SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12
Lincoln National Convertible Securities Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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LINCOLN NATIONAL CONVERTIBLE SECURITIES FUND, INC.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
IMPORTANT ANNUAL MEETING
May 7, 2002
DEAR FELLOW SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Lincoln National Convertible Securities Fund, Inc. (the
"Fund") to be held on Friday, June 14, 2002 at the offices of Delaware
Investments, Two Commerce Square, 2001 Market Street, 2nd Floor, Philadelphia,
Pennsylvania at 10:00 a.m. (EDT). Your Board of Directors and management look
forward to greeting personally those shareholders able to attend.
The attached Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted at the Annual Meeting. During the meeting, we will
also report on the operations of your Fund and directors and officers will be
present to respond to any questions you may have.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WE URGE
YOU TO SIGN, DATE AND MAIL THE ENCLOSED WHITE PROXY CARD AS SOON AS POSSIBLE
EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This will not prevent
you from voting in person, but will assure that your vote is counted if you are
unable to attend the meeting and save your Fund the expense of further
solicitation.
On behalf of your Board of Directors, thank you for your continued interest
and support.
Sincerely,
/s/ David K. Downes
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David K. Downes
President
IMPORTANT
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. AS SUCH,
PLEASE SIGN, DATE AND MAIL YOUR WHITE PROXY CARD AT YOUR EARLIEST
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
This Page Intentionally Left Blank
LINCOLN NATIONAL CONVERTIBLE SECURITIES FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of LINCOLN NATIONAL CONVERTIBLE SECURITIES
FUND, INC. (the "Fund") will be held at the offices of Delaware Investments, Two
Commerce Square, 2001 Market Street, 2nd Floor, Philadelphia, Pennsylvania, on
Friday, June 14, 2002 at 10:00 a.m. (EDT), for the following purposes.
1. To elect seven Directors for the Fund to hold office until their
successors are elected and qualified.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Stockholders of record at the close of business on May 1, 2002 are entitled
to notice of and to vote at the Annual Meeting.
By order of the Board of Directors.
/s/ David F. Connor
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David F. Connor
Secretary
May 7, 2002
YOUR VOTE IS IMPORTANT
TO AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, PLEASE
MARK PREFERENCES, SIGN, DATE AND PROMPTLY MAIL YOUR WHITE PROXY CARD IN THE
ENCLOSED POSTAGE PAID ENVELOPE. PLEASE ACT TODAY!
LINCOLN NATIONAL CONVERTIBLE SECURITIES FUND, INC.
ONE COMMERCE SQUARE
2005 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
PROXY STATEMENT
Annual Meeting of Stockholders to be held June 14, 2002
The Board of Directors of Lincoln National Convertible Securities Fund, Inc.
(the "Fund") is soliciting proxies for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on June 14, 2002 at 10:00 a.m. (EDT) at the
offices of Delaware Investments, Two Commerce Square, 2001 Market Street, 2nd
Floor, Philadelphia, Pennsylvania, or at any adjournment of that meeting.
The Fund's most recent annual report was previously mailed to shareholders.
The Fund will furnish, without charge, a copy of its annual report to a
stockholder upon request made to Delaware Service Company, Inc. ("DSC"), the
Fund's administrator, One Commerce Square, 2005 Market Street, Philadelphia,
Pennsylvania 19103, or by calling 1-800-523-1918.
The purpose of the Annual Meeting is to consider the Proposal referenced on
the accompanying Notice. The Board of Directors of the Fund urges you to
complete, sign, date and mail promptly the Proxy Card (or Cards) included with
the Proxy Statement, whether or not you intend to be present at the Annual
Meeting. It is important that you provide voting instructions promptly to help
ensure a quorum for the Annual Meeting. A proxy may be revoked at any time
before it is voted by submission to the Fund of a later dated proxy, by notice
in writing to the Fund, or by the stockholder's attendance and vote at the
Annual Meeting. If your shares are held in the name of your broker, you will
have to make arrangements with your broker to revoke any previously executed
proxy. If the proxy is not revoked, the shares represented by such proxy will be
voted according to the instructions on the Proxy Card or, if not marked, the
proxies will vote "FOR" the election of the nominees to the Board. The proxies
will also be authorized to vote in their discretion on any other matter which
may properly come before the Annual Meeting. If you sign and return a Proxy
Card, you may still attend the Annual Meeting and vote your shares in person. If
your shares are held of record by a broker and you wish to vote in person at the
Annual Meeting, you should obtain a Legal Proxy from your broker of record and
present it at the Annual Meeting.
Abstentions will be included for purposes of determining whether a quorum is
present for the Fund at the Annual Meeting. They will be treated as votes
present at the Annual Meeting, but will not be treated as votes cast. They
therefore would have no effect on the election of Directors which requires a
plurality of votes cast. Because the sole Proposal presented is considered to be
a "routine" voting item, the Fund does not expect to recognize broker non-votes.
In the event that a quorum is not present, or if sufficient votes are not
received for the adoption of any Proposal, management may determine to propose
an adjournment or adjournments of the Annual Meeting. Any adjournment would
require a vote in favor of the adjournment by the holders of a majority of the
shares present at the Annual Meeting in person or by proxy. In such
circumstances, the persons named as proxies will vote in favor of any proposed
adjournment.
2
Stockholders of record at the close of business on May 1, 2002 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. On that date, the Fund had 5,841,281 shares of Common Stock outstanding
and entitled to vote. Each share of Common Stock will be entitled to one vote at
the Annual Meeting.
This Proxy Statement and accompanying Proxy Card are being mailed on or about
May 9, 2002. The solicitation of proxies will be largely by mail but may include
telephonic, telegraphic or other electronic means, or by personal contacts by
Directors and officers of the Fund or regular employees of the Fund's investment
adviser (the "Adviser") and its affiliates, and/or employees of DSC or employees
of the Fund's stock transfer agent, Mellon Investor Services LLC. The Fund also
has retained D.F. King & Co., Inc. to assist it in the solicitation of proxies
for a fee of $7,500, plus reimbursement of expenses.This proxy solicitation is
being made by the Board of Directors of the Fund for use at the Annual Meeting.
The cost of this proxy solicitation will be borne by the Fund. This includes
reimbursement of banks, brokerage houses and other custodians for the expense
associated with forwarding proxy solicitation materials to beneficial owners of
the Fund's common stock.The Fund's Adviser is Delaware Management Company, a
series of Delaware Management Business Trust, One Commerce Square, Philadelphia,
PA 19103.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
On December 19, 2001, the Board of Directors unanimously approved a change to
the Fund's Articles of Incorporation declassifying the Board of Directors.
Articles Supplementary were subsequently filed in the State of Maryland to
effectuate this decision of the Board. As a result, all seven Directors will be
elected at the Annual Meeting to hold office until the 2003 annual meeting and
their successors are elected and qualified.
Except as otherwise directed on the Proxy Card, the persons named as proxies
will vote "FOR" the election of the nominees for Directors listed below. Each of
the nominees has consented to be a nominee and to serve as a Director if
elected. In the event that any of the nominees should become unavailable for
election as a Director, the persons named in the accompanying proxy intend to
vote for such substitute as the Board of Directors of the Fund may select.
3
Required Vote. Under Maryland law, the nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected.
INFORMATION ON THE BOARD OF DIRECTORS
Principal Number of Other
Name, Position(s) Occupation(s) Portfolios in Fund Directorships
Address Held with Length of Time During Complex* Overseen Held by
and Birthdate Registrant Served Past 5 Years by Director Director
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Interested Directors
David K. Downes(1) President 1 Year Executive Vice President, 2 President and
2005 Market Street and Director Chief Operating Officer and Director/Trustee of
Philadelphia, PA Chief Financial Officer, 33 investment
19103 Delaware Lincoln Investment companies in
Advisers; Chairman, President the Delaware
January 8, 1940 and Chief Executive Officer, Investments family
Delaware Service Company, Inc.; of funds
Mr Downes has served in
various executive capacities Director/President,
at different times at Lincoln National
Delaware Investments. Income Fund, Inc.
Richard M.Burridge,Sr.(2) Director 17 Years Vice President, 2 Director, Lincoln
125 S. Wacker Drive UBS/PaineWebber National Income
Suite 2600 (since 2000); Fund, Inc.
Chicago, IL 60606 Chairman,
The Burridge Group, Inc.
March 19,1929 (1996-2000).
H. Thomas McMeekin(3) Director 12 Years Managing Director, 2 Director, Lincoln
100 Mulberry Street Prudential Investment Management National Income
Gateway Center Four (since 2001);Managing Partner, Fund, Inc.
7th Floor Griffin Investments (since 2000);
Newark, NJ 07102 Executive Vice President and
Chief Investment Officer -
Fixed Income,
June 17, 1953 Delaware Investments (1999-2000);
President and Director, Lincoln
Investment Management, Inc.,
Executive Vice President and
Chief Investment Officer,
Lincoln National Corporation
(until 2000).
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* The Fund Complex is comprised of the Fund and Lincoln National Income Fund,
Inc.
1 Mr. Downes is considered to be an "interested director" because he is an
executive officer of the Fund's Adviser and accounting service provider. Mr.
Downes acquired shares of common stock of Lincoln National Corporation (LNC),
of which the Adviser is a wholly-owned subsidiary, in the ordinary course of
business during 2001, but those transactions involved substantially less than
1% of the outstanding shares of common stock of LNC.
2 Mr. Burridge is considered to be an "interested director" by virtue of his
affiliation with a registered broker-dealer.
3 Mr. McMeekin is considered to be an "interested director" because prior to
July 2000 he was an executive officer of Delaware Investments and Lincoln
National Corporation (LNC), of which the Fund's Adviser is a wholly-owned
subsidary. In addition, Mr. McMeekin currently owns shares of LNC and is
affiliated with a registered broker-dealer.
4
Principal Number of Other
Name, Position(s) Occupation(s) Portfolios in Fund Directorships
Address Held with Length of Time During Complex* Overseen Held by
and Birthdate Registrant Served Past 5 Years by Director Director
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Interested Directors
Thomas L. Bindley Director 4 Years President, Bindley 2 Director, Midas, Inc.
707 Skokie Boulevard Capital Corporation and Lincoln National
Suite 600 (since 1998); Income Fund, Inc.
Northbrook, IL 60062 Executive Vice President
and Chief Financial Officer,
November 8, 1943 Whitman Corporation
(until 1998).
Adela Cepeda Director 10 Years President, 2 Commissioner,
Suite 1515 A.C. Advisory, Inc. Chicago Public
70 W. Madison Street (since 1995). Building
Chicago, IL 60602 Commission;
Director, Harvard
April 30,1958 Club of Chicago,
Fort Dearborn
Income Securities,
Inc. and Lincoln
National Income
Fund, Inc.
Roger J. Deshaies Director 10 Years Senior Vice President - 2 Director, Partners
Executive Offices Finance, Brigham & Health System and
PBB-Admin.4 Women's Hospital Lincoln National
c/o Receiving (since 1998); Convertible
29 Shattuck Street Senior Vice President - Securities Fund Inc.
Boston, MA 02115 Finance, Parkview Health
System (until 1998).
August 5, 1949
Daniel R. Toll Director 17 Years President, Heller 2 Director, Lincoln
560 Green Bay Road International Corporation National Income
Suite 300 (until 1984). Fund, Inc.
Winnetka, IL 60093
December 3, 1927
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* The Fund Complex is comprised of the Fund and Lincoln National Income Fund,
Inc.
5
As of May 1, 2002, the Directors and officers of the Fund as a group
beneficially owned 20,373 shares of the Fund, representing less than 1% of the
shares of Common Stock outstanding of the Fund. The table below sets forth
information on each Director's ownership of shares in the Fund and in the Fund
Complex.
Common Stock Dollar Range of Equity Aggregate Dollar Range of Equity
Beneficially Owned Securities in the Fund Securities in All Funds Overseen by
Name of Director At May 1, 2002* Director in Fund Complex**
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Interested Directors
Richard M. Burridge 5,923 $50,001 - $100,000 over $100,000
David K. Downes 1,000 $10,001 - $50,000 $10,001 - $50,000
H. Thomas McMeekin 1,338 $10,001 - $50,000 $50,001 - $100,000
Independent Directors
Thomas L. Bindley 5,000 $50,001 - $100,000 over $100,000
Adela Cepeda 3,795 $50,001 - $100,000 over $100,000
Roger J. Deshaies 2,317 $10,001 - $50,000 $50,001 - $100,000
Daniel R. Toll 1,000 $10,001 - $50,000 $50,001 - $100,000
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* Each Director has sole voting and investment authority over the shares shown
except as follows. The Fund shares listed for Mr. Deshaies include 1,530
shares held in trust.
** The Fund Complex is comprised of the Fund and Lincoln National Income Fund,
Inc.
The members of the Nominating, Audit and Joint Transaction Committees consist
of all of the Directors except Messrs. Burridge, Downes and McMeekin who, as
noted above, are "interested persons" of the Fund. The Nominating Committee
recommends nominees for Directors and officers for consideration by the full
Board of the Fund. The Nominating Committee will consider suggestions for
nominees for the Board of Directors of the Fund, if suggestions accompanied by
detailed biographical data are sent to the Secretary of the Fund by the date set
forth under "Date for Stockholder Proposals" below, though the Nominating
Committee is not currently soliciting such suggestions. The Audit Committee
makes recommendations to the full Board of the Fund with respect to the
engagement of independent auditors and reviews with the independent auditors the
plan and results of the audit engagement and matters having a material effect
upon the Fund's financial operations. Pursuant to an exemptive order granted by
the Securities and Exchange Commission, the Joint Transaction Committee is
responsible for reviewing any investments in private placement securities by the
Fund in which affiliates of the Adviser are also investing. The Board of
Directors of the Fund met nine times during the year ended December 31, 2001. In
addition, the Audit and Nominating Committees of the Fund met three times and
twice, respectively.
During the year ended December 31, 2001, all of the current Directors
attended 75% or more of the aggregate meetings of the Board of Directors and the
Board committees of which such Directors were members and were eligible to
attend.
The executive officers of the Fund, other than those shown above, are: David
F. Connor (38), Secretary since October 2000; and Michael P. Bishof (39),
Treasurer since January 2000. In addition, Robert D. Schwartz (43) has been a
Senior Vice President of the Fund since 1993. Mr. Schwartz has been Portfolio
Manager and Vice President of the Fund's Adviser since March 2000. Mr. Bishof is
a Senior Vice President / Investment Accounting of Delaware Service Company,
Inc., the Fund's administrator. The executive officers of the Fund are elected
annually by the Fund's Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
EACH INCUMBENT DIRECTOR.
6
COMPENSATION OF DIRECTORS AND OFFICERS
The Fund pays directors' fees to those Directors who are not affiliated with
the Adviser at the rate of $7,000 per year. The Fund pays a $500 fee for
attendance at each Board meeting and at each Audit Committee or Nominating
Committee meeting which occurs separately from a Board meeting, a $250 fee for
attendance at each Joint Transaction Committee meeting and reimburses Directors
for any reasonable travel expenses incurred to attend each meeting. The Fund
pays no other remuneration to its Directors and officers. In addition, the Fund
provides no pension or retirement benefits to its Directors and officers.
The following table shows compensation for the Directors of the Fund for the
year ended December 31, 2001: YEAR ENDED DECEMBER 31, 2001
YEAR ENDED DECEMBER 31, 2001
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TOTAL TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM FUND
NAME FROM THE FUND(1) COMPLEX(2)
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Thomas L. Bindley $12,000 $23,000
Richard M. Burridge $11,500 $22,000
Adela Cepeda $12,000 $23,000
Roger J. Deshaies $12,000 $23,000
H. Thomas McMeekin $11,500 $22,000
Daniel R.Toll $10,000 $21,000
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1 Includes a director's fee of $7,000 per year, a $500 fee for attendance at
each Board meeting and at each Audit Committee or Nominating Committee
meeting which occurs separately from a Board Meeting and a $250 fee for
attendance at each Joint Transaction Committee meeting.
2 This information represents the aggregate directors' fees paid to the
Directors by the Fund and Lincoln National Income Fund, Inc.
COMMITMENT TO GOOD CORPORATE GOVERNANCE
The Board of Directors believes strongly that its commitment to good
corporate governance greatly aids the long-term success of the Fund in
delivering value to its shareholders. The Board of Directors has developed and
followed a program of corporate governance, the highlights of which are
described below.
The Role of Independent Directors
The Fund's Directors acknowledge the important oversight role played by the
Directors who are independent of Fund management. Independent Directors
constitute a majority of the Fund's Board of Directors. In addition, the Fund's
Audit Committee and Nominating Committee are comprised entirely of independent
Directors.
Qualifications of the Directors
The qualifications and experience of the individual Directors has greatly
enhanced the effectiveness of the Fund's Board. When there are vacancies on the
Board, the Nominating Committee seeks out new Board members whose business and
educational background will make a significant contribution to the deliberations
of the Board. This is reflected in the current Directors, all of whom have
impressive credentials and significant expertise in investments, business or
finance.
7
Audit Committee Independence and Financial Literacy
All members of the Audit Committee are independent Directors, and the Board,
in its business judgment, has determined that they meet the independence and
financial literacy requirements of the New York Stock Exchange.
Directors are Shareholders
The Board has adopted a policy that requires each Director to own shares of
the Fund. This policy serves to ensure that the interests of the Board will
always be aligned with those of the Fund's shareholders.
Responsiveness to Shareholders
The Board recognizes that its most important function is to serve the best
interests of the Fund's shareholders. The Board endeavors to be responsive to
the concerns of the Fund's shareholders. For example, the Directors recently
destaggered the Board after a number of shareholders expressed a preference for
a declassified Board structure. In response to shareholder concern about the
discount at which the Fund's shares were trading, the Board implemented a share
repurchase program that it believes has contributed to a greatly reduced
discount since the program's implementation. The Board has also recently adopted
a managed distribution policy to further support the market price at which the
Fund's shares trade. In addition, the Board discontinued the Fund's practice of
retaining long-term capital gains last year in response to shareholder requests.
The Board believes that its actions are concrete evidence of its responsiveness
to the interests of all Fund shareholders.
AUDIT COMMITTEE REPORT
As required by its charter, the Fund's Audit Committee has reviewed and
discussed with Fund management and representatives from PricewaterhouseCoopers
LLP, the Fund's independent auditors, the audited financial statements for the
Fund's fiscal year ended December 31, 2001. The Audit Committee has discussed
with the independent auditors the matters required to be discussed by Statement
of Auditing Standards 61. The Audit Committee also received the written
disclosures and the letter from its independent auditors required by
Independence Standards Board Standard No. 1, and discussed with a representative
of PricewaterhouseCoopers LLP the independent auditor's independence. Based on
the foregoing discussions with management and the Fund's independent auditors,
the Audit Committee unanimously recommended to the Fund's Board of Directors
that the aforementioned audited financial statements be included in the Fund's
annual report to shareholders for the fiscal year ended December 31, 2001.
As noted above, the members of the Fund's Audit Committee are: Thomas L.
Bindley, Adela Cepeda, Roger J. Deshaies and Daniel R. Toll. All members of the
Audit Committee meet the standard of independence set forth in the listing
standards of the New York Stock Exchange. The Fund's Board of Directors has
adopted a formal charter for the Audit Committee setting forth its
responsibilities. A copy of the Audit Committee's charter is included in
Attachment A to this proxy statement.
A representative of PricewaterhouseCoopers LLP will attend the Annual
Meeting, will be given an opportunity to make a statement, and will be available
to answer appropriate questions.
Audit Fees. The aggregate fees paid to PricewaterhouseCoopers in connection
with the annual audit of the Fund's financial statements for the fiscal year
ended December 31, 2001 were $33,000.
8
Financial information systems design and implementation fees. There were no
financial information systems design and implementation services rendered by
PricewaterhouseCoopers to the Fund, its Adviser, and entities controlling,
controlled by or under common control with the Adviser for the fiscal year ended
December 31, 2001.
All other fees. The aggregate fees billed for other non-audit services
rendered by PricewaterhouseCoopers LLP to the Adviser and DSC and their
affiliates during the fiscal year ended December 31, 2001 were $480,000.
LEGAL PROCEEDINGS
Goldstein v. Lincoln National Convertible Securities Fund, Inc. In May 2000,
Phillip Goldstein filed a suit against the Fund and its Directors then in office
(including each current Director of the Fund except for Mr. Downes) in the U.S.
District Court for the Eastern District of Pennsylvania. The plaintiff is a
stockholder of LNV who, in April 2000, expressed an intention to nominate
candidates for the two director positions that were to be filled at the Fund's
2000 annual shareholder meeting, to move that the shareholders of the Fund pass
a certain resolution at that meeting, and to solicit proxies. The Fund informed
him that it would not permit him to raise the matters he wished to raise at the
2000 shareholder meeting because he had failed to notify the Fund of his
intentions prior to a published January 2000 deadline. In the action, the
plaintiff claims that it was illegal for the Fund to enforce this deadline and
that the defendants made false and misleading statements in the proxy materials
that they disseminated in connection with the Fund's 2000 annual meeting. In
April 2001, the District Court found in favor of the plaintiff, finding that
under Maryland law the Fund's Directors, by precluding the plaintiff from
nominating his candidates for election to the Board of the Fund and submitting
his other proposal at the meeting, breached their fiduciary duty. This ruling
was based on the court's conclusion that the published deadline for submitting
shareholder proposals was invalid and unenforceable because it was not also
reflected in the Fund's bylaws. The court also found that the Fund's Directors
had omitted material facts in connection with the solicitation of proxies for
the 2000 annual meeting. Although the Fund's proxy materials disclosed that the
Board had implemented a classified structure as permitted by Maryland law (which
structure has now been eliminated by Board action), the court ruled that the
Fund's proxy materials should have stated that this was accomplished by way of
an amendment to the Fund's charter documents. Mr. Goldstein has filed a motion
with the district Court seeking attorneys fees and expenses to be paid by the
Fund. The Board of the Fund has appealed the decision of the District Court in
this case.
Daniels v. Lincoln National Convertible Securities Fund, Inc. ("Daniels I").
In January 2001, an action was filed against the Fund and its directors in the
Circuit Court for Baltimore City in Baltimore, Maryland. This action purports to
have been brought on behalf of a class consisting of all the Fund's
shareholders. The allegations in this action are functionally identical to those
in the Goldstein action described above. The plaintiff seeks unspecified damages
and attorneys fees.
Daniels v. Lincoln National Convertible Securities Fund, Inc. ("Daniels II").
In September 2001, the plaintiff in the Daniels I case filed a separate class
action complaint in the District Court for the Southern District of New York. In
addition to the Fund and its directors, the complaint in Daniels II names the
Fund's former and current investment adviser as defendants. The complaint
alleges that the defendants engaged in a joint transaction in contravention of
Section 17(d) of the 1940 Act. Specifically, the complaint alleges that the
directors and the Fund's investment adviser improperly used Fund assets to
finance a proxy contest against Mr. Goldstein and related litigation. The
plaintiff seeks unspecified damages and attorneys fees.
9
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Fund's executive officers, Directors and 10% stockholders and certain
persons who are directors, officers or affiliated persons of the Adviser are
required under the Securities Exchange Act of 1934 to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Copies of these reports must also be furnished to the Fund.
Based solely on a review of copies of such reports furnished to the Fund through
the date hereof, or written representations that no reports were required, the
Fund believes that during fiscal year 2001 the filing requirements applicable to
the above-mentioned persons were met.
SHAREHOLDERS OWNING 5% OR MORE OF A FUND
As of the record date, May 1, 2002, Cede & Co., P.O. Box 20, Bowling Green
Station, New York, NY 10004, was the owner of record of 5,294,731 shares (91%)
of the outstanding Common Stock of the Fund. Such shares are believed to be held
on behalf of the beneficial owners of the shares. Other than as reported herein,
the Fund has no knowledge of beneficial ownership of its shares.
DATE FOR STOCKHOLDER PROPOSALS
Any stockholder proposals intended to be presented at the next Annual Meeting
and be included in the proxy statement and proxy of the Fund must be in proper
form and must be received on or before December 17, 2002. Any stockholder
proposals intended to be presented at the next Annual Meeting, but not to be
included in the proxy statement and proxy of the Fund, must be in proper form
and must be received on or before March 3, 2003. All such proposals should be
sent to the Secretary of the Fund, One Commerce Square, 2005 Market Street,
Philadelphia, Pennsylvania 19103. The inclusion and/or presentation of any such
proposal is subject to the applicable requirements of the proxy rules under the
Securities Exchange Act of 1934.
OTHER MATTERS
The Board of Directors of the Fund does not know of any other matter or
business that may be brought before the Annual Meeting. However, if any such
matter or business properly comes before the Annual Meeting, it is intended that
the persons named as proxies in the enclosed Proxy Card will vote in accordance
with their best judgment.
/s/ David F. Connor
-------------------
David F. Connor
Secretary
Dated May 7, 2002
YOUR VOTE IS IMPORTANT! YOU ARE URGED TO SIGN, DATE AND MAIL YOUR EXECUTED
PROXY PROMPTLY.
10
ATTACHMENT A
LINCOLN NATIONAL CONVERTIBLE SECURITIES FUND, INC.
LINCOLN NATIONAL INCOME FUND, INC.
AUDIT COMMITTEE CHARTER
Statement of Policy
Each Audit Committee shall oversee the audit process and provide assistance
to the Fund's Directors in fulfilling their responsibilities to the Fund
relating to the fund accounting and reporting practices of the Fund, and the
quality and integrity of the financial reports of the Fund. The Audit
Committee's role is clearly one of overview and review and not of direct
management of the fund accounting, reporting or audit processes. It is the
responsibility of the Audit Committee to maintain a free and open means of
communication among the Directors, the independent accountants and the Fund's
officers.
The outside auditor for the Fund shall be ultimately accountable to the Board
of Directors and this Committee. This Committee and the Board of Directors shall
have the ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditor (or, alternatively, to nominate the
outside auditor to be proposed for shareholder approval in any proxy
statements).
Membership
The Audit Committee shall consist of a Chairman and at least two other Board
members, all of whom shall have no relationship to the Fund that may interfere
with the exercise of their independence from management and the Fund. The
independence of the members of this Committee shall be interpreted in accordance
with the Rules of the New York Stock Exchange regarding Audit Committee as
promulgated from time to time. Each member of the Audit Committee shall be
financially literate in the reasonable business judgement of the Board of
Directors, or become financially literate within a reasonable period of time
after appointment to the Committee. At least one member of the Audit Committee
shall have accounting or related financial management expertise in the
reasonable business judgement of the Board of Directors.
Principal Functions
The Audit Committee Shall:
1. Review and reassess the adequacy of this charter on an annual basis. The
Committee Chairman shall insure that the Fund provides the New York Stock
Exchange written confirmation regarding: (1) any determination that the
Board of Directors has made regarding the independence of Directors; (2)
the financial literacy of the Audit Committee members; (3) the
determination that at least one of the Audit Committee members has
accounting or related financial management expertise; and (4) the annual
review and reassessment of the adequacy of this Charter.
2. Review the audit reports of the Fund prepared by its designated certified
public accounting firm outside auditor, recommend the selection of an
outside auditor for the ensuing year, review the audit and non-audit fees
paid to the Fund's certified public accountants, and review in draft form
the Annual Report, SEC 10-K, and Annual Proxy Statements for
recommendation to the full Board.
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3. Ensure that the outside auditor submits on a periodic basis to this
Committee a formal written statement delineating all relationships between
the auditor and the Fund. This Committee shall also actively engage in a
dialogue with the outside auditor with respect to any disclosed
relationships or services that may impact the objectively and independence
of the outside auditor and shall make recommendations to the Board of
Directors to take appropriate action in response to the outside auditors
report to satisfy itself of the outside auditors' independence.
4. Review, in consultation with the independent accountants, the conduct and
results of each external audit of the financial statements of the Fund,
each certification, report or opinion rendered by the independent
accountants in connection with each audit, each related management letter,
and management's responses to any recommendations made by the independent
accountants in connection with each audit.
5. Review, in consultation, as appropriate, with the independent accountants,
the Fund's officers and the service contractors;
a) Any disputes between the service contractors and the independent
accountants that arise in connection with the audits and/or preparation
of the financial statements;
b) The independent accountant's review of each Fund's accounting and
internal control procedures to check compliance with the rules and
regulations of the SEC and other applicable requirements; and
c) The review by the independent accountants (or other independent
accountants) of the accounting and internal control procedures of the
Fund's custodians and transfer agent to check compliance with the rules
and regulations of the SEC and other applicable requirements.
d) Consider, in consultation with the independent accountants and the
Fund's officers, the scope and plan of forthcoming external audits and
the review of the Fund's accounting and internal control procedures.
6. Consider, when presented by the Fund's officers, the service contractors
or the independent accountants, material questions of choice with respect
to appropriate accounting principles and practices to be used in the
preparation of the Fund's financial statements.
7. Have the power to inquire into any financial matters in addition to those
set forth above.
8. Review, in consultation with the Fund's officers and/or service
contractors, any proposal to employ the independent accountants to render
consulting or other non-audit services.
9. Report to the entire Fund's Board periodically and as requested on the
performance of its responsibilities and its findings.
10. Perform such other functions as may be assigned to it by law, the Fund's
charter, declaration of trust or by-laws, or by the Board.
Resource and Staff Assistance
The appropriate officers of the Fund shall provide or arrange to provide such
information, data and services as the Audit Committee may request. The Audit
Committee shall consult as they deem appropriate with personnel of the Fund,
and/or others whose views would be considered helpful to the Audit Committee.
Meetings
The Audit Committee shall meet at least twice each year, to determine
the firm to be recommended to be employed as the Fund's independent accountants
and the proposed terms of such engagements, to discuss and approve the scope of
the next year's audit of the financial statements, and to review the results of
the audit for the prior year. The Audit Committee shall meet with the Fund's
independent accountants at least once annually outside the presence of the
Fund's officers and management representatives.
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| Lincoln National Convertible
| Securities Fund, Inc.
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| PROXY STATEMENT
| Notice of Annual Meeting
| of Shareholders
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| June 14, 2002
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LINCOLN NATIONAL CONVERTIBLE SECURITIES, INC. (the "Fund")
ANNUAL MEETING OF STOCKHOLDERS - JUNE 14, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David K. Downes and David F. Connor, or either
of them, with the right of substitution, proxies of the undersigned at the
Annual Meeting of Stockholders of the Fund indicated on this form to be held at
the offices of Delaware Investments, Two Commerce Square, 2001 Market Street,
2nd Floor, Philadelphia, Pennsylvania 19103, on Friday, June 14, 2002 at 10:00
A.M. (EDT), or at any postponement or adjournments thereof, with all the powers
which the undersigned would possess if personally present, and instructs them to
vote all of the shares of common stock of the Fund held by the undersigned,
thereby revoking all previous proxies, upon any matters which may properly be
acted upon at this meeting. Please refer to the proxy statement for a discussion
of each of these matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NO. 1, THE
PERSONS NAMED ON THE PROXY CARD WILL USE THEIR DISCRETION TO VOTE ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING, OR AT ANY POSTPONEMENT OR
ADJOURNMENT THEREOF. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENCLOSED
ENVELOPE.
Date __________________________________________, 2002
Signature(s) (Joint Owners) (PLEASE SIGN WITHIN BOX)
PLEASE DATE AND SIGN NAME OR NAMES ABOVE AS PRINTED
ON THIS CARD TO AUTHORIZE THE VOTING OF YOUR SHARES
AS INDICATED. WHERE SHARES ARE REGISTERED WITH JOINT
OWNERS, ALL JOINT OWNERS SHOULD SIGN. PERSONS SIGNING
AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR OTHER
REPRESENTATIVE SHOULD GIVE FULL TITLE AS SUCH.
536
Please fill in box(es) as shown using black or blue ink. X
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1
FOR WITHHOLD FOR ALL
1. To elect the following nominees as Directors of the Fund. ALL ALL EXCEPT
01) Thomas L. Bindley 02) Richard M. Burridge 03) Adela Cepeda
04) Roger J. Deshaies 05) David K. Downes 06) H. Thomas McMeekin
07) Daniel R. Toll
If you checked "For All Except," write the withheld nominee's name above.
536