, 1994
---------------- ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.03
Net realized and unrealized gain
(loss) on investments 0.00 0.00
------- --------
Total from investment operations 0.05 0.03
------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.05) (0.03)
From net realized gains -- --
------- --------
Total distributions (0.05) (0.03)
------- --------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
======= ========
TOTAL RETURN 4.94% 2.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $11,452 $10,897
Net expenses to average daily net
assets 1.10% 1.10%*
Net investment income (loss) to
average daily net assets 4.85% 2.90%*
Commencement of operations 12/03/93
Without the waiver of fees and
reimbursement of expenses by the
advisor, the ratio of net
expenses to average net assets
would have been: 1.51% 2.11%*
</TABLE>
* Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE A - SUMMARY OF ACCOUNTING POLICIES
The Lincoln Advisor Funds, Inc. (the "Fund"), is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. The Fund currently issues
nine separate series of shares (each referred to as a Portfolio or collectively
as the Portfolios) each representing a separate, diversified portfolio of
securities. The Portfolios are Lincoln Growth and Income Portfolio ("Lincoln
Growth and Income"), Lincoln Enterprise Portfolio ("Lincoln Enterprise"),
Lincoln U. S. Growth Portfolio ("Lincoln U. S. Growth"), Lincoln World Growth
Portfolio ("Lincoln World Growth"), Lincoln New Pacific Portfolio ("Lincoln New
Pacific"), Lincoln Government Income Portfolio ("Lincoln Government"), Lincoln
Corporate Income Portfolio ("Lincoln Corporate"), Lincoln Tax-Free Income
Portfolio ("Lincoln Tax-Free"), and Lincoln Cashfund Portfolio ("Lincoln
Cashfund"). Each of the Portfolios, except Lincoln Cashfund, currently offers
four classes of shares: Class A, Class B, Class C and Class D. Lincoln Cashfund
currently offers two classes of shares: Regular and Class B Exchange shares.
For ease of presentation within the financial statements, Lincoln Cashfund
Regular shares appear under the heading as Class A shares. As of the date of
this report, all classes of the Fund with the exception of Lincoln Tax-Free
Class D and Lincoln Cashfund Class B Exchange had commenced operations. The
following is a summary of the significant accounting policies followed by the
Portfolios in the preparation of their financial statements.
SECURITIES VALUATIONS
A security listed or traded on an exchange (including the NASDAQ National
Market System) is valued at its last sale price on the exchange where the
security is principally traded or, if lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices on
that day. Each security traded in the over-the-counter market is valued at the
mean between the last available bid and asked prices based upon quotes
furnished by market makers for such securities. Debt obligations that are
issued or guaranteed by the U.S. Government, its agencies, authorities and
instrumentalities are valued on the basis of prices provided by independent
pricing services. Prices provided by the pricing services may be determined
without exclusive reliance on quoted prices, and may reflect appropriate
factors such as yield, type of issue, coupon rate, maturity and general market
conditions. Securities for which market quotations are not readily available
are valued at fair market value as determined in good faith by or under the
supervision of the Fund's officers in a manner specifically authorized by the
Board of Directors of the Fund. The securities of Lincoln Cashfund are valued
at amortized cost. For all other funds, short-term obligations having 60 days
or less to maturity are valued at amortized cost. Amortized cost valuation
involves assuming a constant amortization of any discount or premium from
maturity, regardless of the effect of fluctuating interest rates on the market
value of the instrument.
REPURCHASE AGREEMENTS
Each Portfolio may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Portfolio takes possession of an
underlying debt obligation subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during the Portfolio's holding period.
This arrangement results in a fixed rate of return that is not subject to
market fluctuations during the Portfolio's holding period. The value of the
collateral is at least equal at all times to the total amount of the repurchase
obligation, including interest. In the event of counterparty default, the
Portfolio has the right to use the collateral to offset losses incurred. There
is potential loss to the Portfolio in the event the Portfolio is delayed or
prevented from exercising its rights to dispose of the collateral securities,
including the risk
68
<PAGE>
of a possible decline in the value of the underlying securities during the
period while the Portfolio seeks to assert its rights. The Portfolios'
investment advisor, acting under the supervision of the Board of Directors of
the Fund, reviews the value of the collateral and the creditworthiness of those
banks and dealers with which the Portfolio enters into repurchase agreements to
evaluate potential risks.
FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolios (other than Lincoln Tax-Free and Lincoln Cashfund) may enter
into forward foreign currency exchange contracts. Forward foreign currency
contracts are valued at the forward rate and are marked-to-market daily. The
change in market value is recorded by the Portfolio as an unrealized gain or
loss. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Portfolio's investment securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Portfolio
could be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts.
FOREIGN CURRENCY
The books and records of the Portfolios are maintained in United States (U.S.)
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expense items
are translated on the respective dates of such transactions. Unrealized gains
and losses which result from changes in foreign currency exchange rates have
been included in the unrealized appreciation/(depreciation) of investments. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Portfolio and the amount actually received. The
portion of foreign currency gains and losses related to fluctuation in exchange
rates between the initial purchase trade date and subsequent sale trade date is
included in realized gains and losses on investment securities sold.
OPTION TRANSACTIONS
The Portfolios may purchase and write (i.e., sell) put and call options on
securities and currencies. A call option gives the purchaser, in exchange for a
premium paid, the right for a specified period of time to purchase securities
or currencies subject to the option at a specified price (the exercise price or
strike price). When a Portfolio writes a call option, the Portfolio gives up
the potential for gain on the underlying securities in excess of the exercise
price of the option. A put option gives the purchaser, in return for a premium,
the right for a specified period of time to sell the securities or currencies
to the writer of the put at the specified exercise price. The writer of the put
option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the securities underlying the option at the exercise price.
A Portfolio might, therefore, be obligated to purchase the underlying
securities for more than their current market price.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for on a trade date basis. Realized gains
and losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of discounts and
premiums on investments, is earned from settlement date and is recorded on the
accrual basis. Dividend income and distributions to shareholders are recorded
on the ex-dividend date.
69
<PAGE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, for Lincoln Growth and Income,
Lincoln Enterprise, Lincoln U.S. Growth, Lincoln World Growth, and Lincoln New
Pacific Portfolios are declared and paid at least annually. Dividends from net
investment income for Lincoln Government, Lincoln Corporate, and Lincoln Tax-
Free Portfolios are declared and paid monthly. Dividends from net investment
income for the Lincoln Cashfund are declared daily and paid monthly. Net
realized capital gains, if any, for the Portfolios are declared and paid at
least annually. Additional distributions may be made at the discretion of the
Board of Directors in order to avoid the application of a 4% non-deductible
excise tax on certain amounts of undistributed ordinary income and capital
gains.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid-in capital. Undistributed net
investment income and accumulated net realized gain may include temporary book
and tax differences which will reverse in a subsequent period. For the year
ended December 31, 1994, the Funds reclassified the following amounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME (LOSS) GAIN (LOSS) CAPITAL
-------------- ------------ ---------
<S> <C> <C> <C>
Lincoln Enterprise....................... $127,474 $ -- ($127,474)
Lincoln U.S. Growth...................... 127,175 -- (127,175)
Lincoln World Growth..................... 52,566 (52,566) --
Lincoln New Pacific...................... 59,261 (80,392) 21,131
Lincoln Government....................... (513) 513 --
</TABLE>
Distributions in excess of tax basis earnings and profits will be reported in
the Fund's financial statements as a return of capital. Furthermore,
differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Per share net investment income or loss does not reflect current period
reclassification of permanent differences between book and tax basis net
investment income or loss.
FEDERAL INCOME TAXES
Each Portfolio intends to qualify as a regulated investment company, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing substantially all of its
earnings to shareholders. Therefore, no Federal income tax provision is
required. Distributions in excess of tax basis earnings and profits will be
reported in the Fund's financial statements as a return of capital.
Furthermore, differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
EXPENSES
Operating expenses directly attributable to a class of shares are charged to
that class' operations. Expenses of the Fund not directly attributable to the
operations of any class of shares or Portfolio are prorated among the classes
and Portfolios, respectively, to which the expense relates based on the
relative net assets of such class or Portfolio.
70
<PAGE>
NOTE B - INVESTMENTS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) for the period from November 1, 1994 to October 31, 1995
were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Lincoln Growth and Income.................... $13,387,883 $ 7,793,015
Lincoln Enterprise........................... 20,427,323 14,543,631
Lincoln U.S. Growth.......................... 12,384,988 8,544,836
Lincoln World Growth......................... 3,129,483 1,051,295
Lincoln New Pacific.......................... 17,889,177 16,654,473
Lincoln Government........................... 24,464,198* 23,661,659*
Lincoln Corporate............................ 18,131,686** 14,586,905**
Lincoln Tax-Free............................. 897,847 300,000
</TABLE>
*U.S. Government Securities
**Includes $7,580,856 in purchases, and $9,158,861 in sales of U.S. Government
Securities
NOTE C - MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under an agreement between the Fund and Lincoln Investment Management, Inc.
("LIM" or the "Advisor") (formerly Lincoln National Investment Management
Company), the Advisor is responsible for the investment of each Portfolio's
assets, bearing the cost of research and statistical analysis as well as
ordinary office costs and salaries of officers and employees who provide
services to the Fund. In return for these services, LIM receives advisory fees
monthly based upon each Portfolio's average daily net assets at the following
annual rates:
<TABLE>
<S> <C>
Lincoln Growth and Income .80%
Lincoln Enterprise .80%
Lincoln U.S. Growth .70%
Lincoln World Growth 1.10%
Lincoln New Pacific 1.10%
Lincoln Government .30%
Lincoln Corporate .30%
Lincoln Tax-Free .30%
Lincoln Cashfund .25%
</TABLE>
Pursuant to separate agreements with LIM, Lincoln Growth and Income, Lincoln
Enterprise, Lincoln U.S. Growth, Lincoln World Growth and Lincoln New Pacific
Portfolios have sub-advisors who participate in the management of its
respective Portfolio's assets. The sub-advisors are each responsible for the
day-to-day investment management of the Portfolio under the direct supervision
of LIM. Lynch & Mayer, Inc., an affiliate of LIM, serves as the sub-advisor to
the Lincoln Enterprise Portfolio and earned sub-advisory fees of $72,723 for
the period ended October 31, 1995. None of the other current sub-advisors are
affiliated with the Advisor. The sub-advisors' fees are paid by the advisor;
the Portfolios do not pay any fees directly to the sub-advisors.
Securities regulations of various states in which the Portfolios have
shareholders provide that, if expenses borne by the Portfolio in any year
(including the advisory fee but excluding interest, taxes, brokerage fees and
where permitted, extraordinary expenses) exceed certain limitations, the
Advisor must reimburse the Portfolio for any such excess at least annually.
These expense limitations may be raised or lowered from time to time. The Fund
71
<PAGE>
believes the most restrictive expense limitation of state securities
commissioners is 2.5% of each Portfolio's average daily net assets up to
$30,000,000; 2% of the next $70,000,000 and 1.5% of average daily net assets in
excess of $100,000,000 during the applicable year. During any year, the Advisor
will be bound by the most stringent applicable requirements of any state.
Delaware Distributors L.P., ("Delaware"), an affiliate of LIM, has served as
the Fund's distributor of Portfolio shares since September 22, 1995. Prior to
September 22, 1995 LNC Equity Sales Corporation, an affiliate of LIM, served as
the Fund's distributor. The distributor is paid an annual service fee with
respect to Class A (excluding Lincoln Cashfund "Regular" shares), Class B
(including Lincoln Cashfund "Class B Exchange" shares) and Class C shares of
the Portfolios at the rate of .25% of the value of the average daily net assets
of the respective class of each Portfolio. Delaware is also paid an annual
distribution fee by Class A (excluding Lincoln Cashfund "Regular" shares),
Class B (including Lincoln Cashfund "Class B Exchange" shares) and Class C
shares at the rate of .10%, .75% and .75%, respectively, of the value of
average daily net assets attributable to those classes of shares. The fees are
authorized pursuant to separate service and distribution plans for each of the
classes of shares (the "Plans") adopted by the Portfolios pursuant to Rule 12b-
1 under the Investment Company Act and are used by Delaware to cover expenses
primarily intended to result in the sale of those shares of the Portfolios.
Delaware Service Company, Inc. has also served as the Fund's transfer and
shareholder services agent since September 22, 1995. For the year ended October
31, 1995 Delaware received $24,222 in fees for transfer and shareholder
services provided. Prior to September 22, 1995 Fundamental Shareholder Services
Inc. served as the Fund's transfer and shareholder services agent.
Certain officers and directors of the Fund are also officers or directors of
the Advisor. The compensation of unaffiliated directors of the Fund is borne by
the Fund.
Initial investments into the Fund were made by American States Insurance
Company ("ASI") and Lincoln National Life Insurance Company ("LNLIC"), both
affiliates of the Advisor. As of October 31, 1995, ASI held approximately 57%,
66%, and 96% of the outstanding shares of Lincoln Enterprise, Lincoln U.S.
Growth, and Lincoln Tax-Free, respectively. LNLIC held approximately 54%, 79%,
82%, 88%, 70%, and 94% of the outstanding shares of Lincoln Growth and Income,
Lincoln World Growth, Lincoln New Pacific, Lincoln Government, Lincoln
Corporate, and Lincoln Cashfund, respectively.
NOTE D - INCOME TAXES
At October 31, 1995, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there is an excess of tax
cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
------------ ------------
<S> <C> <C>
Lincoln Growth and Income $2,530,884 $ 675,158
Lincoln Enterprise 3,621,020 487,321
Lincoln U.S. Growth 5,183,478 146,408
Lincoln World Growth 2,945,463 1,163,565
Lincoln New Pacific 487,688 1,526,981
Lincoln Government 177,602 27,249
Lincoln Corporate 625,956 68,619
Lincoln Tax-Free 43,944 177,147
</TABLE>
72
<PAGE>
At October 31, 1995, the following funds have available, for Federal income tax
purposes, unused capital losses:
<TABLE>
<CAPTION>
AMOUNT EXPIRATION DATE
-------- ----------------
<S> <C> <C>
Lincoln Enterprise............................. $663,935 October 31, 2002
--------------------------------------------------------------------------
Lincoln U.S. Growth............................ 762,603 October 31, 2002
479,792 October 31, 2003
--------------------------------------------------------------------------
Lincoln World Growth........................... 117,153 October 31, 2002
109,076 October 31, 2003
--------------------------------------------------------------------------
Lincoln New Pacific............................ 432,949 October 31, 2003
Lincoln Government............................. 286,991 October 31, 2002
Lincoln Corporate.............................. 538,910 October 31, 2002
</TABLE>
NOTE E - CAPITAL STOCK
The Portfolios (other than the Lincoln Cashfund) issue the following classes of
shares: Class A shares are sold to investors choosing the initial sales charge
alternative, Class B shares are sold to investors choosing the contingent
deferred sales charge ("CDSC") alternative, Class C shares are sold to
investors choosing the annual distribution fee alternative and Class D shares
are sold to investors choosing the no sales charge alternative and are
available to insurance companies (including both general and separate
accounts), affiliates of insurance companies and investment companies
registered under the Investment Company Act only. The Lincoln Cashfund offers
two classes of shares: Regular Shares and Class B Exchange Shares. The Regular
Shares are offered and sold at the net asset value ($1.00) without a sales
charge and without any service or distribution fees. The Class B Exchange
Shares, which are issued only upon the exchange of shares of Class B of any
other Portfolio, are subject to the applicable CDSC, if any, upon redemption
and are charged distribution and service fees totaling 1% of the net asset
value of the shares. As of October 31, 1995, 810,000,000 shares of $.01 par
value Common Stock, issued in separate series, were authorized. Because the
Lincoln Cashfund has sold shares, issued shares as reinvestment of dividends
and redeemed shares at a constant net asset value of $1.00 per share, the
number of shares represented by such sales, reinvestments and redemptions is
the same as the amounts shown below for such transactions. Changes in shares
outstanding for each Portfolio for the periods indicated are presented on the
following pages:
73
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1995
----------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------------------- ----------------- --------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- -------- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LINCOLN GROWTH AND
INCOME PORTFOLIO
Sold................... 86,373 $870,351 65,262 $643,559 4,279 $46,101 404,257 $4,170,140
Issued as reinvestment
of dividends.......... 37,192 348,324 2,566 22,782 90 843 14,252 137,112
Redeemed............... (10,399) (110,067) (6,830) (65,613) (379) (3,940) (89,601) (935,726)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase........... 113,166 1,108,608 60,998 600,728 3,990 43,004 328,908 3,371,526
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN ENTERPRISE
PORTFOLIO
Sold................... 165,155 $1,624,685 81,179 $854,499 1,660 $17,046 308,608 $3,416,787
Issued as reinvestment
of dividends.......... -- -- -- -- -- -- -- --
Redeemed............... (28,541) (292,832) (7,295) (73,731) (637) (6,965) (9,614) (98,099)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase........... 136,614 1,331,853 73,884 780,768 1,023 10,081 298,994 3,318,688
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN U.S. GROWTH
PORTFOLIO
Sold................... 52,639 $551,988 26,729 $276,925 1,865 $21,207 307,706 $3,303,266
Issued as reinvestment
of dividends.......... -- -- -- -- -- -- -- --
Redeemed............... (5,890) (63,231) (829) (8,494) (232) (2,435) (81,517) (892,235)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase........... 46,749 488,757 25,900 268,431 1,633 18,772 226,189 2,411,031
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN WORLD GROWTH
PORTFOLIO
Sold................... 87,908 $933,753 66,883 $672,282 1,735 $17,206 10,800 $ 116,640
Issued as reinvestment
of dividends.......... 895 9,471 123 1,192 11 104 25 262
Redeemed............... (13,283) (143,637) (6,937) (67,664) (1,466) (14,973) (2,532) (27,631)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase........... 75,520 799,587 60,069 605,810 280 2,337 8,293 89,271
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN NEW PACIFIC
PORTFOLIO
Sold................... 88,098 $793,387 36,512 $345,285 1,031 $ 8,907 2,883 $ 25,647
Issued as reinvestment
of dividends.......... 33,992 315,456 1,505 14,514 37 342 176 1,631
Redeemed............... (18,925) (167,228) (14,072) (127,921) (271) (2,436) (494) (4,175)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase........... 103,165 941,615 23,945 231,878 797 6,813 2,565 23,103
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN GOVERNMENT
INCOME PORTFOLIO
Sold................... 13,148 $124,019 3,642 $36,391 1,394 $14,219 75,898 $ 711,902
Issued as reinvestment
of dividends.......... 65,220 617,698 1,698 16,613 22 223 5,547 51,430
Redeemed............... (5,486) (52,127) (634) (6,424) (5,071) (49,646) (18,066) (169,910)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase/decrease.. 72,882 689,590 4,706 46,580 (3,655) (35,204) 63,379 593,422
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN CORPORATE INCOME
PORTFOLIO
Sold................... 25,773 $236,627 10,034 $99,507 445 $ 4,556 307,225 $2,785,489
Issued as reinvestment
of dividends.......... 67,335 628,474 2,352 22,994 6 61 26,256 236,120
Redeemed............... (6,735) (62,774) (677) (6,742) (1,004) (9,951) (90,608) (827,213)
------- ---------- ------- -------- ------ ------- ------- ----------
Net increase/decrease.. 86,373 802,327 11,709 115,759 (553) (5,334) 242,873 2,194,396
======= ========== ======= ======== ====== ======= ======= ==========
LINCOLN TAX-FREE INCOME
PORTFOLIO
Sold................... 15,484 $145,064 6,324 $63,931 2,070 $20,000
Issued as reinvestment
of dividends.......... 46,039 433,850 522 5,140 70 671
Redeemed............... (3,463) (33,162) (438) (4,586) (1,873) (18,399)
------- ---------- ------- -------- ------ -------
Net increase........... 58,060 545,752 6,408 64,485 267 2,272
======= ========== ======= ======== ====== =======
LINCOLN CASHFUND
PORTFOLIO
Sold................... $883,280
Issued as reinvestment
of dividends.......... 540,832
Redeemed............... (869,006)
----------
Net increase........... 555,106
==========
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1994
- ----------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
- ---------------------- ---------------- -------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------- ----------- ------ -------- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1,068,102 $10,669,420 59,266 $566,826 2,412 $24,176 270,752 $2,676,462
5,349 52,433 94 896 4 44 1,407 13,721
(1,422) (14,011) -- -- -- -- (3,119) (30,943)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,072,029 $10,707,842 59,360 $567,722 2,416 $24,220 269,040 $2,659,240
========= =========== ====== ======== ===== ======= ======= ==========
1,158,125 $11,443,035 77,581 $714,807 3,744 $36,372 25,578 $ 233,559
499 5,017 -- -- -- -- -- --
(9,348) (83,330) -- -- -- -- (187) (1,676)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,149,276 $11,364,722 77,581 $714,807 3,744 $36,372 25,391 $ 231,883
========= =========== ====== ======== ===== ======= ======= ==========
1,047,871 $10,458,026 20,092 $193,916 480 $ 4,860 162,440 $1,577,056
1,000 10,026 -- -- -- -- -- --
(3,599) (35,620) -- -- -- -- (2,990) (29,533)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,045,272 $10,432,432 20,092 $193,916 480 $ 4,860 159,450 $1,547,523
========= =========== ====== ======== ===== ======= ======= ==========
1,065,506 $10,685,448 50,281 $517,626 3,717 $38,371 5,805 $ 62,275
2,895 31,015 62 644 2 16 14 154
(2,413) (26,075) (3) (34) -- -- (40) (440)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,065,988 $10,690,388 50,340 $518,236 3,719 $38,387 5,779 $ 61,989
========= =========== ====== ======== ===== ======= ======= ==========
1,088,400 $10,888,194 39,703 $416,363 1,183 $12,436 4,593 $ 46,707
928 10,031 -- -- -- -- -- --
(4,038) (42,827) -- -- -- -- (32) (330)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,085,290 $10,855,398 39,703 $416,363 1,183 $12,436 4,561 $ 46,377
========= =========== ====== ======== ===== ======= ======= ==========
1,016,509 $10,145,150 24,286 $244,391 5,000 $50,000 38,052 $ 358,123
39,719 375,220 217 2,147 71 709 815 7,589
(217) (2,000) -- -- -- -- (275) (2,571)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,056,011 $10,518,370 24,503 $246,538 5,071 $50,709 38,592 $ 363,141
========= =========== ====== ======== ===== ======= ======= ==========
1,037,779 $10,337,282 22,598 $227,797 1,001 $10,006 144,764 $1,328,878
57,416 529,917 312 3,080 -- -- 3,662 33,880
(1,481) (13,656) -- -- -- -- (1,100) (9,958)
- --------- ----------- ------ -------- ----- ------- ------- ----------
1,093,714 $10,853,543 22,910 $230,877 1,001 $10,006 147,326 $1,352,800
========= =========== ====== ======== ===== ======= ======= ==========
1,020,228 $10,183,405 9,799 $ 99,784 750 $ 7,500
37,748 353,653 101 1,001 -- --
(462) (4,363) -- -- -- --
- --------- ----------- ------ -------- ----- -------
1,057,514 $10,532,695 9,900 $100,785 750 $ 7,500
========= =========== ====== ======== ===== =======
$10,732,901
272,486
(108,470)
-----------
$10,896,917
===========
</TABLE>
75
<PAGE>
NOTE F - ORGANIZATION COSTS
Each Portfolio bore the costs incurred in connection with its organization. All
such costs are being amortized on the straight-line method over a period of
five years from the commencement of operations of each Portfolio. In the event
that any of the initial shares of the Portfolio are redeemed during such
amortization period, the Portfolio will be reimbursed for any unamortized costs
in the same proportion as the number of shares redeemed bears to the number of
initial shares outstanding at the time of the redemption.
NOTE G - FINANCIAL INSTRUMENTS
The Funds regularly trade financial instruments with off-balance sheet risk in
the normal course of their investing activities to assist in managing exposure
to market risks, such as interest rates and foreign currency exchange rates.
These financial instruments include forward currency contracts and futures
contracts.
The notional or contractual amounts of these instruments represent the
investments the Funds have in particular classes of financial instruments and
do not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at October 31, 1995 is as
follows:
Forward Currency Contracts:
Lincoln New Pacific
Sells
<TABLE>
<CAPTION>
Net Unrealized
Settlement Date Contracts to Deliver Currency In Exchange For Appreciation
- --------------- -------------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C>
11/06/95 111,100,000 Japanese Yen $1,100,000 $12,348
01/12/96 609,096 Malaysian Ringgit $ 240,000 712
-------
$13,060
=======
</TABLE>
NOTE H - FOREIGN SECURITIES
The Lincoln World Growth and Lincoln New Pacific Portfolios may invest
substantially all of their assets in foreign securities. Investing in
securities of foreign companies and foreign governments involves special risks
and considerations not typically associated with investing in U.S. companies
and the U.S. Government. These risks include revaluation of currencies and
future adverse political and economic developments. Moreover, securities of
many foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of comparable
U.S. companies and the U.S. Government.
NOTE I - FEDERAL TAX INFORMATION (UNAUDITED)
The Lincoln Tax-Free Fund has designated 95.4% of dividends paid from net
investment income during the fiscal year as tax exempt for Federal income tax
purposes.
The Form 1099 you receive in January 1996 will show the tax status of all
distributions paid to your account in calendar 1995.
Foreign taxes paid by Lincoln New Pacific Fund to foreign countries amounted to
$68,091.
76
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Lincoln Advisor Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of the
Lincoln Advisor Funds, Inc. (the Fund), consisting of Lincoln Growth and Income
Portfolio, Lincoln Enterprise Portfolio, Lincoln U.S. Growth Portfolio, Lincoln
World Growth Portfolio, Lincoln New Pacific Portfolio, Lincoln Government
Income Portfolio, Lincoln Corporate Income Portfolio, Lincoln Tax-Free Income
Portfolio, and Lincoln Cashfund Portfolio (the "Portfolios"), including the
schedules of portfolio of investments, as of October 31, 1995, and the related
statement of operations, the statement of changes in net assets and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolios of the Fund as of October 31, 1995, the results of their operations,
the changes in their net assets and the financial highlights for the periods
indicated therein, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 12, 1995
77
<PAGE>
LINCOLN ADVISOR FUNDS
C/O DELAWARE SERVICES COMPANY, INC., TRANSFER AGENT
1818 MARKET STREET
PHILADELPHIA, PA 19103
FORM 27955A 12/94
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
PART C
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a)(1) Financial Statements included in the Prospectus constituting
Part A of this Registration Statement:
Financial Highlights for the year ended October 31, 1995 and for
the period ended October 31, 1994.
(2) Financial statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:
Portfolios of Investments at October 31, 1995.
Statements of Assets and Liabilities at October 31, 1995.
Statement of Operations at October 31, 1995.
Statement of Changes in Net Assets for the year ended
October 31, 1995 and for the period December 3, 1993
(Commencement of Operations) to October 31, 1994.
Financial Highlights for the year ended October 31, 1995
and for the period ended October 31, 1994.
Notes to the Financial Statements.
Report of Independent Accountants.
(b) Exhibits
1(a) Articles of Incorporation of the Registrant. Incorporated by
reference to Exhibit No. 1 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-67490) filed on
September 27, 1993.
1(b) Articles of Amendment, as filed with the Department of Assessments
and Taxation of Maryland on November 29, 1993. Incorporated by
reference to Exhibit No. 1(b) to Pre-Effective Amendment No. 2 to
the Registration Statement on Form N-1A (File No. 33-67490) filed
on November 29, 1993.
2(a) Bylaws of the Registrant. Incorporated by reference to Exhibit No.
2(a) to Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1A (File No. 33-67490) filed on September 27, 1993.
2(b) Amended Bylaws. Incorporated by reference to Exhibit No. 1(b) to
Pre-Effective Amendment No. 2 to the Registration Statement on Form
N-1A (File No. 33-67490) filed on November 29, 1993.
3 Not Applicable.
4 Not Applicable.
- ----------
* Filed herewith.
C-1
<PAGE>
5(a) Form of Investment Advisory Agreements between the Registrant and
Lincoln National Investment Management Company (now known as
Lincoln Investment Management, Inc.). Incorporated by reference to
Exhibit No. 5(a) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-67490) filed on
September 27, 1993.
5(b) Form of Sub-Advisory Agreements. Incorporated by reference to
Exhibit No. 1(b) to Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-67490) filed on
November 29, 1993.
6 Distribution Agreement between the Registrant and Delaware
Distributors, L.P. dated September 25, 1995*
7 Not Applicable.
8 Form of Custodian Agreement between the Registrant and Investors
Bank and Trust Company. Incorporated by reference to Exhibit No. 8
to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-67490) filed on September 27, 1993.
9(a) Form of Administration Agreement between the Registrant and
Investors Bank and Trust Company. Incorporated by reference to
Exhibit No. 9 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-67490) filed on September 27,
1993.
9(b) Transfer Agency and Service Agreement between the Registrant and
Delaware Service Company, Inc. dated September 25, 1995*
10 Opinion of Counsel. Incorporated by reference to Rule 24F-2 Notice
as filed on November 17, 1995 and Amended and Restated Rule 24F-2
Notice as filed on December 22, 1995.
11(a) Consent of Independent Accountants*
11(b) Powers of Attorney for Jon A. Boscia, Priscilla S. Brown, Richard
M. Burridge, Jorge Castro, Adela Cepeda, Roger J. Deshaies, Charles
G. Freund, Gary R. McPhail and Barbara Peck. Incorporated by
reference to Exhibit No. 11(b) to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A (File No. 33-67490) filed
on September 27, 1993.
11(c) Power of Attorney for Philip L. Holstein. Incorporated by reference
to Exhibit No. 11(c) to Post-Effective Amendment No. 1 to the
Registration Statement on form N-1A (File No. 33-67490) filed on
June 30, 1994.
11(d) Power of Attorney for H. Thomas McMeekin. Incorporated by reference
to Exhibit No. 11(d) to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-67490) filed on
November 25, 1994.
11(e) Powers of Attorney for David G. Humes and Steven R. Brody*
12 Not Applicable.
13 Not Applicable.
- ----------
* Filed herewith.
C-2
<PAGE>
14 Not Applicable.
15 Plan of Distribution pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated September 25, 1995*
16 Not Applicable.
27 Financial Data Schedules*
- ------------
*Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
- ---- --- -------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
- -------- -------------------------------
Shares of Common Stock as of December 29, 1995.
(1) (2)
Title of Class Number of Record Holders
Shares of Common Stock
Lincoln Growth and Income Portfolio (Class A) 865
Lincoln Growth and Income Portfolio (Class B) 205
Lincoln Growth and Income Portfolio (Class C) 34
Lincoln Growth and Income Portfolio (Class D) 1
Lincoln Enterprise Portfolio (Class A) 1256
Lincoln Enterprise Portfolio (Class B) 340
Lincoln Enterprise Portfolio (Class C) 28
Lincoln Enterprise Portfolio (Class D) 1
Lincoln U.S. Growth Portfolio (Class A) 528
Lincoln U.S. Growth Portfolio (Class B) 152
Lincoln U.S. Growth Portfolio (Class C) 18
Lincoln U.S. Growth Portfolio (Class D) 1
Lincoln World Growth Portfolio (Class A) 941
Lincoln World Growth Portfolio (Class B) 216
Lincoln World Growth Portfolio (Class C) 19
Lincoln World Growth Portfolio (Class D) 1
Lincoln New Pacific Portfolio (Class A) 705
Lincoln New Pacific Portfolio (Class B) 151
Lincoln New Pacific Portfolio (Class C) 13
Lincoln New Pacific Portfolio (Class D) 1
C-3
<PAGE>
Lincoln Government Income Portfolio (Class A) 90
Lincoln Government Income Portfolio (Class B) 22
C-4
<PAGE>
Lincoln Government Income Portfolio (Class C) 4
Lincoln Government Income Portfolio (Class D) 1
Lincoln Corporate Income Portfolio (Class A) 320
Lincoln Corporate Income Portfolio (Class B) 53
Lincoln Corporate Income Portfolio (Class C) 5
Lincoln Corporate Income Portfolio (Class D) 1
Lincoln Tax-Free Income Portfolio (Class A) 88
Lincoln Tax-Free Income Portfolio (Class B) 19
Lincoln Tax-Free Income Portfolio (Class C) 2
Lincoln Tax-Free Income Portfolio (Class D) 0
Lincoln Cashfund Portfolio (Class A) 151
Lincoln Cashfund Portfolio (Class B) 0
Item 27. Indemnification
- -------- ---------------
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the "Investment Company Act") and pursuant to Article VII of the Fund's Bylaws
(Exhibit 2 to the Registration Statement), officers, directors, employees and
agents of the Registrant will not be liable to the Registrant, any stockholder,
officer, director, employee, agent or other person for any action or failure to
act, except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 2-418 of Maryland General Corporation Law permits indemnification of
directors who acted in good faith and reasonably believed that the conduct was
in the best interests of the Registrant. As permitted by Section 17(i) of the
Investment Company Act, pursuant to Section of 10 each Distribution Agreement
(Exhibit 6 herein), the Distributor of the Registrant may be indemnified against
liabilities which it may incur, except liabilities arising from bad faith, gross
negligence, willful misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Investment Company Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant by
such director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Investment Company Act and will be governed by the
final adjudication of such issue.
The Registrant purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties.
The insurance policy also insures the Registrant against the cost of
indemnification payments to officers and directors under certain circumstances.
C-5
<PAGE>
Section 9 of the Investment Advisory Agreement (Exhibit 5(a) to the
Registration Statement) and Section 4 of the Sub -Advisory Agreement (Exhibit
5(b) to the Registration Statement) limit the liability of Lincoln Investment
Management, Inc., Beutel, Goodman Capital Management, Lynch & Mayer, Inc.,
Provident Investment Counsel (a wholly owned subsidiary of United Asset
Management Corporation), Walter Scott & Partners Limited and John Govett & Co.
Limited (a majority owned indirect subsidiary of the AIB Group of Companies), to
liabilities arising from willful misfeasance, bad faith or gross negligence in
the performance of their respective duties or from reckless disregard by them of
their respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Bylaws and its Distribution Agreement in a
manner consistent with Release No. 11330 of the Securities and Exchange
Commission under the Investment Company Act so long as the interpretations of
Section 17(h) and 17(i) of such Act remain in effect and are consistently
applied.
Item 28(a). Business and Other Connections of Investment Advisor
- ----------- ----------------------------------------------------
The Investment Advisor serves as investment advisor to the following
closed-end management investment companies:
Lincoln National Convertible Securities Fund, Inc.
Lincoln National Income Fund, Inc.
The Investment Advisor serves as investment advisor to the following
open-end management investment companies:
Lincoln Advisor Funds, Inc.
Lincoln National Aggressive Growth Fund, Inc.
Lincoln National Bond Fund, Inc.
Lincoln National Capital Appreciation Fund, Inc.
Lincoln National Equity-Income Fund, Inc.
Lincoln National Growth and Income Fund, Inc.
Lincoln National International Fund, Inc.
Lincoln National Managed Fund, Inc.
Lincoln National Money Market Fund, Inc.
Lincoln National Global Asset Allocation Fund, Inc.
Lincoln National Social Awareness Fund, Inc.
Lincoln National Special Opportunities Fund, Inc.
In addition to the persons and information set forth under
"Management" in the Prospectus and the Statement of Additional Information, the
names and other businesses, professions, vocations and employments (and the
business address thereof if different from that of the Investment Advisor at 200
East Berry Street, Fort Wayne, Indiana 46802) of a substantial nature during the
past two fiscal years of directors and officers of Lincoln Investment
Management, Inc. having such other businesses, professions, vocations or
employments, either for their own account or as directors, officers, employees,
partners or trustees are as follows:
<TABLE>
<CAPTION>
Principal Occupations and Positions and Offices with
Name Lincoln Investment Management, Inc.
- ---- -----------------------------------
<S> <C>
Janet C. Whitney Vice President and Treasurer, Lincoln National Corporation
Dennis A. Blume Senior Vice President, Treasurer and Director, Real Estate
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Steven R. Brody Senior Vice President and Assistant Treasurer; Vice President, The
Lincoln National Life Insurance Company
Ann L. Warner Senior Vice President
Lawrence T. Kissko Vice President
Joann E. Becker Vice President
David A. Berry Vice President
Anne E. Bookwalter Vice President
Phillip C. Byrde Vice President
Patrick R. Chasey Vice President
Garrett W. Cooper Vice President
David C. Fischer Vice President
Luc N. Girard Vice President
Donald P. Groover Vice President
William N. Holm, Jr. Vice President
John A. Kellogg Vice President
Jennifer C. Hom Vice President
Timothy H. Kilfoil Vice President
Walter M. Korinke Vice President
Lawrence M. Lee Vice President
Thomas A. McAvity, Jr. Vice President
Harold F. McElraft Vice President
Mary Beth Montgomery Vice President
John David Moore Vice President
Oliver H. G. Nichols Vice President
David C. Patch Vice President
Joseph T. Pusateri Vice President
Gregory E. Reed Vice President
Bill L. Sanders Vice President
Milton W. Shuey Vice President
Gerald M. Weiss Vice President
O. Douglas Worthington Vice President, Controller and Assistant Treasurer, The
Lincoln National Life Insurance Company
C. Suzanne Womack Assistant Vice President and Corporate Secretary; Vice
President, Secretary and Director, Lincoln National
Foundation, Inc.
Joseph J. Voors Regional Vice President
Harold L. Hughes Sales Vice President
</TABLE>
Item 28(b). Business and Other Connections Of Investment Sub-Advisor
- ----------- --------------------------------------------------------
The management committee members and officers of Beutel,
Goodman Capital Management are listed below. Unless otherwise indicated, the
address of each person is 5847 San Felipe, Suite 4500, Houston Texas, 77057.
<TABLE>
<CAPTION>
Positions and Offices with
Name Beutel, Goodman Capital Management
- ---- ----------------------------------
<S> <C>
Robert F. McFarland Chief Executive Officer and Management Committee Member
Richard J. Andrews President and Management Committee Member
Austin C. Beutel Vice President and Management Committee Member
J. Philip Ferguson Vice President and Management Committee Member
Owen R. McCreery Vice President and Management Committee Member
Stephen H. Pouns Vice President and Management Committee Member
Seymour Schulich Vice President and Management Committee Member
David A. Williams Vice President and Management Committee Member
Carl W. Dinger, III Vice President
Jennifer Snyder Secretary and Treasurer
</TABLE>
Item 28(c). Business and Other Connections of Investment Sub-Advisor
- ----------- --------------------------------------------------------
The directors and officers of Lynch & Mayer, Inc. are listed
below. Unless otherwise indicated, the address of each person is 520 Madison
Avenue, New York, New York 10022.
<TABLE>
<CAPTION>
Positions and Offices with
Name Lynch and Mayer, Inc.
- ---- ---------------------
<S> <C>
Dennis P. Lynch Chairman and Co-Chief Executive Officer
Eldon C. Mayer, Jr. Vice Chairman
Edward J. Petner President and Co-Chief Executive Officer
Item 28(d). Business and Other Connections of Investment Sub-Advisor
- ----------- --------------------------------------------------------
</TABLE>
The directors and officers of Provident Investment Counsel, a
wholly owned subsidiary of United Asset Management Corporation, are listed
below. Unless otherwise indicated, the address of each person is 300 North Lake
Avenue, Penthouse Suite, Pasadena, California 91101-4106.
<TABLE>
<CAPTION>
Positions and Offices with
Name Provident Investment Counsel
- ---- ----------------------------
<S> <C>
Robert Kommerstad Chairman and President
George E. Handtmann, III Managing Director
Larry D. Tashjian Managing Director
Thomas J. Condon Managing Director
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Jeffrey J. Miller Managing Director
Paula B. Blacher Vice President
</TABLE>
Item 28(e). Business and Other Connections of Investment Sub-Advisor
- ----------- --------------------------------------------------------
The directors and officers of Walter Scott & Partners Limited
are listed below. Unless otherwise indicated the address of each person is
Milburn Tower, Gogar, Edinburgh, Scotland EH12 9BS.
<TABLE>
<CAPTION>
Positions and Offices with
Name Walter Scott and Partners Limited
- ---- ---------------------------------
<S> <C>
Dr. Walter G. Scott Chairman and Managing Director
Dr. Kenneth J. Lyall Director and Pension Fund Manager
</TABLE>
Item 28(f). Business and Other Connections of Investment Sub-Advisor
- ----------- --------------------------------------------------------
The directors and officers of John Govett & Co. Limited, a
majority owned indirect subsidiary of the AIB Group of Companies as of December
29, 1995, are listed below. Unless otherwise indicated, the address of each
person is Shackleton House, 4 Battlebridge Lane, London, England SE1 2HR.
<TABLE>
<CAPTION>
Positions and Offices with
Name John Govett and Co. Limited
- ---- ---------------------------
<S> <C>
Andrew Barnett Director
Peter Cotgrove Director
Charles Fowler Joint Chairman
Peter Kysel Director
Caroline Lane Director
Brian Lee Managing Director Operations
Rachael Maunder Director
Peter Moffatt Director
Rosemary Morgan Director
Ian Morley Director
John Murray Director
Kevin Pakenham Joint Chairman and Chief Executive Officer
Peter Pejacsevich Director and Chief Investment Officer
Peter Robson Director
Gareth Watts Director
Steve Wood Director
Andrew Yates Director
</TABLE>
C-9
<PAGE>
Item 29. Principal Underwriter
- -------- ---------------------
(a) Delaware Distributors, L. P., currently acts as distributor for
the following funds:
Delaware Group Delaware Fund, Inc.
Delaware Group Trend Fund, Inc.
Delaware Group Decatur Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Value Fund, Inc.
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Government Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Delaware Group Cash Reserve, Inc.
Delaware Group Tax-Free Money Fund, Inc.
DMC Tax-Free Income Trust-Pennsylvania
Delaware Group Tax-Free Fund, Inc.
Delaware Group Pooled Trust, Inc.
Delaware Group Premium Fund, Inc.
Delaware Group Global & International Funds, Inc.
Lincoln Advisor Funds, Inc.
The directors and officers of Delaware Distributors, L.P. are listed
below. Unless otherwise indicated, the address of each person is 1818 Market
Street, Philadelphia, PA 19103.
<TABLE>
<CAPTION>
Positions and Positions and
(b) Name and Principal Offices with Offices with
Address Business Underwriter Registrant
---------------- ----------- ----------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner None
Delaware Investment
Counselors, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman None
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and None
Cief Administrative Officer
George M. Chamberlain, Jr. Senior Vice President/ None
Secretary
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Minette van Noppen Senior Vice President/ None
Retirement Services
Richard L. Flannery Managing Director/Corporate None
& Tax Affairs
Eric E. Miller Vice President/ None
Assistant Secretary
Richelle S. Macstro Vice President/ None
Assistant Secretary
John M. Zerr Vice President/ None
Assistant Secretary
Michael P. Bishof Vice President/Treasurer None
Joseph H. Hastings Vice President/ None
Corporate Controller
Steven T. Lampe Vice President/Taxation None
Lisa O. Brinkley Vice President/ None
Compliance
Rosemary E. Milner Vice President/Taxation None
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/ None
Client Services
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/
Retirement Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Thomas S. Butler Vice President/ None
DDI Administration
Stephen J. DeAngelis Vice President/Product None
Development
Susan T. Friestedt Vice President/Customer None
Service
Dianah J. Huntoon Vice President/Product None
Development
Jodie J. Johnson Vice President/ None
National Accounts
Ellen M. Krott Vice President/ None
Communications
Holly W. Reimel Vice President/ None
Telemarketing
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Richards Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/ None
Human Resources
</TABLE>
Item 30. Location of Accounts and Records
- ------- --------------------------------
(1) Lincoln Advisor Funds, Inc.
200 East Berry Street
Fort Wayne, Indiana 46802
(Articles of Incorporation and Bylaws)
(2) Lincoln Investment Management, Inc.
200 East Berry Street
Fort Wayne, Indiana 46802
(with respect to their services as investment advisor and sub-
advisor)
(3) Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
(with respect to their services as distributor)
C-10
<PAGE>
(4) Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(with respect to their services as administrator and custodian)
(5) Delaware Service Company, Inc.
1818 Market Street
' Philadelphia, PA 19103
(with respect to their services as shareholder services agent)
(6) Beutel, Goodman Capital Management
5847 San Felipe
Suite 4500
Houston, Texas 77057
(with respect to their services as sub-advisor)
(7) Lynch & Mayer, Inc.
520 Madison Avenue
New York, New York 10022
(with respect to their services as sub-advisor)
(8) Provident Investment Counsel
300 North Lake Avenue
Penthouse Suite
Pasadena, California 91101-4106
(with respect to their services as sub-advisor)
(9) Walter Scott & Partners Limited
Milburn Tower
Gogar
Edinburgh, Scotland EH12 9BS
(with respect to their services as sub-advisor)
(10) John Govett & Company Limited
Shackleton House
4 Battlebridge Lane
London, England SE1 2HR
(with respect to their services as sub-advisor)
(11) Gardner, Carton & Douglas
321 North Clark Street
Suite 3400
Chicago, Illinois 60610
(with respect to their services as counsel to Registrant)
Item 31. Management Services
- -------- -------------------
Not applicable.
C-11
<PAGE>
Item 32. Undertakings
- -------- ------------
The Registrant undertakes to furnish each person to whom a Prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
The Registrant undertakes to call a meeting for the purpose of voting
upon the question of removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940 if requested to do so by the holders of at least
10% of the Registrant's outstanding shares.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this post-effective amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Fort Wayne and State of Indiana on the 14th day of February, 1996.
LINCOLN ADVISOR FUNDS, INC.
By: /s/ C. Suzanne Womack
C. Suzanne Womack
Secretary
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of February, 1996.
<TABLE>
<CAPTION>
Signature Titles Date
- --------- ------ ----
<S> <C> <C>
* President and Director
--------------------
- --------------------------------------------------------
Priscilla S. Brown
* Director
--------------------
- --------------------------------------------------------
Richard M. Burridge
* Director
--------------------
- --------------------------------------------------------
Jorge G. Castro
* Director
--------------------
- --------------------------------------------------------
Adela Cepeda
* Director
--------------------
- --------------------------------------------------------
Roger J. Deshaies
* Director
--------------------
- --------------------------------------------------------
Charles G. Freund
* Director
--------------------
- --------------------------------------------------------
Philip L. Holstein
* Director
--------------------
- --------------------------------------------------------
H. Thomas McMeekin
</TABLE>
C-13
<PAGE>
<TABLE>
<S> <C> <C>
* Director
--------------------
- --------------------------------------------------------
Barbara Peck
* Vice President, Treasurer and
Chief Financial Officer
--------------------
- --------------------------------------------------------
Steven R. Brody
Assistant Vice President and
* Chief Accounting Officer
--------------------
- --------------------------------------------------------
David G. Humes
/s/ John Steinkamp
- -------------------------------------------------------- --------------------
*John Steinkamp, as Attorney-in-fact
pursuant to Powers of Attorney granted on
October 1, 1993, May 23, 1994, November
22, 1994 and February 14, 1996.
</TABLE>
C-14
<PAGE>
LINCOLN ADVISOR FUNDS, INC.
INDEX TO EXHIBITS
-----------------
Exhibit Number
- --------------
6. Distribution Agreement
9(b). Transfer Agency and Service Agreement
11(a). Consent of Independent Accountants
11(e). Powers of Attorney
15. Plan of Distribution
27. Financial Data Schedules
LINCOLN ADVISOR FUNDS, INC.
DISTRIBUTION AGREEMENT
(Class A shares)
AGREEMENT, made as of the 25th day of September, 1995, between Lincoln
Advisor Funds, Inc., a Maryland corporation (the "Fund"), and Delaware
Distributors, L.P., a Delaware limited partnership (the "Distributor").
RECITALS
1. The Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified, open-end, management investment
company, its shares are divided into separate series and within each series
(with limited exception) divided into separate classes, and it is in the
interest of the Fund to offer its Class A shares for sale continuously.
2. The Distributor is a securities firm engaged in the business of
promoting the distribution of the securities of investment companies and, in
connection therewith, acting solely as agent for such investment companies and
not as principal, and the Distributor is an affiliate of Lincoln National
Corporation.
3. The Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's Class A shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class A shares.
4. It is contemplated that the Fund will adopt a Distribution and
Service Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") authorizing
payments by the Fund to the Distributor with respect to the distribution of
Class A shares of the Fund and the maintenance of Class A stockholder accounts.
The Fund and the Distributor hereby agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Class A shares
of the Fund to sell Class A shares, as agent, on the Fund's behalf to the public
either directly or through other securities dealers, and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund hereby agrees
during the term of this Agreement to sell Class A shares of the Fund through the
Distributor on the terms and conditions set forth below.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor of the Fund's Class A shares, except that:
2.1 The exclusive rights granted to the Distributor to sell
Class A shares on behalf of the Fund shall not apply to Class A shares of the
Fund issued in connection with the
<PAGE>
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to Class A shares
issued by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
2.3 Such exclusive rights shall not apply to Class A shares
issued by the Fund pursuant to the reinstatement privilege afforded redeeming
stockholders.
2.4 Such exclusive rights shall not apply to purchases made
through the Fund's transfer and dividend disbursing agent in the manner set
forth in the currently effective Prospectus of the Fund. The term "Prospectus"
shall mean the Prospectus and Statement of Additional Information included as
part of the Fund's Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to time, and the
term "Registration Statement" shall mean the Registration Statement filed by the
Fund with the Securities and Exchange Commission and effective under the
Securities Act of 1933, as amended (the "Securities Act"), and the 1940 Act, as
such Registration Statement is amended from time to time.
Section 3. Sale of Class A Shares.
3.1 All shares sold by the Fund either directly or through the
Distributor, whether to registered broker-dealers or other financial
institutions ("selected dealers") or directly to investors, shall be sold at the
public offering price. The public offering price for all orders accepted by the
Fund shall be the net asset value per share, plus any applicable sales charge on
such shares, determined in the manner described in the Fund's current
Prospectus.
3.2 The Distributor shall receive compensation for sales of
the shares of the Fund in the form of front-end, contingent deferred, or
asset-based sales charges as provided in Sections 7 and 8 of this Agreement, and
shall have the right to enter into agreements with selected dealers under which
such selected dealers will perform distributor and/or shareholder servicing
activities relating to the sale of Class A shares. The Distributor may
compensate selected dealers in accordance with such agreements, by forwarding to
such selected dealers, all or a portion of the compensation received by the
Distributor in connection with the sale of the Fund's shares, or in any other
manner provided in the dealer agreement.
3.3 The Fund shall have the right to suspend the sale of its
Class A shares at times when redemption is suspended pursuant to the conditions
in Section 4.3 hereof or at such other times as may be determined by the Board
of Directors. The Fund shall also have the right to suspend the sale of its
Class A shares if a banking moratorium shall have been declared by federal or
New York authorities.
3.4 The Fund, the Distributor, or any other agent of the Fund
designated in writing by the Fund, shall have the right to reject any order;
provided, however, that the Fund
2
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will not arbitrarily or without reasonable cause refuse to accept or confirm
orders for the purchase of Class A shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such Class A shares pursuant to the instructions of the Distributor. Payment
shall be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class A Shares by the Fund.
4.1 Any of the outstanding Class A shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class A
shares so tendered in accordance with its Articles of Incorporation, as amended
from time to time, and in accordance with the applicable provisions of the
Prospectus. The price to be paid to redeem or repurchase the Class A shares
shall be equal to the net asset value determined as set forth in the Prospectus.
All payments by the Fund hereunder shall be made in the manner set forth in
Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption
price as defined in the above paragraph pursuant to the instructions of the
Distributor on or before the seventh business day subsequent to its having
received the notice of redemption in proper form. The proceeds of any redemption
of Class A shares shall be paid by the Fund as follows: (a) any applicable
contingent deferred sales charge shall be paid to the Distributor and (b) the
balance shall be paid to or for the account of the redeeming stockholder, in
each case in accordance with applicable provisions of the Prospectus.
4.3 Redemption of Class A shares or payment may be suspended
at times when the New York Stock Exchange is closed for other than customary
weekends and holidays, when trading on said Exchange is suspended, when trading
on said Exchange is restricted, when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets, or during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Fund.
5.1 Subject to the possible suspension of the sale of Class A
shares as provided herein, the Fund agrees to sell its Class A shares so long as
it has Class A shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class A
shares, and this shall include one certified copy, upon request by the
Distributor, of all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the Distributor such number
of copies of its Prospectus and annual and interim reports as the Distributor
shall reasonably request.
3
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5.3 The Fund shall take, from time to time, but subject to the
necessary approval of the Board of Directors and the stockholders, all necessary
action to fix the number of authorized Class A shares and such steps as may be
necessary to register the same under the Securities Act, to the end that there
will be available for sale such number of Class A shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time to time such
amendments, reports and other documents as may be necessary in order that there
will be no untrue statement of a material fact in the Registration Statement, or
necessary in order that there will be no omission to state a material fact in
the Registration Statement which omission would make the statement therein
misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class A shares for
sales under the securities laws of such states as the Distributor and the Fund
may approve; provided that the Fund shall not be required to amend its Articles
of Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class A shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
A shares. Any such qualification may be withheld, terminated or withdrawn by the
Fund at any time in its discretion. As provided in Section 9.1 hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material relating
to its affairs and activities as may be required by the Fund in connection with
such qualifications.
Section 6. Duties of the Distributor.
6.1 The Distributor shall devote reasonable time and effort to
effect sales of Class A shares of the Fund, but shall not be obligated to sell
any specific number of Class A shares on behalf of the Fund. Sales of the Class
A shares shall be on the terms described in the Prospectus. The Distributor may
enter into like arrangements with other investment companies.
6.2 In selling the Class A shares, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer nor any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales literature,
the use of which is permitted by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales, and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of the National Association of Securities Dealers, Inc. (the
"NASD").
4
<PAGE>
Section 7. Payments to the Distributor.
The Distributor shall receive and may retain any front-end sales charge
which is imposed on sales of Class A shares as set forth in the Prospectus,
subject to the limitations of Article III, Section 26 of the NASD Rules of Fair
Practice. Payment of these amounts to the Distributor is not contingent upon the
adoption or continuation of the Plan.
Section 8. Payments to the Distributor under the Plan.
8.1 The Fund shall pay to the Distributor as compensation for
services under the Distribution and Service Plan and this agreement a fee of
.35% (including a service fee of .25%) per annum of the average daily net assets
of the Class A shares of the Fund. Amounts payable under the Plan shall be
accrued daily and paid monthly or at such other intervals as the Directors may
determine. Amounts payable under the Plan shall be subject to the limitations of
Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in effect,
the Distributor shall inform the Board of Directors of the commissions and
account servicing fees to be paid by the Distributor to account executives of
the Distributor and to broker-dealers and financial institutions which have
dealer agreements with the Distributor. So long as the Plan (or any amendment
thereto) is in effect, at the request of the Board of Directors or any agent or
representative of the Fund, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.
8.3 Expenses of distribution with respect to the Class A
shares of the fund include, among others: (a) sales commissions and trailer
commissions paid to, or on account of, broker-dealers and financial institutions
which have entered into selected dealer agreements with the Distributor with
respect to Class A shares of the Fund; (b) indirect and overhead costs of the
Distributor associated with the performance of distribution activities,
including central office and branch expenses; (c) sales commissions (including
trailer commissions) paid to, or on account of, account executives of the
Distributor; (d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund Prospectuses and
periodic financial reports and sales literature to persons other than current
stockholders of the Fund and (e) amounts paid to, or on account of,
broker-dealers or financial institutions for personal service and/or the
maintenance of stockholder accounts. Indirect and overhead costs referred to in
clause (b) of the foregoing sentence include (i) lease expenses, (ii) salaries
and benefits of personnel including operations and sales support personnel,
(iii) utility expenses, (iv) communications expense, (v) sales promotion
expenses, (vi) expenses of postage, stationery and supplies and (vii) general
overhead.
Section 9. Allocation of Expenses.
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class A shares, including fees and disbursements of
its counsel and auditors, in connection with
5
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the preparation and filing of any required Registration Statements and/or
Prospectuses under the 1940 Act or the Securities Act, and preparing and mailing
annual and periodic reports and proxy materials to stockholders (including but
not limited to the expense of setting in type any such Registration Statements,
Prospectuses, annual or periodic reports or proxy materials). The Fund shall
also bear the cost of expenses of qualification of the Class A shares for sale,
and, if necessary or advisable in connection therewith, of qualifying the Fund
as a broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor pursuant to
Section 5.4 hereof and the cost and expense payable to each such state for
continuing qualification therein until the Fund decides to discontinue such
qualification pursuant to Section 5.4 hereof. As set forth in Section 8 above,
the Fund shall also bear the expenses it assumes pursuant to the Plan with
respect to Class A shares, so long as the Plan is in effect.
Section 10. Indemnification.
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and directors and any person who controls the
Distributor within the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the Securities Act, or under common law or otherwise, arising out of or
based upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to the benefit
of any such officer, director or controlling person unless a court of competent
jurisdiction shall determine in a final decision on the merits, that the person
to be indemnified was not liable, by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or, in
the absence of such a decision, a reasonable determination, based upon a review
of the facts, that the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of Directors who are neither
"interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its officers and
directors and any such controlling person as aforesaid is expressly conditioned
upon the Fund's being promptly notified of any action brought against the
Distributor, its officers or directors, or any such controlling person, such
notification to be given by letter or telegram addressed to the Fund at its
principal business office. The Fund agrees promptly to notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any Class A
shares.
6
<PAGE>
10.2 The Distributor agrees to indemnify, defend and hold the
Fund, its officers and directors and any person who controls the Fund, if any,
within the meaning of Section 15 of the Securities Act, free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
directors or officers or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement or Prospectus or necessary
to make such information not misleading. The Distributor's agreement to
indemnify the Fund, its directors and officers, and any such controlling person
as aforesaid, is expressly conditioned upon the Distributor's being promptly
notified of any action brought against the Fund, its officers or directors or
any such controlling person, such notification being given to the Distributor at
its principal business office.
Section 11. Duration and Termination of this Agreement.
11.1 This Agreement shall become effective as of the date
first above written and shall remain in force for two years from the date hereof
and thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class A shares of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the Fund's
Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act or in any
agreement related thereto ("Rule 12b-1 Directors"), cast in person at a meeting
called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the Rule 12b-1 Directors or by vote of
a majority of the outstanding voting securities of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party. The
Distributor may also terminate this Agreement on written notice to the Fund at
anytime in case the Registration Statement shall be suspended, or in case Stop
Order proceedings are initiated by the SEC in respect of the Registration
Statement and such proceedings are not withdrawn or terminated within thirty
days. This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment," "interested
person" and "voting securities", when used in this Agreement, shall have the
respective meaning specified in the 1940 Act.
Section 12. Amendment to this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (a) the Board
of Directors of the
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Fund, or by the vote of a majority of outstanding voting securities of the Class
A Shares of the Fund, and (b) by the vote of a majority of the Rule 12b-1
Directors cast in person at a meeting called for the purpose of voting on such
amendment.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Delaware
as at the time in effect and the applicable provisions of the 1940 Act. To the
extent that the applicable law of the State of Delaware, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
LINCOLN ADVISOR FUNDS, INC.
By: /s/ Steven R. Brody
Title: Steven R. Brody, Vice President
DELAWARE DISTRIBUTORS, L.P., by
Delaware Distributors, Inc.,
General Partner
By: /s/ Keith E. Mitchell
Keith E. Mitchell
Title: President and Chief Executive Officer
President and Chief Executive Officer
8
LINCOLN ADVISOR FUNDS, INC.
TRANSFER AGENCY AND SERVICE AGREEMENT
THIS AGREEMENT, made as of this 25th day of September, 1995 by and
between LINCOLN ADVISOR FUNDS, INC. (the "Fund"), a Maryland Corporation, and
DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware Corporation, having its
principal office and place of business at 1818 Market Street, Philadelphia,
Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Fund desires to appoint DSC as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and DSC desires to accept such appointment;
WHEREAS, DSC is duly registered as a transfer agent under the
Securities Exchange Act of 1934, as amended;
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund currently offers shares in 9 series, Growth and
Income Portfolio, Enterprise Portfolio, U.S. Growth Portfolio, World Growth
Portfolio, New Pacific Portfolio, Government Income Portfolio, Tax-Free Income
Portfolio, Corporate Income Portfolio and Cashfund Portfolio (such series,
together with all other series subsequently established by the Fund and made
subject to this Agreement in accordance with Article XI, being herein referred
to
<PAGE>
as the "Series", and each of the Series currently offers and sells up to four
different classes of shares of Common Stock $.01 par value;
WHEREAS, the Fund and DSC desire to have a written agreement concerning the
performance of the foregoing services and providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
l.l The Fund hereby appoints DSC Shareholder Services Agent
for the Series to provide as agent for the Fund services as Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts
such appointment and agrees to provide the Fund, as its agent, the services
described herein.
l.2 The Fund shall pay DSC and DSC shall accept, for the
services provided hereunder, the compensation provided for in Section VIII
hereof. The Fund also shall reimburse DSC for expenses incurred or advanced by
it for the Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available
to DSC (or has given DSC an opportunity to examine) copies of, and DSC
represents that it has received from the Fund (or is otherwise familiar with),
the following documents:
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(a) The Articles of Incorporation or other documents evidencing
the Fund's form of organization and any current amendments or supplements
thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or Series of shares of the Fund, or altering or abolishing
each such class or Series;
(d) A certified copy of a resolution of the Board of Directors of
the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The form of share certificates of the Series in the form
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectus and
Statement of Additional Information under the Securities Act of l933, if
effective;
(g) Copies of all account application forms and other documents
relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's
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<PAGE>
organization, including the status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of Directors
of the Fund authorizing any person to give instructions to DSC under this
Agreement (with a specimen signature of such person if not already provided),
setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.l.
2.2 The Fund and DSC may consult as to forms or documents that
may be required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a
certified copy of any resolution of the stockholders or the Board of Directors
of the Fund providing for a dividend, capital gains distribution, distribution
of capital, stock dividend, stock split or other similar action affecting the
authorization or issuance of shares of the Series or the payment of dividends.
2.4 In the case of any recapitalization or other capital
adjustment requiring a change in the form of stock certificate or the books
recording the same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
(b) Written instructions from an authorized officer implementing
such change; and
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<PAGE>
(c) An opinion of counsel to the Fund as to the validity of such
action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is a properly registered investment company under
the Investment Company Act of l940 and any and all Series' shares which it
issues will be properly registered and lawfully issued under applicable federal
and state laws.
(b) The provisions of this contract do not violate the terms of
any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of l934 and is duly authorized to serve, and
may lawfully serve as such.
(b) The provisions of this contract do not violate the terms of
any instrument by which DSC is bound; nor do they violate any law or regulation
of any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.l The Fund shall furnish or authorize DSC to obtain, at the
Fund's expense, a sufficient supply of blank stock certificates for the Series,
and from time to time will replenish such supply upon the request of DSC. The
Fund agrees to indemnify and exonerate, save and hold DSC harmless, from and
against any and all
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<PAGE>
claims or demands that may be asserted against DSC concerning the genuineness of
any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon
its demand for, all such stock certificates: (a) as issued, showing to whom
issued, or (b) as unissued, establishing the safekeeping, cancellation or
destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any
change in the officers authorized to sign stock certificates or in the form
thereof. If an officer whose manual or facsimile signature is affixed to any
blank share certificate shall die, resign or be removed prior to the issuance of
such certificate, DSC may nevertheless issue such certificate notwithstanding
such death, resignation or removal, and the Fund shall with respect thereto
promptly provide to DSC any approval, adoption or ratification as may be
required by DSC.
IV. TRANSFER AGENT
4.l As Transfer Agent for the Series, DSC shall issue, redeem
and transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
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(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee-stockholders; if applicable, issue
and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash due
and paid, shares issued and to be issued, cash remitted and to be remitted and
shares debited and credited to accounts; provide such notices, instructions or
authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem
Series' shares upon receipt by DSC from the Fund, or from any federal or state
regulatory agency or authority, of written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.l As Dividend Disbursing Agent for the Series, DSC shall
disburse and cause to be disbursed to Series' stockholders Series' dividends,
capital gains distributions or any payments from
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<PAGE>
other sources as directed by the Fund. In connection therewith, but not in
limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder, as
aforesaid, for which Series' shares are to be issued and authorized and instruct
the issuance of Series' shares therefor in accordance with Section IV hereof.
(d) Prepare and mail or deliver such forms and notices pertaining
to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon
the receipt by DSC from the Fund, or from any federal or state agency or
authority, of written notice that such disbursement shall not be made.
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<PAGE>
VI. SHAREHOLDER SERVICING AGENT
6.l As Shareholder Servicing Agent for the Series, DSC shall
provide those services ancillary to but in implementation of the services
provided under Sections I through V hereof, and those generally defined and
accepted as shareholder services. In connection therewith, but not in limitation
thereof, DSC shall:
(a) Except where instructed in writing by the Fund not to do so,
and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of stockholders
and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to investor
and Series stockholders, including retirement plans, including activities not
otherwise provided in Section I through V of this Agreement.
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<PAGE>
VII. PERFORMANCE OF DUTIES
7.l The parties hereto intend that Series stockholders and
their stockholdings shall be confidential, and any information relating thereto
shall be released by DSC only to those persons or authorities who DSC has reason
to believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or
the Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and
may, at the Fund's expense, consult with counsel for the Fund or its own counsel
with respect to any matter arising in connection with the performance of its
duties hereunder, and shall not be liable for any action taken or omitted by it
in good faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for
errors and omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to
provide services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services
hereunder may be used to perform similar services to other funds, including,
without limitation, funds comprising the Delaware Group of funds, and may be
used to perform other services for the Fund, the funds in the Delaware Group and
others.
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<PAGE>
7.7 DSC shall provide its services as transfer agent hereunder
in accordance with Section l7 of the Securities Exchange Act of l934, and the
rules and regulations thereunder. Further, the parties intend that the
processes, procedures, safeguards and controls employed should be those
generally applied and accepted for the type services provided hereunder by other
institutions providing the same or similar services, and, those which should
provide efficient, safe and economical services so as to promote promptness and
accuracy and to maintain the integrity of the Fund's records.
7.8 DSC shall establish and maintain those accounts, books and
other documents that the Fund is required to establish and maintain under the
provisions of the Investment Company Act of 1940 and the rules thereunder as DSC
and the Fund may agree from time to time. The Fund and DSC may, from time to
time, set forth in writing Guidelines For Selective Procedures to be applicable
to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested person of the
parties hereto, has determined after due consideration to be necessary for the
conduct
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<PAGE>
of the business of the Fund, in the best interests of the Fund, the Series and
its stockholders.
8.2 Compensation by the Fund to DSC hereunder shall be
determined in accordance with Schedule A hereto as it shall be amended from time
to time as provided for herein and which is incorporated herein as a part
hereof.
8.3 Compensation as provided in Schedule A shall be reviewed
and approved in the manner set forth in Section l0.l hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.l The Fund acknowledges that DSC shall not be liable for,
and in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of the performance of its duties under this Agreement, agrees
to indemnify DSC against, any claim or deficiency arising from the performance
of DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
-12-
<PAGE>
X. CONTRACTUAL STATUS
l0.l This Agreement shall be executed and become effective on
the date first written above if approved by a vote of the Board of Directors of
the Fund, including an affirmative vote of a majority of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on such approval. It shall continue in effect for an indeterminate
period, and is subject to termination on sixty (60) days notice by either party
unless earlier terminated or amended by agreement among the parties.
Compensation under this Agreement shall require approval by a majority vote of
the Board of Directors of the Fund.
l0.2 This Agreement may not be assigned without the approval
of the Fund.
-13-
<PAGE>
l0.3 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
XI. ADDITIONAL FUNDS
11.1 In the event that the Fund establishes one or more series
in addition to the currently offered Series, or additional classes within any
Series with respect to which it desires to have DSC render services as transfer
agent, dividend disbursing agent and shareholders service agent under the terms
hereof, it shall so notify DSC in writing, and if DSC agrees in writing to
provide such services, such series shall become a Series hereunder.
DELAWARE SERVICE COMPANY, INC.
Attest: /s/ Eric E. Miller By: /s/ David K. Downes
Eric E. Miller David K. Downes
Vice President/ Senior Vice President/
Assistant Secretary Chief Administrative Officer/
Chief Financial Officer
LINCOLN ADVISOR FUNDS, INC.
Attest: /s/ John Steinkamp By: /s/ Steve R. Brody
John Steinkamp Vice President
Steven R. Brody
-14
<PAGE>
SCHEDULE A
to
TRANSFER AGENCY AND SERVICE AGREEMENT
COMPENSATION SCHEDULE
1. Delaware Service Company, Inc. (DSC) will determine and report to the
Fund, at least annually, the compensation for services to be provided
to the Fund for DSC's forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or per transaction, as may be applicable, for
services provided. DSC will bill, and the Fund will pay, such
compensation monthly.
3. For the period commencing September 25, 1995, the charge will consist
of two charges for each of the Fund's Series, an annual charge and a
per transaction charge for each account on the transfer agent's records
and each account on an automated retirement processing system. These
charges are as follows:
A. ANNUAL CHARGE
Daily Dividend Funds $11.00 Per annum
Other Funds 5.50 Per annum
Merrill Lynch - Omnibus Accounts:
Regular Accounts 11.00 Per annum
Accounts with a Contingent
Deferred Sales Charge 14.00 Per annum
Networked Accounts 3.00 - 6.00 Per annum
B. TRANSACTION CHARGES
1. Dividend Payment $ 0.25
2. New Account 6.00
3. Purchase:
a. Wire 8.00
b. Automated* 1.50
c. Other 2.60
4. Transfer 8.00
5. Certificate Issuance 4.00
* (Purchase transactions received directly from Lincoln National Corporation or
its affiliates payroll, via automated transmission will be charged at $.075 per
transaction.)
<PAGE>
6. Liquidation:
a. Wires 12.00
b. Drafts .75
c. Money Market Regular 4.50
d. Other Regular 4.50
7. Exchanges:
a. Dividend Exchanges 3.50
b. Other 10.00
<PAGE>
SCHEDULE A
(Continued)
OUT-OF-POCKET EXPENSES
I. TRANSFER AGENT SYSTEM CHARGES
A. All accounts at $1.80 per account per year.
B. Includes Fund/Serv, Networking Systems and Sungard supported
remote access to the ACS Mutual Fund Sales Reporting System.
C. Includes ALL transactions.
D. Excludes customary out-of-pocket expenses of service provider and
non-standard interfaces, special modifications, or special jobs.
II. SPECIAL SERVICES AND FEES
A. AD-HOC Reportwriter Generator $ 46.00 per report
$ .009 per account
passed
B. Additional on-line history $ .045 per account
per qtr.
C. Off hours IMS uptime $150.00 per hour
D. Interim Research $ 70.00 per run
Statements $ 4.40/each cwu
E. Reruns $ 70.00 per run
$ 4.40/cwu
F. Extract Tapes $105.00
$ .022 per a/c
G. Retroactive Record Date $ 63.25 per run
$ .0165/account
H. Hot Jobs $139.00
$ 7.60/cwu
<PAGE>
SCHEDULE A
OUT-OF-POCKET EXPENSES
(Continued)
I. Labor Charges
System Support Representatives
and Programmers $100.00/hour
Consultants or Department Heads $125.00/hour
Officers $150.00/hour
J. Training/Consulting $800.00/day
K. TELCOM COSTS for processing activity
L. Customer pays costs to establish and process non-standard
interfaces (tape, CPU transmissions, Audio Response, etc.)
III. OTHER OUT-OF-POCKET EXPENSES INCLUDE, BUT ARE NOT LIMITED TO:
Cost of forms
Postage
Cost of third party statements and confirmation vendor.
Cost of proxy mailing and solicitation.
Off-site storage costs.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A (1933 Act File Number 33-67490 and 1940 Act
File Number 811-7972) of Lincoln Advisor Funds, Inc. (the "Funds") of our report
dated December 12, 1995 on our audit of the financial statements and
supplementary data of the Funds for the period ended October 31, 1995, which is
also included in this Registration Statement.
We also consent to the reference to our Firm under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 26, 1995
POWER OF ATTORNEY
The undersigned hereby appoints John L. Steinkamp and Priscilla S.
Brown and each of them severally, acting alone and without the other, his true
and lawful attorney-in-fact with authority to execute in his name and to file
with the Securities and Exchange Commission, together with any exhibits thereto
and other documents therewith, any and all amendments (including without
limitation post-effective amendments) to the Lincoln Advisor Funds, Inc.'s
Registration Statement necessary or advisable to enable the Registration
Statement to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, which amendments may make such other changes in the
Registration Statement as the aforesaid attorney-in-fact executing the same
deems appropriate.
Signature Title Date
- --------- ----- ----
/s/ David G. Humes Assistant Vice President and 2/14/96
David G. Humes Chief Accounting Officer
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints John L. Steinkamp and Priscilla S.
Brown and each of them severally, acting alone and without the other, his true
and lawful attorney-in-fact with authority to execute in his name and to file
with the Securities and Exchange Commission, together with any exhibits thereto
and other documents therewith, any and all amendments (including without
limitation post-effective amendments) to the Lincoln Advisor Funds, Inc.'s
Registration Statement necessary or advisable to enable the Registration
Statement to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, which amendments may make such other changes in the
Registration Statement as the aforesaid attorney-in-fact executing the same
deems appropriate.
Signature Title Date
- --------- ----- ----
/s/ Steven R. Brody Vice President, Treasurer and 2/14/96
Steven R. Brody Chief Financial Officer
LINCOLN ADVISOR FUNDS, INC.
Form of
Distribution and Service Plan
(Class A Shares)
Introduction
The Distribution and Service Plan (the "Plan") set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act") and Article III, Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. (NASD) has
been adopted by LINCOLN ADVISOR FUNDS, INC. (the "Fund").
The Fund has entered into a distribution agreement (the "Distribution
Agreement") with a distributor as identified from time to time in the Fund's
Prospectus (the "Distributor") pursuant to which the Fund will employ the
Distributor to distribute Class A shares issued by the Fund (Class A shares).
Under the Distribution Agreement, the Distributor will be entitled to receive
payments from investors of front-end sales charges with respect to the sale of
Class A shares. Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class A shares.
A majority of the Board of Directors of the Fund, including a majority
of those Directors who are not "interested persons" of the Fund (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreement related to it (the "Rule 12b-1
Directors"), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined below) are
primarily intended to result in the sale of Class A shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the 1940 Act.
The purpose of the Plan is to create incentives to the Distributor
and/or other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation,
<PAGE>
printing and distribution of prospectuses and sales literature and other
promotional and distribution activities and to provide for the servicing and
maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class A shares of
the Fund and to service shareholder accounts using all of the facilities of the
distribution networks of such qualified broker-dealers and financial
institutions as the Distributor may select. Services provided and activities
undertaken to distribute Class A shares of the Fund are referred to herein as
"Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25%
per annum of the average daily net assets of the Class A shares (service fee).
The Fund shall calculate and accrue daily amounts payable by the Class A shares
of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services
a distribution fee, together with the service fee (described in Section 2
hereof), of .10% per annum of the average daily net assets of the Class A shares
of the Fund for the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
Amounts paid to the Distributor by the Class A shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class A shares according to the
ratio of the sales of Class A shares to the total sales of the Fund's shares
2
<PAGE>
over the Fund's fiscal year or such other allocation method approved by the
Board of Directors. The allocation of distribution expenses among classes will
be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to,
or on account of, broker-dealers and financial institutions
which have entered into selected dealer agreements with the
Distributor with respect to shares of the Fund; and
(b) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund prospectuses, statements of additional information and
periodic financial reports and sales literature to persons other
than current shareholders of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors of the Fund such additional
information as the Board shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be undertaken by the
Distributor.
The Distributor will inform the Board of Directors of the Fund of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and financial institutions
which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
the Class A shares of the Fund.
3
<PAGE>
If approved by a vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, the Plan shall, unless earlier
terminated in accordance with its terms, continue in full force and effect
thereafter for so long as such continuance is specifically approved at least
annually by a majority of the Board of Directors of the Fund and a majority of
the Rule 12b-1 Directors by votes cast in person at a meeting called for the
purposes of voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Class A shares of the Fund.
7. Amendments
The Plan may not be amended to change the distribution expenses to be
paid as provided for in Section 3 hereof so as to increase materially the
amounts payable under this Plan unless such amendment shall be approved by the
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Class A shares of the Fund. All material amendments of the Plan
shall be approved by a majority of the Board of Directors of the Fund and a
majority of the Rule 12b-1 Directors by votes cast in person at a meeting called
for the purpose of voting on the Plan.
8. Non-interested Directors
While the Plan is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund (non-interested
Directors) shall be committed to the discretion of the non-interested Directors.
9. Records
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof for a period of not less than
six years from the date of effectiveness of the Plan, and for at least the first
two years in an easily accessible place. Dated: October 25, 1993 (as amended on
September 25, 1995)
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended October 31, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> Lincoln Growth and Income, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 20,761,419
<INVESTMENTS-AT-VALUE> 22,617,145
<RECEIVABLES> 182,345
<ASSETS-OTHER> 6,430
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,805,920
<PAYABLE-FOR-SECURITIES> 1,261,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160,718
<TOTAL-LIABILITIES> 1,422,182
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,095,891
<SHARES-COMMON-STOCK> 1,185,195
<SHARES-COMMON-PRIOR> 1,072,029
<ACCUMULATED-NII-CURRENT> 20,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 411,734
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,855,726
<NET-ASSETS> 13,297,253
<DIVIDEND-INCOME> 230,521
<INTEREST-INCOME> 80,547
<OTHER-INCOME> 0
<EXPENSES-NET> 206,597
<NET-INVESTMENT-INCOME> 104,471
<REALIZED-GAINS-CURRENT> 251,026
<APPREC-INCREASE-CURRENT> 1,746,066
<NET-CHANGE-FROM-OPS> 2,101,563
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 82,711
<DISTRIBUTIONS-OF-GAINS> 267,001
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86,373
<NUMBER-OF-SHARES-REDEEMED> 10,399
<SHARES-REINVESTED> 37,192
<NET-CHANGE-IN-ASSETS> 2,860,459
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 354,897
<OVERDISTRIB-NII-PRIOR> (11,981)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,107
<AVERAGE-NET-ASSETS> 11,833,896
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 1.71
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.32)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.22
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended October 31, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> Lincoln Growth and Income, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 20,761,419
<INVESTMENTS-AT-VALUE> 22,617,145
<RECEIVABLES> 182,345
<ASSETS-OTHER> 6,430
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,805,920
<PAYABLE-FOR-SECURITIES> 1,261,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160,718
<TOTAL-LIABILITIES> 1,422,182
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,095,891
<SHARES-COMMON-STOCK> 120,358
<SHARES-COMMON-PRIOR> 59,360
<ACCUMULATED-NII-CURRENT> 20,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 411,734
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,855,726
<NET-ASSETS> 1,307,566
<DIVIDEND-INCOME> 18,966
<INTEREST-INCOME> 6,627
<OTHER-INCOME> 0
<EXPENSES-NET> 23,322
<NET-INVESTMENT-INCOME> 2,271
<REALIZED-GAINS-CURRENT> 28,666
<APPREC-INCREASE-CURRENT> 136,792
<NET-CHANGE-FROM-OPS> 167,729
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,970
<DISTRIBUTIONS-OF-GAINS> 19,100
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65,262
<NUMBER-OF-SHARES-REDEEMED> 6,830
<SHARES-REINVESTED> 2,566
<NET-CHANGE-IN-ASSETS> 744,387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 354,897
<OVERDISTRIB-NII-PRIOR> (11,981)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,107
<AVERAGE-NET-ASSETS> 971,000
<PER-SHARE-NAV-BEGIN> 9.49
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 1.64
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.31)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.86
<EXPENSE-RATIO> 2.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended October 31, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> Lincoln Growth and Income, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 20,761,419
<INVESTMENTS-AT-VALUE> 22,617,145
<RECEIVABLES> 182,345
<ASSETS-OTHER> 6,430
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,805,920
<PAYABLE-FOR-SECURITIES> 1,261,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160,718
<TOTAL-LIABILITIES> 1,422,182
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,095,891
<SHARES-COMMON-STOCK> 6,406
<SHARES-COMMON-PRIOR> 2,416
<ACCUMULATED-NII-CURRENT> 20,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 411,734
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,855,726
<NET-ASSETS> 73,181
<DIVIDEND-INCOME> 834
<INTEREST-INCOME> 291
<OTHER-INCOME> 0
<EXPENSES-NET> 1,025
<NET-INVESTMENT-INCOME> 100
<REALIZED-GAINS-CURRENT> 1,402
<APPREC-INCREASE-CURRENT> 5,453
<NET-CHANGE-FROM-OPS> 6,955
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 191
<DISTRIBUTIONS-OF-GAINS> 653
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,279
<NUMBER-OF-SHARES-REDEEMED> 379
<SHARES-REINVESTED> 90
<NET-CHANGE-IN-ASSETS> 49,115
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 354,897
<OVERDISTRIB-NII-PRIOR> (11,981)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,107
<AVERAGE-NET-ASSETS> 42,636
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 1.72
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.30)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.42
<EXPENSE-RATIO> 2.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended October 31, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 14
<NAME> Lincoln Growth and Income, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 20,761,419
<INVESTMENTS-AT-VALUE> 22,617,145
<RECEIVABLES> 182,345
<ASSETS-OTHER> 6,430
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,805,920
<PAYABLE-FOR-SECURITIES> 1,261,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160,718
<TOTAL-LIABILITIES> 1,422,182
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,095,891
<SHARES-COMMON-STOCK> 597,948
<SHARES-COMMON-PRIOR> 269,040
<ACCUMULATED-NII-CURRENT> 20,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 411,734
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,855,726
<NET-ASSETS> 6,705,738
<DIVIDEND-INCOME> 90,157
<INTEREST-INCOME> 31,502
<OTHER-INCOME> 0
<EXPENSES-NET> 64,911
<NET-INVESTMENT-INCOME> 56,748
<REALIZED-GAINS-CURRENT> 144,280
<APPREC-INCREASE-CURRENT> 650,583
<NET-CHANGE-FROM-OPS> 851,611
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 55,332
<DISTRIBUTIONS-OF-GAINS> 81,783
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 404,257
<NUMBER-OF-SHARES-REDEEMED> 89,601
<SHARES-REINVESTED> 14,252
<NET-CHANGE-IN-ASSETS> 4,086,022
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 354,897
<OVERDISTRIB-NII-PRIOR> (11,981)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,107
<AVERAGE-NET-ASSETS> 4,629,340
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 1.71
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.36)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.21
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 21
<NAME> Lincoln Enterprise, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 16,835,673
<INVESTMENTS-AT-VALUE> 19,969,372
<RECEIVABLES> 272,471
<ASSETS-OTHER> 6,371
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,248,214
<PAYABLE-FOR-SECURITIES> 104,111
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,898
<TOTAL-LIABILITIES> 205,009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,573,452
<SHARES-COMMON-STOCK> 1,285,890
<SHARES-COMMON-PRIOR> 1,149,276
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (663,946)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,133,699
<NET-ASSETS> 14,507,841
<DIVIDEND-INCOME> 72,402
<INTEREST-INCOME> 51,946
<OTHER-INCOME> 0
<EXPENSES-NET> 226,408
<NET-INVESTMENT-INCOME> (102,060)
<REALIZED-GAINS-CURRENT> 781,913
<APPREC-INCREASE-CURRENT> 1,917,282
<NET-CHANGE-FROM-OPS> 2,597,135
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 165,155
<NUMBER-OF-SHARES-REDEEMED> 28,541
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,928,988
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,615,958)
<OVERDISTRIB-NII-PRIOR> (5,017)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 116,353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,733
<AVERAGE-NET-ASSETS> 12,252,710
<PER-SHARE-NAV-BEGIN> 9.20
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 2.16
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.28
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 22
<NAME> Lincoln Enterprise, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 16,835,673
<INVESTMENTS-AT-VALUE> 19,969,372
<RECEIVABLES> 272,471
<ASSETS-OTHER> 6,371
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,248,214
<PAYABLE-FOR-SECURITIES> 104,111
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,898
<TOTAL-LIABILITIES> 205,009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,573,452
<SHARES-COMMON-STOCK> 151,465
<SHARES-COMMON-PRIOR> 77,581
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (663,946)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,133,699
<NET-ASSETS> 1,811,208
<DIVIDEND-INCOME> 7,247
<INTEREST-INCOME> 5,200
<OTHER-INCOME> 0
<EXPENSES-NET> 31,196
<NET-INVESTMENT-INCOME> (18,749)
<REALIZED-GAINS-CURRENT> 85,373
<APPREC-INCREASE-CURRENT> 202,776
<NET-CHANGE-FROM-OPS> 269,401
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 81,179
<NUMBER-OF-SHARES-REDEEMED> 7,295
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,050,169
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,615,958)
<OVERDISTRIB-NII-PRIOR> (5,017)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 116,353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,733
<AVERAGE-NET-ASSETS> 1,247,473
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> (0.12)
<PER-SHARE-GAIN-APPREC> 2.27
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.96
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 23
<NAME> Lincoln Enterprise, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 16,835,673
<INVESTMENTS-AT-VALUE> 19,969,372
<RECEIVABLES> 272,471
<ASSETS-OTHER> 6,371
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,248,214
<PAYABLE-FOR-SECURITIES> 104,111
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,898
<TOTAL-LIABILITIES> 205,009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,573,452
<SHARES-COMMON-STOCK> 4,767
<SHARES-COMMON-PRIOR> 3,744
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (663,946)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,133,699
<NET-ASSETS> 58,186
<DIVIDEND-INCOME> 286
<INTEREST-INCOME> 205
<OTHER-INCOME> 0
<EXPENSES-NET> 1,214
<NET-INVESTMENT-INCOME> (723)
<REALIZED-GAINS-CURRENT> 3,319
<APPREC-INCREASE-CURRENT> 7,980
<NET-CHANGE-FROM-OPS> 10,576
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,660
<NUMBER-OF-SHARES-REDEEMED> 637
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 20,657
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,615,958)
<OVERDISTRIB-NII-PRIOR> (5,017)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 116,353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,733
<AVERAGE-NET-ASSETS> 48,603
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> (0.15)
<PER-SHARE-GAIN-APPREC> 2.34
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.21
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 24
<NAME> Lincoln Enterprise, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 16,835,673
<INVESTMENTS-AT-VALUE> 19,969,372
<RECEIVABLES> 272,471
<ASSETS-OTHER> 6,371
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,248,214
<PAYABLE-FOR-SECURITIES> 104,111
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,898
<TOTAL-LIABILITIES> 205,009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,573,452
<SHARES-COMMON-STOCK> 324,385
<SHARES-COMMON-PRIOR> 25,391
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (663,946)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,133,699
<NET-ASSETS> 3,665,970
<DIVIDEND-INCOME> 5,383
<INTEREST-INCOME> 3,862
<OTHER-INCOME> 0
<EXPENSES-NET> 15,187
<NET-INVESTMENT-INCOME> (5,942)
<REALIZED-GAINS-CURRENT> 81,406
<APPREC-INCREASE-CURRENT> 37,499
<NET-CHANGE-FROM-OPS> 112,963
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 308,608
<NUMBER-OF-SHARES-REDEEMED> 9,614
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,431,651
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,615,958)
<OVERDISTRIB-NII-PRIOR> (5,017)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 116,353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349,733
<AVERAGE-NET-ASSETS> 995,838
<PER-SHARE-NAV-BEGIN> 9.23
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 2.09
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.30
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 31
<NAME> Lincoln U.S. Growth, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,027,492
<INVESTMENTS-AT-VALUE> 19,064,562
<RECEIVABLES> 34,890
<ASSETS-OTHER> 4,935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,104,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,099
<TOTAL-LIABILITIES> 117,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,192,613
<SHARES-COMMON-STOCK> 1,092,021
<SHARES-COMMON-PRIOR> 1,045,272
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,242,395)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,037,070
<NET-ASSETS> 13,573,827
<DIVIDEND-INCOME> 82,144
<INTEREST-INCOME> 29,855
<OTHER-INCOME> 0
<EXPENSES-NET> 214,018
<NET-INVESTMENT-INCOME> (102,019)
<REALIZED-GAINS-CURRENT> (382,763)
<APPREC-INCREASE-CURRENT> 2,899,956
<NET-CHANGE-FROM-OPS> 2,415,175
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52,639
<NUMBER-OF-SHARES-REDEEMED> 5,890
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,903,932
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (765,893)
<OVERDISTRIB-NII-PRIOR> (10,026)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105,965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 314,354
<AVERAGE-NET-ASSETS> 11,574,220
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 2.31
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.43
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 32
<NAME> Lincoln U.S. Growth, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,027,492
<INVESTMENTS-AT-VALUE> 19,064,562
<RECEIVABLES> 34,890
<ASSETS-OTHER> 4,935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,104,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,099
<TOTAL-LIABILITIES> 117,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,192,613
<SHARES-COMMON-STOCK> 45,992
<SHARES-COMMON-PRIOR> 20,092
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,242,395)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,037,070
<NET-ASSETS> 566,975
<DIVIDEND-INCOME> 2,714
<INTEREST-INCOME> 987
<OTHER-INCOME> 0
<EXPENSES-NET> 9,967
<NET-INVESTMENT-INCOME> (6,266)
<REALIZED-GAINS-CURRENT> (11,518)
<APPREC-INCREASE-CURRENT> 111,602
<NET-CHANGE-FROM-OPS> 93,817
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,729
<NUMBER-OF-SHARES-REDEEMED> 829
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 362,248
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (765,893)
<OVERDISTRIB-NII-PRIOR> (10,026)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105,965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 314,354
<AVERAGE-NET-ASSETS> 398,264
<PER-SHARE-NAV-BEGIN> 10.19
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 2.28
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.33
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 33
<NAME> Lincoln U.S. Growth, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,027,492
<INVESTMENTS-AT-VALUE> 19,064,562
<RECEIVABLES> 34,890
<ASSETS-OTHER> 4,935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,104,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,099
<TOTAL-LIABILITIES> 117,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,192,613
<SHARES-COMMON-STOCK> 2,113
<SHARES-COMMON-PRIOR> 480
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,242,395)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,037,070
<NET-ASSETS> 27,138
<DIVIDEND-INCOME> 84
<INTEREST-INCOME> 30
<OTHER-INCOME> 0
<EXPENSES-NET> 320
<NET-INVESTMENT-INCOME> (206)
<REALIZED-GAINS-CURRENT> (306)
<APPREC-INCREASE-CURRENT> 3,780
<NET-CHANGE-FROM-OPS> 3,269
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,865
<NUMBER-OF-SHARES-REDEEMED> 232
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22,041
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (765,893)
<OVERDISTRIB-NII-PRIOR> (10,026)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105,965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 314,354
<AVERAGE-NET-ASSETS> 12,766
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 2.33
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.85
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 34
<NAME> Lincoln U.S. Growth, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,027,492
<INVESTMENTS-AT-VALUE> 19,064,562
<RECEIVABLES> 34,890
<ASSETS-OTHER> 4,935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,104,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,099
<TOTAL-LIABILITIES> 117,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,192,613
<SHARES-COMMON-STOCK> 385,639
<SHARES-COMMON-PRIOR> 159,450
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,242,395)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,037,070
<NET-ASSETS> 4,819,348
<DIVIDEND-INCOME> 21,048
<INTEREST-INCOME> 7,650
<OTHER-INCOME> 0
<EXPENSES-NET> 47,382
<NET-INVESTMENT-INCOME> (18,684)
<REALIZED-GAINS-CURRENT> (81,915)
<APPREC-INCREASE-CURRENT> 878,103
<NET-CHANGE-FROM-OPS> 777,502
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 307,706
<NUMBER-OF-SHARES-REDEEMED> 81,517
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,188,534
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (765,893)
<OVERDISTRIB-NII-PRIOR> (10,026)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105,965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 314,354
<AVERAGE-NET-ASSETS> 3,152,815
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 2.32
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.50
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 41
<NAME> Lincoln World Growth, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 12,601,602
<INVESTMENTS-AT-VALUE> 14,383,500
<RECEIVABLES> 75,064
<ASSETS-OTHER> 6,159
<OTHER-ITEMS-ASSETS> 13,029
<TOTAL-ASSETS> 14,477,752
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,603
<TOTAL-LIABILITIES> 73,603
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,819,006
<SHARES-COMMON-STOCK> 1,141,508
<SHARES-COMMON-PRIOR> 1,065,988
<ACCUMULATED-NII-CURRENT> 28,952
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (226,230)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,782,421
<NET-ASSETS> 13,017,521
<DIVIDEND-INCOME> 191,861
<INTEREST-INCOME> 29,285
<OTHER-INCOME> 0
<EXPENSES-NET> 221,255
<NET-INVESTMENT-INCOME> (109)
<REALIZED-GAINS-CURRENT> (54,104)
<APPREC-INCREASE-CURRENT> 560,406
<NET-CHANGE-FROM-OPS> 506,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,506
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 87,908
<NUMBER-OF-SHARES-REDEEMED> 13,283
<SHARES-REINVESTED> 895
<NET-CHANGE-IN-ASSETS> 1,296,273
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (117,654)
<OVERDISTRIB-NII-PRIOR> (7,747)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142,529
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 381,859
<AVERAGE-NET-ASSETS> 11,961,598
<PER-SHARE-NAV-BEGIN> 11.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 42
<NAME> Lincoln World Growth, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 12,601,602
<INVESTMENTS-AT-VALUE> 14,383,500
<RECEIVABLES> 75,064
<ASSETS-OTHER> 6,159
<OTHER-ITEMS-ASSETS> 13,029
<TOTAL-ASSETS> 14,477,752
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,603
<TOTAL-LIABILITIES> 73,603
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,819,006
<SHARES-COMMON-STOCK> 110,409
<SHARES-COMMON-PRIOR> 50,340
<ACCUMULATED-NII-CURRENT> 28,952
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (226,230)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,782,421
<NET-ASSETS> 1,182,741
<DIVIDEND-INCOME> 14,182
<INTEREST-INCOME> 2,165
<OTHER-INCOME> 0
<EXPENSES-NET> 21,202
<NET-INVESTMENT-INCOME> (4,855)
<REALIZED-GAINS-CURRENT> (1,541)
<APPREC-INCREASE-CURRENT> 60,774
<NET-CHANGE-FROM-OPS> 54,378
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,209
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66,883
<NUMBER-OF-SHARES-REDEEMED> 6,937
<SHARES-REINVESTED> 123
<NET-CHANGE-IN-ASSETS> 658,979
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (117,654)
<OVERDISTRIB-NII-PRIOR> (7,747)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142,529
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 381,859
<AVERAGE-NET-ASSETS> 846,863
<PER-SHARE-NAV-BEGIN> 10.40
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 0.35
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.71
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 43
<NAME> Lincoln World Growth, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 12,601,602
<INVESTMENTS-AT-VALUE> 14,383,500
<RECEIVABLES> 75,064
<ASSETS-OTHER> 6,159
<OTHER-ITEMS-ASSETS> 13,029
<TOTAL-ASSETS> 14,477,752
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,603
<TOTAL-LIABILITIES> 73,603
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,819,006
<SHARES-COMMON-STOCK> 3,999
<SHARES-COMMON-PRIOR> 3,719
<ACCUMULATED-NII-CURRENT> 28,952
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (226,230)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,782,421
<NET-ASSETS> 42,905
<DIVIDEND-INCOME> 665
<INTEREST-INCOME> 102
<OTHER-INCOME> 0
<EXPENSES-NET> 1,021
<NET-INVESTMENT-INCOME> (254)
<REALIZED-GAINS-CURRENT> (146)
<APPREC-INCREASE-CURRENT> 2,279
<NET-CHANGE-FROM-OPS> 1,879
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 104
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,735
<NUMBER-OF-SHARES-REDEEMED> 1,466
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 4,112
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (117,654)
<OVERDISTRIB-NII-PRIOR> (7,747)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142,529
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 381,859
<AVERAGE-NET-ASSETS> 40,845
<PER-SHARE-NAV-BEGIN> 10.43
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.73
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 44
<NAME> Lincoln World Growth, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 12,601,602
<INVESTMENTS-AT-VALUE> 14,383,500
<RECEIVABLES> 75,064
<ASSETS-OTHER> 6,159
<OTHER-ITEMS-ASSETS> 13,029
<TOTAL-ASSETS> 14,477,752
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,603
<TOTAL-LIABILITIES> 73,603
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,819,006
<SHARES-COMMON-STOCK> 14,072
<SHARES-COMMON-PRIOR> 5,779
<ACCUMULATED-NII-CURRENT> 28,952
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (226,230)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,782,421
<NET-ASSETS> 160,982
<DIVIDEND-INCOME> 1,784
<INTEREST-INCOME> 272
<OTHER-INCOME> 0
<EXPENSES-NET> 1,622
<NET-INVESTMENT-INCOME> 434
<REALIZED-GAINS-CURRENT> (218)
<APPREC-INCREASE-CURRENT> 8,099
<NET-CHANGE-FROM-OPS> 8,315
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 263
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,800
<NUMBER-OF-SHARES-REDEEMED> 2,532
<SHARES-REINVESTED> 25
<NET-CHANGE-IN-ASSETS> 97,322
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (117,654)
<OVERDISTRIB-NII-PRIOR> (7,747)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142,529
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 381,859
<AVERAGE-NET-ASSETS> 107,936
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.44
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 51
<NAME> Lincoln New Pacific, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,767,716
<INVESTMENTS-AT-VALUE> 10,728,423
<RECEIVABLES> 172,088
<ASSETS-OTHER> 5,833
<OTHER-ITEMS-ASSETS> 346,436
<TOTAL-ASSETS> 11,252,780
<PAYABLE-FOR-SECURITIES> 180,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66,239
<TOTAL-LIABILITIES> 246,364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,546,983
<SHARES-COMMON-STOCK> 1,188,455
<SHARES-COMMON-PRIOR> 1,085,290
<ACCUMULATED-NII-CURRENT> (9,219)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (507,330)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,024,018)
<NET-ASSETS> 10,353,101
<DIVIDEND-INCOME> 104,877
<INTEREST-INCOME> 23,547
<OTHER-INCOME> 0
<EXPENSES-NET> 190,178
<NET-INVESTMENT-INCOME> (61,754)
<REALIZED-GAINS-CURRENT> (364,438)
<APPREC-INCREASE-CURRENT> (1,179,866)
<NET-CHANGE-FROM-OPS> (1,606,059)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 316,289
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 88,098
<NUMBER-OF-SHARES-REDEEMED> 18,925
<SHARES-REINVESTED> 33,992
<NET-CHANGE-IN-ASSETS> (980,733)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 295,028
<OVERDISTRIB-NII-PRIOR> (10,033)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 402,651
<AVERAGE-NET-ASSETS> 10,280,853
<PER-SHARE-NAV-BEGIN> 10.44
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> (1.39)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.71
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 52
<NAME> Lincoln New Pacific, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,767,716
<INVESTMENTS-AT-VALUE> 10,728,423
<RECEIVABLES> 172,088
<ASSETS-OTHER> 5,833
<OTHER-ITEMS-ASSETS> 346,436
<TOTAL-ASSETS> 11,252,780
<PAYABLE-FOR-SECURITIES> 180,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66,239
<TOTAL-LIABILITIES> 246,364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,546,983
<SHARES-COMMON-STOCK> 63,648
<SHARES-COMMON-PRIOR> 39,703
<ACCUMULATED-NII-CURRENT> (9,219)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (507,330)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,024,018)
<NET-ASSETS> 573,331
<DIVIDEND-INCOME> 5,698
<INTEREST-INCOME> 1,279
<OTHER-INCOME> 0
<EXPENSES-NET> 13,446
<NET-INVESTMENT-INCOME> (6,469)
<REALIZED-GAINS-CURRENT> (21,237)
<APPREC-INCREASE-CURRENT> (46,838)
<NET-CHANGE-FROM-OPS> (74,544)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 15,095
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,512
<NUMBER-OF-SHARES-REDEEMED> 14,072
<SHARES-REINVESTED> 1,505
<NET-CHANGE-IN-ASSETS> 142,239
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 295,028
<OVERDISTRIB-NII-PRIOR> (10,033)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 402,651
<AVERAGE-NET-ASSETS> 537,370
<PER-SHARE-NAV-BEGIN> 10.86
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> (1.46)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.01
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 53
<NAME> Lincoln New Pacific, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,767,716
<INVESTMENTS-AT-VALUE> 10,728,423
<RECEIVABLES> 172,088
<ASSETS-OTHER> 5,833
<OTHER-ITEMS-ASSETS> 346,436
<TOTAL-ASSETS> 11,252,780
<PAYABLE-FOR-SECURITIES> 180,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66,239
<TOTAL-LIABILITIES> 246,364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,546,983
<SHARES-COMMON-STOCK> 1,980
<SHARES-COMMON-PRIOR> 1,183
<ACCUMULATED-NII-CURRENT> (9,219)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (507,330)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,024,018)
<NET-ASSETS> 17,490
<DIVIDEND-INCOME> 192
<INTEREST-INCOME> 43
<OTHER-INCOME> 0
<EXPENSES-NET> 398
<NET-INVESTMENT-INCOME> (163)
<REALIZED-GAINS-CURRENT> (626)
<APPREC-INCREASE-CURRENT> (798)
<NET-CHANGE-FROM-OPS> (1,586)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 342
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,031
<NUMBER-OF-SHARES-REDEEMED> 271
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 4,885
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 295,028
<OVERDISTRIB-NII-PRIOR> (10,033)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 402,651
<AVERAGE-NET-ASSETS> 15,894
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> (1.46)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.83
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 54
<NAME> Lincoln New Pacific, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,767,716
<INVESTMENTS-AT-VALUE> 10,728,423
<RECEIVABLES> 172,088
<ASSETS-OTHER> 5,833
<OTHER-ITEMS-ASSETS> 346,436
<TOTAL-ASSETS> 11,252,780
<PAYABLE-FOR-SECURITIES> 180,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66,239
<TOTAL-LIABILITIES> 246,364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,546,983
<SHARES-COMMON-STOCK> 7,126
<SHARES-COMMON-PRIOR> 4,561
<ACCUMULATED-NII-CURRENT> (9,219)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (507,330)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,024,018)
<NET-ASSETS> 62,494
<DIVIDEND-INCOME> 645
<INTEREST-INCOME> 145
<OTHER-INCOME> 0
<EXPENSES-NET> 884
<NET-INVESTMENT-INCOME> (94)
<REALIZED-GAINS-CURRENT> (2,309)
<APPREC-INCREASE-CURRENT> (4,352)
<NET-CHANGE-FROM-OPS> (6,755)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,631
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,883
<NUMBER-OF-SHARES-REDEEMED> 494
<SHARES-REINVESTED> 176
<NET-CHANGE-IN-ASSETS> 14,717
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 295,028
<OVERDISTRIB-NII-PRIOR> (10,033)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 402,651
<AVERAGE-NET-ASSETS> 58,871
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> (1.41)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.77
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 61
<NAME> Lincoln Government Income, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,907,686
<INVESTMENTS-AT-VALUE> 12,058,039
<RECEIVABLES> 1,048,500
<ASSETS-OTHER> 6,550
<OTHER-ITEMS-ASSETS> 32,500
<TOTAL-ASSETS> 13,145,589
<PAYABLE-FOR-SECURITIES> 741,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,262
<TOTAL-LIABILITIES> 790,612
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,486,146
<SHARES-COMMON-STOCK> 1,128,893
<SHARES-COMMON-PRIOR> 1,056,011
<ACCUMULATED-NII-CURRENT> 5,468
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (286,990)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 150,353
<NET-ASSETS> 11,061,948
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 756,217
<OTHER-INCOME> 0
<EXPENSES-NET> 129,133
<NET-INVESTMENT-INCOME> 627,084
<REALIZED-GAINS-CURRENT> 284,615
<APPREC-INCREASE-CURRENT> 423,198
<NET-CHANGE-FROM-OPS> 1,334,897
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 620,799
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,148
<NUMBER-OF-SHARES-REDEEMED> 5,486
<SHARES-REINVESTED> 65,220
<NET-CHANGE-IN-ASSETS> 1,403,688
<ACCUMULATED-NII-PRIOR> 15,024
<ACCUMULATED-GAINS-PRIOR> (602,768)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,746
<AVERAGE-NET-ASSETS> 10,331,128
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.65
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.57)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.80
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 62
<NAME> Lincoln Government Income, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,907,686
<INVESTMENTS-AT-VALUE> 12,058,039
<RECEIVABLES> 1,048,500
<ASSETS-OTHER> 6,550
<OTHER-ITEMS-ASSETS> 32,500
<TOTAL-ASSETS> 13,145,589
<PAYABLE-FOR-SECURITIES> 741,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,262
<TOTAL-LIABILITIES> 790,612
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,486,146
<SHARES-COMMON-STOCK> 29,209
<SHARES-COMMON-PRIOR> 24,503
<ACCUMULATED-NII-CURRENT> 5,468
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (286,990)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 150,353
<NET-ASSETS> 299,270
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,418
<OTHER-INCOME> 0
<EXPENSES-NET> 5,036
<NET-INVESTMENT-INCOME> 14,382
<REALIZED-GAINS-CURRENT> 7,585
<APPREC-INCREASE-CURRENT> 10,652
<NET-CHANGE-FROM-OPS> 32,620
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,661
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,642
<NUMBER-OF-SHARES-REDEEMED> 634
<SHARES-REINVESTED> 1,698
<NET-CHANGE-IN-ASSETS> 59,539
<ACCUMULATED-NII-PRIOR> 15,024
<ACCUMULATED-GAINS-PRIOR> (602,768)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,746
<AVERAGE-NET-ASSETS> 264,959
<PER-SHARE-NAV-BEGIN> 9.78
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.65
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.75)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 63
<NAME> Lincoln Government Income, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,907,686
<INVESTMENTS-AT-VALUE> 12,058,039
<RECEIVABLES> 1,048,500
<ASSETS-OTHER> 6,550
<OTHER-ITEMS-ASSETS> 32,500
<TOTAL-ASSETS> 13,145,589
<PAYABLE-FOR-SECURITIES> 741,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,262
<TOTAL-LIABILITIES> 790,612
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,486,146
<SHARES-COMMON-STOCK> 1,416
<SHARES-COMMON-PRIOR> 5,071
<ACCUMULATED-NII-CURRENT> 5,468
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (286,990)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 150,353
<NET-ASSETS> 14,696
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 492
<OTHER-INCOME> 0
<EXPENSES-NET> 138
<NET-INVESTMENT-INCOME> 354
<REALIZED-GAINS-CURRENT> (252)
<APPREC-INCREASE-CURRENT> 382
<NET-CHANGE-FROM-OPS> 485
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 224
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,394
<NUMBER-OF-SHARES-REDEEMED> 5,071
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> (34,943)
<ACCUMULATED-NII-PRIOR> 15,024
<ACCUMULATED-GAINS-PRIOR> (602,768)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,746
<AVERAGE-NET-ASSETS> 7,478
<PER-SHARE-NAV-BEGIN> 9.79
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.51)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.38
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 64
<NAME> Lincoln Government Income, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,907,686
<INVESTMENTS-AT-VALUE> 12,058,039
<RECEIVABLES> 1,048,500
<ASSETS-OTHER> 6,550
<OTHER-ITEMS-ASSETS> 32,500
<TOTAL-ASSETS> 13,145,589
<PAYABLE-FOR-SECURITIES> 741,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,262
<TOTAL-LIABILITIES> 790,612
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,486,146
<SHARES-COMMON-STOCK> 101,971
<SHARES-COMMON-PRIOR> 38,592
<ACCUMULATED-NII-CURRENT> 5,468
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (286,990)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 150,353
<NET-ASSETS> 979,063
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 47,076
<OTHER-INCOME> 0
<EXPENSES-NET> 5,825
<NET-INVESTMENT-INCOME> 41,251
<REALIZED-GAINS-CURRENT> 23,316
<APPREC-INCREASE-CURRENT> 19,343
<NET-CHANGE-FROM-OPS> 83,910
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 51,430
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 75,898
<NUMBER-OF-SHARES-REDEEMED> 18,066
<SHARES-REINVESTED> 5,547
<NET-CHANGE-IN-ASSETS> 625,901
<ACCUMULATED-NII-PRIOR> 15,024
<ACCUMULATED-GAINS-PRIOR> (602,768)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,746
<AVERAGE-NET-ASSETS> 645,731
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.78)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.60
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 71
<NAME> Lincoln Corporate Income, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,733,850
<INVESTMENTS-AT-VALUE> 15,291,187
<RECEIVABLES> 344,559
<ASSETS-OTHER> 6,278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,642,024
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,166
<TOTAL-LIABILITIES> 54,166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,567,374
<SHARES-COMMON-STOCK> 1,180,087
<SHARES-COMMON-PRIOR> 1,093,714
<ACCUMULATED-NII-CURRENT> 2,057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (538,910)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 557,337
<NET-ASSETS> 11,517,879
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 830,799
<OTHER-INCOME> 0
<EXPENSES-NET> 131,666
<NET-INVESTMENT-INCOME> 699,133
<REALIZED-GAINS-CURRENT> 68,791
<APPREC-INCREASE-CURRENT> 961,066
<NET-CHANGE-FROM-OPS> 1,728,990
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 633,907
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,773
<NUMBER-OF-SHARES-REDEEMED> 6,735
<SHARES-REINVESTED> 67,335
<NET-CHANGE-IN-ASSETS> 1,897,410
<ACCUMULATED-NII-PRIOR> 772
<ACCUMULATED-GAINS-PRIOR> (643,261)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 236,876
<AVERAGE-NET-ASSETS> 10,536,636
<PER-SHARE-NAV-BEGIN> 8.80
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.56)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 72
<NAME> Lincoln Corporate Income, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,733,850
<INVESTMENTS-AT-VALUE> 15,291,187
<RECEIVABLES> 344,559
<ASSETS-OTHER> 6,278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,642,024
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,166
<TOTAL-LIABILITIES> 54,166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,567,374
<SHARES-COMMON-STOCK> 34,619
<SHARES-COMMON-PRIOR> 22,910
<ACCUMULATED-NII-CURRENT> 2,057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (538,910)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 557,337
<NET-ASSETS> 361,777
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,529
<OTHER-INCOME> 0
<EXPENSES-NET> 5,686
<NET-INVESTMENT-INCOME> 17,843
<REALIZED-GAINS-CURRENT> 2,595
<APPREC-INCREASE-CURRENT> 26,841
<NET-CHANGE-FROM-OPS> 47,280
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24,234
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,034
<NUMBER-OF-SHARES-REDEEMED> 677
<SHARES-REINVESTED> 2,352
<NET-CHANGE-IN-ASSETS> 138,805
<ACCUMULATED-NII-PRIOR> 772
<ACCUMULATED-GAINS-PRIOR> (643,261)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 236,876
<AVERAGE-NET-ASSETS> 299,099
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.85)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 73
<NAME> Lincoln Corporate Income, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,733,850
<INVESTMENTS-AT-VALUE> 15,291,187
<RECEIVABLES> 344,559
<ASSETS-OTHER> 6,278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,642,024
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,166
<TOTAL-LIABILITIES> 54,166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,567,374
<SHARES-COMMON-STOCK> 448
<SHARES-COMMON-PRIOR> 1,001
<ACCUMULATED-NII-CURRENT> 2,057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (538,910)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 557,337
<NET-ASSETS> 4,677
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 406
<OTHER-INCOME> 0
<EXPENSES-NET> 101
<NET-INVESTMENT-INCOME> 305
<REALIZED-GAINS-CURRENT> (99)
<APPREC-INCREASE-CURRENT> 597
<NET-CHANGE-FROM-OPS> 803
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 604
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 445
<NUMBER-OF-SHARES-REDEEMED> 1,004
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> (5,135)
<ACCUMULATED-NII-PRIOR> 772
<ACCUMULATED-GAINS-PRIOR> (643,261)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 236,876
<AVERAGE-NET-ASSETS> 5,308
<PER-SHARE-NAV-BEGIN> 9.80
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 1.33
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.87)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.44
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 74
<NAME> Lincoln Corporate Income, Class D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 14,733,850
<INVESTMENTS-AT-VALUE> 15,291,187
<RECEIVABLES> 344,559
<ASSETS-OTHER> 6,278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,642,024
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,166
<TOTAL-LIABILITIES> 54,166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,567,374
<SHARES-COMMON-STOCK> 390,199
<SHARES-COMMON-PRIOR> 147,326
<ACCUMULATED-NII-CURRENT> 2,057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (538,910)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 557,337
<NET-ASSETS> 3,703,525
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 202,081
<OTHER-INCOME> 0
<EXPENSES-NET> 23,213
<NET-INVESTMENT-INCOME> 178,868
<REALIZED-GAINS-CURRENT> 33,064
<APPREC-INCREASE-CURRENT> 231,085
<NET-CHANGE-FROM-OPS> 443,017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 236,120
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 307,225
<NUMBER-OF-SHARES-REDEEMED> 90,608
<SHARES-REINVESTED> 26,256
<NET-CHANGE-IN-ASSETS> 2,401,293
<ACCUMULATED-NII-PRIOR> 772
<ACCUMULATED-GAINS-PRIOR> (643,261)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 236,876
<AVERAGE-NET-ASSETS> 2,574,145
<PER-SHARE-NAV-BEGIN> 8.84
<PER-SHARE-NII> 0.73
<PER-SHARE-GAIN-APPREC> 0.78
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.86)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.49
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 81
<NAME> Lincoln Tax-Free Income, Class A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,068,221
<INVESTMENTS-AT-VALUE> 10,935,018
<RECEIVABLES> 239,212
<ASSETS-OTHER> 6,460
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,180,690
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50,600
<TOTAL-LIABILITIES> 50,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,264,858
<SHARES-COMMON-STOCK> 1,115,574
<SHARES-COMMON-PRIOR> 1,057,514
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,565)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (133,203)
<NET-ASSETS> 10,949,759
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 550,520
<OTHER-INCOME> 0
<EXPENSES-NET> 112,339
<NET-INVESTMENT-INCOME> 438,181
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 964,323
<NET-CHANGE-FROM-OPS> 1,402,504
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 437,188
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,484
<NUMBER-OF-SHARES-REDEEMED> 3,463
<SHARES-REINVESTED> 46,039
<NET-CHANGE-IN-ASSETS> 1,511,068
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,630)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31,052
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 223,567
<AVERAGE-NET-ASSETS> 10,212,412
<PER-SHARE-NAV-BEGIN> 8.93
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> 0.89
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.40)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 82
<NAME> Lincoln Tax-Free Income, Class B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,068,221
<INVESTMENTS-AT-VALUE> 10,935,018
<RECEIVABLES> 239,212
<ASSETS-OTHER> 6,460
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,180,690
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50,600
<TOTAL-LIABILITIES> 50,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,264,858
<SHARES-COMMON-STOCK> 16,308
<SHARES-COMMON-PRIOR> 9,900
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,565)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (133,203)
<NET-ASSETS> 169,947
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,749
<OTHER-INCOME> 0
<EXPENSES-NET> 2,199
<NET-INVESTMENT-INCOME> 4,550
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 11,783
<NET-CHANGE-FROM-OPS> 16,333
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,574
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,324
<NUMBER-OF-SHARES-REDEEMED> 438
<SHARES-REINVESTED> 522
<NET-CHANGE-IN-ASSETS> 74,244
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,630)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31,052
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 223,567
<AVERAGE-NET-ASSETS> 125,488
<PER-SHARE-NAV-BEGIN> 9.67
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.88
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.56)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 83
<NAME> Lincoln Tax-Free Income, Class C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,068,221
<INVESTMENTS-AT-VALUE> 10,935,018
<RECEIVABLES> 239,212
<ASSETS-OTHER> 6,460
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,180,690
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50,600
<TOTAL-LIABILITIES> 50,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,264,858
<SHARES-COMMON-STOCK> 1,017
<SHARES-COMMON-PRIOR> 750
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,565)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (133,203)
<NET-ASSETS> 10,384
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 670
<OTHER-INCOME> 0
<EXPENSES-NET> 216
<NET-INVESTMENT-INCOME> 454
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 1,418
<NET-CHANGE-FROM-OPS> 1,872
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 988
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,070
<NUMBER-OF-SHARES-REDEEMED> 1,873
<SHARES-REINVESTED> 70
<NET-CHANGE-IN-ASSETS> 3,156
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,630)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31,052
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 223,567
<AVERAGE-NET-ASSETS> 12,318
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.10
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.66)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Lincoln Advisor Funds, Inc.
form N-SAR for the period ended April 30, 1995
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 91
<NAME> Lincoln Cashfund, Regular
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,434,499
<INVESTMENTS-AT-VALUE> 11,434,499
<RECEIVABLES> 45,017
<ASSETS-OTHER> 6,087
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,485,603
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33,580
<TOTAL-LIABILITIES> 33,580
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,452,023
<SHARES-COMMON-STOCK> 11,452,023
<SHARES-COMMON-PRIOR> 10,896,917
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,452,023
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 665,485
<OTHER-INCOME> 0
<EXPENSES-NET> 122,963
<NET-INVESTMENT-INCOME> 542,522
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 542,522
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 542,522
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 883,280
<NUMBER-OF-SHARES-REDEEMED> 869,006
<SHARES-REINVESTED> 540,832
<NET-CHANGE-IN-ASSETS> 555,106
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27,946
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 162,057
<AVERAGE-NET-ASSETS> 11,177,370
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
