[JANUS LOGO]
Lincoln National
Capital Appreciation Fund, Inc.
Annual Report
December 31, 1999
<PAGE>
Lincoln National Capital Appreciation Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
<PAGE>
Lincoln National
Capital Appreciation Fund, Inc.
Managed by: [JANUS LOGO]
The Capital Appreciation Fund returned 45.5% for the year ended December 31,1999
versus its benchmark the S&P 500 Index* of 21.1%. A persistent rise in interest
rates could not discourage the bulls in the second half and the broad stock
market averages finished the period higher. Many of our core holdings gained
substantially as improving company fundamentals translated into superior stock
price performance, allowing us to outpace the S&P 500 Index. The accelerating
pace of cellular subscriber growth buoyed wireless positions Nokia and Sprint
PCS while also providing lift for several of our microchip and
telecommunications infrastructure stocks. Texas Instruments, which dominates the
market for microchips used in cellular handsets, and Cisco Systems, a leading
supplier of voice and data network solutions, were two examples. Meanwhile,
heightened industry consolidation and the strongest advertising market on record
helped push media holdings such as Liberty Media, Viacom and Comcast to
substantial gains. Disappointments included office product retailer Staples and
drug company Schering-Plough, which lost ground with other large-cap
pharmaceutical companies because of higher interest rates, pipeline
disappointments and regulatory uncertainty.
Jim Craig
Growth of $10,000 invested 1/3/94 through 12/31/99
1/3/94 12/31/99
Capital Appreciation Fund $10,000 $39,222
S&P 500 Index $10,000 $35,543
This chart illustrates, hypothetically, that $10,000 was invested in the Capital
Appreciation Fund on 1/3/94. As the chart shows, by December 31, 1999, the value
of the investment at net asset value, with any dividends and capital gains
reinvested, would have grown to $39,222. For comparison, look at how the S&P 500
Index did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $35,545. Past
performance is not indicative of future performance. Remember, an investor
cannot invest directly in an index.
Average annual return Ended
on investments 12/31/99
- ---------------------------------------------
One Year +45.46%
- ---------------------------------------------
Five Years +30.73%
- ---------------------------------------------
Lifetime
(since 1/3/94) +25.58%
- ---------------------------------------------
* Standard & Poor's 500 Index - Broad based measurement of changes in stock
market conditions based on average performance of 500 widely held common
stocks. An investor cannot invest directly in the above index/indexes, which
is/are unmanaged.
Capital Appreciation Fund 1
<PAGE>
Lincoln National
Capital Appreciation Fund, Inc.
Statement of Net Assets
December 31, 1999
Investments:
Number Market
Common Stock: of Shares Value
- -------------------------------------------------------------------------------
Automobiles & Auto Parts: 0.1%
- -------------------------------------------------------------------------------
Federal-Mogul 51,490 $ 1,036,236
- -------------------------------------------------------------------------------
Banking, Finance & Insurance: 11.2%
American Express 281,230 46,754,488
American International Group 239,241 25,867,933
Bank of New York 1,282,485 51,299,400
Citigroup 290,000 16,113,125
M & T Bank 13,450 5,571,663
Northern Trust 108,010 5,768,409
Progessive 86,260 6,307,763
Prudential PLC (United Kingdom) 1,532,971 30,074,753
Schwab (Charles) 674,890 25,898,904
- -------------------------------------------------------------------------------
213,656,438
Business Services: 1.1%
- -------------------------------------------------------------------------------
Paychex 527,137 21,069,007
- -------------------------------------------------------------------------------
Cable, Media & Publishing: 18.1%
- -------------------------------------------------------------------------------
AT&T Liberty Media Class A 826,975 46,930,831
Adelphia Communications Class A 201,915 13,244,362
Charter Communications Class A 184,775 4,041,953
Clear Channel Communications 295,130 26,340,353
Cox Communications Class A 929,863 47,887,945
Infinity Broadcasting Class A 478,630 17,320,423
New York Times 118,450 5,818,856
Telewest Communications (United Kingdom) 2,967,884 15,814,400
Time Warner 1,351,477 97,897,615
Univision Communications Class A 273,415 27,939,595
Viacom Class B 715,140 43,221,274
- -------------------------------------------------------------------------------
346,457,607
Computers & Technology: 19.3%
- -------------------------------------------------------------------------------
I2 Technologies 52,305 10,189,668
America Online 334,280 25,217,248
Apple Computer 156,430 16,078,071
Automatic Data Processing 565,285 30,454,729
Bea Systems 87,315 6,114,779
Cisco Systems 697,491 74,696,927
Dell Computer 391,220 19,939,994
EMC 187,960 20,534,630
Linear Technology 631,400 45,184,563
Microsoft 313,210 36,557,480
Network Solutions Class A 34,855 7,584,230
Pitney Bowes 157,070 7,588,444
Sun Microsystems 900,910 69,736,065
- -------------------------------------------------------------------------------
369,876,828
Consumer Products: 2.6%
- -------------------------------------------------------------------------------
Gemstar International Group Limited 115,130 8,195,817
Tyco International 1,071,808 41,666,536
- -------------------------------------------------------------------------------
49,862,353
Electronics & Electrical Equipment: 10.0%
- -------------------------------------------------------------------------------
Conexant Systems 73,190 4,846,550
General Electric 459,385 71,089,829
Maxim Integrated Products * 1,033,400 48,731,269
Pittway 99,374 4,453,197
Symbol Technologies 117,220 7,450,796
Texas Instruments 558,845 54,138,109
- -------------------------------------------------------------------------------
190,709,750
Energy: 2.6%
- -------------------------------------------------------------------------------
Enron 1,119,310 49,669,381
- -------------------------------------------------------------------------------
Number Market
of Shares Value
- -------------------------------------------------------------------------------
Environmental Services: 0.1%
- -------------------------------------------------------------------------------
Pe Corp - Pe Biosystems Group 7,960 $ 957,687
- -------------------------------------------------------------------------------
Food, Beverage & Tobacco: 3.2%
- -------------------------------------------------------------------------------
Anheuser Busch 112,475 7,971,666
McDonald's 1,230,225 49,593,445
U.S. Foodservice * 177,450 2,972,288
- -------------------------------------------------------------------------------
60,537,399
Healthcare & Pharmaceuticals: 3.3%
- -------------------------------------------------------------------------------
Allergan 208,440 10,369,890
Genetech 233,680 31,429,960
Medtronic 195,830 7,135,556
Schering-Plough 363,165 15,321,023
- -------------------------------------------------------------------------------
64,256,429
Industrial Machinery: 1.4%
- -------------------------------------------------------------------------------
Dionex 647,455 26,646,820
- -------------------------------------------------------------------------------
Leisure, Lodging & Entertainment: 0.7%
- -------------------------------------------------------------------------------
Carnival Cruise Lines 129,815 6,206,780
Royal Caribbean Cruises 148,220 7,309,099
- -------------------------------------------------------------------------------
13,515,879
Retail: 3.7%
- -------------------------------------------------------------------------------
Costco Wholesale 190,540 17,380,821
Colgate-Palmolive 126,205 8,203,325
Home Depot 357,915 24,539,547
Staples 666,710 13,792,563
Wal-Mart Stores 104,315 7,210,774
- -------------------------------------------------------------------------------
71,127,030
Telecommunications: 18.2%
- -------------------------------------------------------------------------------
Adelphia Business Solutions 105,000 5,007,187
Comcast - Special Class A 2,103,415 106,288,189
Lucent Technologies 736,335 55,087,062
NTL 154,056 19,199,229
NTT Mobile Communications (Japan) 608 23,397,205
Nextel Communications 315,635 32,539,995
Nokia 312,585 59,391,150
Nokia Oyj (Finland) 6,808 1,233,344
Omnipoint 53,585 6,453,643
Sprint 88,140 9,034,350
Voicestream Wireless 180,645 25,668,525
Winstar Communications 75,000 5,639,063
- -------------------------------------------------------------------------------
348,938,942
Utilities: 0.5%
- -------------------------------------------------------------------------------
Telefonica (Spain) 416,588 10,398,020
- -------------------------------------------------------------------------------
Total Common Stock: 96.1%
(Cost $1,170,530,762) 1,838,715,806
- -------------------------------------------------------------------------------
Par
Money Market Instruments: Amount
- -------------------------------------------------------------------------------
Associates Corp
4.0013% 1/03/00 $22,500,000 22,495,000
Federal Home Loan Bank Association
5.5200% 1/19/00 10,000,000 9,972,400
Federal National Mortgage Association
5.5586% 1/28/00 15,000,000 14,938,350
5.3416% 5/15/00 15,000,000 14,714,250
- -------------------------------------------------------------------------------
Total Money Market Instruments: 3.3%
(Cost $62,120,000) $62,120,000
- -------------------------------------------------------------------------------
Convertible Bonds:
- -------------------------------------------------------------------------------
Amazon.com
4.7500% 2/01/09 7,490,000 8,510,512
NTL
5.7500% 12/15/09 7,000,000 7,560,000
- -------------------------------------------------------------------------------
Total Convertible Bonds: 0.8%
(Cost $14,994,516) 16,070,512
- -------------------------------------------------------------------------------
Capital Appreciation Fund 2
<PAGE>
Market
Value
- -------------------------------------------------------------------------------
Total Investments: 100.2%
(Cost $1,247,645,278) $1,916,906,318
- -------------------------------------------------------------------------------
Other Assets Under Liabilities: (0.2%) (3,830,119)
- -------------------------------------------------------------------------------
Net Assets: 100.0%
(Equivalent to $31.466 per share
based on 60,799,038 shares
issued and outstanding) $1,913,076,199
- -------------------------------------------------------------------------------
Components of Net Assets at December 31, 1999:
- -------------------------------------------------------------------------------
Common Stock, par value $.01 per share,
100,000,000 authorized shares $ 607,990
Paid in capital in excess of par value of shares issued 1,147,067,834
Undistributed net investment income** 330,317
Accumulated net realized gain on investments 95,661,369
Net unrealized appreciation of investments and
foreign currency 669,408,689
- -------------------------------------------------------------------------------
Total Net Assets $1,913,076,199
- -------------------------------------------------------------------------------
* Non-income producing security.
** Undistributed net investment income includes net realized gain on foreign
currencies. Net realized gains on foreign currencies are treated as net
invest-ment income in accordance with provisions of the Internal Revenue
Code. See accompanying notes to financial statements.
Capital Appreciation Fund 3
<PAGE>
Lincoln National Capital Appreciation Fund, Inc.
Statement of Operations
Year ended December 31, 1999
Investment income:
Dividends $ 4,163,209
- -------------------------------------------------------------------------------
Interest 5,964,014
- -------------------------------------------------------------------------------
Less: Foreign withholding tax (31,167)
- -------------------------------------------------------------------------------
Total investment income 10,096,056
- -------------------------------------------------------------------------------
Expenses:
Management fees 9,051,341
- -------------------------------------------------------------------------------
Accounting fees 466,101
- -------------------------------------------------------------------------------
Printing and postage 88,560
- -------------------------------------------------------------------------------
Custody fees 66,454
- -------------------------------------------------------------------------------
Directors fees 4,200
- -------------------------------------------------------------------------------
Other 96,462
- -------------------------------------------------------------------------------
Total expenses 9,773,118
- -------------------------------------------------------------------------------
Net investment income 322,938
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investment
and foreign currency:
Net realized gain on:
Investment transactions 101,613,151
- -------------------------------------------------------------------------------
Foreign currency transactions 7,379
- -------------------------------------------------------------------------------
Net realized gain on investment and foreign currency
transactions 101,620,530
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments 417,687,959
- -------------------------------------------------------------------------------
Foreign currency 143,057
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation on
investments and foreign currency 417,831,016
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 519,451,546
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $519,774,484
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
Year ended Year ended
12/31/99 12/31/98
-----------------------------
Changes from operations:
Net investment income (loss) $ 322,938 $ (95,825)
- -------------------------------------------------------------------------------
Net realized gain on investment
and foreign currency transactions 101,620,530 7,137,985
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments and foreign currency 417,831,016 187,316,139
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 519,774,484 194,358,299
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income - (1,290,717)
- -------------------------------------------------------------------------------
Net realized gain on investment transactions (7,376,586) (47,582,501)
- -------------------------------------------------------------------------------
Total distributions to shareholders (7,376,586) (48,873,218)
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share transactions 629,941,949 174,215,604
- -------------------------------------------------------------------------------
Total increase in net assets 1,142,339,847 319,700,685
- -------------------------------------------------------------------------------
Net Assets, beginning of year 770,736,352 451,035,667
- -------------------------------------------------------------------------------
Net Assets, end of year $1,913,076,199 $770,736,352
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
Capital Appreciation Fund 4
<PAGE>
Lincoln National Capital Appreciation Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each year)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 21.772 $ 17.530 $ 14.504 $ 12.916 $ 10.152
Income (loss) from investment operations:
Net investment income (loss)(2) 0.007 (0.003) 0.050 0.135 0.116
Net realized and unrealized gain
on investments and foreign currency 9.839 6.127 3.510 2.051 2.764
------------------------------------------------------
Total from investment operations 9.846 6.124 3.560 2.186 2.880
------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income - (0.050) - (0.135) (0.116)
Distributions from net realized gain on
investment transactions (0.152) (1.832) (0.534) (0.463) -
------------------------------------------------------
Total dividends and distributions (0.152) (1.882) (0.534) (0.598) (0.116)
------------------------------------------------------
Net asset value, end of year $31.466 $21.772 $17.530 $14.504 $12.916
------------------------------------------------------
Total Return(1) 45.46% 37.96% 25.29% 18.02% 28.69%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.78% 0.83% 0.89% 0.93% 1.07%
Ratio of net investment income (loss)
to average net assets 0.03% (0.01%) 0.35% 0.99% 1.00%
Portfolio Turnover 59.68% 77.99% 137.07% 92.73% 195.63%
Net assets, end of year (000 omitted) $1,913,076 $770,736 $451,036 $267,242 $127,936
</TABLE>
1 Total return percentages in this table are calculated on the basis prescribed
by the Securities and Exchange Commission. These percentages are based on the
underlying mutual fund shares. The total return percentages in the table are
NOT calculated on the same basis as the performance percentages in the letter
at the front of this booklet (those percentages are based upon the change in
unit value).
2 Per share information for the years ended December 31, 1999 and 1998 were
based on the average shares outstanding method.
See accompanying notes to financial statements.
Capital Appreciation Fund 5
<PAGE>
Lincoln National Capital Appreciation Fund, Inc.
Notes to Financial Statements
December 31, 1999
The Fund: Lincoln National Capital Appreciation Fund, Inc. (the "Fund") is
registered as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended. The Fund's shares are sold only to
The Lincoln National Life Insurance Company and Lincoln Life & Annuity Company
of New York (the "Companies") for allocation to their variable annuity products
and variable universal life products.
The Fund's investment objective is to maximize long-term growth of capital in a
manner consistent with preservation of capital. The Fund primarily buys stocks
in a large number of companies of all sizes if the companies are competing well
and if their products or services are in high demand. It may also buy money
market securities and bonds, including high-risk bonds.
1. Significant Accounting Policies
Security Valuation: All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (NYSE) on the valuation
date. If on a particular day an equity security does not trade, then the mean
between the bid and asked prices will be used. Other securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors. Money market instruments having less than 60 days to maturity are
stated at amortized cost, which approximates market value.
Investment Transactions and Investment Income: Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis and includes
amortization of any premium and discount. Foreign dividends are also recorded on
the ex-dividend date or as soon after the ex-dividend date that the Fund is
aware of such dividends, net of all non-rebatable tax withholdings. Withholding
taxes on foreign interest and dividends have been provided for in accordance
with the applicable country's tax rules and rates. Realized gains or losses from
investment transactions are reported on an identified cost basis.
Foreign Currency Transactions: The books and records of the Fund are maintained
in U.S. dollars. All assets and liabilities denominated in a foreign currency
are translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the rate of exchange prevailing
on the respective dates of such transactions. It is not practical to isolate
that portion of both realized and unrealized gains and losses on investments in
equity securities that result from fluctuations in foreign currency exchange
rates in the statement of operations. The Fund does isolate that portion of
gains and losses on investments in debt securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
debt securities.
Reported net realized gains and losses on foreign currency transactions arise
from sales and maturities of forward foreign currency contracts, currency gains
and losses between the trade and settlement dates on securities transactions,
and the differences between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net change in unrealized appreciation or
depreciation on translation of assets and liabilities denominated in foreign
currencies arise from changes in the value of such assets and liabilities at the
end of the period resulting from changes in exchange rates.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
Taxes: The Fund has complied with the special provisions of the Internal Revenue
Code for regulated investment companies. As such, the Fund is not subject to
U.S. federal income taxes to the extent that it distributes all of its taxable
income for its fiscal year.
2. Management Fees and Other Transactions With Affiliates
Lincoln Investment Management Company (the "Advisor") and its affiliates manage
the Fund's investment portfolios and maintain its accounts and records. For
these services, the Advisor receives a management fee at an annual rate of .75%
of average daily net assets of the Fund on the first $500 million and .70% in
excess of $500 million. The sub-advisor, Janus Capital Management, is paid
directly by the Advisor.
Delaware Service Company ("Delaware"), an affiliate of the Advisor, provides
accounting services and other administration support to the Fund. For these
services, the Fund pays Delaware a monthly fee based on average net assets,
subject to certain minimums.
Capital Appreciation Fund 6
<PAGE>
Notes to Financial Statements - (Continued)
If the aggregate annual expenses of the Fund, including the management fee, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses, exceed
1.50% of the average daily net assets of the Fund, the Advisor will reimburse
the Fund in the amount of such excess. No reimbursement was due for the year
ended December 31, 1999.
Certain officers and directors of the Fund are also officers or directors of the
Companies and receive no compensation from the Fund. The compensation of
unaffiliated directors of the Fund is borne by the Fund.
3. Investments
The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of investments purchased, and the aggregate
proceeds from investments sold for the year ended December 31, 1999 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized appreciation at December 31, 1999 are as
follows:
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Appreciation
-----------------------------------------------------------------------
$1,248,185,502 $673,448,405 $686,689,481 $(17,428,441) $669,261,040
4. Supplemental Financial Instrument Information
Forward Foreign Curency Contracts: The Fund may enter into forward foreign
currency contracts to hedge risks of fluctuations in specific transactions or
portfolio positions. Forward foreign currency contracts obligate the Fund to
take or deliver a foreign currency at a future date at a specified price. The
realized and unrealized gain or loss on the contracts is reflected in the
accompanying financial statements. The Fund is subject to the credit risks that
the counter parties to these contracts will fail to perform; although this risk
is minimized by purchasing such agreements from financial institutions with long
standing, superior performance records. In addition, the Fund is subject to the
market risks associated with unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. Forward foreign currency contracts that
were open at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Contracts to Foreign U.S. Cost Unrealized
Receive (Deliver) Currency (Proceeds) Settlement Dates Gain (Loss)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(11,800,000) Great Britain Pound $(19,190,536) April 2000 $ 137,115
(1,100,000) Great Britain Pound (1,786,136) April 2000 10,065
(30,000,000) Japanese Yen (299,410) March 2000 1,999
-----------
$ 149,179
===========
</TABLE>
5. Market Risks
The Fund invests in foreign securities. As a result, there may be additional
risks, such as the investments being subject to restrictions as to repatriation
of cash back to the United States and to political or economic uncertainties. At
December 31, 1999 the Fund did not have investments in excess of 5% of assets in
any individual foreign country.
6. Summary of Changes From Capital Share Transactions
<TABLE>
<CAPTION>
Shares Issued Upon Net Increase
Capital Reinvestment of Capital Shares Resulting From Capital
Shares Sold Dividends Redeemed Share Transactions
------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1999: 25,575,402 $635,678,317 313,390 $ 7,376,586 (489,775) $ (13,112,954) 25,399,017 $629,941,949
Year ended
December 31, 1998: 7,536,050 138,042,283 2,876,629 48,873,218 (741,305) (12,699,897) 9,671,374 174,215,604
</TABLE>
7. Distributions to Shareholders
The Fund declares and distributes dividends from net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
Capital Appreciation Fund 7
<PAGE>
Lincoln National Capital Appreciation Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and Board of Directors
Lincoln National Capital Appreciation Fund, Inc.
We have audited the accompanying statement of net assets of Lincoln National
Capital Appreciation Fund, Inc. (the "Fund") as of December 31, 1999, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the Fund's 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
audits provide 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
Lincoln National Capital Appreciation Fund, Inc. at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its financial highlights
for each of the five years in the period then ended in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 4, 2000
Capital Appreciation Fund 8
