[LOGO OF PUTNAM INVESTMENTS]
Lincoln National
Aggressive Growth Fund, Inc.
Semi-Annual Report
June 30, 2000
<PAGE>
Lincoln National Aggressive Growth Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
<PAGE>
Lincoln National Aggressive Growth Fund, Inc.
Managed by: [LOGO OF PUTNAM INVESTMENTS]
The Fund returned 16.7% (net of fees) for the six months ended June 30, 2000
while its benchmark, the Russell Midcap(R) Growth Index, returned 12.2% for the
same period.
The U.S. economy remained generally favorable throughout the period, despite
three Fed interest-rate hikes, growing inflation concerns, and record levels of
stock market volatility. U.S. equity markets broadened and the divergence
between growth and value narrowed; the S&P 500's flat performance -0.5%, masked
dramatic volatility, especially in the second half of the period and
particularly in the technology sector, which took a steep dive in April before
firming at the period's end. Throughout the period, growth stocks outperformed
their value counterparts and mid-cap stocks outperformed large- and small-cap
stocks.
While portfolio performance was driven primarily by solid stock selection,
favorable sector allocation also aided returns. With respect to stock selection,
technology, health care, and utilities were particularly strong and worked to
offset weaker returns among consumer cyclicals. Overweight exposure to energy -
the period's top-performing sector - and a market-weight position in the strong
technology sector also significantly aided portfolio performance.
We believe that high-quality growth companies, particularly within the
technology and communications services sectors, will continue to benefit from
persistent demand and visible earnings growth.
Eric M. Wetlaufer
Aggressive Growth Fund 1
<PAGE>
Lincoln National
Aggressive Growth Fund, Inc.
Statement of Net Assets - Unaudited
June 30, 2000
Investments:
Number Market
Common Stock: of Shares Value
---------------------------------------------------------------------
Automobiles & Auto Parts: 0.9%
---------------------------------------------------------------------
Danaher 109,000 $ 5,388,687
---------------------------------------------------------------------
Banking, Finance & Insurance: 1.2%
---------------------------------------------------------------------
Legg Mason 32,200 1,610,000
M & T Bank 6,200 2,790,000
Zions Bancorp 66,300 3,042,548
---------------------------------------------------------------------
7,442,548
Business Services: 2.5%
---------------------------------------------------------------------
Cintas 61,000 2,237,937
Convergys 99,000 5,135,625
Diamond Partners 43,000 3,784,000
Young & Rubicam 76,600 4,380,562
---------------------------------------------------------------------
15,538,124
Cable, Media & Publishing: 5.1%
---------------------------------------------------------------------
Interpublic Group 206,600 8,883,800
Omnicom Group 41,600 3,705,000
Primedia 48,700 1,107,925
Radio One 79,900 2,362,044
Radio One - Class D 159,800 3,525,587
Spanish Broadcasting Systems 232,400 4,778,725
Univision Communications 73,600 7,617,600
---------------------------------------------------------------------
31,980,681
Chemicals: 0.9%
---------------------------------------------------------------------
Praxair 144,300 5,402,231
---------------------------------------------------------------------
Computers & Technology: 31.1%
---------------------------------------------------------------------
I2 Technologies 57,500 5,995,273
Akamai Technologies 26,700 3,170,208
Apple Computer 89,600 4,692,800
Bea Systems 114,000 5,635,875
BMC Software 28,400 1,036,156
Bookham Technology 76,300 4,520,775
Broadvision 116,200 5,904,412
Brocade Communications Systems 51,000 9,357,703
CMGI 94,700 4,338,444
Comverse Technology 122,500 11,392,500
Crossroads Systems 35,900 906,475
Finisar 152,500 3,993,594
Fiserv 162,100 7,010,825
Foundry Networks 13,500 1,491,750
General Motors H Class 37,500 3,290,625
Handspring 49,550 1,337,850
Infospace 67,700 3,740,425
Inktomi 29,200 3,452,900
Intuit 116,900 4,836,737
ISS Group 30,100 2,971,905
Jabil Circuit 73,800 3,662,325
Lexmark International Group 77,400 5,205,150
Macromedia 38,800 3,751,475
Macrovision 12,300 786,239
Mercury Interactive 30,000 2,902,500
Micromuse 4,800 794,325
Peregrine Systems 248,900 8,633,719
Perkinelmer 103,300 6,830,713
Phone.com 22,200 1,445,775
Portal Software 114,600 7,320,075
Quest Software 51,700 2,862,888
Rational Software 126,300 11,738,006
Redback Networks 67,100 11,943,800
Scient 28,700 1,266,388
Siebel Systems 31,300 5,119,506
Storagenetworks 1,600 144,400
Number Market
Computers & Technology (Cont.) of Shares Value
---------------------------------------------------------------------
Teradyne 59,000 $ 4,336,500
Tibco Software 7,700 825,705
VeriSign 20,300 3,582,950
Veritas Software 104,350 11,793,178
Vignette 184,300 9,586,475
Ziff-Davis 121,200 1,090,800
---------------------------------------------------------------------
194,700,124
Consumer Products: 0.9%
---------------------------------------------------------------------
Estee Lauder Class A 117,400 5,803,963
---------------------------------------------------------------------
Electronics & Electronic Equipment: 16.9%
---------------------------------------------------------------------
Altera 44,000 4,485,250
Analog Devices 72,000 5,472,000
Applied Micro Circuits 79,900 7,890,125
Atmel 72,500 2,673,438
E-Tek Dynamics 33,600 8,864,100
Florida Progress 50,900 2,385,938
Globespan 9,000 1,098,703
JDS Uniphase 49,100 5,885,863
Lam Research 116,900 4,383,750
LSI Logic 46,100 2,495,163
LTX. 82,500 2,882,344
Maxim Integrated Products 85,100 5,782,469
PMC - Sierra 26,500 4,708,719
RF Micro Devices 49,200 4,311,150
Sanmina 63,800 5,454,900
Sawtek 104,900 6,038,306
SCI Systems 130,300 5,106,131
Symbol Technologies 246,900 13,332,600
Vitesse Semiconductor 108,700 7,996,244
Waters 13,400 1,672,488
Xilinx 33,700 2,782,356
---------------------------------------------------------------------
105,702,037
Energy: 5.6%
---------------------------------------------------------------------
BJ Services 65,900 4,118,750
Cooper Cameron 66,100 4,362,600
Devon Energy 86,400 4,854,600
Global Marine 223,500 6,299,906
Murphy Oil 72,400 4,303,275
Smith International 55,400 4,033,813
Transocean Sedco Forex 127,400 6,807,938
---------------------------------------------------------------------
34,780,882
Environmental Services: 2.4%
---------------------------------------------------------------------
Ecolab 175,300 6,847,656
PE Corp- PE Biosystems Group 127,000 8,366,125
---------------------------------------------------------------------
15,213,781
Food, Beverage & Tobacco: 0.5%
---------------------------------------------------------------------
Darden Restaurants 180,800 2,938,000
---------------------------------------------------------------------
Healthcare & Pharmaceuticals: 13.3%
---------------------------------------------------------------------
Abgenix 11,000 1,318,453
Allergan 193,000 14,378,500
Andrx 41,800 2,671,934
Diversa 42,300 1,401,188
Forest Laboratories 85,900 8,675,900
Gilead Sciences 52,400 3,726,950
Health Management Associates 126,200 1,648,488
Idec Pharmaceuticals 13,400 1,571,988
Idexx Laboratories 100,800 2,305,800
Immunex 92,000 4,548,250
Inhale Therapeutic Systems 43,000 4,363,156
Ivax 245,050 10,169,575
Medarex 3,900 329,550
Medimmune 173,200 12,816,800
Millenium Pharmaceuticals 12,700 1,420,813
Protein Design Labs 9,700 1,600,045
Sepracor 77,200 9,312,250
United Therapeutics 7,000 758,625
---------------------------------------------------------------------
83,018,265
Leisure, Lodging & Entertainment: 0.9%
---------------------------------------------------------------------
Harley-Davidson 149,300 5,748,050
---------------------------------------------------------------------
Aggressive Growth Fund 2
<PAGE>
Number Market
Packaging & Containers: 0.2% of Shares Value
---------------------------------------------------------------------
Sealed Air 33,400 $ 1,749,325
---------------------------------------------------------------------
Retail: 4.9%
---------------------------------------------------------------------
BJ's Wholesale Club 171,500 5,659,500
Circuit City Stores 90,400 3,000,150
Family Dollar Stores 303,500 5,937,219
Linens N Things 167,100 4,532,588
Radioshack 71,000 3,363,625
Starbucks 72,300 2,760,956
Tiffany 84,500 5,703,750
---------------------------------------------------------------------
30,957,788
Telecommunications: 6.2%
---------------------------------------------------------------------
ADC Telecommunications 76,900 6,449,988
Allegiance Telecom 96,500 6,176,000
Crown Castle 153,500 5,602,750
McLeod 318,700 6,593,106
Network Appliance 5,600 450,800
NTL 63,625 3,809,547
Telephone & Data Systems 51,100 5,122,775
Voicestream Wireless 40,046 4,657,265
---------------------------------------------------------------------
38,862,231
Textiles, Apparel & Furniture: 0.3%
---------------------------------------------------------------------
Furniture Brands International 126,200 1,908,775
---------------------------------------------------------------------
Utilities: 1.2%
---------------------------------------------------------------------
Calpine 110,700 7,278,525
---------------------------------------------------------------------
Common Stock: 95.0%
(Cost $456,862,903) 594,414,017
---------------------------------------------------------------------
Par Market
Repurchase Agreement: Amount Value
---------------------------------------------------------------------
Warburg, Dillon & Read Repurchase
Agreement, dated 6/30/00, 6.58%
maturing 7/3/00, collateralized by
$24,224,000 U.S. Treasury Bonds,
7.50%, 11/15/16 market value
$27,602,112 $27,014,000 $ 27,014,000
---------------------------------------------------------------------
Total Repurchase Agreement: 4.3%
(Cost $27,014,000) 27,014,000
---------------------------------------------------------------------
Total Investments: 99.3%
(Cost $483,876,903) 621,428,017
---------------------------------------------------------------------
Other Assets Over Liabilities: 0.7% 4,088,758
---------------------------------------------------------------------
Net Assets: 100.0%
(Equivalent to $21.170 per share
based on 29,546,684 shares
issued and outstanding) $625,516,775
---------------------------------------------------------------------
Components of Net Assets at June 30, 2000:
---------------------------------------------------------------------
Common Stock, par value $.01 per share,
50,000,000 authorized shares $ 295,467
Paid in capital in excess of par value
of shares issued 407,698,925
Undistributed net investment loss (1,120,671)
Accumulated net realized gain on investments 81,091,940
Net unrealized appreciation of investments 137,551,114
---------------------------------------------------------------------
Total Net Assets $625,516,775
---------------------------------------------------------------------
* Non-income producing security.
See accompanying notes to financial statements.
Aggressive Growth Fund 3
<PAGE>
Lincoln National Aggressive Growth Fund, Inc.
Statement of Operations - Unaudited
Six months ended June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
Investment income:
Dividends $ 433,543
---------------------------------------------------------------------------------------------------------
Interest 581,417
---------------------------------------------------------------------------------------------------------
Total investment income 1,014,960
---------------------------------------------------------------------------------------------------------
Expenses:
Management fees 1,916,227
---------------------------------------------------------------------------------------------------------
Accounting fees 117,244
---------------------------------------------------------------------------------------------------------
Printing and postage 37,967
---------------------------------------------------------------------------------------------------------
Custody fees 19,538
---------------------------------------------------------------------------------------------------------
Professional fees 13,241
---------------------------------------------------------------------------------------------------------
Directors fees 2,100
---------------------------------------------------------------------------------------------------------
Other 29,314
---------------------------------------------------------------------------------------------------------
Total expenses 2,135,631
---------------------------------------------------------------------------------------------------------
Net investment loss (1,120,671)
---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments:
Net realized gain on investment transactions 81,973,970
---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments (2,259,832)
---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 79,714,138
---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $78,593,467
---------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months
ended
6/30/00 Year ended
(Unaudited) 12/31/99
--------------------------------------
<S> <C> <C>
Changes from operations:
Net investment loss $ (1,120,671) $ (1,580,247)
---------------------------------------------------------------------------------------------------------
Net realized gain on investments 81,973,970 48,798,680
---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments (2,259,832) 87,585,017
---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 78,593,467 134,803,450
---------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income - (29,870)
---------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions (28,759,205) (45,635,441)
---------------------------------------------------------------------------------------------------------
Total distributions to shareholders (28,759,205) (29,870)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions 127,489,642 (21,947,147)
---------------------------------------------------------------------------------------------------------
Total increase in net assets 177,323,904 112,826,433
---------------------------------------------------------------------------------------------------------
Net Assets, beginning of period 448,192,871 335,366,438
---------------------------------------------------------------------------------------------------------
Net Assets, end of period $625,516,775) $448,192,871
---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
Aggressive Growth Fund 4
<PAGE>
Lincoln National Aggressive Growth Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each period)
<TABLE>
<CAPTION>
Six months
ended
6/30/00 Year ended December 31,
(Unaudited) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.038 $ 13.367 $ 16.385 $ 13.980 $12.183 $ 9.048
Income (loss) from investment operations:
Net investment income (loss) (0.038) (0.060) 0.001 0.023 0.004 0.007
Net realized and unrealized gain (loss)
on investments 3.202 5.732 (0.810) 3.055 1.989 3.135
---------------------------------------------------------------------------------------
Total from investment operations 3.164 5.672 (0.809) 3.078 1.993 3.142
---------------------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income - (0.001) (0.023) - (0.004) (0.007)
Distributions from net realized gain on
investment transactions (1.032) - (2.186) (0.673) (0.192) -
---------------------------------------------------------------------------------------
Total dividends and distributions (1.032) (0.001) (2.209) (0.673) (0.196) (0.007)
---------------------------------------------------------------------------------------
Net asset value, end of period $ 21.170 $ 19.038 $ 13.367 $ 16.385 $13.980 $12.183
---------------------------------------------------------------------------------------
Total Return (1) 16.72% 42.43% (6.20%) 23.09% 17.02% 34.15%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.78%(2) 0.87% 0.81% 0.81% 0.82% 0.94%
Ratio of net investment income (loss)
to average net assets (0.41%)(2) (0.48%) 0.01% 0.16% 0.03% 0.06%
Portfolio Turnover 54.33% 208.50% 102.33% 105.07% 77.51% 85.82%
Net assets, end of period (000 omitted) $625,517 $448,193 $335,366 $342,763 $242,609 $138,471
</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) Annualized
See accompanying notes to financial statements.
Aggressive Growth Fund 5
<PAGE>
Lincoln National Aggressive Growth Fund, Inc.
Notes to Financial Statements - Unaudited
June 30, 2000
The Fund: Lincoln National Aggressive Growth 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 capital appreciation. The Fund
invests in stocks of smaller, lesser-known companies, which have a chance to
grow significantly in a short time.
1. Significant Accounting Policies
Investment 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. Money market instruments having
less than 60 days to maturity are valued at amortized cost, which approximates
market value. 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.
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. Realized gains or losses from
investment transactions are reported on an identified cost basis.
Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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 portfolio and maintain its accounts and records. For these
services, the Advisor receives a management fee at an annual rate of .75% of the
first $200,000,000 of the average daily net assets of the Fund, .70% of the next
$200,000,000, and .65% of the average daily net assets of the Fund in excess of
$400,000,000. Effective May 1, 1999, Putnum Investments replaced Lynch & Mayer
as the Fund's sub-advisor. The sub-advisor, 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.
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 six
months ended June 30, 2000.
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 is borne by the Fund.
Aggressive Growth Fund 6
<PAGE>
Notes to Financial Statements - Unaudited - (Continued)
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 six months ended June 30, 2000 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized appreciation at June 30, 2000 are as
follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Appreciation
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$362,714,471 $287,966,465 $161,729,746 ($24,178,632) $137,551,114
</TABLE>
4. Supplemental Financial Instrument Information
Repurchase Agreements: The Fund, through its custodian, receives delivery of the
underlying securities, whose market value is required to be at least 102% of the
repurchase price. The Advisor is responsible for determining that the value of
the collateral is at least equal to the repurchase price. However, in the event
of default or bankruptcy by the counterparty to the agreement, realization of
the collateral may be subject to legal proceedings.
5. Summary of Changes From Capital Share Transactions
<TABLE>
<CAPTION>
Shares Issued Upon Net Increase (Decrease)
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>
Six months ended
June 30, 2000
(Unaudited): 5,237,419 $112,929,874 1,393,507 $28,759,205 (625,737) ($14,199,437) 6,005,189 $127,489,642
Year ended
December 31, 1999: 3,059,555 41,142,340 2,205 29,870 (4,608,585) (63,119,357) (1,546,825) (21,974,147)
</TABLE>
6. Distributions to Shareholders
The Fund declares and distributes dividends on net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
Aggressive Growth Fund 7