-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UC1sCFnmpkJPjkKuTWHlF0om0GDYhsoS36yu9yORy+Jf3H/hi+AAg1Ow7bY65G2V 6JhGVDeSLYD22FoN52cASg== 0000893220-03-000586.txt : 20030410 0000893220-03-000586.hdr.sgml : 20030410 20030410112845 ACCESSION NUMBER: 0000893220-03-000586 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030410 EFFECTIVENESS DATE: 20030410 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND INC CENTRAL INDEX KEY: 0000355933 IRS NUMBER: 351524384 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03291 FILM NUMBER: 03644939 BUSINESS ADDRESS: STREET 1: 1300 S CLINTON STREET STREET 2: P O BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46802 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: 1300 S CLINTON STREET STREET 2: POST OFFICE BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46802 N-CSR 1 w84914hnvcsr.txt LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-03291 LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. (Exact name of registrant as specified in charter) 1300 South Clinton Street Fort Wayne, Indiana 46802 (Address of principal executive offices) (Zip code) Elizabeth Frederick, Esq. Lincoln National Life Insurance Company 1300 South Clinton Street Fort Wayne, Indiana 46802 (Name and address of agent for service) Copies of all communications to: Jeffrey S. Puretz, Esq. Dechert LLP 1775 Eye Street, N.W. Washington, D.C. 2006 Registrant's telephone number, including area code: (260) 455-2000 Date of fiscal year end: December 31, 2002 Date of reporting period: January 1, 2002 through December 31, 2002 SPECIAL OPPORTUNITIES FUND [DELAWARE INVESTMENTS LOGO] Lincoln National Special Opportunities Fund, Inc. Annual Report December 31, 2002 LINCOLN NATIONAL SPECIAL OPPORTUNITIES 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 OFFICER/DIRECTOR INFORMATION
LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. ANNUAL PORTFOLIO COMMENTARY For the year ended December 31, 2002 Managed by: [DELAWARE INVESTMENTS LOGO] The Lincoln National Special Opportunities Fund had a return of -11.8% for the year ended December 31, 2002, while its style specific benchmark, the Russell MidCap Value Index*, returned -9.7% and the broader market index, the S&P MidCap 400 Index**, returned -14.5%. For 2002, the markets declined for the third year in a row -- the first series of three consecutive years of decline in over 50 years. The Fund's performance lagged the performance of the Russell Mid-Cap Value Index* for the year. The underperformance can be attributed in part to stock selection in media and healthcare stocks. This underperformance was partially offset by stock selection in the utility and finance sectors. Although U.S. equity markets performed strongly in the fourth quarter of 2002, much of the strength was in lower quality stocks that had, with hindsight, been oversold. We expect the current high level of volatility in stock prices to continue until investors are convinced that a sustained economic recovery has begun and corporate earnings concerns ease. However, the Federal Reserve's recent 50 basis point reduction in short-term interest rates, to levels not seen in 40 years, and improved prospects for further tax cuts, due to the Republican Party's victory in the mid-term Congressional elections, should both be interpreted positively by the equity markets. The hope is that this combination of fiscal and monetary easing will help stimulate increased economic activity in the U.S. in 2003. So, looking forward, we maintain a positive long-term view on both the economy and equity markets and thus remain committed to our process -- blending quantitative screening, fundamental research and portfolio risk control. At year end, the Fund held moderately overweight positions in the finance, healthcare and defense sectors relative to its benchmark, the Russell MidCap Value Index*. J. Paul Dokas Growth of $10,000 invested 1/1/93 through 12/31/02 (CHART) This chart illustrates, hypothetically, that $10,000 was invested in the Special Opportunities Fund on 1/1/93. As the chart shows, by December 31, 2002, the value of the investment at net asset value, with any dividends and distributions reinvested, would have grown to $24,631. For comparison, look at how the S&P MidCap 400 Index and the Russell MidCap Value Index did over the same period. The same $10,000 investment would have grown to $30,945 and $28,537, respectively. Past performance is not indicative of future performance. Remember, an investor cannot invest directly in an index.
Average annual return Ended on investment 12/31/02 - ------------------------------------------ One Year -11.75% - ------------------------------------------ Five Years + 1.31% - ------------------------------------------ Ten Years + 9.43% - ------------------------------------------
* Russell MidCap Value Index - Measures the performance of those Russell MidCap companies with lower price-to-book ratios and lower forecasted growth values. ** The S&P MidCap 400 Index is the Standard & Poor's Composite Index of 400 stocks, a widely recognized unmanaged index of common stock prices of mid-sized companies. Special Opportunities Fund 1 LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. STATEMENT OF NET ASSETS December 31, 2002
Number Market COMMON STOCK - 99.56% of Shares Value - ------------------------------------------------------------------- AEROSPACE & DEFENSE - 0.83% - ------------------------------------------------------------------- Goodrich 104,000 $ 1,905,280 Northrop Grumman 18,001 1,746,069 - ------------------------------------------------------------------- 3,651,349 AUTOMOBILES & AUTOMOTIVE PARTS - 3.08% - ------------------------------------------------------------------- Autoliv 51,000 1,067,430 + Autonation 180,000 2,260,800 BorgWarner 35,000 1,764,700 Dana 147,800 1,738,128 Delphi 343,200 2,762,760 Genuine Parts 29,500 908,600 + Lear 54,500 1,813,760 Magna International Class A 22,000 1,235,300 - ------------------------------------------------------------------- 13,551,478 BANKING & FINANCE - 15.24% - ------------------------------------------------------------------- A.G. Edwards 58,400 1,924,864 + Affiliated Managers Group 18,500 930,550 AmSouth Bancorporation 183,000 3,513,600 Associated Banc-Corp 79,000 2,681,260 Astoria Financial 60,000 1,629,000 Bancorpsouth 57,500 1,116,650 Banknorth 124,000 2,802,400 Bear Stearns 62,400 3,706,560 Brascan 59,000 1,209,500 Capital One Financial 34,000 1,010,480 Charter One Financial 113,400 3,257,982 Colonial BancGroup 146,000 1,741,780 Compass Bancshares 83,000 2,595,410 Countrywide Financial 60,000 3,099,000 Cullen Frost Bankers 52,500 1,716,750 First Merit 49,500 1,072,170 First Tennessee National 70,000 2,515,800 Golden West Financial 6,500 466,765 Greenpoint Financial 60,000 2,710,800 Hibernia Class A 117,800 2,266,472 Hudson United Bancorp 49,000 1,523,900 M & T Bank 16,300 1,293,405 Marshall & Ilsley 123,000 3,367,740 National Commerce Financial 117,500 2,802,375 Popular 56,500 1,909,700 Regions Financial 62,000 2,068,320 SouthTrust 89,000 2,211,650 Sovereign Bancorp 118,000 1,657,900 TCF Financial 36,000 1,572,840 Union BanCal 47,500 1,865,325 Union Planters 116,000 3,264,240 Washington Federal 28,000 695,800 Zions Bancorporation 22,000 865,678 - ------------------------------------------------------------------- 67,066,666 BUILDINGS & MATERIALS - 2.22% - ------------------------------------------------------------------- Centex 43,500 2,183,700 D.R. Horton 104,000 1,804,400 KB Home 26,000 1,114,100 Martin Marietta Materials 65,000 1,992,900 + Toll Brothers 76,000 1,535,200 York International 44,500 1,137,865 - ------------------------------------------------------------------- 9,768,165 Number Market BUSINESS SERVICES - 1.04% of Shares Value - ------------------------------------------------------------------- Fluor 57,000 $ 1,596,000 + Republic Services 141,000 2,958,180 - ------------------------------------------------------------------- 4,554,180 CABLE, MEDIA & PUBLISHING - 2.67% - ------------------------------------------------------------------- Belo 74,500 1,588,340 + Borders Group 54,000 869,400 + COX Radio Class A 28,500 650,085 + Hearst-Argyle Television 50,500 1,217,555 Knight-Ridder 52,000 3,289,000 New York Times 35,000 1,600,550 RR Donnelley & Sons 73,500 1,600,095 + Scholastic 26,000 934,700 - ------------------------------------------------------------------- 11,749,725 CHEMICALS - 3.73% - ------------------------------------------------------------------- Eastman Chemical 19,000 698,630 Englehard 113,000 2,525,550 Lubrizol 69,000 2,104,500 PPG Industries 36,000 1,805,400 Praxair 68,500 3,957,245 Rohm & Haas 30,000 974,400 RPM International 119,300 1,822,904 Sigma-Aldrich 51,500 2,508,050 - ------------------------------------------------------------------- 16,396,679 COMPUTERS & TECHNOLOGY - 4.12% - ------------------------------------------------------------------- + Apple Computer 77,000 1,103,410 Autodesk 104,000 1,487,200 + Cadence Design Systems 80,000 943,200 + Ceridian 48,000 692,160 + Citrix Systems 40,000 492,800 Computer Associates International 84,400 1,139,400 + Computer Sciences 88,000 3,031,600 + Dun & Bradstreet 39,500 1,362,355 + Emulex 52,000 964,600 + Ingram Micro Class A 92,000 1,136,200 ITT Industries 16,000 971,040 + Lexmark International 23,200 1,403,600 Pitney Bowes 28,000 914,480 + Storage Technology 77,500 1,660,050 + Xerox 101,000 813,050 - ------------------------------------------------------------------- 18,115,145 CONSUMER PRODUCTS - 2.50% - ------------------------------------------------------------------- Black & Decker 22,000 943,580 Fortune Brands 72,000 3,348,720 Newell Rubbermaid 129,500 3,927,735 Whirlpool 53,000 2,767,660 - ------------------------------------------------------------------- 10,987,695 ELECTRONICS & ELECTRICAL EQUIPMENT - 5.52% - ------------------------------------------------------------------- + Broadcom Class A 60,000 903,600 + Energizer Holdings 68,000 1,897,200 + Fairchild Semiconductor Class A 53,500 572,985 + General Motors Class H 42,000 449,400 + International Rectifier 42,000 775,320 + Jabil Circuit 50,200 899,584 Johnson Controls 43,500 3,487,395 + National Semiconductor 61,000 915,610 + Novellus Systems 38,000 1,067,040 Pittston Brink's Group 77,000 1,422,960 + SPX 47,000 1,760,150 Symbol Technologies 94,000 772,680 Teleflex 32,000 1,372,480 Textron 85,000 3,654,150 + Thermo Electron 121,500 2,444,580
Special Opportunities Fund 2
ELECTRONICS & ELECTRICAL Number Market EQUIPMENT (CONT'D) of Shares Value - ------------------------------------------------------------------- + Varco International 78,500 $ 1,365,900 + Vishay Intertechnology 47,000 525,460 - ------------------------------------------------------------------- 24,286,494 ENERGY - 6.94% - ------------------------------------------------------------------- Amerada Hess 27,200 1,497,360 Apache 69,500 3,960,805 Burlington Resources 44,100 1,880,865 Devon Energy 78,500 3,603,150 ENSCO International 50,400 1,484,280 EOG Resources 46,000 1,836,320 Equitable Resources 64,500 2,260,080 Kerr-McGee 71,000 3,145,300 Marathon Oil 127,500 2,714,475 Questar 49,000 1,363,180 Tidewater 48,000 1,492,800 Unocal 108,000 3,302,640 Valero Energy 54,500 2,013,230 - ------------------------------------------------------------------- 30,554,485 FOOD, BEVERAGE & TOBACCO - 3.51% - ------------------------------------------------------------------- Adolph Coors Class B 28,500 1,745,625 Archer-Daniels-Midland 298,000 3,695,200 Hershey Foods 34,500 2,326,680 Interstate Bakeries 60,000 915,000 RJ Reynolds Tobacco Holdings 60,000 2,526,600 Sensient Technologies 53,000 1,190,910 Supervalu 83,500 1,378,585 + Yum! Brands 68,000 1,646,960 - ------------------------------------------------------------------- 15,425,560 HEALTHCARE & PHARMACEUTICALS - 4.45% - ------------------------------------------------------------------- Aetna 28,000 1,151,360 AmerisourceBergen Class A 21,000 1,140,510 Becton Dickinson 110,000 3,375,900 + Health Net 87,500 2,310,000 + Henry Schein 29,500 1,327,500 Hillenbrand Industries 44,000 2,125,640 + Humana 107,000 1,070,000 McKesson 50,100 1,354,203 Omnicare 56,500 1,346,395 + Priority Healthcare 42,500 986,000 + Quintiles Transnational 91,000 1,101,100 + Steris 41,000 994,250 + Triad Hospitals 43,500 1,297,605 - ------------------------------------------------------------------- 19,580,463 INDUSTRIAL MACHINERY - 1.72% - ------------------------------------------------------------------- Dover 40,000 1,166,400 Ingersoll-Rand Class A 38,000 1,636,280 Pentair 47,000 1,623,850 Rockwell Automation 122,000 2,526,620 + Zebra Technologies Class A 10,500 601,650 - ------------------------------------------------------------------- 7,554,800 INSURANCE - 8.38% - ------------------------------------------------------------------- American Financial 70,500 1,626,435 AON 45,000 850,050 Berkley 21,000 831,810 Cincinnati Financial 36,000 1,351,800 Everest Re 18,500 1,023,050 Fidelity National Financial 73,500 2,413,005 Jefferson-Pilot 33,500 1,276,685 John Hancock Financial Services 35,000 976,500 Loews 38,000 1,689,480 MBIA 88,000 3,859,680 MGIC Investment 43,500 1,796,550 Old Republic International 99,000 2,772,000 Phoenix 95,000 722,000 + Platinum Underwriters Holdings 37,500 988,125 PMI 66,000 1,982,640 Progressive 24,000 1,191,120
Number Market INSURANCE (CONT'D) of Shares Value - ------------------------------------------------------------------- Protective Life 71,500 $ 1,967,680 Reinsurance Group of America 16,500 446,820 Saint Paul 55,500 1,889,775 Stancorp Financial Group 22,500 1,099,125 Torchmark 76,500 2,794,545 Transatlantic Holdings 8,200 546,940 UnumProvident 158,500 2,780,090 - ------------------------------------------------------------------- 36,875,905 LEISURE, LODGING & ENTERTAINMENT - 2.86% - ------------------------------------------------------------------- Eastman Kodak 92,000 3,223,680 Marriott International Class A 81,300 2,672,331 Mattel 64,000 1,225,600 + MGM MIRAGE 55,000 1,813,350 + Park Place Entertainment 73,000 613,200 Starwood Hotels & Resorts Worldwide 58,000 1,376,920 Viad 75,000 1,676,250 - ------------------------------------------------------------------- 12,601,331 METALS & MINING - 1.03% - ------------------------------------------------------------------- Precision Castparts 68,500 1,661,125 United States Steel 128,000 1,679,360 Vulcan Materials 31,600 1,185,000 - ------------------------------------------------------------------- 4,525,485 PACKAGING & CONTAINERS - 1.60% - ------------------------------------------------------------------- Ball 8,500 435,115 Bemis 35,000 1,737,050 + Pactiv 110,500 2,415,530 Sonoco Products 107,000 2,453,510 - ------------------------------------------------------------------- 7,041,205 PAPER & FOREST PRODUCTS - 1.07% - ------------------------------------------------------------------- Boise Cascade 62,000 1,563,640 Georgia-Pacific 55,000 888,800 MeadWestvaco 39,000 963,690 Temple-Inland 29,000 1,299,490 - ------------------------------------------------------------------- 4,715,620 REAL ESTATE - 6.32% - ------------------------------------------------------------------- AMB Property 84,000 2,298,240 Archstone-Smith Trust 103,500 2,436,390 Boston Properties 30,000 1,105,800 Duke Realty 105,000 2,672,250 Equity Office Properties Trust 46,000 1,149,080 Equity Residential Properties 161,000 3,957,380 Highwoods Properties 83,500 1,845,350 + Host Marriott 122,000 1,079,700 Kimco Realty 53,000 1,623,920 Mack-Cali Realty 63,200 1,914,960 New Plan Excel Realty Trust 75,000 1,431,750 Prologis 100,000 2,515,000 Public Storage 60,500 1,954,755 Simon Property 55,000 1,873,850 - ------------------------------------------------------------------- 27,858,425 RETAIL - 4.16% - ------------------------------------------------------------------- Blockbuster Class A 32,000 392,000 + Brinker International 48,000 1,548,000 Circuit City Stores 90,000 667,800 + Federated Department Stores 117,000 3,364,920 Ikon Office Solutions 213,000 1,522,950 J.C. Penney 102,000 2,347,020 May Department Stores 58,000 1,332,840 Nordstrom 68,000 1,289,960 + Office Depot 91,000 1,343,160 Pier 1 Imports 49,000 927,570 + Saks 165,000 1,937,100 Winn-Dixie Stores 105,500 1,612,040 - ------------------------------------------------------------------- 18,285,360
Special Opportunities Fund 3
Number Market TELECOMMUNICATIONS - 2.12% of Shares Value - ------------------------------------------------------------------- + Andrew 158,000 $ 1,624,240 CenturyTel 96,500 2,835,170 Harris 59,000 1,551,700 + JDS Uniphase 480,000 1,185,600 Scientific-Atlanta 143,000 1,695,980 + Tellabs 61,000 443,470 - ------------------------------------------------------------------- 9,336,160 TEXTILES, APPAREL & FURNITURE - 0.99% - ------------------------------------------------------------------- + Jones Apparel 27,500 974,600 + Skechers USA Class A 95,000 806,550 VF 72,000 2,595,600 - ------------------------------------------------------------------- 4,376,750 TRANSPORTATION & SHIPPING - 1.49% - ------------------------------------------------------------------- Alexander & Baldwin 20,500 528,695 CSX 135,500 3,836,005 Norfolk Southern 108,800 2,174,912 - ------------------------------------------------------------------- 6,539,612 UTILITIES - 11.97% - ------------------------------------------------------------------- Ameren 45,500 1,891,435 Cinergy 70,500 2,377,260 Consolidated Edison 75,500 3,232,910 DTE Energy 96,800 4,491,520 + Edison International 217,000 2,571,450 Energy East 116,000 2,562,440 Entergy 119,500 5,448,005 FirstEnergy 150,000 4,945,500 Great Plains Energy 69,500 1,590,160 KeySpan 99,500 3,506,380 NiSource 61,400 1,228,000 Pepco Holdings 57,000 1,105,230 + PG&E 191,500 2,661,850 PPL 77,000 2,670,360 Public Service Enterprise 135,000 4,333,500 Sempra Energy 125,000 2,956,250 TECO Energy 85,500 1,322,685 Wisconsin Energy 101,000 2,545,200 Xcel Energy 113,000 1,243,000 - ------------------------------------------------------------------- 52,683,135 - ------------------------------------------------------------------- TOTAL COMMON STOCK (Cost $442,777,304) 438,081,872 - ------------------------------------------------------------------- Principal Market COMMERCIAL PAPER - 0.26% Amount Value - ------------------------------------------------------------------- UBS Finance 1.20% 1/2/03 $1,130,000 $ 1,129,962 - ------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (Cost $1,129,962) 1,129,962 - ------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES - 99.82% (Cost $443,907,266) 439,211,834 - ------------------------------------------------------------------- Receivables and Other Assets Net of Liabilities - 0.18% 772,581 - ------------------------------------------------------------------- NET ASSETS - 100.00% (Equivalent to $22.471 per share based on 19,579,863 shares issued and outstanding) $439,984,415 - ------------------------------------------------------------------- COMPONENTS OF NET ASSETS AT DECEMBER 31, 2002: Common stock, par value $0.01 per share, 50,000,000 authorized shares $466,420,024 Undistributed net investment income 1,711,951 Accumulated net realized loss on investments (23,452,128) Net unrealized depreciation of investments (4,695,432) - ------------------------------------------------------------------- TOTAL NET ASSETS $439,984,415 - -------------------------------------------------------------------
+ Non-income producing security for the year ended December 31, 2002. See accompanying notes to financial statements. Special Opportunities Fund 4 LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. STATEMENT OF OPERATIONS Year ended December 31, 2002 INVESTMENT INCOME: Dividends $ 10,888,773 - -------------------------------------------------------------------------- Interest 34,821 - -------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 10,923,594 - -------------------------------------------------------------------------- EXPENSES: Management fees 2,090,889 - -------------------------------------------------------------------------- Accounting and administration fees 218,878 - -------------------------------------------------------------------------- Printing and postage 128,408 - -------------------------------------------------------------------------- Professional fees 42,695 - -------------------------------------------------------------------------- Custody fees 24,203 - -------------------------------------------------------------------------- Directors' fees 4,200 - -------------------------------------------------------------------------- Other 13,233 - -------------------------------------------------------------------------- 2,522,506 - -------------------------------------------------------------------------- Less fees waived (92,455) - -------------------------------------------------------------------------- Less expenses paid indirectly (2,346) - -------------------------------------------------------------------------- TOTAL EXPENSES 2,427,705 - -------------------------------------------------------------------------- NET INVESTMENT INCOME 8,495,889 - -------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS: - -------------------------------------------------------------------------- Net realized loss on investments (22,338,083) - -------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation of investments (50,415,703) - -------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (72,753,786) - -------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(64,257,897) - --------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended 12/31/2002 12/31/2001 ------------------------------ Changes from operations: Net investment income $ 8,495,889 $ 8,942,534 - -------------------------------------------------------------------------------------------- Net realized gain (loss) on investments (22,338,083) 20,001,395 - -------------------------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation of investments (50,415,703) (18,926,319) - -------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (64,257,897) 10,017,610 - -------------------------------------------------------------------------------------------- Dividends and distributions to shareholders from: Net investment income (7,102,162) (7,567,654) - -------------------------------------------------------------------------------------------- Net realized gain on investments (2,512,598) -- - -------------------------------------------------------------------------------------------- TOTAL DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (9,614,760) (7,567,654) - -------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS (26,013,097) 1,133,219 - -------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (99,885,754) 3,583,175 - -------------------------------------------------------------------------------------------- Net assets, at beginning of period 539,870,169 536,286,994 - -------------------------------------------------------------------------------------------- NET ASSETS, AT END OF PERIOD $439,984,415 $539,870,169 - --------------------------------------------------------------------------------------------
See accompanying notes to financial statements. Special Opportunities Fund 5 LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. FINANCIAL HIGHLIGHTS (Selected data for each capital share outstanding throughout the year)
Year ended December 31, 2002 2001 2000 1999 1998 ---------------------------------------------------- Net asset value, beginning of year $ 26.006 $ 25.846 $ 28.225 $ 33.416 $ 35.056 Income from investment operations: Net investment income(1) 0.418 0.431 0.536 0.482 0.470 Net realized and unrealized gain (loss) on investments (3.467) 0.098 3.153 (1.779) 1.795 - ----------------------------------------------------------------------------------------------- Total from investment operations (3.049) 0.529 3.689 (1.297) 2.265 - ----------------------------------------------------------------------------------------------- Less dividends and distributions from: Net investment income (0.365) (0.369) (0.494) (0.373) (0.862) Net realized gain on investments (0.121) -- (5.574) (3.521) (3.043) - ----------------------------------------------------------------------------------------------- Total dividends and distributions (0.486) (0.369) (6.068) (3.894) (3.905) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $ 22.471 $ 26.006 $ 25.846 $ 28.225 $ 33.416 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Total return(2) (11.75%) 2.16% 16.04% (4.48%) 6.79% Ratios and supplemental data: Net assets, end of period (000 omitted) $439,984 $539,870 $536,287 $665,642 $917,796 Ratio of expenses to average net assets 0.47% 0.48% 0.49% 0.44% 0.42% Ratio of expenses to average net assets prior to fees waived and expenses paid indirectly 0.49% 0.48% 0.49% 0.44% 0.42% Ratio of net investment income to average net assets 1.67% 1.65% 2.15% 1.46% 1.44% Ratio of net investment income to average net assets prior to fees waived and expenses paid indirectly 1.65% 1.65% 2.15% 1.46% 1.44% Portfolio turnover 55% 73% 75% 96% 76%
(1) The average shares outstanding method has been applied for per share information for the years ended December 31, 2002, 2001 and 2000. (2) Total return percentages in this table are calculated on the basis prescribed by the Securities and Exchange Commission. See accompanying notes to financial statements. Special Opportunities Fund 6 LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 THE FUND: Lincoln National Special Opportunities 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 capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with accounting principles generally accepted in the United States and are consistently followed by the Fund. SECURITY VALUATION: All equity securities are valued at the last quoted sales price as of the time of the regular 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 normally be used. Short-term debt securities 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 under the direction of the Fund's Board of Directors. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, or with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g. government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). FEDERAL INCOME TAXES: The Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. OTHER: Security transactions are accounted for on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. The Fund declares and distributes dividends from net investment income, if any, semi-annually. Distributions from net realized gains, if any, are declared and distributed annually. The Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the year ended December 31, 2002, were approximately $2,346. The expense paid under the above arrangement is included under custodial fees on the Statement of Operations with the expense offset shown as "expenses paid indirectly". 2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Effective May 1, 2002, Delaware Management Company (DMC) is responsible for overall management of the Fund's investment portfolio and provides certain administrative services to the Fund. DMC is a series of Delaware Management Business Trust (DMBT), a multi-series business trust registered with the Securities and Exchange Commission as an investment adviser. DMBT is an indirect wholly-owned subsidiary of Lincoln National Corporation (LNC). For its services, DMC receives a management fee at an annual rate of 0.48% of the first $200 million of the average daily net assets of the Fund, 0.40% of the next $200 million, and 0.30% of the average daily net assets of the Fund in excess of $400 million. Prior to May 1, 2002, Vantage Investment Advisers (VIA), an affiliate of DMC, served as the investment manager to the Fund under identical terms. Special Opportunities Fund 7 NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the year ended December 31, 2002, DMC and VIA contractually waived a portion of their management fees in the amount of $92,455. Effective January 1, 2003, this waiver was discontinued in connection with stockholder approval of the amended Management Agreement as discussed below on December 9, 2002. 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, DMC has agreed to reimburse the Fund in the amount of such excess. No reimbursement was due for the year ended December 31, 2002. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting services and other administration support to the Fund. For these services, the Fund pays DSC a monthly fee based on average net assets, subject to certain minimums. At December 31, 2002, the Fund had payables to affiliates as follows: Management Fees Payable to DMC $153,844 Accounting and Administration Fees Payable to DSC 32,186
On December 9, 2002, stockholders of the Fund approved an amended Management Agreement between the Fund and DMC that is effective January 1, 2003. The Fund will incur additional fees and expenses under the new agreement because certain expenses relating to the administration of the Fund's affairs and the maintenance of the Fund's books and records will be paid by the Fund rather than the investment adviser. In connection with the amended Management Agreement, the Board of Directors of the Fund approved an Administration Agreement with Lincoln National Life Insurance Company (Lincoln Life), an affiliate of DMC, dated January 1, 2003. Pursuant to the Administration Agreement, Lincoln Life will provide various administrative services necessary for the operation of the Fund. For these services, the Fund will pay Lincoln Life an annual fee of $15,000 plus the cost of certain support services, such as legal and corporate secretary services. 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 For the year ended December 31, 2002, the Fund made purchases of $282,312,202 and sales of $310,468,114 of investment securities other than short-term investments. At December 31, 2002, the cost of investments for federal income tax purposes was $444,316,490. At December 31, 2002, net unrealized depreciation was $5,104,656, of which $37,299,379 related to unrealized appreciation of investments and $42,404,035 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. Ordinary income includes dividends from net investment income and distributions from short-term capital gains. The tax character of dividends and distributions paid during the years ended December 31, 2002 and 2001 were as follows:
Year ended Year ended 12/31/02 12/31/01 -------------------------- Ordinary income $7,102,162 $7,567,654 Long-term capital gain 2,512,598 -- ---------- ---------- Total $9,614,760 $7,567,654 ========== ==========
In addition, the Fund declared an ordinary income consent dividend of $1,056,656 for the year ended December 31, 2001. Such amount has been deemed paid and contributed to the Fund as additional paid-in capital. Special Opportunities Fund 8 NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2002, the components of net assets on a tax basis were as follows: Shares of beneficial interest $466,420,024 Undistributed ordinary income 1,711,951 Capital loss carryforwards (22,074,286) Post-October losses (968,618) Unrealized depreciation of investments (5,104,656) ------------ Net assets $439,984,415 ============
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Such capital loss carryforwards expire as follows: $22,074,286 expires in 2010. Post-October losses represent losses realized on investment transactions from November 1, 2002 through December 31, 2002, that, in accordance with federal income tax regulations, the Fund has elected to defer and treat as having arisen in the following fiscal year. 5. CAPITAL SHARES Transactions in capital shares were as follows:
Shares Issued Upon Reinvestment of Capital Shares Dividends and Capital Shares Sold Distributions Redeemed -------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount -------------------------------------------------------------------------- Year ended December 31, 2002: 1,204,035 $32,376,305 420,406 $9,614,760 (2,804,338) $(68,004,162) Year ended December 31, 2001: 1,340,283 $34,495,032 314,284 $7,567,654 (1,644,323) $(40,929,467) Net Increase (Decrease) Resulting From Capital Share Transactions ------------------------- Shares Amount ------------------------- Year ended December 31, 2002: (1,179,897) $(26,013,097) Year ended December 31, 2001: 10,244 $ 1,133,219
6. LINE OF CREDIT The Fund, along with certain other Lincoln National Mutual Funds (the "Participants"), participates in a $50,000,000 Credit Agreement to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated among the Participants in accordance with the agreement. Effective January 1, 2003, the Fund may borrow up to 33 1/3% of its total assets (including the amount borrowed). The Fund had no amount outstanding at December 31, 2002, or at any time during the year. 7. TAX INFORMATION (UNAUDITED) For the fiscal year ended December 31, 2002, the Fund designates distributions paid during the year as follows:
(A) (B) Long-Term Ordinary Total (C) Capital Gains Income Distributions Qualifying(1) Distributions Distributions (Tax Basis) Dividends ------------------------------------------------------------- 26% 74% 100% 100%
Items (A) and (B) are based on a percentage of the Fund's total distributions. Item (C) is based on a percentage of ordinary income of the Fund. (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. Special Opportunities Fund 9 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. PROXY RESULTS (UNAUDITED) Lincoln National Special Opportunities Fund, Inc., shareholders voted on the following proposals at the special meeting of shareholders on December 9, 2002, or as adjourned. The resulting votes are presented below.
Outstanding Total Percent Percent Percent Shares Voted For Withheld Abstained --------------------------------------------------------- 1. To elect five Directors of the Fund to hold office until their respective successors have been duly elected and qualified or until their earlier resignation or removal. John B. Borsch, Jr. 20,082,672 20,082,672 93.81% 6.19% 0.00% Kelly D Clevenger 20,082,672 20,082,672 93.82% 6.18% 0.00% Nancy L. Frisby 20,082,672 20,082,672 94.03% 5.97% 0.00% Barbara S. Kowalczyk 20,082,672 20,082,672 93.71% 6.29% 0.00% Kenneth G. Stella 20,082,672 20,082,672 93.67% 6.33% 0.00% Outstanding Total Percent Percent Percent Shares Voted For Against Abstained --------------------------------------------------------- 2. To approve a reorganization to change Fund from a Maryland corporation to a series of a Delaware business trust. 20,082,672 20,082,672 87.61% 8.82% 3.57% 3. To approve a proposal that would permit the Fund to enter into or materially change sub-advisory agreements with sub-advisers 20,082,672 20,082,672 82.38% 14.00% 3.62% without obtaining stockholder approval. 4. To approve a new investment management agreement between the Fund and their current investment adviser, Delaware Management Company, a series of Delaware Management Business Trust. 20,082,672 20,082,672 86.64% 9.25% 4.11% 5. To approve the amendment of certain Fundamental Investment Restrictions. 5A) Amendment to Fundamental Restrictions on Concentration of Investments in the Same Industry. 20,082,672 20,082,672 86.04% 9.24% 4.72% 5B) Amendment to Fundamental Restrictions on Borrowing Money and Issuing Senior Securities. 20,082,672 20,082,672 85.78% 9.48% 4.74% 5C) Amendment to Fundamental Restrictions on Underwriting. 20,082,672 20,082,672 85.93% 9.29% 4.78% 5D) Amendment to Fundamental Restrictions on Investments in Real Estate. 20,082,672 20,082,672 86.46% 8.92% 4.62% 5E) Amendment to Fundamental Restrictions on Investments in Commodities or Commodity Issues. 20,082,672 20,082,672 85.95% 9.38% 4.67% 5F) Amendment to Fundamental Restrictions on Lending. 20,082,672 20,082,672 85.72% 9.54% 4.74% 5G) Amendment to Fundamental Restrictions on Diversification. 20,082,672 20,082,672 86.17% 9.19% 4.64% 6. To approve the elimination of certain Fundamental Investment Restrictions. 6A) Elimination of Fundamental Restrictions on Investments in Other Investment Companies. 20,082,672 20,082,672 83.13% 12.29% 4.58% 6B) Elimination of Fundamental Restrictions on Selling Securities Short. 20,082,672 20,082,672 82.86% 12.44% 4.70% 6C) Elimination of Fundamental Restrictions on Margin Transactions. 20,082,672 20,082,672 82.75% 12.65% 4.60% 6D) Elimination of Fundamental Restrictions on Pledging Fund Assets. 20,082,672 20,082,672 82.83% 12.51% 4.66% 6E) Elimination of Fundamental Restrictions on Illiquid and Restricted Securities. 20,082,672 20,082,672 82.72% 12.60% 4.68% 6F) Elimination of Fundamental Restrictions on Purchase of Put and Call Options. 20,082,672 20,082,672 82.86% 12.40% 4.74% 6G) Elimination of Fundamental Restrictions on Investments in Companies for the Purpose of Acquiring Control. 20,082,672 20,082,672 83.13% 12.22% 4.65%
Special Opportunities Fund 10 LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. REPORT OF INDEPENDENT AUDITORS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. We have audited the accompanying statement of net assets of Lincoln National Special Opportunities Fund, Inc. (the "Fund") as of December 31, 2002, 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, 2002, 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 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 Special Opportunities Fund, Inc. at December 31, 2002, 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. [ERNST & YOUNG LLP] Philadelphia, Pennsylvania February 7, 2003 Special Opportunities Fund 11 OFFICER/DIRECTOR INFORMATION
Name, address and Position(s) held Term of office Number of date of birth with the funds and length of Principal funds in time served occupation(s) fund complex during the past overseen by five years Director - ------------------------------------------------------------------------------------------------------------ Kelly D. Clevenger(1) Chairman, President Chairman since Vice President, The 12 1300 S. Clinton Street and Director August 1995; Lincoln National Life Fort Wayne, IN 46802 President and Insurance Company. Vice DOB: 07/25/52 Director since President, Lincoln November 1994 Retirement Services Company, LLC; Second Vice President, Lincoln Life & Annuity Company of New York Barbara S. Kowalczyk Director Director since Senior Vice President, 12 Centre Square, West Tower November 1993 Corporate Planning and 1500 Market St., Suite 3900 Development, Lincoln Philadelphia, PA 19102 National Corporation DOB: 04/07/51 (insurance holding company); Senior Vice President, Lincoln National Management Corporation John B. Borsch, Jr. Director Director since Retired; formerly 12 1300 S. Clinton Street December 1981 Associate Vice President, Fort Wayne, IN 46802 Investments, Northwestern DOB: 06/09/33 University Nancy L. Frisby Director Director since Vice President and Chief 12 1300 S. Clinton Street April 1992 Financial Officer, DeSoto Fort Wayne, IN 46802 Memorial Hospital; DOB: 11/10/41 formerly Chief Financial Officer, Bascom Palmer Eye Institute, University of Miami School of Medicine; formerly Vice President and Chief Financial Officer, St. Joseph Medical Center, Inc. Kenneth G. Stella Director Director since President, Indiana 12 1300 S. Clinton Street February 1998 Hospital & Health Fort Wayne, IN 46802 Association DOB: 08/20/43 Frederick J. Crawford(1) Vice President and Vice President Vice President and N/A Centre Square, West Tower, Treasurer and Treasurer Treasurer, Lincoln 1500 Market Street, Suite since January National Corporation; 3900 2001 formerly President and Philadelphia, PA 19102 Market Manager, Greater DOB: 08/03/63 Cincinnati Region, Bank One, N.A. Cynthia A. Rose(1) Secretary Secretary since Secretary and Assistant N/A 1300 S. Clinton Street February 1995 Vice President, The Fort Wayne, IN 46802 Lincoln National Life DOB: 04/24/54 Insurance Company; formerly Assistant Secretary, Lincoln National Corporation William P. Flory, Jr.(1) Assistant Vice Chief Accounting Assistant Vice President, N/A 1300 S. Clinton Street President and Chief Officer since May The Lincoln National Life Fort Wayne, IN 46802 Accounting Officer 2002 Insurance Company; DOB: 09/02/61 formerly Vice President, MetLife Investors; formerly Assistant Vice President, MetLife Investors; formerly Accounting Manager, Transamerica Life Companies Steven M. Kluever(1) Second Vice Second Vice Second Vice President, N/A 1300 S. Clinton Street President President since The Lincoln National Life Fort Wayne, IN 46802 August 1999; Insurance Company; Second DOB: 08/04/62 Assistant Vice Vice President, Lincoln President since Life & Annuity Company of August 1997 New York Name, address and Other directorships date of birth held by Director - --------------------------- ------------------------- Kelly D. Clevenger(1) Lincoln Retirement 1300 S. Clinton Street Services Company, LLC Fort Wayne, IN 46802 DOB: 07/25/52 Barbara S. Kowalczyk Lincoln National Centre Square, West Tower Management Corporation; 1500 Market St., Suite 3900 The Lincoln National Life Philadelphia, PA 19102 Insurance Company; DOB: 04/07/51 Lincoln Financial Group Foundation, Inc.; Lincoln Life & Annuity Company of New York; Lincoln National (UK) PLC (financial services company) John B. Borsch, Jr. N/A 1300 S. Clinton Street Fort Wayne, IN 46802 DOB: 06/09/33 Nancy L. Frisby N/A 1300 S. Clinton Street Fort Wayne, IN 46802 DOB: 11/10/41 Kenneth G. Stella First National Bank & 1300 S. Clinton Street Trust Fort Wayne, IN 46802 DOB: 08/20/43 Frederick J. Crawford(1) N/A Centre Square, West Tower, 1500 Market Street, Suite 3900 Philadelphia, PA 19102 DOB: 08/03/63 Cynthia A. Rose(1) N/A 1300 S. Clinton Street Fort Wayne, IN 46802 DOB: 04/24/54 William P. Flory, Jr.(1) N/A 1300 S. Clinton Street Fort Wayne, IN 46802 DOB: 09/02/61 Steven M. Kluever(1) N/A 1300 S. Clinton Street Fort Wayne, IN 46802 DOB: 08/04/62
- ------------------------ Additional information on the officers and directors can be found in the Statement of Additional Information ("SAI") to the Fund's prospectus. To obtain a free copy of the SAI, write: Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, Indiana 46801, or call 1-800-4LINCOLN (454-6265). The SAI is also available on the SEC's web site (http://www.sec.gov). (1) All of the executive officers are "interested persons" of the Fund, as that term is defined by Section 2(a)(19) of the 1940 Act, by reason of their being officers of the Fund. (2) The officers and directors are re-elected annually. The officers and directors hold their position with the Fund until retirement or resignation. The Bylaws of the Funds do not specify a term of office. Special Opportunities Fund 12 ' SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. (Registrant) By /s/ Kelly D. Clevenger -------------------------------------------------------------- Kelly D. Clevenger President (Signature and Title) Date March 7, 2003 ---------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Kelly D. Clevenger -------------------------------- Kelly D. Clevenger Chairman, President and Director (Signature and Title) Date March 7, 2003 ---------------------- By /s/ William P. Flory, Jr. --------------------------------- William P. Flory, Jr. Assistant Vice President and Chief Accounting Officer (Signature and Title) Date March 7, 2003 ------------------------------- EX-99.CERT 3 w84914hexv99wcert.txt CERTIFICATIONS CERTIFICATIONS I, Kelly D. Clevenger, certify that: 1. I have reviewed this report on Form N-CSR of LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. Date: March 7, 2003 ------------- /s/ Kelly D. Clevenger ---------------------- Kelly D. Clevenger Chairman, President and Director CERTIFICATIONS I, William P. Flory, Jr., certify that: 1. I have reviewed this report on Form N-CSR of LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. Date: March 7, 2003 ------------- /s/ William P. Flory, Jr. ------------------------- William P. Flory, Jr. Assistant Vice President and Chief Accounting Officer EX-99.906CERT 4 w84914hexv99w906cert.txt CERTIFICATION PURSUANT TO SECTION 906 EX-99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act The undersigned officers of Lincoln National Special Opportunities Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: as of March 7, 2003 /s/ Kelly D. Clevenger ------------------------------------------- Kelly D. Clevenger Chairman, President and Director Lincoln National Special Opportunities Fund, Inc. /s/ William P. Flory, Jr. -------------------------------------------- William P. Flory, Jr. Assistant Vice President and Chief Accounting Officer Lincoln National Special Opportunities Fund, Inc. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----