Lincoln Advisor Funds, Inc. (the "Fund")
Supplement dated February 26, 1996
to the Prospectus dated January 27, 1995
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.
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
Adviser Funds, Inc. With the exception of the Lincoln New
Pacific Portfolio which will have lower advisory fees, the
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%.
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.
