<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-
File No. 811-
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
DELAWARE GROUP FOUNDATION FUNDS
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
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George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: December 31, 1997
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The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
Title of Securities Being Registered: The securities being registered are a
number of individual classes of separate series f shares of beneficial interest
of Delaware Group Foundation Funds, a Delaware business trust, as follows:
Income Portfolio
Income Fund A Class
Income Fund B Class
Income Fund C Class
Income Fund Institutional Class
Balanced Portfolio
Balanced Fund A Class
Balanced Fund B Class
Balanced Fund C Class
Balanced Fund Institutional Class
Growth Portfolio
Growth Fund A Class
Growth Fund B Class
Growth Fund C Class
Growth Fund Institutional Class
<PAGE> 2
--- C O N T E N T S ---
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectus
5. Part B - Statements of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE> 3
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
Income Portfolio
Balanced Portfolio
Growth Portfolio
A Class/ Institutional
B Class/ Class
C Class
<S> <C> <C> <C>
1 Cover Page....................................................... Cover Cover
2 Synopsis......................................................... Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information.................................. Financial Financial
Highlights Highlights
4 General Description of Registrant................................ Investment Investment
Objectives and Objectives and
Policies; Shares; Policies; Shares;
Investments of the Investments of the
Underlying Funds; Underlying Funds;
Other Investment Other Investment
Policies and Policies and
Risk Factors Risk Factors
5 Management of the Fund........................................... Management of Management of
the Portfolios the Portfolios
6 Capital Stock and Other Securities............................... Delaware Dividends and
Difference; Distributions;
Dividends and Taxes;
Distributions; Shares
Taxes; Shares
7 Purchase of Securities Being Offered............................. Cover; Cover;
How to Buy How to Buy Shares;
Shares; Calculation Calculation of
of Offering Price Net Asset
and Net Asset Value Per Share;
Value Per Share; Management of
Management of the Portfolios
the Portfolios
</TABLE>
<PAGE> 4
CROSS-REFERENCE SHEET
PART A
(continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
Income Portfolio
Balanced Portfolio
Growth Portfolio
A Class/ Institutional
B Class/ Class
C Class
<S> <C> <C> <C>
8 Redemption or Repurchase......................................... How to Buy How to Buy
Shares; Shares;
Redemption and Redemption and
Exchange Exchange
9 Pending Legal Proceedings........................................ None None
</TABLE>
<PAGE> 5
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page........................................................ Cover
11 Table of Contents................................................. Table of Contents
12 General Information and History................................... General Information
13 Investment Objectives and Policies................................ Investment Objectives
and Policies
14 Management of the Registrant...................................... Officers and Trustees
15 Control Persons and Principal Holders
of Securities..................................................... Officers and Trustees
16 Investment Advisory and Other Services............................ Plans Under Rule 12b-1
for the Fund Classes
(under Purchasing Shares);
Asset Allocation
Agreements; Officers and
Trustees; General Information;
Financial Statements
17 Brokerage Allocation.............................................. Trading Practices
and Brokerage
18 Capital Stock and Other Securities................................ Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of
Securities Being Offered........................................... Purchasing Shares;
Determining Offering Price
and Net Asset Value;
Redemption and Repurchase;
Exchange Privilege
</TABLE>
<PAGE> 6
CROSS-REFERENCE SHEET
PART B
(Continued)
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
-------- ----------- -------------------------
<S> <C> <C>
20 Tax Status . . . . . . . . . . . . . . . . . . . Taxes
21 Underwriters . . . . . . . . . . . . . . . . . Purchasing Shares
22 Calculation of Performance Data . . . . . . . . Performance Information
23 Financial Statements . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 7
CROSS REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Location
Item No. Description in Part C
------- ----------- ----------
<S> <C> <C>
24 Financial Statements and Exhibits . . . . . . . . . . . . . . . . . Item 24
25 Persons Controlled by or under Common
Control with Registrant . . . . . . . . . . . . . . . . . . . . . . Item 25
26 Number of Holders of Securities . . . . . . . . . . . . . . . . . . Item 26
27 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . Item 27
28 Business and Other Connections of
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . Item 28
29 Principal Underwriters . . . . . . . . . . . . . . . . . . . . . . Item 29
30 Location of Accounts and Records . . . . . . . . . . . . . . . . . Item 30
31 Management Services . . . . . . . . . . . . . . . . . . . . . . . . Item 31
32 Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 32
</TABLE>
<PAGE> 8
SUBJECT TO CHANGE
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
DECEMBER 31, 1997
DELAWARE GROUP FOUNDATION FUNDS
1818 Market Street, Philadelphia, PA 19103
Delaware Group Foundation Funds (the "Trust") is an open-end management
investment company with three separate Portfolios: the Income Portfolio, the
Balanced Portfolio and the Growth Portfolio. Each Portfolio is in effect a
separate fund issuing its own shares. The investment objectives and principal
policies of the Portfolios are described below. See Investment Objectives and
Policies. Although each Portfolio will constantly strive to attain its
objective, there can be no assurance that it will be attained.
The Portfolios will invest in open-end investment companies (mutual
funds) that are members of the Delaware Group of Mutual Funds (individually, an
"Underlying Fund" and collectively, the "Underlying Funds"). The Underlying
Funds include funds investing in U.S. and foreign stocks, bonds, and money
market instruments. In addition, if the Trust receives an exemptive order from
the Securities and Exchange Commission ("SEC"), the Portfolios may, to the
extent consistent with their respective investment objectives, invest in the
same securities that the Underlying Funds may invest in. At any point in time,
it can be expected that each Portfolio will invest in a different combination of
securities and Underlying Funds, reflecting the different investment objectives
and levels of risk and return each Portfolio seeks.
This Prospectus describes the Portfolios and their Class A Shares, Class B
Shares and Class C Shares and sets forth information that you should read and
consider before you invest. Please retain it for future reference. A Statement
of Additional Information ("Part B" of the Trust's registration statement),
dated December 31, 1997, as it may be amended from time to time, contains
additional information about the Trust and has been filed with the Securities
and Exchange Commission. Part B is incorporated by reference into this
Prospectus and is available, without charge, by writing to the Trust at the
above address or by calling 800-523-4640. The Portfolios' financial statements,
when available, appear in the Trust's Annual Report, which will accompany any
response to requests for Part B.
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Each Portfolio also offers Institutional Class Shares, which are available
for purchase only by certain investors. A prospectus for the Institutional
Classes can be obtained by writing to Delaware Distributors, L.P. at the above
address or by calling 800-828-5052.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE PORTFOLIOS
ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT
UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
SHARES OF THE PORTFOLIOS ARE NOT BANK OR CREDIT UNION DEPOSITS.
TABLE OF CONTENTS
COVER PAGE
SYNOPSIS
SUMMARY OF EXPENSES
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES
SUITABILITY
INVESTMENT STRATEGY
INVESTMENTS OF THE UNDERLYING FUNDS
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
RETIREMENT PLANNING
CLASSES OF SHARES
HOW TO BUY SHARES
REDEMPTION AND EXCHANGE
DIVIDENDS AND DISTRIBUTIONS
TAXES
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
MANAGEMENT OF THE PORTFOLIOS
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
APPENDIX A - RATINGS
APPENDIX B - INVESTMENT ILLUSTRATIONS
APPENDIX C - CLASSES OFFERED
<PAGE> 10
SYNOPSIS
INVESTMENT OBJECTIVES
The investment objective of the Income Portfolio is to seek a combination
of current income and preservation of capital with capital appreciation as a
secondary objective. The investment objective of the Balanced Portfolio is to
seek capital appreciation with current income as a secondary objective. The
investment objective of the Growth Portfolio is to seek long term capital
growth. Each Portfolio has different levels of risk and return. For further
details, see Investment Objectives and Policies and Other Investment Policies.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Each Portfolio invests in Underlying Funds in the Delaware Group of Mutual
Funds, and may, if the Trust receives an exemptive order from the SEC, invest in
the same securities as those in which the Underlying Funds invest, and is
therefore subject to the same risks as those attendant to the Underlying Funds.
See Investment Objectives and Policies and Other Investment Policies and Risk
Considerations.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to each Portfolio, subject to the supervision and direction
of the Company's Board of Trustees. The Manager and certain of its affiliates
also provide investment management services to the Underlying Funds and certain
of the other funds in the Delaware Group. Delaware Distributors, L.P. (the
"Distributor"), an affiliate of the Manager, is the national distributor for
each Portfolio and for all of the other mutual funds in the Delaware Group,
including the Underlying Funds. Delaware Service Company, Inc. (the "Transfer
Agent"), an affiliate of the Manager, is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for each Portfolio and for
all of the other mutual funds in the Delaware Group, including the Underlying
Funds. See Summary of Expenses and Management of the Portfolios for further
information regarding the Manager, the Distributor and the Transfer Agent and
the fees payable to these entities by each of the Portfolios.
SALES CHARGES
The price of each of the Class A Shares includes a maximum front-end sales
charge of 4.75% of the offering price, which is equivalent to 0.00% of the
amount invested for Income Portfolio A Class, 0.00% of the amount invested for
Balanced Portfolio A Class, and 0.00% of the amount invested for Growth
Portfolio A Class. The sales charge is reduced on certain transactions of at
least $100,000 but under $1,000,000. For purchases of $1,000,000 or more, the
front-end sales charge is eliminated. Class A Shares are subject to annual 12b-1
Plan expenses for the life of the investment.
The price of each of the Class B Shares is equal to the net asset value per
share. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
subject to annual 12b-1 Plan expenses for approximately eight years after
purchase. See Deferred Sales Charge Alternative - Class B Shares and Automatic
Conversion of Class B Shares under Classes of Shares.
The price of the Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
<PAGE> 11
See Classes of Shares and Distribution (12b-1) and Service under Management
of the Portfolios.
PURCHASE AMOUNTS
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments generally must be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase limitation
of $250,000. For Class C Shares, each purchase must be in an amount that is less
than $1,000,000. An investor may exceed these maximum purchase limitations for
Class B Shares and Class C Shares by making cumulative purchases over a period
of time. An investor should keep in mind, however, that reduced front-end sales
charges apply to investments of $100,000 or more in Class A Shares, and that
Class A Shares are subject to lower annual 12b-1 Plan expenses than Class B and
Class C Shares and generally are not subject to a CDSC. The minimum and maximum
purchase amounts for retirement plans may vary. See How to Buy Shares.
REDEMPTION AND EXCHANGE
Class A Shares of each Portfolio may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Portfolios nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the
Portfolios nor the Distributor assesses any charges other than the CDSC for
redemptions or exchanges of Class B or Class C Shares. There are certain
limitations on an investor's ability to exchange shares between the various
classes of shares that are offered. See Redemption and Exchange.
OPEN-END INVESTMENT COMPANY
The Trust, which was organized as a Delaware Business Trust on October 00,
1997, is an open-end management investment company. Each Portfolio is
non-diversified as defined by the Investment Company Act of 1940 (the "1940
Act"). See Shares under Management of the Portfolios.
2
<PAGE> 12
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Portfolio's Class A, Class B, Class C and Institutional
Shares follows:
<TABLE>
<CAPTION>
Income Portfolio
Balanced Portfolio
Growth Portfolio
------------------
Shareholder Transaction Class A Class B Class C
Expenses Shares Shares Shares
-------- ------ ------ ------
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases (as a
percentage of offering price) .. 4.75% None None
Maximum Sales Charge
Imposed on Reinvested
Dividends (as a percentage of
offering price) ................ None None None
Maximum Contingent Deferred
Sales Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) .................... None* 4.00%* 1.00%*
Redemption Fees ................ None** None** None**
</TABLE>
*Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is paid to
the financial adviser through whom such purchase is effected, a CDSC of 1% will
be imposed on certain redemptions within 12 months of purchase ("Limited CDSC").
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC
of 1% if shares are redeemed within 12 months of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange; Deferred Sales Charge Alternative -
Class B Shares and Level Sales Charge Alternative - Class C Shares under Classes
of Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
3
<PAGE> 13
<TABLE>
<CAPTION>
Income Portfolio
Balanced Portfolio
Growth Portfolio
----------------
Annual Operating Expenses
(as a percentage of average daily Class A Class B Class C
net assets) Shares Shares Shares
----------- ------ ------ ------
<S> <C> <C> <C>
Asset Allocation Fees
(after waivers)1 ........ 0.10% 0.10% 0.10%
12b-1 Plan Expenses
(including service fees)2 0.25% 1.00% 1.00%
Other Operating Expenses3 . 1.10% 1.10% 1.10%
---- ---- ----
Total Operating Expenses
(after waivers)4 ........ 1.45% 2.20% 2.20%
==== ==== ====
</TABLE>
(1) The Manager has elected voluntarily to waive that portion, if any, of
the annual Asset Allocation Fees payable by the Portfolios and to pay the
Portfolios' expenses to the extent necessary to ensure that the "Total Operating
Expenses" of the Portfolios do not exceed 1.20% (exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and 12b-1 expenses) during the
commencement of the public offering of the Portfolios through June 30, 1998. If
the voluntary expense waivers and payments were not in effect, it is estimated
that the "Total Operating Expenses" as a percentage of average daily net assets
would be 1.92%, 2.67% and 2.67% for each Portfolio's A Class, B Class and C
Class, respectively, reflecting Asset Allocation Fees of 0.25% for each
Portfolio.
(2) Class A Shares, Class B Shares and Class C Shares of each Portfolio
are subject to separate 12b-1 Plans. Long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. (the "NASD"). The
annual 12b-1 Plan expenses for Class A Shares have been set by the Board of
Trustees at 0.25% of the average daily net assets of such Classes. The maximum
annual 12b-1 Plan expenses permitted under the 12b-1 Plan for Class A Shares are
0.30% of the average daily net assets of such Class. See Distribution (12b-1)
and Service under Management of the Portfolios.
(3) "Other Operating Expenses" are based on estimated amounts for the
current fiscal year.
(4) The Portfolios will indirectly bear their pro rata share of the
expenses of the Underlying Funds in which they invest. See Management of the
Portfolios for the expense ratios for each of the Underlying Funds' most current
fiscal year.
Investors utilizing the Delaware Group Asset Planner asset allocation
service also typically incur an annual maintenance fee of $35 per Strategy.
However, effective November 1, 1996, the annual maintenance fee
4
<PAGE> 14
is waived until further notice. Investors who utilize the Asset Planner for an
Individual Retirement Account ("IRA") will pay an annual IRA fee of $15 per
Social Security number. See Delaware Group Asset Planner in Part B.
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual rate
of return, (2) redemption and no redemption at the end of each time period and
(3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable. The following example assumes the voluntary waiver of
the asset allocation fee by the Manager as discussed in this Prospectus.
INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
ASSUMING REDEMPTION ASSUMING NO REDEMPTION
1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares(1) $000 $000 $000 $000
Class B Shares(2) $000 $000 $000 $000
Class C Shares $000 $000 $000 $000
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has not been
reflected in this calculation, may be imposed on certain redemptions within 12
months of purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
of a Portfolio will be automatically converted into Class A Shares of that
Portfolio. However, the conversion may occur as late as three months after the
eighth anniversary of purchase, during which time the higher 12b-1 Plan fees
payable by Class B Shares will continue to be assessed. See Automatic Conversion
of Class B Shares under Classes of Shares for a description of the automatic
conversion feature.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The purpose of the above tables is to assist the investor in understanding
the various costs and expenses that an investor in each Class will bear directly
or indirectly.
5
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FINANCIAL HIGHLIGHTS
Financial Highlights for the Portfolios are not included because, as of the date
of this Prospectus, the Portfolios had no operating history.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Income Portfolio is to seek a combination
of current income and preservation of capital with capital appreciation as a
secondary objective. It seeks to achieve this objective by investing in a mix of
fixed income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. The Income Portfolio will generally invest at least 45%
of its portfolio in fixed income securities and 20% in domestic equity
securities.
The investment objective of the Balanced Portfolio is to seek capital
appreciation with current income as a secondary objective. The Balanced
Portfolio seeks to achieve its objective by investing primarily in domestic
equity and fixed income securities, including domestic equity and fixed income
Underlying Funds. The Balanced Portfolio may also invest in international equity
and fixed income securities, including international equity and fixed income
Underlying Funds. The Balanced Portfolio will generally invest at least 25% of
its net assets in fixed income securities, including fixed-income Underlying
Funds.
The investment objective of the Growth Portfolio is to seek long term
capital growth. The Growth Portfolio seeks to achieve this objective by
investing primarily in equity securities, including equity Underlying Funds,
and, to a lesser extent, in fixed income securities, including fixed-income
Underlying Funds. The equity securities may include international securities,
including international Underlying Funds.
Each Portfolio will pursue its investment objective through active asset
allocation implemented primarily with investments in a combination of the
Underlying Funds. The Portfolios may also separately invest directly in the same
securities as those in which the Underlying Funds may invest, to the extent
consistent with each Portfolio's investment objectives. The investment objective
of each Portfolio is considered a "fundamental policy," which means that it may
not be changed without approval of a Portfolio's shareholders. There is no
assurance that a Portfolio will achieve its objective.
SUITABILITY
The Trust consists of three separate Portfolios. The Portfolios pursue
different investment objectives, with different levels of risk and return. Each
Portfolio is designed to be a long-term investment. The descriptions below
compare the three Portfolios' levels of risk and return relative to one another
and are not intended to imply any particular absolute level of risk or return
for any Portfolio.
INCOME PORTFOLIO (Wealth Preservation Phase - Lower Risk Tolerance)
May be appropriate for the investor in the pre-Retirement/Retirement phase (55+
yrs.) or the investor looking for reduced portfolio risk and/or an increase in
current income.
6
<PAGE> 16
BALANCED PORTFOLIO (Wealth Accumulation Phase - Moderate Risk Tolerance)
May be appropriate for the investor looking for the capital appreciation
potential of the stock market and the income potential of the bond market.
GROWTH PORTFOLIO (Earlier Wealth Accumulation Phase - Higher Risk
Tolerance) May be appropriate for the investor looking for long term capital
growth with no need for current income.
INVESTMENT STRATEGY
The Portfolios will invest primarily in open-end investment companies
(mutual funds) that are members of the Delaware Group of Funds (individually, an
"Underlying Fund" and collectively, the "Underlying Funds"), as well as, if the
Trust receives an exemptive order from the SEC, the same kinds of securities as
those in which the Underlying Funds may invest, to the extent consistent with
each Portfolio's investment objectives. The Underlying Funds include funds
investing in U.S. and foreign stocks, bonds, and money market instruments. At
any point in time, it can be expected that each Portfolio will invest in a
different combination of securities and Underlying Funds, reflecting the
different investment objectives and levels of risk and return that each
Portfolio seeks. In allocating the Portfolios' assets, the Manager will evaluate
the expected return of the Underlying Funds, the volatility of the Underlying
Funds (i.e., the variability of returns from one period to the next), and the
correlation of the Underlying Funds (i.e. the degree to which the Underlying
Funds move together).
The allocation of the assets of each Portfolio will be determined by the
Manager. The Manager is the investment manager for each Portfolio. The Manager
or its affiliates also serve as the investment manager to each Underlying Fund.
In determining the asset allocation of the Portfolios, the Manager will
establish an allocation according to asset classes and will implement such
allocation through investment in an appropriate combination of securities and
Underlying Funds.
The Underlying Funds that will be considered for investment by each
Portfolio are listed below, grouped within broad asset classes. The asset class
headings below are provided for convenience and are approximate in nature. For
more detailed information on the investment policies of each Underlying Fund,
see Investment Policies of the Underlying Funds. The list of Underlying Funds
may change from time to time, and Underlying Funds may be added or deleted upon
the recommendation of the Manager without shareholder approval.
UNDERLYING FUND
U.S. EQUITY
Aggressive Growth Fund
Blue Chip Fund
Decatur Total Return Fund
DelCap Fund
Devon Fund
Small Cap Value Fund
Trend Fund
U.S. Growth Fund
INTERNATIONAL EQUITY
Emerging Markets Fund
International Equity Fund
International Small Cap Fund
New Pacific Fund
7
<PAGE> 17
FIXED INCOME
Delchester Fund
Global Bond Fund
Limited-Term Government Fund
U.S. Government Fund
MONEY MARKET
Delaware Cash Reserve
U.S. Government Money Fund
Under normal circumstances, it can generally be anticipated that of the
three Portfolios, the Growth Portfolio will hold a higher percentage of its
assets in U.S. equity and international securities (including Underlying Funds
which invest primarily in those securities) than will the Balanced Portfolio,
which in turn will hold a higher percentage in such securities and Underlying
Funds than will the Income Portfolio. Likewise, it can generally be anticipated
that of the three Portfolios, the Income Portfolio will hold a higher percentage
of its assets in fixed-income securities (including Underlying Funds which
invest primarily in those securities) than will the Balanced Portfolio, which in
turn will hold a higher percentage in such securities and Underlying Funds than
will the Growth Portfolio.
The percentage ranges targeted for each Portfolio by broad asset class are
set forth below. The percentage ranges applicable to each asset class for each
Portfolio may be changed from time to time by the Manager without the approval
of shareholders.
PERCENTAGE RANGES OF INVESTMENT IN ASSET CLASSES
<TABLE>
<CAPTION>
ASSET CLASS INCOME PORTFOLIO BALANCED PORTFOLIO GROWTH PORTFOLIO
- ----------- ---------------- ------------------ ----------------
<S> <C> <C> <C>
U.S. Equity 20%-50% 35%-65% 45%-75%
International Equity 0%-10% 5%-15% 10%-30%
Fixed Income 45%-75% 25%-55% 05%-35%
Money Market 0%-35% 0%-35% 0%-35%
</TABLE>
A Portfolio will generally at all times be invested in at least four
Underlying Funds, consistent with the table above. Any Portfolio may invest up
to 100% of its total assets in cash, money market instruments or the Cash
Reserve or U.S. Government Money Funds for temporary, defensive purposes.
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<PAGE> 18
PURCHASES OF SHARES OF THE UNDERLYING FUNDS
To the extent the Portfolios invest in Underlying Funds, they will invest
only in Institutional Class Shares of such Underlying Funds. Accordingly, the
Portfolios will not pay any sales load or 12b-1 service or distribution fees in
connection with their investments in shares of the Underlying Funds. The
Portfolios, however, will indirectly bear their pro rata share of the fees and
expenses incurred by the Underlying Funds that are applicable to holders of
Institutional Class Shares. The investment returns of each Portfolio, therefore,
will be net of the expenses of the Underlying Funds in which it is invested.
DIRECT INVESTMENT IN SECURITIES AND OTHER INVESTMENT STRATEGIES
The Trust has applied for an exemptive order from the SEC to permit the
Portfolios to invest directly in the same securities which the Underlying Funds
may invest. Until such order is granted, the Portfolios will only invest in the
Underlying Funds and such other securities as are expressly permitted by the
1940 Act. There is no guarantee that the SEC will grant such an order. In the
event this order is granted, each Portfolio may, to the extent consistent with
its investment objective, invest its assets directly in the same types of
securities as those in which the Underlying Funds invest. In addition, if the
order is granted, each Portfolio may, to the extent consistent with its
investment objective, engage directly in the same types of investment strategies
as those in which each Underlying Fund may engage. Each Portfolio would use such
investment strategies to hedge investment positions, including investments
directly in securities and investments in the Underlying Funds, to protect the
Portfolio against a decline in an Underlying Fund's value. Each Portfolio does
not intend to engage in these investment strategies for non-hedging purposes
such that more than 5% of its assets will be exposed. For a description of these
securities and investment strategies, see Investment Policies of the Underlying
Funds.
RISK FACTORS
The value of the Portfolios' shares will increase as the value of the
securities owned by the Portfolios increases and will decrease as the value of
the Portfolios' investments decrease. In addition, the Portfolios' share prices
and yields will fluctuate in response to movements in the securities markets as
a whole. Over time, the value of an investment in the Growth Portfolio is
generally expected to fluctuate more than an investment in the Balanced
Portfolio, which in turn is generally expected to fluctuate more over time then
an investment in the Income Portfolio.
Each Portfolio's assets may be primarily invested in a combination of the
Underlying Funds. As a result, each Portfolio's investment performance may be
directly related to the investment performance of the Underlying Funds held by
it. The ability of each Portfolio to meet its investment objective may thus be
directly related to the ability of the Underlying Funds to meet their objectives
as well as the allocation among those Underlying Funds by the Manager. There can
be no assurance that the investment objective of any Portfolio or Underlying
Fund will be achieved.
The Underlying Funds may engage in a variety of investment strategies
which involve certain risks. Moreover, each Portfolio may, if the Trust is
granted an exemptive order by the SEC, to the extent consistent with its
investment objectives, invest in the same securities and employ the same
investment strategies as any of the Underlying Funds. The Portfolios may
therefore be subject to some of the risks resulting from these strategies. The
Portfolios, to the extent consistent with their investment objectives, and
certain of the Underlying Funds may purchase foreign securities; purchase high
yielding, high risk debt securities (commonly referred to as "junk bonds");
enter into foreign currency transactions; engage in options transactions;
engage in futures contracts and options on futures; purchase zero coupon bonds
and pay-in-kind bonds; purchase restricted and illiquid securities; enter into
forward roll transactions; purchase securities on a when-issued or delayed
delivery basis; enter into repurchase agreements; borrow money; loan portfolio
securities and engage in various other investment strategies. Further
information on these investment strategies can be found under Other Investment
Policies and Risk Considerations and in Part B.
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<PAGE> 19
Each Portfolio is considered a non-diversified investment company under
the regulations which govern mutual funds because it may invest in a limited
number of securities and Underlying Funds. As a result, each Portfolio may be
subject to greater risk with respect to its individual portfolio than a fund
that is more broadly diversified among a number of issuers. However, most of the
Underlying Funds themselves are diversified investment companies. The Portfolios
do not intend to concentrate in any particular industry, sector or foreign
government security (except for investment companies, to the extent that it is
considered an industry or sector).
* * *
For additional information about each Portfolio's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations.
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<PAGE> 20
INVESTMENTS OF THE UNDERLYING FUNDS
The following is a summary of the investment objectives and strategies of
the Underlying Funds and the types of securities in which they may invest. The
investment objectives of the Underlying Funds are fundamental policies and there
is no assurance that they will achieve their respective investment objectives.
Each Underlying Fund will constantly strive to achieve its objectives and, in
investing to do so, may hold securities for any period of time. To the extent
that an Underlying Fund (other than a Money Market Fund) engages in short-term
trading in attempting to achieve its objectives, it may increase its portfolio
turnover rate and incur larger portfolio transaction expenses (including
brokerage commissions) and other expenses than might otherwise be the case.
Additional investment strategies with respect to the Underlying Funds are
described in Other Investment Policies and Risk Considerations and in Part B, as
well as in the prospectuses of each Underlying Fund. For a free copy of a
prospectus of any of the Underlying Funds, call 1-800-523-4640 or write to the
Trust at the address given above. Except where noted, the Manager serves as
investment manager for each of the Underlying Funds.
U.S. EQUITY FUNDS
As described below, the following Underlying Funds invest primarily in
equity securities of companies located or conducting their business primarily in
the United States.
Aggressive Growth Fund. The investment objective of Aggressive Growth Fund is
long-term capital appreciation which the Aggressive Growth Fund attempts to
achieve by investing primarily in equity securities of companies which the
Manager believes have the potential for high earnings growth. Although the
Aggressive Growth Fund, in seeking its objective, may receive current income
from dividends and interest, income is only an incidental consideration in the
selection of the Aggressive Growth Fund's investments. The Aggressive Growth
Fund seeks to achieve its investment objective by investing primarily (at least
65% of its total assets) in equity securities (including convertible securities)
of companies which the Manager believes have the potential for high earnings
growth and which are U.S. companies with stock market capitalizations of at
least $300 million. The Aggressive Growth Fund has been designed to provide
investors with potentially greater long-term rewards than provided by an
investment in a fund that seeks capital appreciation from common stocks with
more established earnings histories.
The Aggressive Growth Fund will invest in equity securities of companies
the Manager believes to be undervalued and to have the potential for high
earnings growth. Companies in which the Aggressive Growth Fund invests generally
will meet one or more of the following criteria: high historical
earnings-per-share (EPS) growth; high projected future EPS growth; an increase
in research analyst earnings estimates; attractive relative price to earnings
ratios; and high relative discounted cash flows. In selecting the Aggressive
Growth Fund's investments, the Manager also focuses on companies with capable
management teams, strong industry positions, sound capital structures, high
returns on equity, high reinvestment rates and conservative financial accounting
policies.
In pursuing its objective, the Aggressive Growth Fund anticipates that it
will invest substantially all, and under normal conditions not less than 65%, of
its assets in common stocks, preferred stocks, convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks and warrants or
rights. To the extent that the Aggressive Growth Fund invests in convertible
debt securities, those securities will be purchased on the
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<PAGE> 21
basis of their equity characteristics, and ratings, if any, of those securities
will not be an important factor in their selection.
At no time will the investments of the Aggressive Growth Fund in bank
obligations, including time deposits, exceed 25% of the value of the Aggressive
Growth Fund's assets.
Blue Chip Fund. The investment objective of Blue Chip Fund is to achieve
long-term capital appreciation. Current income is a secondary objective. It
seeks to achieve these objectives by investing primarily in equity securities
and securities that are convertible into equity securities. The sub-adviser,
Vantage Global Advisors, Inc. ("Vantage"), an affiliate of the Manager, will
invest in companies which it believes exhibit growth potential that
significantly exceeds the average anticipated growth rate of companies included
in the Standard and Poor's 500 Index ("S&P 500"). Under normal market
conditions, at least 65% of the total assets of Blue Chip Fund will be in
companies determined by Vantage to be "Blue Chip." Generally, the median market
capitalization of companies targeted for investment by Blue Chip Fund will be
greater than $5 billion. For investment purposes, however, "Blue Chip" companies
are those whose market capitalization is greater than $2.5 billion at the time
of investment.
Vantage believes "Blue Chip" companies have characteristics which are
desirable in seeking to achieve the investment objectives of Blue Chip Fund. For
example, such companies tend to have a lengthy history of profit growth and
dividend payment, and a reputation for quality management structure, products
and service. Securities of "Blue Chip" companies generally are considered to be
highly liquid, because compared to those of lesser capitalized companies, more
shares of these securities are outstanding in the marketplace and their trading
volume tends to be higher.
While it is anticipated that Blue Chip Fund will invest principally in
common stock and securities that are convertible into common stock, Blue Chip
Fund may invest in all available types of equity securities, including without
limitation, preferred stock and warrants. Investments in equity securities other
than common stock or securities that are convertible into common stock will be
made when such securities are more attractively priced relative to the
underlying common stock. Such investments may be made in any proportion deemed
prudent under existing market and economic conditions. Convertible securities
include preferred stock and debentures that pay a stated interest rate or
dividend and are convertible into common stock at an established ratio. These
securities, which are usually priced at a premium to their conversion value, may
allow Blue Chip Fund to receive current income while participating to some
extent in any appreciation in the underlying common stock. The value of a
convertible security tends to be affected by changes in interest rates as well
as factors affecting the market value of the underlying common stock.
Up to 20% of Blue Chip Fund's total assets may be invested directly or
indirectly in securities of issuers domiciled in foreign countries, including
investments in American, European and Global Depositary Receipts. ("ADRs",
"EDRs" and "GDRs," respectively or, collectively, "Depositary Receipts"). Blue
Chip Fund may enter into options and futures transactions for hedging purposes
to attempt to counterbalance portfolio volatility.
Decatur Total Return Fund. The investment objective of Decatur Total Return Fund
is to seek to achieve long- term growth. It seeks to achieve its objective by
investing primarily in securities that provide the potential for income and
capital appreciation without undue risk to principal. The Decatur Total Return
Fund seeks to
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<PAGE> 22
provide shareholders with a current return while allowing them to participate in
the capital gains potential associated with equity investments.
The Decatur Total Return Fund generally invests in common stocks and
income-producing securities that are convertible into common stocks. The Manager
looks for securities having a better dividend yield than the average of the
Standard & Poor's ("S&P") 500 Stock Index, as well as capital gains potential.
All available types of appropriate securities are under continuous study.
The Decatur Total Return Fund may invest in all classes of securities, bonds and
preferred and common stocks in any proportion deemed prudent under existing
market and economic conditions. In seeking to obtain its objective, the Decatur
Total Return Fund may hold securities for any period of time. For temporary,
defensive purposes, it may hold a substantial portion of its assets in cash or
short-term obligations.
Income-producing convertible securities include preferred stock and
debentures that pay a stated or variable interest rate or dividend and are
convertible into common stock at an established ratio. These securities, which
are usually priced at a premium to their conversion value, may allow the Decatur
Total Return Fund to receive current income while participating to some extent
in any appreciation in the underlying common stock. The value of a convertible
security tends to be affected by changes in interest rates, as well as factors
affecting the market value of the underlying common stock.
DelCap Fund. The investment objective of DelCap Fund is long-term capital
appreciation. DelCap Fund's strategy is to invest primarily in common stocks
that, in the judgment of the Manager, are of superior quality and in securities
that are convertible into such common stocks. DelCap Fund will attempt to
achieve its objective by purchasing securities issued by companies whose
earnings the Manager believes will grow more rapidly than the average of those
listed in the S&P 500 Stock Index. The Manager's emphasis will be on the
securities of companies that, in its judgment, have the characteristics
supporting such earnings growth. This judgment will be based on, among other
things, the financial strength of the company, the expertise of its management,
the growth potential of the company within the industry and the growth potential
of the industry itself. The focus will be on those securities of companies the
Manager believes have established themselves within their industry while
maintaining growth potential.
While the Manager believes its objective may best be achieved by investing
in common stock, DelCap Fund may also invest in other securities including, but
not limited to, convertible securities, warrants, preferred stock, bonds and
foreign securities. Any specific investment will be dependent upon the judgment
of the Manager. DelCap Fund may make foreign investments through the purchase
and sale of sponsored or unsponsored ADRs.
Devon Fund. The investment objective of Devon Fund is to seek current income and
capital appreciation. The Devon Fund will seek to achieve its objective by
investing primarily in income-producing common stocks, with a focus on common
stocks that the Manager believes have the potential for above average dividend
increases over time. Under normal circumstances, the Devon Fund will generally
invest at least 65% of its total assets in dividend paying common stocks.
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<PAGE> 23
In selecting stocks for the Devon Fund, the Manager will focus primarily
on dividend paying common stocks issued by companies with market capitalizations
in excess of $100 million, but is not precluded from purchasing shares of
companies with market capitalizations of less than $100 million. In seeking
stocks with potential for above average dividend increases, the Manager will
consider such factors as the historical growth rate of a dividend, the frequency
of prior dividend increases, the issuing company's potential to generate cash
flows, and the price/earnings multiple of the stock relative to the market. The
Manager will generally avoid stocks that it believes are overvalued and may
select stocks with current dividend yields that are lower than the current yield
of the Standard & Poor's 500 Stock Index ("S&P 500") in exchange for anticipated
dividend growth.
While the Manager believes that the Devon Fund's objective may best be
attained by investing in common stocks, the Devon Fund may also invest in other
securities including, but not limited to, convertible and preferred securities,
rights and warrants to purchase common stock, and various types of fixed-income
securities, such as U.S. government and government agency securities, corporate
debt securities and bank obligations, and may also engage in futures
transactions. The Devon Fund may also invest in foreign securities.
Small Cap Value Fund. The investment objective of Small Cap Value Fund is
capital appreciation. The strategy will be to invest primarily in common stocks
and securities convertible into common stocks which, in the opinion of the
Manager, have market values which appear low relative to their underlying value
or future earnings and growth potential. Small Cap Value Fund is designed
primarily for capital appreciation; providing current income is not an
objective. Any income produced is expected to be minimal.
Securities will be purchased that the Manager believes to be undervalued
in relation to asset value or long-term earning power of the companies. The
Manager may also invest in securities of companies where current or anticipated
favorable changes within a company provide an opportunity for capital
appreciation. The Manager's emphasis will be on securities of companies that may
be temporarily out of favor or whose value is not yet recognized by the market.
While not a fundamental policy, under normal market conditions the Small
Cap Value Fund intends to invest at least 65% of its net assets in securities
issued by small cap companies, those currently having a market capitalization
generally of less than $1.5 billion. As a general matter, small cap companies
may have more limited product lines, markets and financial resources than large
cap companies. In addition, securities of small cap companies, generally, may
trade less frequently (and with a lesser volume), may be more volatile and may
be somewhat less liquid than securities issued by larger capitalization
companies.
The Manager will consider the financial strength of the company, the
nature of its management and any developments affecting the security, the
company or the industry. Securities may be out of favor due to a variety of
factors, such as lack of an institutional following, or unfavorable developments
affecting the issuer of the securities, such as poor earning reports, dividend
reductions or cyclical economic or business conditions. Other securities
considered by the Manager would include those of companies where current or
anticipated favorable changes such as a new product or service, technological
breakthrough, management change, projected takeovers, changes in capitalization
or redefinition of future corporate operations provide an opportunity for
capital appreciation. The Manager will also consider securities where trading
patterns suggest that significant positions are being accumulated by officers of
the company, outside investors or the company itself. The Manager feels it may
uncover situations where those who have a vested interest in the company feel
the securities are undervalued and have appreciation potential.
While the Manager believes that Small Cap Value Fund's objective may best
be attained by investing in common stocks, it may also invest in other
securities including, but not limited to, convertible securities, warrants,
preferred stocks, bonds and foreign securities. Although it is expected to
receive relatively less emphasis, Small Cap Value Fund may also invest in
fixed-income securities without regard to a minimum grade level in pursuit of
its objective where there are favorable changes in a company's earnings or
growth potential or
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where general economic conditions and the interest rate environment provide an
opportunity for declining interest rates and consequent appreciation in these
securities. Lower rated high yield, high risk bonds are sometimes referred to as
"junk bonds." The strategies employed are dependent upon the judgment of the
Manager.
If the Manager believes that market conditions warrant, Small Cap Value
Fund may employ options strategies. Small Cap Value Fund may write covered call
options on individual issues as well as write call options on stock indices. It
may also purchase put options on individual issues and on stock indices. The
Manager will employ these techniques in an attempt to protect appreciation
attained, to offset capital losses and to take advantage of the liquidity
available in the option markets. The ability to hedge effectively using options
on stock indices will depend, in part, on the correlation between the
composition of the index and Small Cap Value Fund's portfolio as well as the
price movement of individual securities. Small Cap Value Fund does not currently
intend to write or purchase stock index options. While there is no limit on the
amount of Small Cap Value Fund's assets which may be invested in covered call
options, it will not invest more than 2% of its net assets in put options. Small
Cap Value Fund will only use exchange-traded options. It may enter into futures
contracts and buy and sell options on futures contracts relating to securities,
securities indices or interest rates.
Although it will receive relatively minor emphasis in pursuit of its
objective, Small Cap Value Fund may also purchase, at times, lower rated or
unrated corporate bonds without regard to a grade minimum, which may be
considered speculative and may increase the portfolio's credit risk. Although
Small Cap Value Fund will not ordinarily purchase bonds rated below B by Moody's
or S&P (i.e., high-yield, high-risk fixed-income securities), it may do so if
the Manager believes that capital appreciation is likely. Small Cap Value Fund
will not invest more than 25% of its net assets in bonds rated below B.
Investing in such lower rated debt securities may involve certain risks not
typically associated with higher rated securities. Such bonds, commonly referred
to as "junk bonds," are considered very speculative and may possibly be in
default or have interest payments in arrears.
Trend Fund. The investment objective of Trend Fund is long-term capital
appreciation. The strategy is to invest primarily in the common stocks and
securities convertible into common stocks of emerging and other growth-oriented
companies that, in the judgment of the Manager, are responsive to changes within
the marketplace and have the fundamental characteristics to support growth.
Income is not an objective of Trend Fund.
Trend Fund will seek to identify changing and dominant trends within the
economy, the political arena and our society. It will purchase securities which
the Manager believes will benefit from these trends and which have the
fundamentals to exploit them. The fundamentals include managerial skills,
product development and sales and earnings.
Trend Fund may purchase privately placed securities the resale of which is
restricted under applicable securities laws. Such securities may offer a higher
return than comparably registered securities but involve some additional risk as
they can be resold only in privately negotiated transactions, in accordance with
an exemption from the registration requirements under applicable securities laws
or after registration.
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Trend Fund may invest in repurchase agreements, but will not normally do
so except to invest excess cash balances. Trend Fund may also invest in foreign
securities. For hedging purposes, Trend Fund may engage in options activity and
enter into futures contracts and options on futures contracts.
U.S. Growth Fund. The U.S. Growth Fund's fundamental investment objective is to
seek to maximize capital appreciation by investing in companies of all sizes
which have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry. The Manager or sub-adviser, Lynch &
Mayer, Inc. ("Lynch & Mayer"), an affiliate of the Manager, will seek
investments in companies of all sizes that the Manager or sub-adviser believes
have earnings that may be expected to grow faster than the U.S. economy in
general. Such companies may offer the possibility of accelerated earnings growth
because of management changes, new products or structural changes in the
economy. In addition, those companies with relatively high rates of return on
invested capital may be able to finance future growth from internal sources.
Income derived from securities in such companies will be only an incidental
consideration of U.S. Growth Fund.
The U.S. Growth Fund intends to invest primarily in common stocks believed
by the Manager or sub-adviser to have appreciation potential. However, common
stock is not always the class of security that provides the greatest possibility
for appreciation. The U.S. Growth Fund may invest up to 35% of its assets in
debt securities, bonds, convertible bonds, preferred stock and convertible
preferred stock. The U.S. Growth Fund may also invest up to 10% of its assets in
securities rated lower than Baa by Moody's Investors Service, Inc. ("Moody's")
or BBB by Standard & Poor's Ratings Group ("S&P") if, in the opinion of the
Manager or sub-adviser, doing so would further U.S. Growth Fund's objective.
Lower-rated or unrated securities, commonly referred to as "junk bonds," are
more likely to react to developments affecting market and credit risk than are
more highly rated securities, which react primarily to movements in the general
level of interest rates. The U.S. Growth Fund may invest up to 20% of its assets
in foreign securities.
INTERNATIONAL EQUITY FUNDS
As described below, the following Underlying Funds invest primarily in
equity securities of companies located or conducting their business primarily in
foreign countries.
Emerging Markets Fund. The investment objective of Emerging Markets Fund is to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of issuers located or operating in
emerging countries. Under normal circumstances, at least 65% of Emerging
Market's Fund's assets will be invested in equity securities of issuers
organized or having a majority of their assets or deriving a majority of their
operating income in at least three different emerging market countries. It will
attempt to achieve its objective by investing in a broad range of equity
securities, including common stocks, preferred stocks, convertible securities
and warrants issued by companies located or operating in emerging countries. It
is managed by Delaware International Advisers Ltd. ("Delaware International"),
an affiliate of the Manager.
Emerging Markets Fund considers an "emerging country" to be any country
which is generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation, as well as countries that are classified by
the United Nations or otherwise regarded by their authorities as developing. In
addition, any country that is included in the IFC Free Index or MSCI EMF Index
will be considered to be an "emerging country." As of the date of this
Prospectus, there are more than 130 countries which, in Delaware International's
judgment, are generally considered to be emerging or developing countries by the
international financial community, approximately 40
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of which currently have stock markets. Within this group of developing or
emerging countries are included almost every nation in the world, except the
United States, Canada, Japan, Australia, New Zealand and most nations located in
Western and Northern Europe.
Currently, investing in many emerging countries is not feasible, or may,
in Delaware International's opinion, involve unacceptable political risks.
Emerging Markets Fund will focus its investments in those emerging countries
where Delaware International considers the economies to be developing strongly
and where the markets are becoming more sophisticated. Delaware International
believes that investment opportunities may result from an evolving long-term
international trend favoring more market-oriented economies, a trend that may
particularly benefit certain countries having developing markets. This trend may
be facilitated by local or international political, economic or financial
developments that could benefit the capital markets in such countries.
In considering possible emerging countries in which Emerging Markets Fund
may invest, Delaware International will place particular emphasis on certain
factors, such as economic conditions (including growth trends, inflation rates
and trade balances), regulatory and currency controls, accounting standards and
political and social conditions. It is currently anticipated that the countries
in which Emerging Markets Fund may invest will include, but not be limited to,
Argentina, Brazil, Chile, China, Columbia, Czech Republic, Egypt, Greece, Hong
Kong, Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kenya, Korea,
Malaysia, Mexico, Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal,
Russia, South Africa, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and
Zimbabwe. As markets in other emerging countries develop, Delaware International
expects to expand and further diversify the countries in which the Emerging
Markets Fund invests.
Although not an exclusive list of criteria to be considered by Delaware
International, an emerging country equity security is one issued by a company
that, in the opinion of Delaware International, exhibits one or more of the
following characteristics: (i) its principal securities trading market is an
emerging country, as defined above; (ii) while traded in any market, alone or on
a consolidated basis, the company derives 50% or more of its annual revenues
from either goods produced, sales made or services performed in emerging
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging country. Determinations as to eligibility will be made by
Delaware International based on publicly available information and inquiries
made of the companies.
Emerging Markets Fund may invest in Depositary Receipts, and in both
open-end and listed or unlisted closed-end investment companies, as well as
unregistered investment companies. The Emerging Markets Fund may also invest in
convertible preferred stocks that offer enhanced yield features, such as
Preferred Equity Redemption Cumulative Stock, and certain other non-traditional
equity securities.
The Emerging Markets may invest up to 35% of its net assets in
fixed-income securities issued by emerging country companies, and foreign
governments, their agencies, instrumentalities or political subdivisions, all of
which may be high yield, high risk fixed-income securities rated lower than BBB
by S&P and Baa by Moody's or, if unrated, are considered by Delaware
International to be of equivalent quality and which present special investment
risks. Such securities are commonly referred to as "junk bonds." Emerging
Markets Fund may also invest in Brady Bonds and zero coupon securities.
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International Equity Fund. The investment objective of the International Equity
Fund is to achieve long-term growth without undue risk to principal. It seeks to
achieve this objective by investing primarily in securities that provide the
potential for capital appreciation and income. As an international fund,
International Equity Fund may invest in securities issued in any currency and
may hold foreign currency. Under normal circumstances, at least 65% of
International Equity Fund's assets will be invested in the securities of issuers
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three different countries outside of the
United States. Securities of issuers within a given country may be denominated
in the currency of another country or in multinational currency units such as
the European Currency Unit ("ECU"). International Equity Fund is managed by
Delaware International.
International Equity Fund will attempt to achieve its objective by
investing in a broad range of equity securities including common stocks,
preferred stocks, convertible securities and warrants. Delaware International
will employ a dividend discount analysis across country boundaries and will also
use a purchasing power parity approach to identify currencies and markets that
are overvalued or undervalued relative to the U.S. dollar.
With a dividend discount analysis, Delaware International looks at future
anticipated dividends and discounts the value of those dividends back to what
they would be worth if they were being paid today. Delaware International uses
this technique to attempt to compare the value of different investments. With a
purchasing power parity approach, Delaware International attempts to identify
the amount of goods and services that a dollar will buy in the United States and
compare that to the amount of a foreign currency required to buy the same amount
of goods and services in another country. When the dollar buys less, the foreign
currency may be considered to be overvalued. When the dollar buys more, the
currency may be considered to be undervalued. Eventually, currencies should
trade at levels that should make it possible for the dollar to buy the same
amount of goods and services overseas as in the United States. International
Equity Fund may also invest in sponsored or unsponsored ADRs or EDRs.
While International Equity Fund may purchase securities in any foreign
country, developed and underdeveloped, or emerging market countries, it is
currently anticipated that the countries in which International Equity Fund may
invest will include, but not be limited to, Canada, Germany, the United Kingdom,
France, the Netherlands, Belgium, Spain, Switzerland, Japan, Australia, Hong
Kong, and Singapore/Malaysia. With respect to certain countries, investments by
an investment company may only be made through investments in closed-end
investment companies that in turn are authorized to invest in the securities of
such countries. Any investment International Equity Fund may make in other
investment companies is limited in amount by the 1940 Act and would involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies.
Although International Equity Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. It will, however, from time to time,
purchase or sell foreign currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. International Equity Fund may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through entering into
contracts to purchase or sell foreign currencies at a future date (i.e., a
"forward foreign currency" contract or "forward" contract). The International
Equity Fund will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency
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conversion. The International Equity Fund also may purchase and write put and
call options on foreign currencies (trade on U.S. and foreign exchanges or
over-the-counter) for hedging purposes to protect against declines in the U.S.
dollar cost of foreign securities held by International Equity Fund and against
increases in the U.S. dollar cost of such securities to be acquired.
International Small Cap Fund. The investment objective of International Small
Cap Fund is to achieve long-term capital appreciation. This Fund seeks to
achieve its objective by investing primarily in equity securities of smaller
non-U.S. companies, which may include companies located or operating in
established or emerging countries. International Small Cap Fund is an
international fund. Under normal circumstances, at least 65% of International
Small Cap Fund's total assets will be invested in equity securities of companies
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three different countries outside of the
United States. The current market capitalization of the companies in which
International Small Cap Fund intends to invest primarily generally will be $1.5
billion or less (at the time of purchase). International Small Cap Fund is
managed by Delaware International.
The equity securities in which International Small Cap Fund may invest
include common stocks, preferred stocks, rights or warrants to purchase common
stocks and securities convertible into common stocks. International Small Cap
Fund may also invest in foreign companies through sponsored or unsponsored
American Depositary Receipts, European Depositary Receipts or Global Depositary
Receipts ("Depositary Receipts"), which are receipts typically issued by a bank
or trust company evidencing ownership of underlying securities issued by a
foreign company. By focusing on smaller, non-U.S. companies, International Small
Cap Fund seeks to identify equity securities of emerging and other
growth-oriented companies which in the opinion of Delaware International, are
responsive to changes within their markets, and have the fundamental
characteristics to support growth. Delaware International will seek to identify
changing and dominant trends within the relevant markets, and will purchase
securities of companies which it believes will benefit from these trends. In
addition, Delaware International will consider the financial strength of the
company, the nature of its management, and any developments affecting the
company or its industry. Delaware International may invest in smaller
capitalization companies that may be temporarily out of favor or overlooked by
securities analysts and whose value, therefore, may not yet be fully recognized
by the market. See Special Risk Considerations-Small Company Investment Risks.
While International Small Cap Fund may purchase securities in any foreign
country, developed and underdeveloped, or emerging market countries, it is
currently anticipated that the countries in which International Small Cap Fund
may invest will include, but not be limited to, Canada, Germany, the United
Kingdom, France, the Netherlands, Belgium, Spain, Switzerland, Japan, Australia,
Hong Kong and Singapore/Malaysia as well as Indonesia, Korea, the Philippines,
Taiwan and Thailand. With respect to certain countries, investments by an
investment company may only be made through investments in closed-end investment
companies that in turn are authorized to invest in the securities of such
countries. See Investment Company Securities under Other Investment Policies and
Risk Considerations.
In selecting investments for International Small Cap Fund, Delaware
International will employ a dividend discount analysis across country boundaries
and will also use a purchasing power parity approach to identify currencies and
markets that are overvalued or undervalued relative to the U.S. dollar. Delaware
International uses the dividend discount analysis to compare the value of
different investments. Using this technique, Delaware International looks at
future anticipated dividends and discounts the value of those
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dividends back to what they would be worth if they were being paid today. With a
purchasing parity approach, Delaware International attempts to identify the
amount of goods and services that a dollar will buy in the United States and
compare that to the amount of a foreign currency required to buy the same amount
of goods and services in another country. Eventually, currencies should trade at
levels that should make it possible for the dollar to buy the same amount of
goods and services overseas as in the United States. When the dollar buys less,
the foreign currency may be considered to be overvalued. When the dollar buys
more, the currency may be considered to be undervalued.
International Small Cap Fund may invest in both open-end and listed or
unlisted closed-end investment companies, as well as unregistered investment
companies. See Investment Company Securities under Other Investment Policies and
Risk Considerations. International Small Cap Fund may also invest in convertible
preferred stocks that offer enhanced yield features, such as Preferred Equity
Redemption Cumulative Stock, and certain other non-traditional equity
securities.
International Small Cap Fund may invest up to 15% of its net assets in
fixed-income securities issued by emerging country companies, and foreign
governments, their agencies, instrumentalities or political subdivisions, all of
which may be high yield, high risk fixed-income securities rated lower than BBB
by Standard & Poor's Ratings Group ("S&P") and Baa by Moody's Investors
Services, Inc. ("Moody's") or, if unrated, are considered by Delaware
International to be of equivalent quality and which present special investment
risks. International Small Cap Fund may also invest in Brady Bonds. See High
Yield, High Risk Securities and Special Risk Considerations.
For temporary defensive purposes, International Small Cap Fund may invest
all or a substantial portion of its assets in high quality debt instruments
issued by foreign governments, their agencies, instrumentalities or political
subdivisions, the U.S. government, its agencies or instrumentalities (and which
are backed by the full faith and credit of the U.S. government), or issued by
foreign or U.S. companies. For example, International Small Cap Fund may invest
in U.S. fixed-income markets when Delaware International believes that the
global equity markets are excessively volatile or overvalued so that
International Small Cap Fund's objective cannot be achieved in such markets. Any
corporate debt obligations will be rated AA or better by S&P, or Aa or better by
Moody's, or if unrated, will be determined to be of comparable quality by
Delaware International. International Small Cap Fund may also invest in the
securities listed above pending investment of proceeds from new sales of Fund
shares and to maintain sufficient cash to meet redemption requests.
New Pacific Fund. New Pacific Fund's investment objective is to seek to maximize
long-term capital appreciation by investing primarily in equity securities of
companies domiciled or having their principal business activities in countries
located in the Pacific Basin. John Govett & Company Limited ("John Govett")
serves as sub-adviser for New Pacific Fund.
The New Pacific Fund will invest in companies of varying size, measured by
assets, sales and capitalization. It will invest in companies in one or more of
the following Pacific Basin countries: Australia, Pakistan, China, Philippines,
Hong Kong, Singapore, India, South Korea, Indonesia, Sri Lanka, Japan, Taiwan,
Malaysia, Thailand, and New Zealand.
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New Pacific Fund may invest in companies located in other countries or
regions in the Pacific Basin as those economies and markets become more
accessible. While New Pacific Fund will generally have investments in companies
located in at least three different countries or regions, it may from time to
time have investments only in one or a few countries or regions.
New Pacific Fund invests in common stock and may invest in other
securities with equity characteristics, consisting of trust or limited
partnership interests, preferred stock, rights and warrants. It may also invest
in convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. New Pacific Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities.
Under normal circumstances, at least 65% of New Pacific Fund's assets will
be invested in equity securities of foreign issuers located in the Pacific
Basin. It may invest in securities of companies located in, or governments of,
developing countries within the Pacific Basin. New Pacific Fund may invest up to
35% of its assets in securities of U.S. issuers. In addition, it may be invested
in short-term debt instruments to meet anticipated day-to-day operating expenses
and liquidity requirements.
FIXED INCOME FUNDS
As described below, the following Underlying Funds invest primarily in
fixed income securities.
Delchester Fund. The investment objective of the Delchester Fund is to seek the
highest current income which the Manager believes is consistent with prudent
investment management. The strategy is to invest primarily in those securities
having a liberal and consistent yield and those tending to reduce the risk of
market fluctuations. Delchester Fund will invest at least 80% of its assets at
the time of purchase in:
(1) Corporate Bonds. Delchester Fund will invest in both rated and
unrated bonds. Unrated bonds may be more speculative in nature than
rated bonds;
(2) Securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities; and
(3) Commercial paper of companies rated A-1 or A-2 by S&P or rated P-1
or P-2 by Moody's.
Delchester Fund must invest the remaining assets, if any, in
income-producing securities, including common stocks and preferred stocks, some
of which may have convertible features or attached warrants.
In the long run, Delchester Fund's assets are expected to be invested
primarily in unrated corporate bonds and bonds rated BBB or lower by S&P or Baa
or lower by Moody's and in unrated corporate bonds. See Appendix A to this
Prospectus for more rating information. Investing in these so-called "junk" or
"high-yield" bonds entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved in investment grade
bonds. Such bonds are sometimes issued by companies whose earnings at the time
of issuance are less than the projected debt service on the junk bonds.
Global Bond Fund. The investment objective of it Global Bond Fund is to achieve
current income consistent with the preservation of investors' principal. It
seeks to achieve this objective by investing primarily in fixed-
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income securities that may also provide the potential for capital appreciation.
As is a global fund, under normal circumstances, at least 65% of its assets will
be invested in the fixed-income securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating income in
at least three different countries, one of which may be the United States.
Global Bond Fund may invest in securities issued in any currency and may hold
foreign currency. Securities of issuers within a given country may be
denominated in the currency of another country or in multinational currency
units such as the ECU. Global Bond Fund is managed by Delaware International.
Global Bond Fund will attempt to achieve its objective by investing at
least 65% of its assets in a broad range of fixed-income securities, including
foreign and U.S. government securities and debt obligations of foreign and U.S.
companies which are generally rated A or better by S&P or Moody's, or if
unrated, are deemed to be of comparable quality by Delaware International. It
may also invest in zero coupon bonds and in the debt securities of supranational
entities denominated in any currency. Generally, the value of fixed-income
securities moves inversely to the movement of market interest rates. The value
of Global Bond Fund's portfolio securities and, thus, an investor's shares will
be affected by changes in such rates.
Zero coupon bonds are debt obligations which do not entitle the holder to
any periodic payments of interest prior to maturity or a specified date when the
securities begin paying current interest, and therefore are issued and traded at
a discount from their face amounts or par value. A supranational entity is an
entity established or financially supported by the national governments of one
or more countries to promote reconstruction or development. Examples of
supranational entities include, among others, the World Bank, the European
Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and the
Asian Development Bank. For increased safety, Global Bond Fund currently
anticipates that a large percentage of its assets will be invested in U.S. and
foreign government securities and securities of supranational entities.
With respect to U.S. government securities, Global Bond Fund may invest
only in securities issued or guaranteed as to the payment of principal and
interest by the U.S. government, and those of its agencies or instrumentalities
which are backed by the full faith and credit of the United States. Direct
obligations of the U.S. government which are available for purchase by the
Global Bond Fund include bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These obligations differ mainly in interest rates, maturities
and dates of issuance. Agencies whose obligations are backed by the full faith
and credit of the United States include the Farmers Home Administration, Federal
Financing Bank and others.
With respect to securities issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the Global Bond Fund will generally
invest in such securities if they have been rated AAA or AA by S&P or Aaa or Aa
by Moody's or, if unrated, have been determined by Delaware International to be
of comparable quality. Global Bond Fund may also invest in sponsored or
unsponsored American Depositary Receipts or European Depositary Receipts. While
Global Bond Fund may purchase securities of issuers in any foreign country,
developed and underdeveloped, or emerging market countries, it is currently
anticipated that the countries in which Global Bond Fund may invest will
include, but not be limited to, Canada, Germany, the United Kingdom, France, the
Netherlands, Belgium, Spain, Switzerland, Ireland, Denmark, Portugal, Italy,
Austria, Norway, Sweden, Finland, Luxembourg, Japan and Australia. With respect
to certain countries, investments by an investment company may only be made
through investments in closed-end investment companies that in turn are
authorized to invest in the securities of such countries. Any investment Global
Bond
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Fund may make in other investment companies is limited in amount by the 1940 Act
and would involve the indirect payment of a portion of the expenses, including
advisory fees, of such other investment companies.
From time to time, the Global Bond Fund may find opportunities to pursue
its objective outside of the fixed-income markets, but in no event will such
investments exceed 5% of Global Bond Fund's net assets. Global Bond Fund may
invest in restricted securities, including securities eligible for resale
without registration pursuant to Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). It may invest no more than 10% of the value of its net
assets in illiquid securities. Global Bond Fund will not concentrate its
investments in any particular industry, which means that it will not invest 25%
or more of its total assets in any one industry.
It is anticipated that the average weighted maturity of the portfolio will
be in the five-to-ten year range. If, however, Delaware International
anticipates a declining interest rate environment, the average weighted maturity
may be extended past ten years. Conversely, if Delaware International
anticipates a rising rate environment, the average weighted maturity may be
shortened to less than five years.
In order to attempt to protect Global Bond Fund's investments from
interest rate fluctuations, it may engage in interest rate swaps. Global Bond
Fund intends to use interest rate swaps as a hedge and not as a speculative
investment. Interest rate swaps involve the exchange by Global Bond Fund with
another party of their respective rights to receive interest, e.g., an exchange
of fixed rate payments for floating rate payments. For example, if Global Bond
Fund holds an interest-paying security whose interest rate is reset once a year,
it may swap the right to receive interest at this fixed rate for the right to
receive interest at a rate that is reset daily. Such a swap position would
offset changes in the value of the underlying security because of subsequent
changes in interest rates. This would protect Global Bond Fund from a decline in
the value of the underlying security due to rising rates, but would also limit
its ability to benefit from falling interest rates.
Global Bond Fund may enter into interest rate swaps on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or its liabilities, and will usually enter into interest rate swaps on a
net basis, i.e., the two payment streams are netted out, with Global Bond Fund
receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these hedging transactions are entered into for
non-speculative purposes and not for the purpose of leveraging its investments,
Delaware International and Global Bond Fund believe such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. The net amount of the excess, if any, of
Global Bond Fund's obligations over its entitlement with respect to each
interest rate swap will be accrued on a daily basis and an amount of cash or
high-quality liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Custodian Bank. If Global Bond Fund enters into an interest rate swap on other
than a net basis, it would maintain a segregated account in the full amount
accrued on a daily basis of Global Bond Fund's obligations with respect to the
swap.
Limited-Term Government Fund. Limited-Term Government Fund seeks to provide a
high stable level of income, while attempting to minimize fluctuations in
principal and provide maximum liquidity. It seeks to do this by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. Limited-Term Government Fund may also
invest up to 20% of its assets in corporate notes and bonds, certificates of
deposit and obligations of both U.S. and foreign banks, commercial paper and
certain asset-back securities. Limited-Term Government Fund is not a money
market fund. A money market fund is designed for stability of
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principal; consequently, the level of income fluctuates. Limited-Term Government
Fund is designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
The level of income will vary depending on interest rates and the
portfolio. However, since longer term rates are generally less volatile than
short-term rates, the level of income for Limited-Term Government Fund may tend
to be less volatile than, for example, a money market fund. Limited-Term
Government Fund attempts to provide yields higher than those available in money
market funds or bank money market accounts by extending its portfolio
maturities. By extending average maturity, Limited-Term Government Fund seeks
higher income than may be available from money market securities but may also
experience greater principal fluctuation.
Limited-Term Government Fund seeks to reduce the effects of interest rate
volatility on principal by keeping the average effective maturity (as that term
is defined in Part B) to no more than five years. If in the judgment of the
Manager rates are low, it will tend to shorten the average effective maturity to
three years or less. Conversely, if in its judgment rates are high, it will tend
to extend the average effective maturity to as high as five years. The Manager
will increase the proportion of short-term instruments when short-term yields
are higher. The Manager may purchase individual securities with a remaining
maturity of up to fifteen years.
Limited-Term Government Fund will invest primarily in securities issued
or guaranteed by the U.S. government (e.g., Treasury Bills and Notes), its
agencies (e.g., Federal Housing Administration) or instrumentalities (e.g.,
Federal Home Loan Bank) or government-sponsored corporations (e.g., Federal
National Mortgage Association), as well as repurchase agreements and publicly-
and privately-issued mortgage-backed securities collateralized by such
securities. It may invest up to 20% of its assets in: (1) corporate notes and
bonds rated A or above; (2) certificates of deposit and obligations of both U.S.
and foreign banks if they have assets of at least one billion dollars; (3)
commercial paper rated P-1 by Moody's and/or A-1 by S&P's and (4) securities
which are backed by assets such as receivables on home equity and credit loans,
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or financial receivables
currently available or which may be developed in the future. All such securities
must be rated in the highest rating category by a reputable credit rating agency
(e.g., AAA by S&P or Aaa by Moody's).
To achieve its objective, Limited-Term Government Fund may use certain
hedging techniques at the Manager's discretion to protect it's principal value.
Limited-Term Government Fund may purchase put options, write secured put
options, write covered call options, purchase call options and enter into
closing transactions. It may also invest in futures contracts and options on
such futures contracts subject to certain limitations.
Limited-Term Government Fund may invest up to 35% of its assets in
securities issued by certain private, nongovernment corporations, such as
financial institutions, if the securities are fully collateralized at the time
of issuance by securities or certificates issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs). Limited-Term Government Fund
may also invest in securities which are backed by assets such as receivables on
home equity and credit card loans, and receivables on automobile, mobile home
and recreational vehicle loans, wholesale dealer floor plans and leases or other
loans or financial receivables currently available or which may be developed in
the future. All such securities must be rated in the highest rating category by
a reputable credit rating agency (e.g., AAA by S&P or Aaa by Moody's).
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Limited-Term Government Fund may also use repurchase agreements which are
at least 100% collateralized by securities in which Limited-Term Government Fund
can invest directly. Repurchase agreements may be used to invest cash on a
temporary basis. Limited-Term Government Fund may loan up to 25% of its assets
to qualified broker/dealers or institutional investors for their use relating to
short sales or other security transactions. Limited-Term Government Fund may
invest in restricted securities, including Rule 144A securities. Limited-Term
Government may invest no more than 10% of the value of its net assets in
illiquid securities.
U.S. Government Fund. The objective of U.S. Government Fund is high current
income consistent with safety of principal by investing primarily in debt
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These include securities issued or backed by U.S. government
agencies and government-sponsored corporations which may not be backed by the
full faith and credit of the U.S. government, such as the Export-Import Bank,
Federal Housing Authority, Federal National Mortgage Association and Federal
Home Loan Banks and mortgage-backed securities issued by non-government entities
but collateralized by securities of the U.S. government, its agencies and
instrumentalities. The weighted average maturity will be approximately 10 years.
Although these securities are issued or guaranteed as to principal and interest
by the U.S. government or its agencies or instrumentalities, the market value of
these securities, upon which daily net asset value is based, may fluctuate and
is not guaranteed.
U.S. government securities include U.S. Treasury securities consisting of
Treasury Bills, Treasury Notes and Treasury bonds. Some of the other government
securities in which U.S. Government Fund may invest include securities of the
Federal Housing Administration, the Government National Mortgage Association,
the Department of Housing and Urban Development, the Export-Import Bank, the
Farmers Home Administration, the General Services Administration, the Maritime
Administration and the Small Business Administration. The maturities of such
securities usually range from three months to 30 years.
U.S. Government Fund may also invest up to 20% of its assets in: (1)
corporate notes and bonds rated A or above; (2) certificates of deposit and
obligations of both U.S. and foreign banks if they have assets of at least one
billion dollars; (3) commercial paper rated P-1 by Moody's and/or A-1 by S& P;
and (4) asset-backed securities rated Aaa by Moody's or AAA by S&P.
U.S. Government Fund may invest in certificates of the Government National
Mortgage Association ("GNMA"). GNMA Certificates are mortgage-backed securities.
It may also invest in securities issued by certain private, non-government
corporations, such as financial institutions, if the securities are fully
collateralized at the time of issuance by securities or certificates issued or
guaranteed by the U.S. government, its agencies or instrumentalities. Two
principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs). U.S.
Government Fund may invest in securities which are backed by assets such as
receivables on home equity and credit loans, receivables regarding automobile,
mobile home and recreational vehicle loans, wholesale dealer floor plans and
leases or other loans or financial receivables currently available or which may
be developed in the future. All such securities must be rated in the highest
rating category by a reputable credit rating agency (e.g., AAA by S&P or Aaa by
Moody's).
U.S. Government Fund may use repurchase agreements which are at least 100%
collateralized by securities in which it can invest directly. Repurchase
agreements may be used to invest cash on a temporary
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basis. U.S. Government Fund may purchase put options, write secured put options,
write covered call options, purchase call options and enter into closing
transactions. It may invest in futures contracts and options on such futures
contracts subject to certain limitations. U.S. Government Fund may invest in
restricted securities, including Rule 144A securities. U.S. Government Fund may
invest no more than 10% of the value of its net assets in illiquid securities.
U.S. Government Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use relating to short sales
or other security transactions.
MONEY MARKET FUNDS
As described below, the following Underlying Funds invest primarily in
money market instruments.
Cash Reserve Fund. As a money market fund, Cash Reserve Fund's investment
objective is to seek to provide maximum current income, while preserving
principal and maintaining liquidity, by investing at least 80% of its assets in
a diversified portfolio of money market securities and managing the portfolio to
maintain a constant $10 per share value. While Cash Reserve Fund will make every
effort to maintain a fixed net asset value of $10 per share, there can be no
assurance that this objective will be achieved.
Cash Reserve Fund limits its investments to those which its Board of
Directors has determined present minimal credit risks and are of high quality
and which will otherwise meet the maturity, quality and diversification
conditions with which taxable money market funds must comply.
Cash Reserve Fund's investments include securities issued or guaranteed by
the U.S. government (e.g., Treasury Bills and Notes) or by the credit of its
agencies or instrumentalities (e.g., Federal Housing Administration and Federal
Home Loan Bank). It may invest in the certificates of deposit and obligations of
both U.S. and foreign banks if they have assets of at least one billion dollars
in accordance with the maturity, quality and diversification conditions with
which taxable money market funds must comply. It also may purchase commercial
paper and other corporate obligations; if such a security or, as relevant, its
issuer, is considered to be rated, at the time of the proposed purchase, it or,
as relevant, its issuer, must be so rated in one of the two highest rating
categories (e.g., for commercial paper, A-2 or better by S&P and P-2 or better
by Moody's; and, for other corporate obligations, AA or better by S&P and Aa or
better by Moody's) by at least two nationally-recognized statistical rating
organizations approved by the Board of Directors or, if such security is not so
rated, the purchase of the security must be approved or ratified by the Board of
Directors in accordance with the maturity, quality and diversification
conditions with which taxable money market funds must comply. Appendix A
describes the ratings of S&P and Moody's.
Cash Reserve Fund maintains an average maturity of not more than 90 days.
Also, it does not purchase any instruments with an effective remaining maturity
of more than 13 months. Cash Reserve Fund intends to hold its investments until
maturity, but may sell them prior to maturity for a number of reasons. These
reasons include: to shorten or lengthen the average maturity, to increase the
yield, to maintain the quality of the portfolio or to maintain a stable share
value. If there were a national credit crisis, an issuer were to become
insolvent or interest rates were to rise, principal values could be adversely
affected. Investments in foreign banks and overseas branches of U.S. banks may
be subject to less stringent regulations and different risks than U.S. domestic
banks.
U.S. Government Money Fund. As a money market fund, the U.S. Government Money
Fund's investment objective is to provide maximum current income, while
preserving principal and maintaining liquidity. It seeks
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to do this by investing only in short-term securities issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities, and repurchase agreements secured by such permitted
investments. All securities purchased by U.S. Government Money Fund mature
within 13 months from the date of purchase, although repurchase agreements may
be collateralized by securities maturing in more than 13 months. U.S. Government
Money Fund maintains an average maturity of not more than 90 days.
U.S. Government Money Fund limits its investments to those which the Board
of Directors has determined present minimal credit risks and are of high quality
and which are otherwise in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must comply.
U.S. Government Money Fund attempts to manage the portfolio to maintain a
constant net asset value of $1.00 per share. While U.S. Government Money Fund
will make every effort to maintain a fixed net asset value of $1.00 per share,
there can be no assurance that this objective will be achieved. U.S. Government
Money Fund intends to hold its investments until maturity, but may sell them
prior to maturity for a number of reasons. These reasons include: to shorten or
lengthen the average maturity, to increase the yield, to maintain the quality of
the portfolio or to maintain a stable share value.
U.S. Government Money Fund's investments include direct obligations issued
by the U.S. Treasury which include bills, notes and bonds which differ from each
other principally in interest rates, maturities and dates of issuance. These
issues, plus some federal agency obligations, are guaranteed by the full faith
and credit of the U.S. government. Examples include Federal Housing
Administration, Farmers Home Administration, Government National Mortgage
Association and Export-Import Bank of the United States. Other federal agency
obligations only have the guarantee of the agency. Examples include Federal Home
Loan Banks, Federal Land Banks, Federal Home Loan Mortgage Corporation, The
Tennessee Valley Authority and the International Bank for Reconstruction and
Development. Although obligations of agencies and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on such obligations is generally backed directly or indirectly by the U.S.
government. This support can range from the backing of the full faith and credit
of the United States, to U.S. Treasury guarantees, or to the backing solely of
the issuing agency or instrumentality itself.
U.S. Government Money Fund may invest up to 10% of its assets, together
with any other illiquid investments, in fully-insured deposits maturing in 60
days or less from members of the FDIC. U.S. Government Money Fund may also use
repurchase agreements which are at least 100% collateralized by securities in
which it can invest directly. Repurchase agreements may be used to invest cash
on a short-term basis. Under a repurchase agreement, U.S. Government Money Fund
acquires ownership and possession of a security, and the seller agrees to buy
the security back at a specified time and higher price. If the seller is unable
to repurchase the security, U.S. Government Money Fund could experience delays
and losses in liquidating the securities. To minimize this possibility, it
considers the creditworthiness of banks and dealers when entering into
repurchase agreements. U.S. Government Money Fund may borrow money as a
temporary measure for extraordinary purposes or to facilitate redemptions, but
it does not presently intend to do so. U.S. Government Money Fund may invest in
restricted securities, including Rule 144A securities. U.S. Government Money
Fund may invest no more than 10% of the value of its net assets in illiquid
securities. The Manager determines whether or not individual Rule 144A
Securities are liquid for purposes of the U.S. Government Money Fund's 10%
limitation on investments in illiquid assets.
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<PAGE> 37
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
Funds.
SHAREHOLDER PHONE DIRECTORY
INVESTOR INFORMATION CENTER
800-523-4640
PORTFOLIO INFORMATION; LITERATURE; PRICE; YIELD AND PERFORMANCE
FIGURES
SHAREHOLDER SERVICE CENTER
800-523-1918
INFORMATION ON EXISTING REGULAR INVESTMENT ACCOUNTS AND RETIREMENT
PLAN ACCOUNTS; WIRE INVESTMENTS; WIRE LIQUIDATIONS; TELEPHONE
LIQUIDATIONS AND TELEPHONE EXCHANGES
DELAPHONE
800-362-FUND
(800-362-3863)
PERFORMANCE INFORMATION
You can call the Investor Information Center at any time for current
performance information. Current yield and total return information may also be
included in advertisements and information given to shareholders.
Yields are computed on an annual basis over a 30-day period.
SHAREHOLDER SERVICES
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Portfolios, various service features and other funds in the Delaware Group.
DELAPHONE SERVICE
Delaphone is an account inquiry service for investors with Touch-Tone(R)
phone service. It enables you to get information on your account faster than the
mailed statements and confirmations. Delaphone also provides current performance
information on the Portfolios, as well as other funds in the Delaware Group.
Delaphone is available seven days a week, 24 hours a day.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
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<PAGE> 38
DUPLICATE CONFIRMATIONS
If your financial adviser or investment dealer is noted on your investment
application, we will send a duplicate confirmation to him or her. This makes it
easier for your adviser to help you manage your investments.
TAX INFORMATION
Each year, the Trust will mail to you information on the tax status of
your dividends and distributions.
DIVIDEND PAYMENTS
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your Investment
- - Dividend Reinvestment Plan under How to Buy Shares or call the Shareholder
Service Center.
MONEYLINE(SM) SERVICES
Delaware Group offers the following services for fast and convenient
transfer of funds between your personal bank account and your Delaware Group
fund account.
1. MONEYLINE(SM) DIRECT DEPOSIT SERVICE
If you elect to have your dividends and distributions paid in cash
and such dividends and distributions are in an amount of $25 or more, you
may choose the MoneyLine(SM) Direct Deposit Service and have such payments
transferred from your Portfolio account to your predesignated bank
account. See Dividends and Distributions. In addition, you may elect to
have your Systematic Withdrawal Plan payments transferred from your
Portfolio account to your predesignated bank account through this service.
See Systematic Withdrawal Plans under Redemption and Exchange. This
service is not available for certain retirement plans.
2. MONEYLINE(SM) ON DEMAND
You or your investment dealer may request purchases and redemptions
of Portfolio shares by using MoneyLine(SM) On Demand. When you authorize a
Portfolio to accept such requests from you or your investment dealer,
funds will be withdrawn from (for share purchases) or deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is
a $25 minimum and a $50,000 maximum limit for MoneyLine(SM) On Demand
transactions. This service is not available for retirement plans, except
for purchases of shares by IRAs.
For each MoneyLine(SM) Service, it may take up to four business days for
the transactions to be completed. You can initiate either service by completing
an Account Services form. If your name and address are not identical to the name
and address on your Portfolio account, you must have your signature guaranteed.
The Portfolios do not charge a fee for any MoneyLine(SM) Service; however, your
bank may change a fee. Please call the Shareholder Service Center for additional
information about these services.
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<PAGE> 39
RIGHT OF ACCUMULATION
With respect to Class A Shares, the Right of Accumulation feature allows
you to combine the value of your current holdings of Class A Shares, Class B
Shares and Class C Shares of a Portfolio with the dollar amount of new purchases
of Class A Shares of a Portfolio to qualify for a reduced front-end sales charge
on such purchases of Class A Shares. Under the COMBINED PURCHASES PRIVILEGE, you
may also include certain shares that you own in other funds in the Delaware
Group. See Classes of Shares.
LETTER OF INTENTION
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of Delaware Group fund shares over a 13-month period. See Classes of
Shares and Part B.
12-MONTH REINVESTMENT PRIVILEGE
The 12-Month Reinvestment Privilege permits you to reinvest proceeds from
a redemption of Class A Shares, within one year of the date of the redemption,
without paying a front-end sales charge. See Part B.
EXCHANGE PRIVILEGE
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
WEALTH BUILDER OPTION
You may elect to invest in the Portfolios through regular liquidations of
shares in your accounts in other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Portfolio shares. See Additional Methods of
Adding to Your Investment - Wealth Builder Option and Investing by Exchange
under How to Buy Shares, and Redemption and Exchange.
FINANCIAL INFORMATION ABOUT THE PORTFOLIOS
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Portfolio's investments and performance. The Trust's fiscal year ends on
September 30.
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<PAGE> 40
RETIREMENT PLANNING
An investment in the Portfolios may be suitable for tax-deferred
retirement plans. Among the retirement plans noted below, Class B Shares are
available for investment only by Individual Retirement Accounts, SIMPLE IRAs,
Simplified Employee Pension Plans, Salary Reduction Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase Institutional Class shares of the
Portfolios. For additional information on any of the plans and Delaware's
retirement services, call the Shareholder Service Center or see Part B.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
Individuals, even if they participate in an employer-sponsored retirement
plan, may establish their own retirement program for investments in each of the
Classes. Contributions to an IRA may be tax-deductible and earnings are
tax-deferred. The tax deductibility of IRA contributions is restricted, and in
some cases eliminated, for individuals who participate in certain
employer-sponsored retirement plans and whose annual income exceeds certain
limits. Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn on a tax-deferred basis.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes (other than the Institutional Class) is
available for investment by a SEP/IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31, 1996,
existing plans may be maintained by employers having 25 or fewer employees. An
employer may elect to make additional contributions to such existing plans.
403(B)(7) DEFERRED COMPENSATION PLAN
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 DEFERRED COMPENSATION PLAN
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
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<PAGE> 41
PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLAN
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A Shares or Class C Shares. Class
B Shares are not available for purchase by such plans.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan but
is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(K)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors are
limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required. Class B Shares are
not available for purchase by such plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from Delaware Group funds. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
ALLIED PLANS
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
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<PAGE> 42
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
The Limited CDSC is applicable to redemptions of net asset value purchases
from an Allied Plan on which a dealer's commission has been paid. Waivers of the
Limited CDSC, as described under Waiver of Limited Contingent Deferred Sales
Charge - Class A Shares under Redemption and Exchange, apply to redemptions by
participants in Allied Plans except in the case of exchanges between eligible
Delaware Group and non-Delaware Group fund shares. When eligible Delaware Group
fund shares are exchanged into eligible non-Delaware Group fund shares, the
Limited CDSC will be imposed at the time of the exchange, unless the joint
venture agreement specifies that the amount of the Limited CDSC will be paid by
the financial adviser or selling dealer. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
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<PAGE> 43
CLASSES OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the election
of the purchaser, at the time of the purchase for Class A Shares ("front-end
sales charge alternative"), or on a contingent deferred basis for Class B Shares
("deferred sales charge alternative") or Class C Shares ("level sales charge
alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.30% of average daily net assets of such shares (currently waived to
0.25%). Certain purchases of Class A Shares qualify for reduced front-end sales
charges. See Front-End Sales Charge Alternative - Class A Shares, below. See
also Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange and Distribution
(12b-1) and Service under Management of the Portfolios.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately eight years after purchase. Class B Shares permit
all of the investor's dollars to work from the time the investment is made. The
higher 12b-1 Plan expenses paid by Class B Shares will cause such shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. At the
end of approximately eight years after purchase, the Class B Shares will
automatically be converted into Class A Shares and, thereafter, for the
remainder of the life of the investment, the annual 0.30% 12b-1 Plan fee for the
Class A Shares (currently waived to 0.25%) will apply. See Automatic Conversion
of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares, which do not incur a front-end sales charge when they
are purchased, but are subject to a contingent deferred sales charge if they are
redeemed within 12 months of purchase. Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service fees to
be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for the life of the investment. The higher 12b-1 Plan expenses paid by
Class C Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares do
not convert to another class.
The alternative purchase arrangements described above permit investors to
choose the method of purchasing shares that is most suitable given the amount of
their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in a Portfolio with their investment being
subject to a CDSC if they redeem shares within six years of purchase, or
purchase Class C Shares and have the entire initial purchase amount invested in
a Portfolio with their investment being subject to a CDSC if they
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<PAGE> 44
redeem shares within 12 months of purchase. In addition, investors should
consider the level of annual 12b-1 Plan expenses applicable to each Class. The
higher 12b-1 Plan expenses on Class B Shares and Class C Shares will be offset
to the extent a return is realized on the additional money initially invested
upon the purchase of such shares. However, there can be no assurance as to the
return, if any, that will be realized on such additional money and the effect of
earning a return on such additional money will diminish over time. In comparing
Class B Shares to Class C Shares, investors should also consider the
desirability of an automatic conversion feature, which is available only for
Class B Shares.
Prospective investors should refer to Appendix B--Investment Illustrations
in this Prospectus for an illustration of the potential effect that each of the
purchase options may have on a long-term shareholder's investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Portfolios, the Distributor and others will be paid, in
the case of the Class A Shares, from the proceeds of the front-end sales charge
and 12b-1 Plan fees and, in the case of the Class B Shares and the Class C
Shares, from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC
incurred upon redemption. Financial advisers may receive different compensation
for selling Class A, Class B and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Distribution (12b-1) and Service under Management of the
Portfolios.
Dividends paid on Class A, Class B and Class C Shares, to the extent any
dividends are paid, will be calculated in the same manner, at the same time, on
the same day and will be in the same amount, except that the additional amount
of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will be
borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. The Trust and the Distributor intend to operate in compliance with
these rules.
FRONT-END SALES CHARGE ALTERNATIVE - CLASS A SHARES
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
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CLASS A SALES CHARGES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Dealer's
Commission***
Front-End Sales Charge as % of as % of
Offering Offering
Amount of Purchase Price Amount Invested** Price
- -----------------------------------------------------------------------------------------------
Income Balanced Growth
Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 0.00% 0.00% 0.00% 4.00%
$100,000 but under $250,000 3.75 0.00 0.00 0.00 3.00
$250,000 but under $500,000 2.50 0.00 0.00 0.00 2.00
$500,000 but under $1,000,000* 2.00 0.00 0.00 0.00 1.60
- -----------------------------------------------------------------------------------------------
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based upon an initial net asset value of $0.00 per share of the respective
Class A Shares.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Trust must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon confirmation
of the shareholder's holdings by the Trust. Such reduced front-end sales charges
are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales
charge shown above. In addition, certain dealers who enter into an agreement to
provide extra training and information on Delaware Group products and services
and who increase sales of Delaware Group funds may receive an additional
commission of up to 0.15% of the offering price. Dealers who receive 90% or more
of the sales charge may be deemed to be underwriters under the Securities Act of
1933.
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For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made in accordance with the following schedule:
<TABLE>
<CAPTION>
DEALER'S COMMISSION
(as a percentage of
AMOUNT OF PURCHASE amount purchased)
------------------ -----------------
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
</TABLE>
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of a Portfolio. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless a dealer's commission or similar payment has
not been previously paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or termination at
any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
COMBINED PURCHASES PRIVILEGE
By combining your holdings of Class A Shares with your holdings of Class B
Shares and/or Class C Shares of a Portfolio and shares of other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Assets held by investment advisory clients of the Manager or its affiliates in a
stable value account may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members. It also permits you
to use these combinations under a Letter of Intention. A Letter of Intention
allows you to make purchases over a 13-month period and qualify the entire
purchase for a reduction in front-end sales charges on Class A Shares.
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<PAGE> 47
Combined purchases of $1,000,000 or more, including certain purchases made
at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative-Class A Shares, above.
BUYING CLASS A SHARES AT NET ASSET VALUE
Class A Shares of a Portfolio may be purchased at net asset value under
the Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their families) of the
Manager, any affiliate, any of the funds in the Delaware Group, certain of their
agents and registered representatives and employees of authorized investment
dealers and by employee benefit plans for such entities. Individual purchases,
including those in retirement accounts, must be for accounts in the name of the
individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. Officers, directors and key employees of institutional clients of the
Manager or any of its affiliates may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
Class A Shares in connection with special investment products, such as wrap
accounts or similar fee based programs.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers when they are not eligible to purchase shares of the institutional
class of a Portfolio; and any group retirement plan (excluding defined benefit
pension plans), or such plans of the same employer, that (i) has in excess of
$500,000 of plan assets invested in Class A Shares of Delaware Group funds and
in any stable value product available through the Delaware Group, or (ii) is
sponsored by an employer that has at any point after May 1, 1997 more than 100
employees while such plan has held Class A Shares of a Delaware Group fund and
such employer has properly represented to DIRSI in writing that it has the
requisite number of employees and has received written confirmation back from
DIRSI.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest monthly
dividend checks and/or repayment of invested capital into Class A Shares of any
of the funds in the Delaware Group at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
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The Trust must be notified in advance that an investment qualifies for
purchase at net asset value.
GROUP INVESTMENT PLANS
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE 401(k),
Profit Sharing and Money Purchase Pension Plans, 401(k) Defined Contribution
Plans, and 403(b)(7) and 457 Deferred Compensation Plans) may benefit from the
reduced front-end sales charges available on Class A Shares based on total plan
assets. If a company has more than one plan investing in the Delaware Group of
funds, then the total amount invested in all plans will be aggregated to
determine the applicable front-end sales charge reduction on each purchase, both
initial and subsequent, if, at the time of each such purchase, the company
notifies the Company that it qualifies for the reduction. Employees
participating in such Group Investment Plans may also combine the investments
held in their plan account to determine the front-end sales charge applicable to
purchases in non-retirement Delaware Group investment accounts if, at the time
of each such purchase, they notify the Portfolio in which they are investing
that they are eligible to combine purchase amounts held in their plan account.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement Planning.
DEFERRED SALES CHARGE ALTERNATIVE - CLASS B SHARES
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in a Portfolio's shares. The Distributor currently
anticipates compensating dealers or brokers for selling Class B Shares at the
time of purchase from its own assets in an amount equal to no more than 4% of
the dollar amount purchased. In addition, from time to time, upon written notice
to all of its dealers, the Distributor may hold special promotions for specified
periods during which the Distributor may pay additional compensation to dealers
or brokers for selling Class B Shares at the time of purchase. As discussed
below, however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Portfolio to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
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AUTOMATIC CONVERSION OF CLASS B SHARES
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
LEVEL SALES CHARGE ALTERNATIVE - CLASS C SHARES
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Portfolio shares. The Distributor currently
anticipates compensating dealers or brokers for selling Class C Shares at the
time of purchase from its own assets in an amount equal to no more than 1% of
the dollar amount purchased. As discussed below, however, Class C Shares are
subject to annual 12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND CLASS C SHARES
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value
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<PAGE> 50
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestments of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of the Class B Shares or the
Class C Shares of a Portfolio, even if those shares are later exchanged for
shares of another Delaware Group fund. In the event of an exchange of the
shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Portfolios:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR AFTER PURCHASE MADE SUBJECT TO CHARGE)
------------------------ ------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
</TABLE>
During the seventh year after purchase and thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which the Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B Shares,
it will be assumed that shares held for more than six years are redeemed first,
followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange.
OTHER PAYMENTS TO DEALERS -- CLASS A, CLASS B AND CLASS C SHARES
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In
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<PAGE> 51
some instances, these incentives or payments may be offered only to certain
dealers who maintain, have sold or may sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
INSTITUTIONAL CLASS
In addition to offering the Class A, Class B and Class C Shares, the
Portfolios also offer Institutional Class shares, which are described in a
separate prospectus and are available for purchase only by certain institutional
investors. Institutional Class shares generally are distributed directly by the
Distributor and do not have a front-end sales charge, a CDSC or a Limited CDSC,
and are not subject to 12b-1 Plan distribution expenses. To obtain the
prospectus that describes Institutional Class, contact the Distributor by
writing to the address on the cover of this Prospectus or by calling
800-828-5052.
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HOW TO BUY SHARES
PURCHASE AMOUNTS
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under a Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of shares of the Portfolios through most
investment dealers who, as part of the service they provide, must transmit
orders promptly. They may charge for this service. If you want a dealer but do
not have one, the Delaware Group can refer you to one.
INVESTING BY MAIL
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check, payable to the specific Portfolio and Class selected to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Portfolio and Class selected. Your check should
be identified with your name(s) and account number. An investment slip (similar
to a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from the Portfolio. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
INVESTING BY WIRE
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 1412893401 (include
your name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to the specific Portfolio and Class selected, to Delaware
Group at 1818 Market Street, Philadelphia, PA 19103.
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2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of a Portfolio. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus. See Redemption and Exchange for more complete information concerning
your exchange privileges.
Holders of Class A Shares of a Portfolio may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Group, including
other Class A Shares, but may not exchange their Class A Shares for Class B
Shares or Class C Shares of the Portfolios or of any other fund in the Delaware
Group. Holders of Class B Shares of a Portfolio are permitted to exchange all or
part of their Class B Shares only into Class B Shares of other Delaware Group
funds. Similarly, holders of Class C Shares of a Portfolio are permitted to
exchange all or part of their Class C Shares only into Class C Shares of other
Delaware Group funds. See Appendix C--Classes Offered for a list of Delaware
Group funds and the classes they offer. Class B Shares of a Portfolio and Class
C Shares of a Portfolio acquired by exchange will continue to carry the CDSC
and, in the case of Class B Shares, the automatic conversion schedule of the
fund from which the exchange is made. The holding period of Class B Shares of a
Portfolio acquired by exchange will be added to that of the shares that were
exchanged for purposes of determining the time of the automatic conversion into
Class A Shares of that Portfolio.
Permissible exchanges into Class A Shares of a Portfolio will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Portfolio will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
See Allied Plans under Retirement Planning for information on exchanges by
participants in an Allied Plan.
ADDITIONAL METHODS OF ADDING TO YOUR INVESTMENT
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY
INVESTMENTS WITHOUT WRITING OR MAILING CHECKS. You may authorize the Trust to
transfer a designated amount monthly from your checking account to your
Portfolio account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
2. Direct Deposit
YOU MAY HAVE YOUR EMPLOYER OR BANK MAKE REGULAR INVESTMENTS DIRECTLY TO
YOUR ACCOUNT FOR YOU (for example: payroll deduction, pay by phone, annuity
payments). Each Portfolio also accepts preauthorized recurring government and
private payments by Electronic Fund Transfer, which avoids mail time and check
clearing holds on payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, the Trust has the right to
liquidate your shares to reimburse the government or transmitting bank. If there
are insufficient funds in your account, you are obligated to reimburse the
Trust.
3. MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment dealer
may call a Portfolio to request a transfer of funds from your predesignated bank
account to your Portfolio account. See MoneyLine(SM) Services under The Delaware
Difference for additional information about this service.
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4. Wealth Builder Option
You can use our Wealth Builder Option to invest in a Portfolio through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You may also elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through regular liquidations of shares in your
Portfolio account.
Under this automatic exchange program, you can authorize regular monthly
amounts (minimum of $100 per fund) to be liquidated from your account in one or
more funds in the Delaware Group and invested automatically into any other
Delaware Group mutual fund account that you may specify. If in connection with
the election of the Wealth Builder Option, you wish to open a new account to
receive the automatic investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund that you select.
All investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above. You can
terminate your participation in Wealth Builder at any time by written notice to
the fund from which the exchanges are made. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Or, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of a Portfolio or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of a Portfolio or of other
Delaware Group funds or into Class C Shares of a Portfolio or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Classes
of Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Holders of Class A Shares of a Portfolio may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Portfolios. Holders of Class B Shares of a Portfolio may
reinvest their distributions only into Class B Shares of the funds in the
Delaware Group which offer that class of shares. Similarly, holders of Class C
Shares of a Portfolio may reinvest their distributions only into Class C Shares
of the funds in the Delaware Group which offer that class of shares. See
Appendix C-- Classes Offered for a list of the funds offering those classes of
shares. For more information about reinvestments, call the Shareholder Service
Center.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Group fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE IRA,
SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
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PURCHASE PRICE AND EFFECTIVE DATE
The offering price and net asset value of the Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase is the date the order is received by a
Portfolio, its designee. The effective date of a direct purchase is the day your
wire, electronic transfer or check is received, unless it is received after the
time the offering price or net asset value of shares is determined, as noted
above. Purchase orders received after such time will be effective the next
business day.
THE CONDITIONS OF YOUR PURCHASE
Each Portfolio reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. A Portfolio can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. Each Portfolio reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Portfolio also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts that, as a
result of a redemption, have remained below the minimum stated account balance
for a period of three or more consecutive months. Holders of such accounts may
be notified of their insufficient account balance and advised that they have
until the end of the current calendar quarter to raise their balance to the
stated minimum. If the account has not reached the minimum balance requirement
by that time, the Portfolio will charge a $9 fee for that quarter and each
subsequent calendar quarter until the account is brought up to the minimum
balance. The service fee will be deducted from the account during the first week
of each calendar quarter for the previous quarter, and will be used to help
defray the cost of maintaining low-balance accounts. No fees will be charged
without proper notice, and no CDSC will apply to such assessments.
Each Portfolio also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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REDEMPTION AND EXCHANGE
YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT WAYS. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other equity funds, tax-advantaged funds, bond funds or
money market funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a fund that has
the checkwriting feature. Exchanges are subject to the requirements of each fund
and all exchanges of shares constitute taxable events. See Taxes. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
the Delaware Group will best meet your changing objectives, and the consequences
of any exchange transaction. You may also call the Delaware Group directly for
fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Portfolio receives your request in good
order, subject, in the case of a redemption, to any applicable CDSC or Limited
CDSC. For example, redemption or exchange requests received in good order after
the time the offering price and net asset value of shares are determined, as
noted above, will be processed on the next business day. See Purchase Price and
Effective Date under How to Buy Shares. A shareholder submitting a redemption
request may indicate that he or she wishes to receive redemption proceeds of a
specific dollar amount. In the case of such a request, and in the case of
certain redemptions from retirement plan accounts, a Portfolio will redeem the
number of shares necessary to deduct the applicable CDSC in the case of Class B
and Class C Shares, and, if applicable, the Limited CDSC in the case of Class A
Shares and tender to the shareholder the requested amount, assuming the
shareholder holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the shareholder upon
redemption will be reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must also
provide the name of the fund in which you want to invest the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. Each
Portfolio may suspend, terminate, or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.
Each Portfolio will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. Each Portfolio will honor redemption requests as to shares for which a
check was tendered as payment, but a Portfolio will not mail or wire the
proceeds until it is reasonably satisfied that the purchase check has cleared,
which may take up to 15 days from the purchase date. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. Each Portfolio
reserves the
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right to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from a Portfolio, the Portfolio's CDSC schedule may be higher than the
CDSC schedule relating to the New Shares acquired as a result of the exchange.
For purposes of computing the CDSC that may be payable upon a disposition of the
New Shares, the period of time that an investor held the Original Shares is
added to the period of time that an investor held the New Shares. With respect
to Class B Shares, the automatic conversion schedule of the Original Shares may
be longer than that of the New Shares. Consequently, an investment in New Shares
by exchange may subject an investor to the higher 12b-1 fees applicable to Class
B Shares of a Portfolio for a longer period of time than if the investment in
New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Trust or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Portfolio or its
agent.
WRITTEN REDEMPTION
You can write to each Portfolio at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Portfolios require a signature by all owners of the
account and a signature guarantee for each owner. Each signature guarantee must
be supplied by an eligible guarantor institution. Each Portfolio reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Portfolios may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order.
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Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
WRITTEN EXCHANGE
You may also write to each Portfolio (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in the Delaware Group, subject to the same conditions and
limitations as other exchanges noted above.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption - Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are automatically
provided unless you notify the Portfolio in which you have your account in
writing that you do not wish to have such services available with respect to
your account. Each Portfolio reserves the right to modify, terminate or suspend
these procedures upon 60 days' written notice to shareholders. It may be
difficult to reach the Portfolios by telephone during periods when market or
economic conditions lead to an unusually large volume of telephone requests.
Neither the Portfolios nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Portfolio shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Portfolio will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Portfolio or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. Instructions received by telephone
are generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption proceeds. If you ask for a check, it will normally be mailed the next
business day after receipt of your redemption request to your predesignated bank
account. There are no separate fees for this redemption method, but the mail
time
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may delay getting funds into your bank account. Simply call the Shareholder
Service Center prior to the time the offering price and net asset value are
determined, as noted above.
MONEYLINE(SM) ON DEMAND
Through the MoneyLine(SM) On Demand service, you or your investment dealer
may call a Portfolio to request a transfer of funds from your Portfolio account
to your predesignated bank account. See MoneyLine(SM) Services under The
Delaware Difference for additional information about this service.
TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
SYSTEMATIC WITHDRAWAL PLANS
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it can provide them with a stable supplemental amount. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Portfolios do not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your
Portfolio account to your predesignated bank account through the MoneyLine(sm)
Direct Deposit Service. Your funds will normally be credited to your bank
account up to four business days after the payment date. There are no separate
fees for this redemption method. See MoneyLine(sm) Services under The Delaware
Difference for more information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to receive
benefits in periodic payments, the Systematic Withdrawal Plan provides you with
maximum flexibility. A number of formulas are available for calculating your
withdrawals depending upon whether the distributions are required or optional.
Withdrawals must be for $25 or more; however, no minimum account balance is
required. The MoneyLine(SM) Direct Deposit Service described above is not
available for certain retirement plans.
* * *
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission was paid
on that purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value, below.
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The applicable CDSC for Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A SHARES
PURCHASED AT NET ASSET VALUE
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of the Class A
Shares of a Portfolio or the Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
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WAIVER OF LIMITED CONTINGENT DEFERRED SALES CHARGE - CLASS A SHARES
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Portfolio's right to liquidate a shareholder's account if the aggregate
net asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) distributions to participants from a
retirement plan qualified under section 401(a) or 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), or due to death of a participant in such
a plan; (iii) redemptions pursuant to the direction of a participant or
beneficiary of a retirement plan qualified under section 401(a) or 401(k) of the
Code with respect to that retirement plan; (iv) periodic distributions from an
IRA, SIMPLE IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death,
disability, or attainment of age 59 1/2, and IRA distributions qualifying under
Section 72(t) of the Internal Revenue Code; (v) returns of excess contributions
to an IRA; (vi) distributions by other employee benefit plans to pay benefits;
(vii) distributions described in (ii), (iv), and (vi) above pursuant to a
systematic withdrawal plan; and (viii) redemptions by the classes of
shareholders who are permitted to purchase shares at net asset value, regardless
of the size of the purchase (see Buying Class A Shares at Net Asset Value under
Classes of Shares).
WAIVER OF CONTINGENT DEFERRED SALES CHARGE - CLASS B AND CLASS C SHARES
The CDSC is waived on certain redemptions of Class B Shares in connection
with the following redemptions: (i) redemptions that result from a Portfolio's
right to liquidate a shareholder's account if the aggregate net asset value of
the shares held in the account is less than the then-effective minimum account
size; (ii) returns of excess contributions to an IRA, SIMPLE IRA, SEP/IRA or
403(b)(7) or 457 Deferred Compensation Plan, (iii) periodic distributions from
an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, 403(b)(7) or 457 Deferred Compensation
Plan, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; and (iv) distributions from an account if the redemption results
from the death of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of the shares being
redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from A Portfolio's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Pension Plan, or 401(k) Defined Contribution Plans upon
attainment of age 70 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (iv) distributions from a 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, or
401(k) Defined Contribution Plan, under hardship provisions of the plan; (v)
distributions from a 403(b)(7) Deferred Compensation Plan, 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59; and (vii) distributions from an
account if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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DIVIDENDS AND DISTRIBUTIONS
The Income and Balanced Portfolios will normally make payments from net
investment income, if any, on a quarterly basis. The Growth Portfolio will
normally make payments from net investment income, if any, on a annual basis.
Payments from net realized securities profits of a Portfolio, if any, will
normally be distributed annually in the quarter following the close of the
fiscal year.
Each class of a Portfolio will share proportionately in the investment
income and expenses of that Portfolio, except that the per share dividends from
net investment income on the Class A Shares, the Class B Shares and Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Portfolios.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect otherwise. Any check in payment
of dividends or other distributions which cannot be delivered by the United
States Post Office or which remains uncashed for a period of more than one year
may be reinvested in your account at the then-current net asset value and the
dividend option may be changed from cash to reinvest. If you elect to take your
dividends and distributions in cash and such dividends and distributions are in
an amount of $25 or more, you may choose the MoneyLine(SM) Direct Deposit
Service and have such payments transferred from your Portfolio account to your
predesignated bank account. This service is not available for retirement plans.
See MoneyLine(SM) Services under The Delaware Difference for more information
about this service.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Portfolio.
Each Portfolio has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a
Portfolio will not be subject to federal income tax, or to any excise tax, to
the extent its earnings are distributed as provided in the Code.
Each Portfolio intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net investment
income or net short-term capital gains will be taxable to those investors who
are subject to income taxes as ordinary income, whether received in cash or in
additional shares. For corporate investors, dividends from net investment income
will generally qualify in part for the corporate dividends-received deduction.
The portion of dividends paid by a Portfolio that so qualifies will be
designated each year in a notice from the Portfolio to the Portfolio's
shareholders.
Distributions paid by a Portfolio from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in that Portfolio. The Portfolios do not seek
to realize any particular amount of capital gains during a year; rather,
realized gains are a by-product of Portfolio management activities.
Consequently, capital gains distributions may be expected to vary considerably
from year to year. Also, for those investors subject to tax, if purchases of
shares in a Portfolio are made shortly before the record date for a dividend or
capital gains distribution, a portion of the investment will be returned as a
taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Portfolios and received by the
shareholder on December 31 of the year declared.
The sale of shares of a Portfolio is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Portfolios and any other fund in the Delaware Group. Any loss incurred on a
sale or exchange of Portfolio shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares. All or a portion of the sales
charge incurred in acquiring a Portfolio's shares will be excluded from the
federal tax basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss upon sale of such
shares) if the sale proceeds are reinvested in that Portfolio or in another fund
in the Delaware Group of funds and a sales charge that would otherwise apply to
the reinvestment is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax basis of
the shares acquired in the reinvestment.
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The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of each Portfolio are exempt from
Pennsylvania county personal property taxes.
Each year, the Trust will mail to you information on the tax status of
each Portfolio's dividends and distributions. Shareholders will also receive
each year information as to the portion of dividend income, if any, that is
derived from U.S. government securities that are exempt from state income tax.
Of course, shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by a Portfolio.
The Trust is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Taxes in Part B for additional information on tax matters relating to
each Portfolio and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. The securities of the Underlying Funds held by the Portfolios are
priced at market value.
Class A Shares are purchased at the offering price per share, while Class
B Shares and Class C Shares are purchased at the NAV per share. The offering
price per share of Class A Shares consists of the NAV per share next computed
after the order is received, plus any applicable front-end sales charges.
The offering price and NAV are computed as of the close of regular trading
on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when
the Exchange is open.
The net asset values of all outstanding shares of each class of a
Portfolio will be computed on a pro-rata basis for each outstanding share based
on the proportionate participation in that Portfolio represented by the value of
shares of that class. All income earned and expenses incurred by a Portfolio
will be borne on a pro-rata basis by each outstanding share of a class, based on
each class' percentage in that Portfolio represented by the value of shares of
such classes, except that the Institutional Class will not incur any of the
expenses under the Trust's 12b-1 Plans and the Class A, Class B and Class C
Shares of each Portfolio alone will bear the 12b-1 Plan expenses payable under
their respective Plans. Due to the specific distribution expenses and other
costs that will be allocable to each class, the NAV of each class of a Portfolio
will vary.
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MANAGEMENT OF THE PORTFOLIOS
TRUSTEES
The business and affairs of the Trust are managed under the direction of
its Board of Trustees. Part B contains additional information regarding the
Trust's trustees and officers.
INVESTMENT MANAGER
The Manager furnishes asset allocation services to each Portfolio.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On September 30, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International, were managing in
the aggregate more than $00 billion in assets in the various institutional or
separately managed (approximately $00 billion) and investment company
(approximately $00 billion) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
The Manager manages each Portfolio's assets by allocating the Portfolio's
assets among the Underlying Funds. Such management services include monitoring
the Underlying Funds in order to determine whether they are investing their
assets in a manner that is consistent with the asset classes targeted for
investment by each Portfolio. The Manager also administers the Trust's affairs
and pays the salaries of all the trustees, officers and employees of the Trust
who are affiliated with the Manager. For these services, the Manager is paid an
annual Asset Allocation Fee equal to 0.25% (currently waived to 0.10%) of
average daily net assets of each of the Portfolios.
Each Portfolio, as a shareholder in the Underlying Funds, will indirectly
bear its proportionate share of any management fees and other expenses paid by
the Underlying Funds. The investment adviser, sub-adviser (where applicable) and
the management fee (as an annual percentage of net assets before fee waivers)
and expense ratio for the most recent fiscal year for each of the Institutional
Class shares of the Underlying Funds are set forth below:
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<TABLE>
<CAPTION>
UNDERLYING FUND ADVISER SUB-ADVISER** FEE RATE EXPENSE RATIO
- --------------- ------- ----------- -------- -------------
<S> <C> <C> <C> <C>
Aggressive Growth Manager 1.00% 0.90%(6)
Blue Chip Manager Vantage* 0.65%(1) 1.20%
Decatur Total Return Manager 0.57%(2) 0.81%
Delcap Manager 0.75% 1.05%
Devon Manager 0.60%(3) 0.95%(6)
Small Cap Value Manager 0.75% 1.15%
Trend Manager 0.75% 1.08%
U.S. Growth Manager Lynch & Mayer* 0.70% 1.50%(6)
Emerging Markets Delaware International* 1.25% 1.70%(6)
International Equity Delaware International* 0.75% 1.55%(6)
International Small Cap Delaware International* 1.25% 1.70%(6)
New Pacific Manager John Govett 0.80% 1.50%
Delchester Manager 0.59%(4) 0.79%
Global Bond Delaware International* 0.75% 0.95%(6)
Limited-Term Gov't Manager 0.50% 0.78%
U.S. Government Manager 0.60% 0.86%
Delaware Cash Reserve Manager 0.49%(5) 0.88%
U.S. Government Money Manager 0.50% 0.74%(6)
</TABLE>
* Affiliate of the Manager.
** Fees payable by the Manager to a Sub-Adviser have no effect on the management
fees payable by an Underlying Fund.
1. Under the Investment Management Agreement for Blue Chip Fund, the Manager is
paid an annual fee equal to 0.65% on the first $500 million of average daily net
assets, 0.625% on the next $500 million and 0.60% on the average daily net
assets in excess of $1 billion.
2. Under the Investment Management Agreement for Decatur Total Return Fund, the
Manager is paid an annual fee equal to 0.60% on the first $500 million of
average daily net assets, 0.575% on the next $250 million of average daily net
assets and 0.55% on the average daily net assets in excess of $750 million, less
all directors fees paid by the fund.
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3. Under the Investment Management Agreement for Devon Fund, the Manager is paid
an annual fee equal to 0.60% on the first $500 million of average daily net
assets and 0.50% on the average daily net assets in excess of $500 million.
4. Under the Investment Management Agreement for Delchester Fund, the Manager is
paid an annual fee equal to 0.60% on the first $500 million of average daily net
assets, 0.575% on the next $250 million of average daily net assets and 0.55% on
the average daily net assets in excess of $750 million, less all directors fees
paid by the fund.
5. Under the Investment Management Agreement for Delaware Cash Reserve, the
Manager is paid an annual fee equal to 0.50% on the first $500 million of
average daily net assets, 0.475% on the next $250 million of average daily net
assets, 0.45% on the next $250 million of average daily net assets, 0.425% on
the next $250 million of average daily net assets, 0.375% on the next $250
million of average daily net assets, 0.325% on the next $250 million of average
daily net assets, 0.30% on the next $250 million of average daily net assets and
0.275% on the average daily net assets in excess of $2 billion, less all
directors fees paid by the fund.
6. Reflects voluntary waivers and payments of fees by the investment manager.
PORTFOLIO MANAGER
J. Paul Dokas serves as portfolio manager of each of the Portfolios. Mr.
Dokas holds a BBA in Business from Loyola College and an MBA in Business from
the University of Maryland. Prior to joining the Delaware Group in 1997, he was
a Director of Trust Investments for Bell Atlantic Corporation in Philadelphia.
Mr. Dokas is a CFA charterholder.
PORTFOLIO TRADING PRACTICES
No commissions are paid directly by the Portfolios upon the purchase or
sale of Underlying Fund shares. The Portfolios normally will not invest for
short-term trading purposes. However, each Portfolio may sell its shares of an
Underlying Fund without regard to the length of time they have been held. The
degree of portfolio activity may affect taxes payable by the Portfolios'
shareholders to the extent that net capital gains are realized. Given the
Portfolios' investment objectives, their annual portfolio turnover rates are not
expected to exceed 100%. A turnover rate of 100% would occur, for example, if
all the investments held by a Portfolio at the beginning of the year were
replaced by the end of the year.
Because the Manager must consider the interests of the Portfolios as well
as those of the Underlying Funds, the Boards of Trustees/Directors of the Trust
and the Underlying Funds have established Asset Allocation Guidelines
("Guidelines") for the Manager. Pursuant to these Guidelines, under normal
market and economic conditions, the Portfolios' portfolio manager will seek to
provide as much advance notice as is practical to the portfolio manager of an
Underlying Fund of allocation transactions that may affect the Underlying Fund.
In addition, the Portfolios' portfolio manager will normally attempt to avoid
excessive allocation transactions involving any particular Underlying Fund in
any one calendar quarter.
A Portfolio uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, a Portfolio may consider a
broker/dealer's sales of shares of funds in the Delaware Group of funds in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.
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PERFORMANCE INFORMATION
From time to time, the Portfolios may quote total return performance of
their respective Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment, reflecting
the reinvestment of all distributions at net asset value and: (i) in the case of
Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for one-,
five- and ten-year or life-of-fund periods, as relevant. Each Portfolio may also
advertise aggregate and average total return information concerning a Class over
additional periods of time. In addition, each Portfolio may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information that includes the deductions of
the maximum front-end sales charge or any applicable CDSC.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time. Past performance is not a guarantee of future results.
DISTRIBUTION (12b-1) AND SERVICE
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of each Portfolios' shares under separate Distribution Agreements
with the Trust.
The Trust has adopted a separate distribution plan under Rule 12b-1 for
each of the Class A Shares, Class B Shares and Class C Shares of the Portfolios
(the "Plans"). Each Plan permits the Portfolios to which the Plan relates to pay
the Distributor from the assets of the respective Classes a monthly fee for the
Distributor's services and expenses in distributing and promoting sales of
shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
each Portfolio may make payments from the 12b-1 Plan fees of its respective
Classes directly to others, such as banks, who aid in the distribution of Class
shares or provide services in respect of a Class, pursuant to service agreements
with the Trust.
The 12b-1 Plan expenses relating to each of the Class B Shares and Class C
Shares of the Portfolios are also used to pay the Distributor for advancing the
commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by a Portfolio from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) 0.25%
(after waivers) of a Class A Shares' average daily net assets in
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any year, and (ii) 1.00% (0.25% of which are service fees to be paid by the
Portfolios to the Distributor, dealers and others, for providing personal
service and/or maintaining shareholder accounts) of each Portfolio's Class B
Shares' and Class C Shares' average daily net assets in any year. Each
Portfolio's Class A, Class B and Class C Shares will not incur any distribution
expenses beyond these limits, which may not be increased without shareholder
approval.
While payments pursuant to the Plans may not exceed 0.25% annually (after
waivers) with respect to each Portfolio's Class A Shares, and 1.00% annually
with respect to each Portfolio's Class B Shares and Class C Shares, the Plans do
not limit fees to amounts actually expended by the Distributor. It is therefore
possible that the Distributor may realize a profit in any particular year.
However, the Distributor currently expects that its distribution expenses will
likely equal or exceed payments to it under the Plans. The Distributor may,
however, incur such additional expenses and make additional payments to dealers
from its own resources to promote the distribution of shares of the Classes. The
monthly fees paid to the Distributor under the Plans are subject to the review
and approval of the Trust's unaffiliated trustees, who may reduce the fees or
terminate the Plans at any time.
The Plans do not apply to the Institutional Class Shares of each of the
Portfolios. Those shares are not included in calculating the Plans' fees, and
the Plans are not used to assist in the distribution and marketing of the
Institutional Class.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Portfolios
pursuant to a Shareholder Services Agreement. The Transfer Agent also provides
accounting services to each Portfolio pursuant to the terms of a separate Fund
Accounting Agreement. The trustees of the Trust annually review service fees
paid to the Transfer Agent.
The trustees annually review fees paid to the Distributor and the Transfer
Agent. The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.
EXPENSES
Each Portfolio is responsible for all of its own expenses other than those
borne by the Manager under the Asset Allocation Agreements and those borne by
the Distributor under the Distribution Agreements. The expense ratios of each
Class will reflect the impact of its 12b-1 Plan.
SHARES
The Trust is an open-end management investment company. Each Portfolio is
non-diversified, as defined by the 1940 Act. Commonly known as a mutual fund,
the Trust was organized as a Delaware Business Trust on October 00, 1997. The
Trust currently offers three series of shares: the Income, Balanced and Growth
Portfolios. Portfolio shares have a par value of $0.01, equal voting rights,
except as noted below, and are equal in all other respects. Each Portfolio will
vote separately on any matter which affects only that Portfolio. Shares of each
Portfolio have a priority over shares of any other series of the Trust in the
assets and income of that Portfolio.
The Trust's shares have noncumulative voting rights, which means that the
holders of more than 50% of the Trust's shares voting for the election of
trustees can elect 100% of the trustees if they choose to do so. Under Delaware
law and the Trust's Declaration of Trust, the Trust is not required, and does
not intend, to hold
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annual meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act. Shareholders of 10% or more of the Trust's
outstanding shares may request that a special meeting be called to consider the
removal of a trustee.
Shares of each Class represent proportionate interests in the assets of
the respective Portfolio and have the same voting and other rights and
preferences as the other classes of that Portfolio, except that shares of the
Institutional Classes are not subject to, and may not vote on, matters affecting
the Distribution Plans under Rule 12b-1 relating to the Class A, Class B and
Class C Shares. Similarly, as a general matter, the shareholders of the Class A
Shares, Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However, the
Class B Shares of a Portfolio may vote on any proposal to increase materially
the fees to be paid by that Portfolio under the 12b-1 Plan relating to the Class
A Shares.
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OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Discussed below are other investment policies and risk considerations
relating to the Underlying Funds. In addition, if the Trust receives an
exemptive order from the SEC, each Portfolio may, to the extent consistent
with its investment objectives, invest in any of the securities in which an
Underlying Fund may invest and may pursue any of the same strategies as an
Underlying Fund.
HIGH-YIELD, HIGH RISK SECURITIES
The Delchester Fund will invest primarily in, and Decatur Total Return,
U.S. Growth, Small Cap Value and Emerging Markets Funds may invest in, high
risk, high yield securities, commonly known as "junk bonds." These securities
entail the following risks:
Youth and Volatility of the High-Yield Market. Although the market for
high-yield bonds has been in existence for many years, including periods of
economic downturns, the high-yield market grew rapidly during the long economic
expansion which took place in the United States during the 1980s. During that
economic expansion, the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially during that economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield bonds, would adversely
affect the value of outstanding bonds and would adversely affect the ability of
high-yield issuers to repay principal and interest. Those analysts cite
volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield bonds,
an increase in the number of high-yield bond defaults and corresponding
volatility in an Underlying Fund's net asset value. At times in the past,
uncertainty and volatility in the high-yield market resulted in volatility in
certain Underlying Funds' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or
other factors, an Underlying Fund experiences substantial net redemptions of the
Underlying Fund's shares for a sustained period of time (i.e., more shares are
redeemed than are purchased), it may be required to sell securities without
regard to the investment merits of the securities to be sold. If the Underlying
Fund sells a substantial number of securities to generate proceeds for
redemptions, its asset base will decrease and its expense ratio may increase.
Liquidity and Valuation. The secondary market for high-yield securities is
currently dominated by institutional investors, including mutual funds and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse affect on an
Underlying Fund's ability to dispose of particular issues, when necessary, to
meet it's liquidity needs or in response to a specific economic event, such as
the deterioration in the creditworthiness of the issuer. In addition, a less
liquid secondary market makes it more difficult for the Fund to obtain precise
valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
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disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. Such Underlying Fund's privately
placed high-yield securities are particularly susceptible to the liquidity and
valuation risks outlined above.
Legislative and Regulatory Action and Proposals. There are a variety of
legislative actions which have been taken or which are considered from time to
time by the United States Congress which could adversely affect the market for
high-yield bonds. For example, Congressional legislation limited the
deductibility of interest paid on certain high-yield bonds used to finance
corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield
issues, could reduce the number of new high-yield securities being issued and
could make it more difficult for the Portfolio to attain its investment
objective.
Zero Coupon Bonds and Pay-in-Kind Bonds. Global Bond, Delchester and
Emerging Markets may invest in zero coupon bonds or pay-in-kind ("PIK") bonds.
Zero coupon bonds and PIK bonds are generally considered to be more
interest-sensitive than income-bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to the Underlying Fund. For example, an
Underlying Fund accrues, and is required to distribute to shareholders, income
on its zero coupon bonds. However, the Underlying Fund may not receive the cash
associated with this income until the bonds are sold or mature. If the
Underlying Fund did not have sufficient cash to make the required distribution
of accrued income, the it could be required to sell other securities in its
portfolio or to borrow to generate the cash required.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Consistent with their respective objectives, Aggressive Growth, Blue Chip,
Decatur Total Return, U.S. Growth, Devon and New Pacific Funds may invest in
U.S. government securities and corporate debt obligations on a when-issued or
delayed delivery basis. Such transactions involve commitments to buy a new issue
with settlement up to 60 days later. The average settlement date for when-issued
or delayed delivery securities purchased by such Underlying Funds is generally
between 30 and 45 days. During the time between the commitment and settlement,
an Underlying Fund does not accrue interest, but the market value of the bonds
may fluctuate. This can result in the Underlying Fund's share value increasing
or decreasing. The Underlying Funds will not ordinarily sell when-issued or
delayed delivery securities prior to settlement. If an Underlying Funds invest
in securities of this type, they will maintain a segregated account to pay for
them and mark the account to market daily.
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MORTGAGE-BACKED SECURITIES
Devon, U.S. Government and Limited-Term Government Funds may invest in
mortgage-backed securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or government sponsored corporations or those
issued by certain private, non-government corporations, such as financial
institutions. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. Such private-backed securities
may be 100% collateralized at the time of issuance by securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities (so-called
"agency mortgage-backed securities") or may not be so collateralized (so-called
"non-agency mortgage-backed securities"). The aforementioned Underlying Funds
may invest in agency and non-agency mortgage-backed securities. Non-agency
mortgage-backed securities may comprise up to 20% of such Underlying Funds'
respective assets, but all non-agency mortgage-backed securities must (i) be
rated at the time of purchase in the four top rating categories by a
nationally-recognized statistical rating organization (e.g., BBB or better by
Standard & Poor's Ratings Group ("S&P") or Baa or better by Moody's Investors
Service, Inc. ("Moody's")) and (ii) represent interests in whole-loan mortgages,
multi-family mortgages, commercial mortgages or other mortgage collateral
supported by a first mortgage lien on real estate. Non-agency mortgage-backed
securities are subject to the interest rate and prepayment risks to which other
CMOs and REMICs issued by private issuers are subject. Non-agency
mortgage-backed securities may also be subject to a greater risk of loss of
interest and principal because they are not collateralized by securities issued
or guaranteed by the U.S. government. In addition, timely information concerning
the loans underlying these securities may not be as readily available and the
market for these securities may be less liquid than the market for other CMOs
and REMICs.
ASSET-BACKED SECURITIES
Devon, U.S. Government, Limited-Term Government and Delaware Cash Reserve
Funds may invest in securities which are backed by assets such as receivables on
home equity and credit loans, receivables regarding automobile, mobile home and
recreational vehicle loans, wholesale dealer floor plans and leases or other
loans or financial receivables currently available or which may be developed in
the future. For these Underlying Funds, all such securities must be rated in one
of the four highest rating categories by a reputable rating agency (e.g., BBB or
better by S&P or Baa or better by Moody's). It is Cash Reserve's current policy
to limit asset-backed investments to those rated in the highest rating category
by a reputable rating agency (e.g., AAA
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by S&P or Aaa by Moody's) and represented by interests in credit card
receivables, wholesale dealer floor plans, home equity loans and automobile
loans.
Such receivables are securitized in either a pass-through or a pay-through
structure. Pass-through securities provide investors with an income stream
consisting of both principal and interest payments in respect of the receivables
in the underlying pool. Pay-through asset-backed securities are debt obligations
issued usually by a special purpose entity, which are collateralized by the
various receivables and in which the payments on the underlying receivables
provide the funds to pay the debt service on the debt obligations issued.
The rate of principal payment on asset-backed securities generally depends
on the rate of principal payments received on the underlying assets. Such rate
of payments may be affected by economic and various other factors such as
changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. See Mortgage-Backed
Securities, above. Such asset-backed securities do, however, involve certain
risks not associated with mortgage-backed securities, including the risk that
security interests cannot be adequately or in many cases ever established, and
other risks which may be peculiar to particular classes of collateral. For
example, with respect to credit card receivables, a number of state and federal
consumer credit laws give debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the outstanding balance. In the case of
automobile receivables, there is a risk that the holders may not have either a
proper or first security interest in all of the obligations backing such
receivables due to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore, recoveries on
repossessed collateral may not always be available to support payments on the
securities.
REITS
Devon Fund may invest in REITs. REITs are pooled investment vehicles which
invest primarily in income-producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements in
the Code. REITs are subject to substantial cash flow dependency, defaults by
borrowers, self-liquidation, and the risk of failing to qualify for tax-free
pass-through of income under the Code, and/or to maintain exemptions from the
1940 Act.
FOREIGN SECURITIES AND FOREIGN CURRENCY TRANSACTIONS
The Underlying Funds in the International Equity category invest their
assets primarily in securities of foreign issuers, and the Global Bond Fund will
invest at least 65% of its assets in fixed-income securities of issuers
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three different countries, one of which may
be the United States. Blue Chip, Devon, DelCap and Small Cap Value Funds may
also invest a portion of their assets in securities of issuers organized or
having a majority of their assets in or deriving a majority of their operating
income outside the United States. In connection with investments in foreign
securities, such Underlying Funds may, from time to time, conduct foreign
currency exchange transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange
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market or through entering into contracts to purchase or sell foreign currencies
at a future date (i.e., a "forward foreign currency" contract or "forward"
contract). Such Underlying Funds will engage in these foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. Investing in foreign securities and, in
conjunction therewith, engaging in foreign currency transactions present special
considerations not presented by investments in securities issued by United
States companies.
The risk involved in investing in foreign securities include the
possibility of expropriation, nationalization or confiscatory taxation, taxation
of income earned in foreign nations or other taxes imposed with respect to
investments in foreign nations, foreign exchange control (which may include
suspension of the ability to transfer currency from a given country), default in
foreign government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations. In addition, in many countries, there is less publicly available
information about issuers than is available in reports about companies in the
United States, and the information that is available is often of lesser quality
than information available on U.S. companies. Foreign companies are not subject
to uniform accounting, auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to United
States companies. Further, such Underlying Funds may encounter difficulty or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Commission rates on securities transactions in foreign countries, which are
sometimes fixed rather than subject to negotiation as in the United States, are
likely to be higher. Moreover, the settlement period of securities transactions
in foreign markets may be longer than in domestic markets. In many foreign
countries, there is less government supervision and regulation of business and
industry practices, stock exchanges, brokers and listed companies than in the
United States. The foreign securities markets of many of the countries in which
such Underlying Funds may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Emerging Markets. Compared to the United States and other developed
countries, emerging countries may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade a
small number of securities. Prices on these exchanges tend to be volatile and,
in the past, securities in these countries have offered greater potential for
gain (as well as loss) than securities of companies located in developed
countries. Further, investments by foreign investors (such as the Emerging
Markets Fund) are subject to a variety of restrictions in many emerging
countries. These restrictions may take the form of prior governmental approval,
limits on the amount or type of securities held by foreigners, and limits on the
types of companies in which foreigners may invest. Additional restrictions may
be imposed at any time by these or other countries in which such Underlying
Funds invests. In addition, the repatriation of both investment income and
capital from several foreign countries is restricted and controlled under
certain regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging countries, Delaware International and the Manager do not
believe that any current repatriation restrictions would affect its decision to
invest in such countries. Countries such as those in which the aforementioned
Underlying Funds may invest have historically experienced and may continue to
experience, high rates of inflation, high interest rates, exchange rate
fluctuations or currency depreciation, large amounts of external debt, balance
of payments and trade difficulties and extreme poverty and unemployment.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, its
government's policy towards the
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International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.
With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or government-related
issuer to make timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of payments, including
export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. To the extent that a country receives
payment for its exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely affected.
The issuers of the emerging market country government and
government-related high yield securities in which such Underlying Funds may
invest have in the past experienced substantial difficulties in servicing their
external debt obligations, which have led to defaults on certain obligations and
the restructuring of certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling interest and principal
payments by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to Brady Bonds, and obtaining new
credit to finance interest payments. Holders of certain foreign government and
government-related high yield securities may be requested to participate in the
restructuring of such obligations and to extend further loans to their issuers.
There can be no assurance that the Brady Bonds and other foreign government and
government-related high yield securities in which such Underlying Funds may
invest will not be subject to similar defaults or restructuring arrangements
which may adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
Foreign Currency Transactions. Underlying Funds which invest in foreign
securities may also purchase options and forward contracts in foreign currency
for hedging purposes in connection with such foreign securities transactions. As
in the case of other kinds of options, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and such Underlying Funds could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates, although, in the event of rate movements
adverse to the Underlying Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. Such Underlying Funds may enter into forward contracts to "lock in"
the price of a security it has agreed to purchase or sell, in terms of U.S.
dollars or other currencies in which the transaction will be consummated. By
entering into a forward contract for the purchase or sale, for a fixed amount of
U.S. dollars or foreign currency, of the amount of foreign currency involved in
the underlying security transaction, the Underlying Funds will be able to
protect itself against a possible loss resulting from an adverse change in
currency exchange rates during the period between the date the security is
purchased or sold and the date on which payment is made or received.
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When such Underlying Fund's investment manager believes that the currency
of a particular country may suffer a significant decline against the U.S. dollar
or against another currency, the Underlying Fund may enter into a forward
foreign currency contract to sell, for a fixed amount of U.S. dollars or other
appropriate currency, the amount of foreign currency approximating the value of
some or all of the Underlying Fund's securities denominated in such foreign
currency.
An Underlying Fund will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Underlying Fund to deliver an amount of foreign currency in excess
of the value of the Underlying Fund's securities or other assets denominated in
that currency.
At the maturity of a forward contract, the Underlying Funds may either
sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency. The Underlying Fund may realize a gain or loss from
currency transactions.
The precise matching of forward contract amounts and the value of the
securities involved is generally not possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
strategy is highly uncertain.
It is impossible to forecast the market value of portfolio securities at
the expiration of the contract. Accordingly, it may be necessary for the
Underlying Fund to purchase additional foreign currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Underlying Fund is obligated to deliver
(and if a decision is made to sell the security and make delivery of the foreign
currency). Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Underlying Fund is
obligated to deliver.
Such Underlying Funds also may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or over-the-counter)
for hedging purposes to protect against declines in the U.S. dollar cost of
foreign securities held by the Underlying Funds and against increases in the
U.S. dollar cost of such securities to be acquired. Call options on foreign
currency written by the Underlying Fund will be covered, which means that the
Fund will own the underlying foreign currency. With respect to put options on
foreign currency written by the Underlying Fund, the Underlying Fund will
establish a segregated account with its custodian bank consisting of cash, U.S.
government securities or other high-grade liquid debt securities in an amount
equal to the amount the Underlying Fund will be required to pay upon exercise of
the put.
Such Underlying Funds may enter into contracts for the purchase or sale
for future delivery of securities or foreign currencies. The principal purpose
of the purchase or sale of futures contracts for the Underlying Fund is to
protect the Underlying Fund against the fluctuations in interest or exchange
rates which otherwise might adversely affect the value of the Underlying Fund's
portfolio securities or adversely affect the prices of securities which the
Underlying Fund intends to purchase at a later date without actually buying or
selling such securities.
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Depositary Receipts. The aforementioned Underlying Funds may make foreign
investments through the purchase and sale of sponsored or unsponsored American,
European and Global Depositary Receipts. Depositary Receipts are receipts
typically issued by a U.S. or foreign bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. "Sponsored"
Depositary Receipts are issued jointly by the issuer of the underlying security
and a depository, whereas "unsponsored" Depositary Receipts are issued without
participation of the issuer of the deposited security. Holders of unsponsored
Depositary Receipts generally bear all the costs of such facilities and the
depository of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts in
respect of the deposited securities. Therefore, there may not be a correlation
between information concerning the issuer of the security and the market value
of an unsponsored Depositary Receipt.
OPTIONS
To achieve their investment objectives, Aggressive Growth, Blue Chip,
Decatur Total Return, U.S. Growth, Devon, DelCap, Small Cap Value, Emerging
Markets, International Equity, International Small Cap New Pacific, U.S.
Government, Global Bond and Limited-Term Government Funds use certain hedging
techniques. These techniques will be used at the respective investment manager's
discretion to protect the Underlying Funds' principal value.
Such Underlying Funds may purchase put options, write covered call options
and enter into closing transactions in connection therewith in respect of
securities in which they may invest. Such Underlying Funds may also purchase
call options and enter into related closing transactions, or may write covered
put options. In purchasing put and call options, the premium paid by the
Underlying Fund, plus any transaction costs, will reduce any benefit realized by
the Underlying Fund upon exercise of the option.
Purchasing a put option gives the Underlying Fund the right to sell one of
its securities for an agreed price up to an agreed date. The advantage is that
the Underlying Fund can be protected should the market value of the security
decline. However, the Underlying Fund must pay a premium for this right, whether
it exercises it or not.
Writing a covered call option obligates the Underlying Fund to sell one of
its securities for an agreed price up to an agreed date. The advantage is that
the Underlying Fund receives premium income, which may offset the cost of
purchasing put options. However, the Underlying Fund may lose the potential
market appreciation of the security if the respective investment manager's
judgment is wrong and interest rates fall or stock prices rise.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed upon date. The
advantage is that the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy.
Closing transactions essentially let the Underlying Fund offset a put
option or call option prior to its exercise or expiration. If it cannot effect a
closing transaction, it may have to hold a security it would otherwise sell with
a potential decline in net asset value, or deliver a security it might want to
hold.
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These Underlying Funds may use both exchange-traded and over-the-counter
options. Certain over-the-counter options may be illiquid. These Underlying
Funds will only invest in such options to the extent consistent with their limit
on investments in illiquid securities.
These Underlying Funds may write call options and purchase put options on
stock indices and enter into closing transactions in connection therewith. Such
Underlying Funds also may purchase call options on stock indices and enter into
closing transactions in connection therewith. No such Underlying Fund will
engage in transactions on stock indices for speculative purposes. Writing or
purchasing a call option on stock indices is similar to the writing or
purchasing of a call option on an individual stock. Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Stock indices used will include, but will not be limited to,
the S&P 100 and the S&P Over-the-Counter 250. The ability to hedge effectively
using options on stock indices will depend on the degree to which price
movements in the underlying index correlate with price movements in the
portfolio securities of, as the case may be, the applicable Underlying Fund.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
For hedging purposes, each of the Aggressive Growth, International Equity,
International Small Cap, Small Cap Value, Trend, Global Bond, Devon, Blue Chip,
Decatur Total Return, U.S. Growth, New Pacific, U.S. Government, Limited-Term
Government and Emerging Markets Funds may enter into futures contracts relating
to securities, securities indices or interest rates. In addition, the
International Equity, International Small Cap, Global Bond, Devon, Blue Chip and
Emerging Markets Funds may enter into futures transactions relating to foreign
currency.
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement at a stated time
in the future for a fixed price. By its terms, a futures contract provides for a
specified settlement date on which, in the case of the majority of interest rate
and foreign currency futures contracts, the fixed-income securities or currency
underlying the contract are delivered by the seller and paid for by the
purchaser, or on which, in the case of securities index futures contracts and
certain interest rate and foreign currency futures contracts, the difference
between the price at which the contract was entered into and the contract's
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transaction. In
addition, futures contracts call for settlement only on the expiration date, and
cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with or on behalf of the broker as "initial margin" as a good faith deposit.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contract more or
less valuable, a process known as "marking to the market."
A futures contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a
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registered futures commission merchant which is a member of such contract
market. A commission must be paid on each completed purchase and sale
transaction. The contract market clearing house guarantees the performance of
each party to a futures contract, by in effect taking the opposite side of such
contract. At any time prior to the expiration of a futures contract, a trader
may elect to close out its position by taking an opposite position on the
contract market on which the position was entered into, subject to the
availability of a secondary market, which will operate to terminate the initial
position. At that time, a final determination of variation margin is made and
any loss experienced by the trader is required to be paid to the contract market
clearing house while any profit due to the trader must be delivered to it.
Interest rate futures contracts currently are traded on a variety of
fixed-income securities, including long-term U.S. Treasury Bonds, U.S. Treasury
Notes, GNMA modified pass-through mortgage-backed securities, U.S. Treasury
Bills, bank certificates of deposit and commercial paper. In addition, interest
rate futures contracts include contracts on indexes of municipal securities.
Foreign currency futures contracts currently are traded on the British pound,
Canadian dollar, Japanese yen, Swiss franc, German mark and on Eurodollar
deposits.
A securities index or municipal bond index futures contract provides for
the making and acceptance of a cash settlement in much the same manner as the
settlement of an option on a securities index. The types of indexes underlying
securities index futures contracts are essentially the same as those underlying
securities index options, as described above. The index underlying a municipal
bond index futures contract is a broad based index of municipal securities
designed to reflect movements in the municipal securities market as a whole. The
index assigns weighted values to the securities included in the index and its
composition is changed periodically.
Such Underlying Funds may also purchase and write options on the types of
futures contracts that they can invest in.
A call option on a futures contract provides the holder with the right to
purchase, or enter into a "long" position in, the underlying futures contract. A
put option on a futures contract provides the holder with the right to sell, or
enter into a "short" position in, the underlying futures contract. In both
cases, the option provides for a fixed exercise price up to a stated expiration
date. Upon exercise of the option by the holder, the contract market clearing
house establishes a corresponding short position for the writer of the option,
in the case of a call option, or a corresponding long position in the case of a
put option and the writer delivers to the holder the accumulated balance in the
writer's margin account which represents the amount by which the market price of
the futures contract at exercise exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the futures
contract. In the event that an option written by the Underlying Fund is
exercised, the Underlying Fund will be subject to all the risks associated with
the trading of futures contracts, such as payment of variation market deposits.
In addition, the writer of an option on a futures contract, unlike the holder,
is subject to initial and variation margin requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
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An option, whether based on a futures contract, a securities index, a
security or foreign currency, becomes worthless to the holder when it expires.
Upon exercise of an option, the exchange or contract market clearing house
assigns exercise notices on a random basis to those of its members which have
written options of the same series and with the same expiration date. A
brokerage firm receiving such notices then assigns them on a random basis to
those of its customers which have written options of the same series and
expiration date. A writer therefore has no control over whether an option will
be exercised against it, nor over the timing of such exercise.
To the extent that interest or exchange rates or securities prices move in
an unexpected direction, the Underlying Fund may not achieve the anticipated
benefits of investing in futures contracts and options thereon, or may realize a
loss. To the extent that the Underlying Fund purchases an option on a futures
contract and fails to exercise the option prior to the exercise date, it will
suffer a loss of the premium paid. Further, the possible lack of a secondary
market could prevent the Underlying Fund from closing out its positions relating
to futures.
BORROWINGS
Each Underlying Fund except Delaware Cash Reserve and U.S. Government,
Limited-Term Government and U.S. Government Money Funds may borrow money as a
temporary measure for extraordinary purposes or to facilitate redemptions. Such
Underlying Funds will not borrow money in excess of one-third of the value of
their net assets. These Underlying Funds have no intention of increasing their
net income through borrowing. Any borrowing will be done from a bank and, to the
extent that such borrowing exceeds 5% of the value of such Underlying Fund's net
assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, the Underlying Funds shall,
within three days thereafter (not including Sunday or holidays) or such longer
period as the U.S. Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of their borrowings to an extent that the asset
coverage of such borrowings shall be at least 300%. An Underlying Fund will not
purchase investment securities while it has an outstanding borrowing. See Part B
for additional possible restrictions on borrowing.
REPURCHASE AGREEMENTS
The Underlying Funds may invest in repurchase agreements. Each Underlying
Fund may enter into repurchase agreements with broker/dealers or banks which are
deemed creditworthy by the respective investment manager under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Underlying Fund) acquires ownership
of a security and the seller agrees to repurchase the security at a future time
and set price, thereby determining the yield during the purchaser's holding
period. The value of the securities subject to the repurchase agreement is
marked to market daily. In the event of a bankruptcy or other default of the
seller, the Underlying Fund could experience delays and expenses in liquidating
the underlying securities.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. Each Underlying Fund may
invest cash balances in joint repurchase agreements in accordance with the terms
of the Order and subject to the conditions described above.
PORTFOLIO LOAN TRANSACTIONS
Each Underlying Fund, except for Cash Reserve and U.S. Government Money,
may, from time to time, lend securities (but not in excess of 25% of its assets)
from its portfolio to brokers, dealers and financial
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institutions and receive collateral in cash or short-term U.S. government
securities. While the loan is outstanding, this collateral will be maintained at
all times in an account equal to at least 100% of the current market value of
the loaned securities plus accrued interest. Such cash collateral will be
invested in short-term securities, the income from which will increase the
return of the Underlying Fund.
The major risk to which the Underlying Funds would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Underlying Funds will only enter
into loan arrangements after a review of all pertinent facts by the respective
investment manager, subject to overall supervision by the Board of Directors,
including the creditworthiness of the borrowing broker, dealer or institution
and then only if the consideration to be received from such loans would justify
the risk. Creditworthiness will be monitored on an ongoing basis by the
respective investment manager.
LIQUIDITY AND RULE 144A SECURITIES
In order to assure that each Underlying Fund has sufficient liquidity, no
Underlying Fund may invest more than 10% of its net assets in illiquid assets
(15% for Blue Chip Fund), including repurchase agreements maturing in more than
seven days. While maintaining oversight, the Board of Directors has delegated to
the respective investment manager the day-to-day functions of determining
whether or not individual securities eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") of the Securities Act of 1933
("1933 Act") are liquid for purposes of the limitation on investments in
illiquid assets. Rule 144A permits many privately placed and legally restricted
securities to be freely traded among certain institutional buyers such as the
Underlying Funds. The Board has instructed the managers to consider the
following factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). Investing in Rule 144A
Securities could have the effect of increasing the level of illiquidity of an
Underlying Fund to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities.
If the respective manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
applicable Underlying Fund's holdings of illiquid securities exceed the
Underlying Fund's limit on investment in such securities, the respective manager
will determine what action shall be taken to ensure that the Underlying Fund
continues to adhere to such limitation.
INVESTMENT COMPANY SECURITIES
Any investments that the Underlying Funds in the Aggressive Growth,
International Equity, International Small Cap, Emerging Markets or the Global
Bond Funds may make in either closed-end or unregistered investment companies
will be limited by the 1940 Act, and would involve an indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies.
CONVERTIBLE AND NON-TRADITIONAL EQUITY SECURITIES
Blue Chip, U.S. Growth, Devon and New Pacific Funds may invest in
convertible securities. A convertible security is a security which may be
converted at a stated price within a specified period of time into a certain
quantity of the common stock of the same or a different issuer. Convertible
securities are senior to common stocks in a corporation's capital structure,
although convertible securities are usually subordinated to
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similar nonconvertible securities. Convertible securities provide a fixed-income
stream and the opportunity, through its conversion feature, to participate in
the capital appreciation resulting from a market price advance in the
convertible security's underlying common stock. Just as with debt securities,
convertible securities tend to increase in market value when interest rates
decline and tend to decrease in value when interest rates rise. However, the
price of a convertible security is also influenced by the market value of the
security's underlying common stock and tends to increase as the market value of
the underlying stock rises, whereas it tends to decrease as the market value of
the underlying stock declines.
The aforementioned Underlying Funds may invest in convertible preferred
stocks that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stock ("PERCS"), which provide an investor with the opportunity to
earn higher dividend income than is available on a company's common stock. A
PERCS is a preferred stock which generally features a mandatory conversion date,
as well as a capital appreciation limit which is usually expressed in terms of a
stated price. Upon the conversion date, most PERCS convert into common stock of
the issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after a predetermined number of years the issuer's
common stock is trading at a price below that set by the capital appreciation
limit, each PERCS would convert to one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.
The aforementioned Underlying Funds may also invest in other enhanced
convertible securities. These include but are not limited to ACES (Automatically
Convertible Equity Securities), PEPS (Participating Equity Preferred Stock),
PRIDES (Preferred Redeemable Increased Dividend Equity Securities), SAILS (Stock
Appreciation Income Linked Securities), TECONS (Term Convertible Notes), QICS
(Quarterly Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS and DECS generally have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
TEMPORARY DEFENSIVE MEASURES
Each Underlying Fund (other than the Money Market Funds) may hold cash or
invest in short-term debt securities and other money market instruments when, in
the Manager's opinion, such holdings are prudent for temporary defensive
purposes given then prevailing market conditions. An Underlying Fund may also
invest in such instruments pending investment by the Underlying Fund of proceeds
from the sale of portfolio securities or proceeds from new sales of its shares
pending investment in other types of securities or to maintain sufficient
liquidity to meet redemptions. All such short-term investments will be of the
highest quality as determined by a nationally-recognized statistical rating
organization (e.g., AAA by S&P or Aaa by Moody's or, if unrated,
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judged to be of comparable quality as determined by the Manager. Certain Funds
may also invest in corporate bonds of investment grade quality (rated not less
than BBB or S&P or Baa by Moody's) for temporary, defensive purposes. Securities
rated BBB or Baa are regarded as having speculative characteristics.
U.S. GOVERNMENT SECURITIES
All of the Underlying Funds may invest in securities of the U.S.
government. Securities guaranteed by the U.S. government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
(2) federal agency obligations guaranteed as to principal and interest by the
U.S. Treasury (such as GNMA certificates and Federal Housing Administration
debentures). For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of the
highest possible credit quality. Such securities are subject to variations in
market value due to fluctuations in interest rates, but if held to maturity are
deemed to be free of credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
QUALITY RESTRICTIONS
The Money Market Funds limit their investments to those which their Board
of Directors have determined present minimal credit risks and are of high
quality and which are otherwise in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must comply.
The Money Market Funds' investments include direct obligations issued by
the U.S. Treasury which include bills, notes and bonds which differ from each
other principally in interest rates, maturities and dates of issuance. These
issues, plus some federal agency obligations, are guaranteed by the full faith
and credit of the U.S. government. Examples include Federal Housing
Administration, Farmers Home Administration, Government National Mortgage
Association and Export-Import Bank of the United States. Other federal agency
obligations only have the guarantee of the agency. Examples include Federal Home
Loan Banks, Federal Land Banks, Federal Home Loan Mortgage Corporation, The
Tennessee Valley Authority and the International Bank for Reconstruction and
Development. Although obligations of agencies and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on such obligations is generally backed directly or indirectly by the U.S.
government. This support can range from the backing of the full faith and credit
of the United States, to U.S. Treasury guarantees, or to the backing solely of
the issuing agency or instrumentality itself.
Cash Reserve Fund's investments also include certificates of deposit and
obligations of both U.S. and foreign banks if they have assets of at least one
billion dollars in accordance with the maturity, quality and diversification
conditions with which taxable money market funds must comply. Cash Reserve Fund
may also purchase commercial paper and other corporate obligations; if a
security or, as relevant, its issuer is considered to be rated at the time of
the proposed purchase it, or, as relevant, its issuer must be so rated in one of
the two
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highest rating categories (e.g., for commercial paper, A-2 or better by S&P and
P-2 or better by Moody's; and, for other corporate obligations, AA or better by
S&P and Aa or better by Moody's) by at least two nationally-recognized
statistical rating organizations approved by the Board of Directors or, if such
security is not so rated, the purchase of the security must be approved or
ratified by the Board of Directors in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must comply.
Appendix A describes the ratings of S&P and Moody's.
MATURITY RESTRICTIONS
The Money Market Funds maintain an average maturity of not more than 90
days. Also, they do not purchase any instruments with an effective remaining
maturity of more than 13 months.
SMALL TO MEDIUM-SIZED COMPANIES
The Small/Mid Cap U.S. Equity Funds invest their assets in equity
securities of small to medium-sized companies. These stocks have historically
been more volatile in price than larger capitalization stocks, such as those
included in the S& P 500 Index. This is because, among other things, smaller
companies have a lower degree of liquidity and tend to have a greater
sensitivity to changing economic conditions. These companies may have narrow
product lines, markets or financial resources, or may depend on a limited
management group. The companies' securities may trade less frequently and have a
smaller trading volume. The securities may be traded only in the
over-the-counter markets or on a regional securities exchange. In addition to
exhibiting greater volatility, smaller capitalization securities may, to some
degree, fluctuate independently of the stocks of larger capitalization
companies. For example, the stocks of smaller capitalization companies may
decline in price as the price of larger company stocks rise, or vice versa.
GNMA SECURITIES
U.S. Government Fund may invest in certificates of the Government National
Mortgage Association ("GNMA"). GNMA Certificates are mortgage-backed securities.
Each Certificate evidences an interest in a specific pool of mortgages insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Scheduled payments of principal and
interest are made to the registered holders of GNMA Certificates. The GNMA
Certificates in which U.S. Government Fund will invest are of the modified
pass-through type. U.S. Government GNMA guarantees the timely payment of monthly
installments of principal and interest on modified pass-through Certificates at
the time such payments are due, whether or not such amounts are collected by the
issuer on the underlying mortgages. The National Housing Act provides that the
full faith and credit of the United States is pledged to the timely payment of
principal and interest by GNMA of amounts due on these GNMA Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of prepayments of
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, and have the effect of reducing future payments. Due to the GNMA
guarantee, foreclosures impose no risk to principal investments.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including
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the level of interest rates, general economic conditions, the location and age
of the mortgage and other social and demographic conditions. As prepayment rates
vary widely, it is not possible to accurately predict the average life of a
particular pool. However, statistics indicate that the average life of the type
of mortgages backing the majority of GNMA Certificates is approximately 12
years. For this reason, it is standard practice to treat GNMA Certificates as
30-year mortgage-backed securities which prepay fully in the twelfth year. Pools
of mortgages with other maturities or different characteristics will have
varying assumptions for average life. The assumed average life of pools of
mortgages having terms of less than 30 years is less than 12 years, but
typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Prepayments generally occur when interest rates have
fallen. Reinvestments of prepayments will be at lower rates. Historically,
actual average life has been consistent with the 12-year assumption referred to
above. The actual yield of each GNMA Certificate is influenced by the prepayment
experience of the mortgage pool underlying the Certificates and may differ from
the yield based on the assumed average life. Interest on GNMA Certificates is
paid monthly rather than semi-annually as for traditional bonds.
SPECIAL RISK CONSIDERATIONS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in a Portfolio,
nor can there be any assurance that the Portfolio's investment objective will be
attained.
The use of interest rate swaps by the Global Bond, U.S. Growth and New
Pacific Funds involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If such Underlying
Fund's investment adviser is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment performance of the
Underlying Funds will be less favorable than it would have been if this
investment technique were never used. Interest rate swaps do not involve the
delivery of securities or other underlying assets or principal. Thus, if the
other party to an interest rate swap defaults, the Underlying Funds' risk of
loss consists of the net amount of interest payments that the Underlying Fund is
contractually entitled to receive.
While the Global Bond and Emerging Markets Funds intend to seek to qualify
as "diversified" investment companies under provisions of Subchapter M of the
Code, they will not be diversified for purposes of the 1940 Act. Thus, while at
least 50% of each Underlying Funds' total assets will be represented by cash,
cash items, and other securities limited in respect of any one issuer to an
amount not greater than 5% of such Underlying Funds' total assets, it will not
satisfy the 1940 Act requirement in this respect, which applies that test to 75%
of the Underlying Funds' assets. A nondiversified portfolio is believed to be
subject to greater risk because adverse effects on the portfolio's security
holdings may affect a larger portion of the overall assets.
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OTHER INVESTMENT POLICIES
Each Portfolio may invest up to 100% of its assets directly in cash, money
market instruments or in Delaware Cash Reserve or U.S. Government Money Fund,
for temporary, defensive purposes, such as during periods of market instability.
Each Portfolio anticipates that its annual portfolio turnover rate
generally will not exceed 100%. A Portfolio may purchase or sell its portfolio
securities to: (a) accommodate purchases and sales of its shares; (b) change the
percentage of its assets invested in securities or in the Underlying Funds in
response to market conditions; and (c) maintain or modify the allocation of its
assets among the Underlying Funds. High turnover rates with respect to the
Underlying Funds may result in higher expenses being incurred by the Portfolios.
Each Portfolio's investment objective, its designation as an open-end
investment company and certain other policies of the Portfolios may not be
changed unless authorized by the vote of a majority of the Portfolios'
outstanding voting securities, as defined in the 1940 Act. Part B lists other
more specific investment restrictions of the Portfolios which may not be changed
without a majority shareholder vote. A brief discussion of those factors that
materially affected the Portfolios' performance during its most recently
completed fiscal year will appear in the Portfolios' Annual Report. The
remaining investment policies are not fundamental and may be changed by the
Board of Trustees of the Trust without a shareholder vote.
RATINGS
Appendix A describes the ratings of S&P and Moody's.
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APPENDIX A -- RATINGS
BONDS
Excerpts from Moody's description of its bond ratings:
Aaa--judged to be the best quality. They carry the smallest degree of
investment risk; Aa--judged to be of high quality by all standards; A--possess
favorable attributes and are considered "upper medium" grade obligations;
Baa--considered as medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time;
Ba--judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class;
B--generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small; Caa--are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest; Ca--represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings;
C--the lowest rated class of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings:
AAA--highest grade obligations. They possess the ultimate degree of
protection as to principal and interest; AA--also qualify as high grade
obligations, and in the majority of instances differ from AAA issues only in a
small degree; A--strong ability to pay interest and repay principal although
more susceptible to changes in circumstances; BBB--regarded as having an
adequate capacity to pay interest and repay principal; BB, B, CCC, CC--regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions; C--reserved for income bonds on which no
interest is being paid; D--in default, and payment of interest and/or repayment
of principal is in arrears.
Excerpts from Fitch's description of its bond ratings:
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events; AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+; A--Bonds
considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
that bonds with higher ratings; BBB--Bonds considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings; BB--Bonds are considered speculative. The obligor's ability to
pay interest
81
<PAGE> 91
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements; B--Bonds are
considered highly speculative. While bonds in this class are currently meeting
debt service requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of safety and the
need for reasonable business and economic activity throughout the life of the
issue; CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment; CC--Bonds are minimally
protected. Default in payment of interest and/or principal seems probable over
time; C--Bonds are in imminent default in payment of interest or principal; and
DDD, DD AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the "AAA" category.
COMMERCIAL PAPER
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper ratings:
A-1--judged to be the highest investment grade category possessing the highest
relative strength; A-2--investment grade category possessing less relative
strength than the highest rating.
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<PAGE> 92
APPENDIX B - INVESTMENT ILLUSTRATIONS
ILLUSTRATIONS OF THE POTENTIAL IMPACT ON INVESTMENT BASED ON PURCHASE OPTION
$10,000 PURCHASE
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
----------------------------- --------------------------- --------------------------- ---------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,625 10,625 10,192 10,225 10,525+ 10,192 10,625 10,625 10,192 10,625 10,625
2 10,905 11,289 11,289 10,905 11,289 11,289 10,905 11,289 11,289
3 11,669 11,995 11,995 11,669 11,695 11,995+ 11,669 11,995 11,995
4 12,485 12,744 12,744 12,485 12,744 12,744
5 13,359 13,541 13,541 13,359 13,341 13,541+
6 14,294 14,387 14,387
7 15,295 15,286 15,286
8 16,366+ 16,242 16,242
9 17,511 17,379* 17,257
10 18,737 18,595* 18,335
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
$250,000 PURCHASE
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
---------------------------- ---------------------------- --------------------------- ----------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,625 265,625 260,813 255,625 263,125+ 260,813 265,625 265,625 260,813 265,625 265,625
2 279,069 282,227 282,227 279,069 282,227 282,227 279,069 282,227 282,227
3 298,604 299,866 299,866 298,604 292,366 300,866+ 298,604 299,866 299,866
4 319,507+ 318,607 318,607 319,507+ 318,607 318,607
5 341,872 338,520 338,520 341,872 333,520 338,520
6 365,803 359,678 359,678
7 391,409 382,158 382,158
8 418,808 406,043 406,043
9 448,124 434,466* 431,420
10 479,493 464,878* 458,384
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.25% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.25% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on investment amount, the holding period and the expense structure of each
Class.
83
<PAGE> 93
APPENDIX C -- CLASSES OFFERED
<TABLE>
<CAPTION>
GROWTH OF CAPITAL A CLASS B CLASS C CLASS CONSULTANT CLASS
<S> <C> <C> <C> <C>
Aggressive Growth Fund x x x -
Trend Fund x x x -
DelCap Fund x x x -
Small Cap Value Fund x x x -
U.S. Growth Fund x x x -
Growth Stock Fund x x x -
Tax-Efficient Equity Fund x x x -
TOTAL RETURN
Blue Chip Fund x x x -
Quantum Fund x x x -
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -
REIT Fund x x x -
INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund x x x -
New Pacific Fund x x x -
Overseas Equity Fund x x x -
International Equity Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -
CURRENT INCOME
Delchester Fund x x x -
Strategic Income Fund x x x -
U.S. Government Fund x x x -
Delaware-Voyageur US Government
Securities Fund x x x -
Limited-Term Government Fund x x x -
</TABLE>
84
<PAGE> 94
APPENDIX C--CLASSES OFFERED - (CON'T)
<TABLE>
<CAPTION>
TAX PREFERRED INCOME A CLASS B CLASS C CLASS CONSULTANT CLASS
<S> <C> <C> <C> <C>
National High Yield Municipal Bond Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -
Delaware-Voyageur Tax-Free Arizona Insured Fund x x x -
Delaware-Voyageur Tax-Free Arizona Fund x x x -
Delaware-Voyageur Tax-Free California Insured Fund x x x -
Delaware-Voyageur Tax-Free California Fund x x x -
Delaware-Voyageur Tax-Free Colorado Fund x x x -
Delaware-Voyageur Tax-Free Florida Insured Fund x x x -
Delaware-Voyageur Tax-Free Florida Intermediate Fund x x x -
Delaware-Voyageur Tax-Free Florida Fund x x x -
Delaware-Voyageur Tax-Free Idaho Fund x x x -
Delaware-Voyageur Tax-Free Iowa Fund x x x -
Delaware-Voyageur Tax-Free Kansas Fund x x x -
Delaware-Voyageur Minnesota High Yield Municipal Bond Fund x x x -
Delaware-Voyageur Minnesota Insured Fund x x x -
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund x x x -
Delaware-Voyageur Tax-Free Minnesota Fund x x x -
Delaware-Voyageur Tax-Free Missouri Insured Fund x x x -
Tax-Free New Jersey Fund
Delaware-Voyageur Tax-Free New Mexico Fund x x x -
Delaware-Voyageur Tax-Free New York Fund x x x -
Delaware-Voyageur Tax-Free North Dakota Fund x x x -
Tax-Free Ohio Fund x x x -
Delaware-Voyageur Tax-Free Oregon Insured Fund x x x -
Tax-Free Pennsylvania Fund x x x -
Delaware-Voyageur Tax-Free Utah Fund x x x -
Delaware-Voyageur Tax-Free Washington Insured Fund x x x -
Delaware-Voyageur Tax-Free Wisconsin Fund x x x -
MONEY MARKET FUNDS
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
</TABLE>
85
<PAGE> 95
SUBJECT TO CHANGE
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, shareholders of the Fund Classes should
contact their financial adviser or call Delaware Group at 800-523-4640, and
shareholders of the Institutional Class should contact Delaware Group at
800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE GROUP FOUNDATION FUNDS
INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
PART B
STATEMENT OF
ADDITIONAL INFORMATION
DECEMBER 31, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
DELAWARE
GROUP
<PAGE> 96
PART B--STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 31, 1997
DELAWARE GROUP FOUNDATIONS FUNDS
1818 MARKET STREET
PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT THE INSTITUTIONAL CLASSES: 800-828-5052
FOR PROSPECTUS AND PERFORMANCE OF CLASS A SHARES, CLASS B SHARES AND
CLASS C SHARES: NATIONWIDE 800-523-4640
INFORMATION ON EXISTING ACCOUNTS OF CLASS A SHARES, CLASS B SHARES AND
CLASS C SHARES: (SHAREHOLDERS ONLY) NATIONWIDE 800-523-1918
DEALER SERVICES: (BROKER/DEALERS ONLY) NATIONWIDE 800-362-7500
TABLE OF CONTENTS
COVER PAGE
INVESTMENT OBJECTIVES AND POLICIES
PERFORMANCE INFORMATION
TRADING PRACTICES AND BROKERAGE
PURCHASING SHARES
INVESTMENT PLANS
DETERMINING OFFERING PRICE AND
NET ASSET VALUE
REDEMPTION AND REPURCHASE
DIVIDENDS AND REALIZED SECURITIES
PROFITS DISTRIBUTIONS
TAXES
ASSET ALLOCATION AGREEMENTS
OFFICERS AND TRUSTEES
EXCHANGE PRIVILEGE
GENERAL INFORMATION
APPENDIX A--IRA INFORMATION
FINANCIAL STATEMENTS
-1-
<PAGE> 97
Delaware Group Foundation Funds (the "Trust") is a
professionally-managed mutual fund of the series type which currently offers
three series of shares: the Income Portfolio, the Balanced Portfolio and the
Growth Portfolio (individually, a "Portfolio" and collectively, the
"Portfolios").
Each Portfolio offers three retail classes: Class A Shares, Class B
Shares and Class C Shares (collectively referred to as the "Fund Classes"). Each
Portfolio also offers an Institutional Class shares (collectively, the
"Institutional Classes").
Class B Shares, Class C Shares and Institutional Class shares of each
Portfolio may be purchased at a price equal to the next determined net asset
value per share. Class A Shares may be purchased at the public offering price,
which is equal to the next determined net asset value per share, plus a
front-end sales charge. Class A Shares are subject to a maximum front-end sales
charge of 4.75%, and annual 12b-1 Plan expenses that may not exceed 0.30% and
have currently been fixed by the Board at 0.25%. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within six years of purchase and annual 12b-1 Plan expenses of up to 1%
which are assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of Shares in
the Prospectuses for the Fund Classes. Class C Shares are subject to a CDSC
which may be imposed on redemptions made within 12 months of purchase and annual
12b-1 Plan expenses of up to 1%, which are assessed against Class C Shares for
the life of the investment. See Distribution and Service under Investment
Management Agreements.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses for
the Portfolios dated December 31, 1997, as they may be amended from time to
time. Part B should be read in conjunction with the respective class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each class' Prospectus. A Prospectus for each
class may be obtained by writing or calling your investment dealer or by
contacting the Trust's national distributor, Delaware Distributors, L.P. (the
"Distributor"), 1818 Market Street, Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all classes of
shares of the Trust, except where noted. Capitalized terms not otherwise defined
herein should have the meanings ascribed to them in the Prospectus.
-2-
<PAGE> 98
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies, which may not be
amended without approval of a majority of the outstanding voting securities of
the affected Portfolio, which is the lesser of more than 50% of the outstanding
voting securities or 67% of the voting securities of the affected Portfolio
present at a shareholder meeting if 50% or more of the voting securities are
present in person or represented by proxy. The percentage limitations contained
in the restrictions and policies set forth herein apply at the time of purchase
of securities.
1. Each such Portfolio will not invest 25% or more of its total assets
in any one industry provided that there is no limitation with respect to
investments in obligations issued or guaranteed as to principal or interest by
the U.S. Government, its agencies or instrumentalities, or to investments in the
Underlying Funds.
2. Each such Portfolio will not make loans other than by the purchase
of all or a portion of a publicly or privately distributed issue of bonds,
debentures or other debt securities of the types commonly offered publicly or
privately and purchased by financial institutions (including repurchase
agreements and loan participations), whether or not the purchase was made upon
the original issuance of the securities, and except that each Portfolio may loan
its assets to qualified broker/dealers or institutional investors.
3. Each such Portfolio will not engage in underwriting of securities of
other issuers, except that portfolio securities, including securities purchased
in private placements, may be acquired under circumstances where, if sold, the
Portfolio might be deemed to be an underwriter under the Securities Act of 1933.
No limit is placed on the proportion of the Portfolio's assets which may be
invested in such securities.
4. Each such Portfolio will not borrow money or issue senior
securities, except to the extent permitted by the 1940 Act or any rule or order
thereunder or interpretation thereof. Subject to the foregoing, each Portfolio
may engage in short sales, purchase securities on margin, and write put and call
options.
5. Each such Portfolio will not purchase or sell physical commodities
or physical commodity contracts, including physical commodity option or futures
contracts in a contract market or other futures market.
6. Purchase or sell real estate; provided that the Portfolio may invest
in securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
-3-
<PAGE> 99
In addition to the above fundamental investment restrictions, each
Portfolio has the following investment restrictions which may be amended or
changed without approval of shareholders.
1. No Portfolio will invest for the purpose of acquiring control of any
company. This policy will not prohibit acquisition of a controlling interest in
an Underlying Fund.
2. To the extent that a Portfolio invests in securities of other
investment companies, it will only do so in accordance with the provisions of
the Investment Company Act in effect at the time of the investment.
3. No Portfolio will invest in interests in oil, gas and other mineral
leases or other mineral exploration or development programs.
4. No Portfolio will purchase securities on margin except short-term
credits that may be necessary for the clearance of purchases and sales of
securities. This restriction does not apply to the purchase of futures or
options contracts.
INVESTMENT POLICIES
The Portfolios will invest primarily in open-end investment companies
(mutual funds) that are members of the Delaware Group of Funds (individually, an
"Underlying Fund" and collectively, the "Underlying Funds") listed below, as
well as, if the Trust receives an exemptive order from the Securities and
Exchange Commission ("SEC"), the same kinds of securities as those in which the
Underlying Funds may invest, to the extent consistent with each Portfolio's
investment objectives stated in the Prospectuses.
The Underlying Funds include funds investing in U.S. and foreign
stocks, bonds, and money market instruments. The list of Underlying Funds set
forth below may change from time to time, and Underlying Funds may be added or
deleted upon the recommendation of the Manager without shareholder approval.
U.S. EQUITY
Aggressive Growth Fund
Blue Chip Fund
Decatur Total Return Fund
DelCap Fund
Devon Fund
Small Cap Value Fund
Trend Fund
U.S. Growth Fund
INTERNATIONAL EQUITY
Emerging Markets Fund
International Equity Fund
International Small Cap Fund
New Pacific Fund
FIXED INCOME
Delchester Fund
Global Bond Fund
Limited-Term Government Fund
U.S. Government Fund
MONEY MARKET
Delaware Cash Reserve
U.S. Government Money Fund
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<PAGE> 100
The following investment policies relate to the Underlying Funds,
consistent with each fund's investment objective as described in the
Prospectuses. In addition, if the Trust receives an exemptive order from the
SEC, each Portfolio may engage in these investment instruments and strategies
directly.
U.S. GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. government or its agencies
or instrumentalities ("Government Securities") in which the Underlying Funds may
invest include debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by an agency or instrumentality of the U.S.
government, including the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association and Resolution Trust
Corporation. Direct obligations of the United States Treasury include a variety
of securities that differ in their interest rates, maturities and dates of
issuance. Because the U.S. government is not obligated by law to provide support
to an instrumentality that it sponsors, each Underlying Fund invests in
obligations issued by an instrumentality of the U.S. government only if its
investment manager determines that the instrumentality's credit risk does not
make its securities unsuitable for investment by an Underlying Fund.
RULE 144A SECURITIES
The Underlying Funds may invest in restricted securities, including
unregistered securities eligible for resale without registration pursuant to
Rule 144A ("Rule 144A Securities") under the 1933 Act. Rule 144A Securities may
be freely traded among qualified institutional investors without registration
under the 1933 Act.
Investing in Rule 144A Securities could have the effect of increasing
the level of an Underlying Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. After the purchase of a Rule 144A Security, however, the directors
of the Underlying Fund and its investment manager will continue to monitor the
liquidity of that security to ensure that the Underlying Fund's holdings of
illiquid securities does not exceed its limit on investments in such securities.
REPURCHASE AGREEMENTS
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to the
Underlying Funds, if any, would be the difference between the repurchase price
and the market value of the security. An Underlying Fund will limit its
investments in repurchase agreements to those which the respective investment
manager, under the guidelines of the directors of the Underlying Fund,
determines to present minimal credit risks and which are of high quality. In
addition, each Underlying Fund must have collateral of at least 100% of the
repurchase price, including the portion representing such Underlying Fund's
yield under such agreements which is monitored on a daily basis. While the
Underlying Funds are permitted to do so, they normally do not invest in
repurchase agreements, except to invest cash balances.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. The Underlying Funds may
invest cash balances in a joint repurchase agreement in accordance with the
terms of the Order and subject generally to the conditions described above.
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<PAGE> 101
MONEY MARKET INSTRUMENTS
Money market instruments in which the Underlying Funds may invest
include U.S. government securities; certificates of deposit, time deposits and
bankers' acceptances issued by domestic banks (including their branches located
outside the U.S. and subsidiaries located in Canada), domestic branches of
foreign banks, savings and loan associations and similar institutions; high
grade commercial paper; and repurchase agreements with respect to the foregoing
types of instruments.
Certain types of money market instruments are described below.
U.S. Government Securities--Securities issued or guaranteed by the U.S.
government, including Treasury Bills, Notes and Bonds.
U.S. Government Agency Securities--Obligations issued or guaranteed by
agencies or instrumentalities of the U.S. government whether supported by the
full faith and credit of the U.S. Treasury or the credit of a particular agency
or instrumentality.
Bank Obligations--Certificates of deposit, bankers' acceptances and
other short-term obligations of U.S. commercial banks and their overseas
branches and foreign banks of comparable quality, provided each such bank
combined with its branches has total assets of at least one billion dollars. Any
obligations of foreign banks shall be denominated in U.S. dollars. Obligations
of foreign banks and obligations of overseas branches of U.S. banks are subject
to somewhat different regulations and risks than those of U.S. domestic banks.
In particular, a foreign country could impose exchange controls which might
delay the release of proceeds from that country. Such deposits are not covered
by the Federal Deposit Insurance Corporation. Because of conflicting laws and
regulations, an issuing bank could maintain that liability for an investment is
solely that of the overseas branch which could expose the Underlying Fund to a
greater risk of loss. The Underlying Funds will only buy short-term instruments
in nations where these risks are minimal. The Underlying Funds will consider
these factors along with other appropriate factors in making an investment
decision to acquire such obligations and will only acquire those which, in the
opinion of management, are of an investment quality comparable to other debt
securities bought by the Underlying Funds.
Commercial Paper--The Underlying Funds may invest in short-term
promissory notes issued by corporations which at the time of purchase are rated
P-1 and/or A-1. Commercial paper ratings P-1 by Moody's and A-1 by S&P are the
highest investment grade category.
Corporate Debt--The Underlying Funds may invest in corporate notes and
bonds rated A or above. Excerpts from Moody's Investors Service, Inc.
("Moody's") description of those categories of bond ratings: Aaa--judged to be
the best quality. They carry the smallest degree of investment risk; Aa--judged
to be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations.
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<PAGE> 102
PORTFOLIO LOAN TRANSACTIONS
It is the understanding of the respective investment manager that the
staff of the SEC permits portfolio lending by registered investment companies if
certain conditions are met. These conditions are as follows: 1) each transaction
must have 100% collateral in the form of cash, short-term U.S. government
securities, or irrevocable letters of credit payable by banks acceptable to an
Underlying Fund involved from the borrower; 2) this collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Underlying Fund involved; 3)
the Underlying Fund must be able to terminate the loan after notice, at any
time; 4) the Underlying Fund must receive reasonable interest on any loan, and
any dividends, interest or other distributions on the lent securities, and any
increase in the market value of such securities; 5) the Underlying Fund may pay
reasonable custodian fees in connection with the loan; and 6) the voting rights
on the lent securities may pass to the borrower; however, if the directors of
the Underlying Funds know that a material event will occur affecting an
investment loan, they must either terminate the loan in order to vote the proxy
or enter into an alternative arrangement with the borrower to enable the
directors to vote the proxy.
The major risk to which an Underlying Fund would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Underlying Fund Fund will only
enter into loan arrangements after a review of all pertinent facts by the
respective investment manager, under the supervision of the directors, including
the creditworthiness of the borrowing broker, dealer or institution and then
only if the consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the respective
investment manager.
HIGH-YIELD SECURITIES
Among the possible risks of investing in high-yield securities are the
possibility of legislative and regulatory action and proposals. There are a
variety of legislative actions which have been taken or which are considered
from time to time by the United States Congress which could adversely affect the
market for high-yield securities. For example, Congressional legislation limited
the deductibility of interest paid on certain high-yield securities used to
finance corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield securities as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield
issues, could reduce the number of new high-yield securities being issued and
could make it more difficult for an Underlying Fund to attain its investment
objective.
INVESTMENT COMPANY SECURITIES
Any investments that certain Underlying Funds make in either closed-end
or open-end investment companies will be limited by the 1940 Act, and would
involve an indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies. Under the 1940 Act's current
limitations, an Underlying Fund may not (1) own more than 3% of the voting stock
of another investment company; (2) invest more than 5% of the Underlying Fund's
total assets in the shares of any one investment company; nor (3) invest more
than 10% of the Underlying Fund's total assets in shares of other investment
companies. If an Underlying Fund elects to limit its investment in other
investment companies to closed-end investment companies, the 3% limitation
described above is increased to 10%. These percentage limitations also apply to
and Underlying Fund's investments in unregistered investment companies. The
Underlying Funds may not acquire securities of registered open-end investment
companies or registered unit investment trusts in reliance on sections
12(d)(1)(F) or (G) of the 1940 Act.
UNSEASONED COMPANIES
Certain Underlying Funds may invest in relatively new or unseasoned
companies which are in their early stages of development, or small companies
positioned in new and emerging industries where the opportunity for rapid growth
is expected to be above average. Securities of unseasoned companies present
greater risks than securities of larger,
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more established companies. The companies in which an Underlying Fund may invest
may have relatively small revenues, limited product lines, and may have a small
share of the market for their products or services. Small companies may lack
depth of management, they may be unable to internally generate funds necessary
for growth or potential development or to generate such funds through external
financing or favorable terms, or they may be developing or marketing new
products or services for which markets are not yet established and may never
become established. Due these and other factors, small companies may suffer
significant losses as well as realize substantial growth, and investments in
such companies tend to be volatile and are therefore speculative.
MORTGAGE-BACKED SECURITIES
In addition to mortgage-backed securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, certain Underlying Funds may
also invest its assets in securities issued by certain private, nongovernment
corporations, such as financial institutions, if the securities are fully
collateralized at the time of issuance by securities or certificates issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Two
principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the "interest-only" class), while the other class will receive
all of the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Underlying Fund's
yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Underlying Fund may fail to fully
recoup its initial investment in these securities even if the securities are
rated in the highest rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed its limit in such securities.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities and certain REMICs also may be stripped.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Certain Underlying
Funds will invest in such private-backed securities only if they are 100%
collateralized at the time of issuance by securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
MORTGAGE DOLLAR ROLLS
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Certain Underlying Funds may enter into mortgage "dollar rolls" in
which the Underlying Fund sells mortgage-backed securities for delivery in the
current month and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date. Dollar
roll transactions consist of the sale by a Fund of mortgage-backed securities,
together with a commitment to purchase similar, but not necessarily identical,
securities at a future date. Any difference between the sale price and the
purchase price is netted against the interest income foregone on the securities
to arrive at an implied borrowing (reverse repurchase) rate. Alternatively, the
sale and purchase transactions which constitute the dollar roll can be executed
at the same price, with the Underlying Fund being paid a fee as consideration
for entering into the commitment to purchase. Dollar rolls may be renewed prior
to cash settlement and initially may involve only a firm commitment agreement by
the Underlying Fund to buy a security. If the broker/dealer to whom the
Underlying Fund sells the security becomes insolvent, the Underlying Fund's
right to purchase or repurchase the security may be restricted; the value of the
security may change adversely over the term of the dollar roll; the security
that the Underlying Fund is required to repurchase may be worth less than the
security that the Underlying Fund originally held, and the return earned by the
Underlying Fund with the proceeds of a dollar roll may not exceed transaction
costs. The Underlying Fund will place U.S. government or other liquid, high
quality assets in a segregated account in an amount sufficient to cover its
repurchase obligation.
ASSET-BACKED SECURITIES
Certain Underlying Funds may invest a portion of its assets in
asset-backed securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets. Such rate of payments may be affected by economic and various
other factors such as changes in interest rates or, in the case of certain
Underlying Funds, the concentration of collateral in a particular geographic
area. Therefore, the yield may be difficult to predict and actual yield to
maturity may be more or less than the anticipated yield to maturity. The credit
quality of most asset-backed securities depends primarily on the credit quality
of the assets underlying such securities, how well the entities issuing the
securities are insulated from the credit risk of the originator or affiliated
entities, and the amount of credit support provided to the securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Underlying Funds will not pay
any additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information and respecting the level
of credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.
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CONVERTIBLE SECURITIES
Certain Underlying Funds may invest in convertible securities,
including corporate debentures, bonds, notes and preferred stocks that may be
converted into or exchanged for common stock. While providing a fixed-income
stream (generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security), a convertible
security also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. As the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis and
so may not experience market declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the price of a convertible security tends to rise as a reflection of the value
of the underlying common stock. To obtain such a higher yield, an Underlying
Fund may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by an Underlying
Fund upon conversion of a convertible security will generally be held for so
long as the respective manager anticipates such stock will provide an Underlying
Fund with opportunities which are consistent with an Underlying Fund's
investment objectives and policies.
An Underlying Fund may invest not more than 5% of its assets in
convertible debentures that are rated below investment grade or are unrated but
are determined by its investment manager to be of comparable quality. Investing
in convertible debentures that are rated below investment grade or unrated but
of comparable quality entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved in investing in
investment grade convertible debentures. Under rating agency guidelines, lower
rated securities and comparable unrated securities will likely have some quality
and protective characteristics that are outweighed by large uncertainties or
major risk exposures to adverse conditions.
An Underlying Fund may have difficulty disposing of such lower rated
convertible debentures because the trading market for such securities may be
thinner than the market for higher rated convertible debentures. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary trading market for higher rated securities. The lack of
a liquid secondary market as well as adverse publicity with respect to these
securities, may have an adverse impact on market price and the Underlying Fund's
ability to dispose of particular issues in response to a specific economic event
such as a deterioration in the creditworthiness of the issuer. The lack of a
liquid secondary market for certain securities also may make it more difficult
for an Underlying Fund to obtain accurate market quotations for purposes of
pricing the Underlying Fund's portfolio and calculating its net asset value. The
market behavior of convertible securities in lower rating categories is often
more volatile than that of higher quality securities. Lower quality convertible
securities are judged by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Group ("S&P") to have speculative elements or
characteristics; their future cannot be considered as well assured and earnings
and asset protection may be moderate or poor in comparison to investment grade
securities.
In addition, such lower quality securities face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions,
which could lead to inadequate capacity to meet timely payments. The market
values of securities rated below investment grade tend to be more sensitive to
company specific developments and changes in economic conditions than higher
rated securities. Issuers of these securities are often highly leveraged, so
that their ability to service their debt obligations during an economic downturn
or during sustained periods of rising interest rates may be impaired. In
addition, such issuers may not have more traditional methods of financing
available to them, and may be unable to repay debt at maturity by refinancing.
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WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Certain Underlying Funds may purchase securities on a when-issued or
delayed delivery basis. In such transactions, instruments are purchased with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous yield or price at the time of the transaction.
Delivery of and payment for these securities may take as long as a month or more
after the date of the purchase commitment. An Underlying Fund will maintain with
its custodian a separate account with a segregated portfolio of securities in an
amount at least equal to these commitments. The payment obligation and the
interest rates that will be received are each fixed at the time an Underlying
Fund enters into the commitment and no interest accrues to the Underlying Fund
until settlement. Thus, it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed.
COMBINED TRANSACTIONS
Certain Underlying Funds may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions (including forward currency contracts) and multiple
interest rate transactions and any combination of futures, options, currency and
interest rate transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when, in the opinion of
the investment manager, it is in the best interests of the Underlying Fund to do
so. A combined transaction will usually contain elements of risk that are
present in each of its component transactions. Although combined transactions
are normally entered into based on the investment manager's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio management
objective.
SWAPS, CAPS, FLOORS AND COLLARS
Certain Underlying Funds may enter into interest rate, currency and
index swaps and the purchase or sale of related caps, floors and collars. The
Underlying Funds expect to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Underlying Fund
anticipates purchasing at a later date. The Underlying Funds intend to use these
transactions as hedges and not speculative investments and will not sell
interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Underlying Fund may be obligated to
pay. Interest rate swaps involve the exchange by the Underlying Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
nominal amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
An Underlying Fund will usually enter into swaps on a net basis, i.e.,
the two payment streams are netted out in a cash settlement on the payment date
or dates specified in the instrument, with the Underlying Fund receiving or
paying, as the case may be, only the net amount of the two payments. Inasmuch as
these swaps, caps, floors and collars are entered into for good faith hedging
purposes, the investment managers and the Underlying Funds believe such
obligations do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to its borrowing restrictions.
An Underlying Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction, the unsecured
long-term debt of the counterparty, combined with any credit enhancements, is
rated at least A by S&P or Moody's or is determined to be of equivalent credit
quality by the
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investment manager. If there is a default by the counterparty, the Underlying
Fund may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agent utilizing standardized swap documentation. As a result, the swap market
has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
EURODOLLAR INSTRUMENTS
Certain Underlying Funds may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. An Underlying Fund might use Eurodollar futures contracts and
options thereon to hedge against changes in LIBOR, to which many interest rate
swaps and fixed-income instruments are linked.
REVERSE REPURCHASE AGREEMENTS
Certain Underlying Funds are authorized to enter into reverse
repurchase agreements. A reverse repurchase agreement is the sale of a security
by an Underlying Fund and its agreement to repurchase the security at a
specified time and price. An Underlying Fund will maintain in a segregated
account with the Custodian cash, cash equivalents or U.S. government securities
in an amount sufficient to cover its obligations under reverse repurchase
agreements with broker/dealers (but no collateral is required on reverse
repurchase agreements with banks). Under the 1940 Act, reverse repurchase
agreements may be considered borrowings by an Underlying Fund; accordingly, an
Underlying Fund will limit its investments in reverse repurchase agreements,
together with any other borrowings, to no more than one-third of its total
assets. The use of reverse repurchase agreements by an Underlying Fund creates
leverage which increases the Underlying Fund's investment risk. If the income
and gains on securities purchased with the proceeds of reverse repurchase
agreements exceed the costs of the agreements, an Underlying Fund's earnings or
net asset value will increase faster than otherwise would be the case;
conversely, if the income and gains fail to exceed the costs, earnings or net
asset value would decline faster than otherwise would be the case.
"ROLL" TRANSACTIONS
Certain Underlying Funds may engage in "roll" transactions. A "roll"
transaction is the sale of securities together with a commitment (for which an
Underlying Fund may receive a fee) to purchase similar, but not identical,
securities at a future date. Under the 1940 Act, these transactions may be
considered borrowings by an Underlying Fund; accordingly, an Underlying Fund
will limit its use of these transactions, together with any other borrowings, to
no more than one-third of its total assets. An Underlying Fund will segregate
liquid assets such as cash, U.S. government securities or other high grade debt
obligations in an amount sufficient to meet their payment obligations in these
transactions. Although these transactions will not be entered into for
leveraging purposes, to the extent an Underlying Fund's aggregate commitments
under these transactions exceed its holdings of cash and securities that do not
fluctuate in value (such as short-term money market instruments), the Underlying
Fund temporarily will be in a leveraged position (i.e., it will have an amount
greater than its net assets subject to market risk). Should the market value of
an Underlying Fund's portfolio securities decline while the Underlying Fund is
in a leveraged position, greater depreciation of its net assets would likely
occur than were it not in such a position. As an Underlying Fund's aggregate
commitments under these transactions increase, the opportunity for leverage
similarly increases.
VARIABLE AND FLOATING RATE NOTES
Variable rate master demand notes, in which certain Underlying Funds
may invest, are unsecured demand notes that permit the indebtedness thereunder
to vary and provide for periodic adjustments in the interest rate according to
the terms of the instrument. An Underlying Fund will not invest over 5% of its
assets in variable rate master demand notes. Because master demand notes are
direct lending arrangements between an Underlying Fund and the issuer, they are
not
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normally traded. Although there is no secondary market in the notes, an
Underlying Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. In determining average weighted
portfolio maturity, a variable amount master demand note will be deemed to have
a maturity equal to the period of time remaining until the principal amount can
be recovered from the issuer through demand.
A variable rate note is one whose terms provide for the adjustment of
its interest rate on set dates and which, upon such adjustment, can reasonably
be expected to have a market value that approximates its par value. A floating
rate note is one whose terms provide for the adjustment of its interest rate
whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated by credit rating agencies; however, unrated
variable and floating rate notes purchased by an Underlying Fund will be
determined by the Underlying Fund's investment manager under guidelines
established by the Board to be of comparable quality at the time of purchase to
rated instruments eligible for purchase under the Underlying Fund's investment
policies. In making such determinations, the investment manager will consider
the earning power, cash flow and other liquidity ratios of the issuers of such
notes (such issuers include financial, merchandising, bank holding and other
companies) and will continuously monitor their financial condition. Although
there may be no active secondary market with respect to a particular variable or
floating rate note purchased by an Underlying Fund, the Underlying Fund may
re-sell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for the Underlying Fund to
dispose of the variable or floating rate note involved in the event the issuer
of the note defaulted on its payment obligations, and the Underlying Fund could,
for this or other reasons, suffer a loss to the extent of the default. Variable
or floating rate notes may be secured by bank letters of credit.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceed 10% of the Underlying Fund's total assets only if
such notes are subject to a demand feature that will permit the Underlying Fund
to demand payment of the Principal within seven days after demand by the
Underlying Fund. If not rated, such instruments must be found by the Underlying
Fund's investment manager under guidelines established by the Board of
Directors, to be of comparable quality to instruments that are rated high
quality. A rating may be relied upon only if it is provided by a nationally
recognized statistical rating organization that is not affiliated with the
issuer or guarantor of the instruments. For a description of the rating symbols
of S&P and Moody's used in this paragraph, see the Prospectuses. An Underlying
Fund may also invest in Canadian Commercial Paper which is commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation
and in Europaper which is U.S. dollar denominated commercial paper of a foreign
issuer.
MUNICIPAL SECURITIES
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "private activity
bonds" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
intercity rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation. Certain debt obligations known as "industrial development
bonds" under prior federal tax law may have been issued by or on behalf of
public authorities to obtain funds to provide certain privately-operated housing
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facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to finance the construction, improvement, equipment or
repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations with a class of
securities registered under the Securities Exchange Act of 1934.
FOREIGN SECURITIES
Investors should recognize that investing in foreign issuers involves
certain considerations, including those set forth in the Prospectuses, which are
not typically associated with investing in United States issuers. Since the
stocks of foreign companies are frequently denominated in foreign currencies,
and since an Underlying Fund may temporarily hold uninvested reserves in bank
deposits in foreign currencies, an Underlying Fund will be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
The investment policies of certain Underlying Funds permit it to enter into
forward foreign currency exchange contracts in order to hedge the Underlying
Fund's holdings and commitments against changes in the level of future currency
rates. Such contracts involve an obligation to purchase or sell a specific
currency at a future date at a price set at the time of the contract.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by an Underlying Fund.
Payment of such interest equalization tax, if imposed, would reduce an
Underlying Fund's rate of return on its investment. Dividends paid by foreign
issuers may be subject to withholding and other foreign taxes which may decrease
the net return on such investments as compared to dividends paid to an
Underlying Fund by United States corporations. Special rules govern the federal
income tax treatment of certain transactions denominated in terms of a currency
other than the U.S. dollar or determined by reference to the value of one or
more currencies other than the U.S. dollar. The types of transactions covered by
the special rules generally include the following: (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury Regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option and similar
financial instruments other than any "regulated futures contract" or "nonequity
option" marked to market. The disposition of a currency other than the U.S.
dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and nonequity options are generally not subject to the special
currency rules, if they are or would be treated as sold for their fair market
value at year-end under the marking to market rules applicable to other futures
contracts, unless an election is made to have such currency rules apply. With
respect to transactions covered by the special rules, foreign currency gain or
loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable as ordinary gain or loss. A taxpayer may
elect to treat as capital gain or loss foreign currency gain or loss arising
from certain identified forward contracts, futures contracts and options that
are capital assets in the hands of the taxpayer and which are not part of a
straddle. Certain transactions subject to the special currency rules that are
part of a "section 988 hedging transaction" (as defined in the Internal Revenue
Code of 1986, as amended (the "Code"), and the Treasury Regulations) will be
integrated and treated as a single transaction or otherwise treated consistently
for purposes of the Code. The income tax effects of integrating and treating a
transaction as a single transaction are generally to create a synthetic debt
instrument that is subject to the original discount provisions. It is
anticipated that some of the non-U.S. dollar denominated investments and foreign
currency contracts the Underlying Fund Fund may make or enter into will be
subject to the special currency rules described above.
FOREIGN CURRENCY TRANSACTIONS
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Certain Underlying Funds may purchase or sell currencies and/or engage
in forward foreign currency transactions in order to expedite settlement of
portfolio transactions and to minimize currency value fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. An Underlying Fund will account
for forward contracts by marking to market each day at daily exchange rates.
When an Underlying Fund enters into a forward contract to sell, for a
fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of a Fund's assets
denominated in such foreign currency, the Underlying Fund's Custodian Bank or
subcustodian will place cash or liquid high grade debt securities in a separate
account of the Underlying Fund in an amount not less than the value of the
Underlying Fund's total assets committed to the consummation of such forward
contracts. If the additional cash or securities placed in the separate account
declines, additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of an Underlying
Fund's commitments with respect to such contracts.
DEPOSITARY RECEIPTS
Certain Underlying Funds may make foreign investments through the
purchase and sale of sponsored or unsponsored American Depositary Receipts
("ADRs") and European and Global Depositary Receipts ("Depositary Receipts").
ADRs are receipts typically issued by a U.S. bank or trust company, while
Depositary Receipts are issued by a foreign bank or trust company. ADRs and
Depositary Receipts evidence ownership of underlying securities issued by a
foreign corporation. "Sponsored" ADRs and Depositary Receipts are issued jointly
by the issuer of the underlying security and a depository, whereas "unsponsored"
ADRs and Depositary Receipts are issued without participation of the issuer of
the deposited security. Holders of unsponsored ADRs and Depositary Receipts
generally bear all the costs of such facilities and the depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored ADR or Depositary Receipt.
OPTIONS
Certain Underlying Funds may write call options on a covered basis
only, purchase call options, write secured put options and purchase put options,
and will not engage in option writing strategies for speculative purposes.
Certain Underlying Funds may invest in options that are either listed
on U.S. or recognized foreign exchanges or traded over-the-counter. Certain
over-the-counter options may be illiquid. Thus, it may not be possible to close
options positions and this may have an adverse impact on an Underlying Fund's
ability to effectively hedge its securities.
COVERED CALL WRITING -- Certain Underlying Funds may write covered call
options from time to time on such portion of its portfolio, without limit, as
the investment manager determines is appropriate in seeking to obtain the
Underlying Fund's investment objective. A call option gives the purchaser of
such option the right to buy, and the writer, in this case an Underlying Fund,
has the obligation to sell the underlying security at the exercise price during
the option period. The advantage to an Underlying Fund of writing covered calls
is that the Underlying Fund receives additional income, in the form of a
premium, which may offset any capital loss or decline in market value of the
security. However, if the security rises in value, the Underlying Fund may not
fully participate in the market appreciation.
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During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to both options on actual portfolio securities owned by an
Underlying Fund and options on stock indices, an Underlying Fund may enter into
closing purchase transactions. A closing purchase transaction is one in which an
Underlying Fund, when obligated as a writer of an option, terminates its
obligation by purchasing an option of the same series as the option previously
written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable an
Underlying Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. An Underlying Fund
may realize a net gain or loss from a closing purchase transaction depending
upon whether the net amount of the original premium received on the call option
is more or less than the cost of effecting the closing purchase transaction. Any
loss incurred in a closing purchase transaction may be partially or entirely
offset by the premium received from a sale of a different call option on the
same underlying security. Such a loss may also be wholly or partially offset by
unrealized appreciation in the market value of the underlying security.
Conversely, a gain resulting from a closing purchase transaction could be offset
in whole or in part by a decline in the market value of the underlying security.
If a call option expires unexercised, an Underlying Fund will realize a
short-term capital gain in the amount of the premium on the option, less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, an Underlying Fund will realize a gain or loss from the
sale of the underlying security equal to the difference between the cost of the
underlying security, and the proceeds of the sale of the security plus the
amount of the premium on the option, less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
An Underlying Fund will write call options only on a covered basis,
which means that Underlying Fund will own the underlying security subject to the
call option at all times during the option period. Unless a closing purchase
transaction is effected, the Underlying Fund would be required to continue to
hold a security which it might otherwise wish to sell, or deliver a security it
would want to hold. Options written by an Underlying Fund will normally have
expiration dates between one and nine months from the date written. The exercise
price of a call option may be below, equal to or above the current market value
of the underlying security at the time the option is written.
PURCHASING CALL OPTIONS--Certain Underlying Funds may purchase call
options to the extent that premiums paid by the Underlying Fund do not aggregate
more than 2% of the Underlying Fund's total assets. When an Underlying Fund
purchases a call option, in return for a premium paid by an Underlying Fund to
the writer of the option, the Underlying Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium
upon writing the option, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. The
advantage of purchasing call options is that an Underlying Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with portfolio transactions.
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An Underlying Fund may, following the purchase of a call option,
liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option previously
purchased. An Underlying Fund will realize a profit from a closing sale
transaction if the price received on the transaction is more than the premium
paid to purchase the original call option; an Underlying Fund will realize a
loss from a closing sale transaction if the price received on the transaction is
less than the premium paid to purchase the original call option.
Although an Underlying Fund will generally purchase only those call
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an Exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an Exchange may exist. In such event, it may not be possible to effect
closing transactions in particular options, with the result that an Underlying
Fund would have to exercise its options in order to realize any profit and would
incur brokerage commissions upon the exercise of such options and upon the
subsequent disposition of the underlying securities acquired through the
exercise of such options. Further, unless the price of the underlying security
changes sufficiently, a call option purchased by an Underlying Fund may expire
without any value to the Underlying Fund.
WRITING PUT OPTIONS--An Underlying Fund may also write put options on a
secured basis which means that the Underlying Fund will maintain in a segregated
account with its custodian, cash or U.S. government securities in an amount not
less than the exercise price of the option at all times during the option
period. The amount of cash or U.S. government securities held in the segregated
account will be adjusted on a daily basis to reflect changes in the market value
of the securities covered by the put option written by the Underlying Fund.
Secured put options will generally be written in circumstances where the
investment manager wishes to purchase the underlying security for the Underlying
Fund's portfolio at a price lower than the current market price of the security.
In such event, the Underlying Fund would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.
Following the writing of a put option, the Underlying Fund may wish to
terminate the obligation to buy the security underlying the option by effecting
a closing purchase transaction. This is accomplished by buying an option of the
same series as the option previously written. The Underlying Fund may not,
however, effect such a closing transaction after it has been notified of the
exercise of the option.
PURCHASING PUT OPTIONS--Certain Underlying Funds may invest in put
options. An Underlying Fund will, at all times during which it holds a put
option, own the security covered by such option.
Certain Underlying Funds may purchase put options in order to protect
against a decline in the market value of the underlying security below the
exercise price less the premium paid for the option ("protective puts"). The
ability to purchase put options will allow an Underlying Fund to protect an
unrealized gain in an appreciated security in its portfolio without actually
selling the security. If the security does not drop in value, the Underlying
Fund will lose the value of the premium paid. An Underlying Fund may sell a put
option which it has previously purchased prior to the sale of the securities
underlying such option. Such sales will result in a net gain or loss depending
on whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option which is sold.
An Underlying Fund may sell a put option purchased on individual
portfolio securities or stock indices. Additionally, an Underlying Fund may
enter into closing sale transactions. A closing sale transaction is one in which
an Underlying Fund, when it is the holder of an outstanding option, liquidates
its position by selling an option of the same series as the option previously
purchased.
OVER-THE-COUNTER OPTIONS AND ILLIQUID SECURITIES -- Certain Underlying
Funds may deal in over-the-counter ("OTC") options. The Underlying Funds
understand the position of the staff of the Securities and Exchange
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Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. Certain Underlying
Funds and their investment managers disagree with this position and have found
the dealers with which they engage in OTC options transactions generally
agreeable to and capable of entering into closing transactions. The Underlying
Funds have adopted procedures for engaging in OTC options for the purpose of
reducing any potential adverse impact of such transactions upon the liquidity of
the portfolio.
As part of these procedures certain Underlying Funds will engage in OTC
options transactions only with primary dealers that have been specifically
approved by the Board and the investment managers believe that the approved
dealers should be agreeable and able to enter into closing transactions if
necessary and, therefore, present minimal credit risks to the Underlying Fund.
An Underlying Fund anticipates entering into written agreements with those
dealers to whom the Underlying Fund may sell OTC options, pursuant to which the
Underlying Fund would have the absolute right to repurchase the OTC options from
such dealers at any time at a price determined pursuant to a formula set forth
in certain no action letters published by the SEC staff. An Underlying Fund will
not engage in OTC options transactions if the amount invested by the Underlying
Fund in OTC options plus, with respect to OTC options written by the Underlying
Fund, the amounts required to be treated as illiquid pursuant to the terms of
such letters (and the value of the assets used as cover with respect to OTC
option sales which are not within the scope of such letters), plus the amount
invested by the Underlying Fund in illiquid securities, would exceed 15% of the
Underlying Fund's total assets. OTC options on securities other than U.S.
government securities may not be within the scope of such letters and,
accordingly, the amount invested by an Underlying Fund in OTC options on such
other securities and the value of the assets used as cover with respect to OTC
option sales regarding such non-U.S. government securities will be treated as
illiquid and subject to the limitation on the Underlying Fund's net assets that
may be invested in illiquid securities.
OPTIONS ON FOREIGN CURRENCIES--Certain Underlying Funds may purchase
and write options on foreign currencies for hedging purposes in a manner similar
to that in which futures contracts on foreign currencies, or forward contracts,
will be utilized. For example, a decline in the dollar value of a foreign
currency in which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the value of portfolio
securities, an Underlying Fund may purchase put options on the foreign currency.
If the value of the currency does decline, an Underlying Fund will have the
right to sell such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio which otherwise
would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, an Underlying Fund may purchase call options thereon.
The purchase of such options could offset, at least partially, the effects of
the adverse movement in exchange rates. As in the case of other types of
options, however, the benefit to an Underlying Fund deriving from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, an Underlying Fund could
sustain losses on transactions in foreign currency options which would require
it to forego a portion or all of the benefits of advantageous changes in such
rates.
An Underlying Fund may write options on foreign currencies for the same
types of hedging purposes. For example, where an Underlying Fund anticipates a
decline in the dollar value of foreign currency denominated securities due to
adverse fluctuations in exchange rates, it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised, and the diminution in the
value of portfolio securities will be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, an
Underlying Fund could write a put option on the relevant currency which, if
rates move in the manner projected, will expire unexercised and allow an
Underlying Fund to hedge such increased cost up to the
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amount of the premium. As in the case of other types of options, however, the
writing of a foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Underlying Fund would
be required to purchase or sell the underlying currency at a loss which may not
be offset by the amount of the premium. Through the writing of options on
foreign currencies, an Underlying Fund also may be required to forego all or a
portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.
Certain Underlying Funds intend to write covered call options on
foreign currencies. A call option written on a foreign currency by an Underlying
Fund is "covered" if the Underlying Fund owns the underlying foreign currency
covered by the call or has an absolute and immediate right to acquire that
foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by the Custodian Bank) upon
conversion or exchange of other foreign currency held in its portfolio. A call
option is also covered if the Underlying Fund has a call on the same foreign
currency and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written, or (b) is greater than the exercise price of the call written if
the difference is maintained by the Underlying Fund in cash, U.S. government
securities or other high-grade liquid debt securities in a segregated account
with its Custodian Bank.
With respect to writing put options, at the time the put is written, an
Underlying Fund will establish a segregated account with its Custodian Bank
consisting of cash, U.S. government securities or other high-grade liquid debt
securities in an amount equal in value to the amount the Underlying Fund will be
required to pay upon exercise of the put. The account will be maintained until
the put is exercised, has expired, or the Underlying Fund has purchased a
closing put of the same series as the one previously written.
In order to comply with the securities laws of one state, an Underlying
Fund will not write put or call options if the aggregate value of the securities
underlying the calls or obligations underlying the puts determined as of the
date the options are sold exceed 25% of the Underlying Fund's net assets. Should
state laws change or an Underlying Fund receives a waiver of their application
for, the Underlying Funds reserve the right to increase this percentage.
OPTIONS ON STOCK INDICES--A stock index assigns relative values to the
common stocks included in the index with the index fluctuating with changes in
the market values of the underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to an Underlying
Fund on transactions in stock index options will depend on price movements in
the stock market generally (or in a particular industry or segment of the
market) rather than price movements of individual securities.
As with stock options, an Underlying Fund may offset its position in
stock index options prior to expiration by entering into a closing transaction
on an Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 ("S&P 500") or the New York Stock Exchange
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Composite Index, or a narrower market index such as the Standard & Poor's 100
("S&P 100"). Indices are also based on an industry or market segment such as the
AMEX Oil and Gas Index or the Computer and Business Equipment Index. Options on
stock indices are currently traded on the following Exchanges among others: The
Chicago Board Options Exchange, New York Stock Exchange and American Stock
Exchange.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in an
Underlying Fund's portfolio correlate with price movements of the stock index
selected. Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether an
Underlying Fund will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular stock. Since
an Underlying Fund's portfolio will not duplicate the components of an index,
the correlation will not be exact. Consequently, an Underlying Fund bears the
risk that the prices of the securities being hedged will not move in the same
amount as the hedging instrument. It is also possible that there may be a
negative correlation between the index or other securities underlying the
hedging instrument and the hedged securities which would result in a loss on
both such securities and the hedging instrument. Accordingly, successful use of
options on stock indices will be subject to the investment manager's ability to
predict correctly movements in the direction of the stock market generally or of
a particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on an Underlying Fund's ability to
effectively hedge its securities. An Underlying Fund will enter into an option
position only if there appears to be a liquid secondary market for such options.
The Underlying Funds will not engage in transactions in options on
stock indices for speculative purposes but only to protect appreciation
attained, to offset capital losses and to take advantage of the liquidity
available in the option markets.
FUTURES
Certain Underlying Funds may enter into contracts for the purchase or
sale for future delivery of securities or foreign currencies. While futures
contracts provide for the delivery of securities, deliveries usually do not
occur. Contracts are generally terminated by entering into an offsetting
transaction. When an Underlying Fund enters into a futures transaction, it must
deliver to the futures commission merchant selected by the Underlying Fund an
amount referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Underlying Fund's Custodian Bank.
Thereafter, a "variation margin" may be paid by an Underlying Fund to, or drawn
by the Underlying Fund from, such account in accordance with controls set for
such accounts, depending upon changes in the price of the underlying securities
subject to the futures contract.
In addition, when an Underlying Fund engages in futures transactions,
to the extent required by the SEC, it will maintain with its Custodian Bank,
assets in a segregated account to cover its obligations with respect to such
contracts, which assets will consist of cash, cash equivalents or high quality
debt securities from its portfolio in an amount equal to the difference between
the fluctuating market value of such futures contracts and the aggregate value
of the margin payments made by an Underlying Fund with respect to such futures
contracts.
Certain Underlying Funds may enter into such futures contracts to
protect against the adverse affects of fluctuations in interest or foreign
exchange rates without actually buying or selling the securities or foreign
currency. For example, if interest rates are expected to increase, an Underlying
Fund might enter into futures contracts for the sale of debt securities. Such a
sale would have much the same effect as selling an equivalent value of the debt
securities
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owned by an Underlying Fund. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of the futures
contracts to an Underlying Fund would increase at approximately the same rate,
thereby keeping the net asset value of the Underlying Fund from declining as
much as it otherwise would have. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in anticipation
of subsequent purchases of securities at higher prices. Since the fluctuations
in the value of futures contracts should be similar to those of debt securities,
an Underlying Fund could take advantage of the anticipated rise in value of debt
securities without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Underlying Fund could
then buy debt securities on the cash market.
With respect to options on futures contracts, when an Underlying Fund
is not fully invested, it may purchase a call option on a futures contract to
hedge against a market advance due to declining interest rates. The purchase of
a call option on a futures contract is similar in some respects to the purchase
of a call option on an individual security. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based, or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities. As
with the purchase of futures contracts, when an Underlying Fund is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, an Underlying Fund
will retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Underlying Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is higher than the exercise price, the
Underlying Fund will retain the full amount of the option premium which provides
a partial hedge against any increase in the price of securities which the
Underlying Fund intends to purchase.
If a put or call option an Underlying Fund has written is exercised,
the Underlying Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its futures
positions, an Underlying Fund's losses from existing options on futures may, to
some extent, be reduced or increased by changes in the value of portfolio
securities. The purchase of a put option on a futures contract is similar in
some respects to the purchase of protective puts on portfolio securities. For
example, an Underlying Fund will purchase a put option on a futures contract to
hedge the Underlying Fund's portfolio against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, an
Underlying Fund may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if an
Underlying Fund is hedged against the possibility of an increase in interest
rates which would adversely affect the price of securities held in its portfolio
and interest rates decrease instead, the Underlying Fund will lose part or all
of the benefit of the increased value of its securities which it has because it
will have offsetting losses in its futures position. In addition, in such
situations, if the Underlying Fund had insufficient cash, it may be required to
sell securities from its portfolio to meet daily variation margin requirements.
Such sales of securities may, but will not necessarily, be at increased prices
which reflect the rising market. An Underlying Fund may be required to sell
securities at a time when it may be disadvantageous to do so.
Further, with respect to options on futures contracts, an Underlying
Fund may seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.
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FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Certain Underlying Funds may enter into futures contracts on stocks and
stock indices, purchase and sell options on such futures, and enter into closing
transactions with respect to those activities. A futures contract may be
purchased and sold only on an exchange, known as a "contract market," designated
by the Commodity Futures Trading Commission for the trading of such contract,
and only through a registered futures commission merchant which is a member of
such contract market. A commission must be paid on each completed purchase and
sale transaction.
When an Underlying Fund enters into a futures transaction, it must
deliver to the futures commission merchant selected by the Underlying Fund an
amount referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Underlying Fund's custodian bank.
Thereafter, a "variation margin" may be paid by the Underlying Fund to, or drawn
by the Underlying Fund from, such account in accordance with controls set for
such accounts, depending upon changes in the price of the underlying securities
subject to the futures contract.
Although futures contracts by their terms generally call for the actual
delivery or acquisition of underlying securities or the cash value of the index,
in most cases the contractual obligation is fulfilled before the date of the
contract without having to make or take such delivery. The contractual
obligation is offset by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take, as the case may be, delivery of the securities
or cash value of the index underlying the contractual obligations. At the time
such transaction is effected, a final determination of variation margin is made
and any loss experienced by the Underlying Fund must be paid to the contract
market clearing house while any profit due to the Underlying Fund must be
delivered to it.
Positions taken in futures markets are not normally held to maturity,
but instead liquidated through offsetting transactions which may result in a
profit or a loss. While the Underlying Fund's futures contracts on securities
will usually be liquidated in this manner, the Underlying Fund may instead make
or take delivery of the underlying securities whenever it appears economically
advantageous to do so. The clearing house associated with the market on which
futures on the securities are traded guarantees that, if still open, the sale or
purchase will be performed on settlement date.
The Underlying Fund may enter into such futures contracts to protect
against the adverse affects of fluctuations in security prices or interest rates
without actually buying or selling the securities. For example, if interest
rates are expected to increase, the Underlying Fund might enter into futures
contracts for the sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities in the portfolio
owned by the Underlying Fund. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of the futures
contracts to the Underlying Fund would increase at approximately the same rate,
thereby keeping the net asset value of the Underlying Fund from declining as
much as it otherwise would have. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in anticipation
of subsequent purchases of securities at higher prices. Since the fluctuations
in the value of futures contracts should be similar to those of debt securities,
the Underlying Fund could take advantage of the anticipated rise in value of
debt securities without actually buying them until the market had stabilized. At
that time, the futures contracts could be liquidated and the Underlying Fund
could then buy debt securities on the cash market.
With respect to options on futures contracts, when the Underlying Fund
is not fully invested, it may purchase a call option on a futures contract to
hedge against a market advance due to declining interest rates. The purchase of
a call option on a futures contract is similar in some respects to the purchase
of a call option on an individual security. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based, or the
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price of the underlying debt securities, it may or may not be less risky than
ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is below the exercise price, the Underlying Fund will retain the full
amount of the option premium which provides a partial hedge against any decline
that may have occurred in the Underlying Fund's portfolio holdings. The writing
of a put option on a futures contract constitutes a partial hedge against the
increasing price of the security which is deliverable upon exercise of the
futures contract. If the futures price at the expiration of the option is higher
than the exercise price, the Underlying Fund will retain the full amount of the
option premium which provides a partial hedge against any increase in the price
of securities which the Underlying Fund intends to purchase.
Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing price of the futures contract on the expiration date.
If a put or call option the Underlying Fund has written is exercised,
the Underlying Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its futures
positions, the Underlying Fund's losses from existing options on futures may, to
some extent, be reduced or increased by changes in the value of portfolio
securities. The purchase of a put option on a futures contract is similar in
some respects to the purchase of protective puts on portfolio securities. For
example, the Underlying Fund will purchase a put option on a futures contract to
hedge the Underlying Fund's portfolio against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Underlying Fund may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if the
Underlying Fund is hedged against the possibility of an increase in interest
rates which would adversely affect the price of securities held in its portfolio
and interest rates decrease instead, the Underlying Fund will lose part or all
of the benefit of the increased value of its securities which it has because it
will have offsetting losses in its futures position. In addition, in such
situations, if the Underlying Fund had insufficient cash, it may be required to
sell securities from its portfolio to meet daily variation margin requirements.
Such sales of securities may, but will not necessarily, be at increased prices
which reflect the rising market. The Underlying Fund may be required to sell
securities at a time when it may be disadvantageous to do so.
Further, with respect to options on futures contracts, the Underlying
Fund may seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.
SHORT SALES AGAINST THE BOX
Whereas a short sale is the sale of a security an Underlying Fund does
not own, a short sale is "against the box" if at all times during which the
short position is open, the Underlying Fund owns at least an equal amount of the
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as
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the securities sold short. Short sales against the box are typically used by
sophisticated investors to defer recognition of capital gains or losses.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Underlying Funds' dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of an Underlying Fund generally arising in
connection with the purchase or sale of its portfolio securities and accruals of
interest or dividends receivable and fund expenses. Position hedging is the sale
of a foreign currency with respect to portfolio security positions denominated
or quoted in that currency. An Underlying Fund may not position hedge with
respect to a particular currency for an amount greater than the aggregate market
value (determined at the time of making any sale of a forward contract) of
securities held in its portfolio denominated or quoted in, or currently
convertible into, such currency.
When an Underlying Fund enters into a contract for the purchase or sale
of a security denominated in a foreign currency, or when an Underlying Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Underlying Fund may desire to "lock in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment as the case may be. By entering into a forward contract for
a fixed amount of dollars for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, an Underlying Fund will be
able to protect itself against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and the subject foreign currency
during the period between the date on which the security is purchased or sold,
or on which the dividend or interest payment is declared, and the date on which
such payments are made or received.
Additionally, when the investment adviser believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, an Underlying Fund may enter into a forward contract for a fixed amount
of dollars, to sell the amount of foreign currency approximating the value of
some or all of the securities of the Underlying Fund denominated in such foreign
currency.
Certain Underlying Funds may use currency forward contracts to manage
currency risks and to facilitate transactions in foreign securities. The
following discussion summarizes the principal currency management strategies
involving forward contracts that could be used by these Funds.
In connection with purchases and sales of securities denominated in
foreign currencies, an Underlying Fund may enter into currency forward contracts
to fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The investment manager expects to enter into settlement
hedges in the normal course of managing the Underlying Funds' foreign
investments. The Underlying Funds could also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or sales
of securities denominated in foreign currency, even if the specific investments
have not yet been selected by the investment manager.
Certain Underlying Funds may also use forward contracts to hedge
against a decline in the value of existing investments denominated in foreign
currency. For example, if an Underlying Fund owned securities denominated in
pounds sterling, it could enter into a forward contract to sell pounds sterling
in return for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge (sometimes referred to as a "position hedge") would tend to
offset both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. The Underlying Fund could
also hedge the position by selling another currency expected to perform
similarly to the pound sterling -- for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for U.S.
dollars. This type of hedge, sometimes referred to as a "proxy hedge," could
offer advantages in terms of cost, yield, or efficiency, but generally will not
hedge currency exposure as effectively as a simple hedge into
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U.S. dollars. Proxy hedges may result in losses if the currency used to hedge
does not perform similarly to the currency in which the hedged securities are
denominated.
Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodian account to
cover currency forward contracts. As required by SEC guidelines, certain
Underlying Funds will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. The Underlying Funds will not
segregate assets to cover forward contracts, including settlement hedges,
position hedges, and proxy hedges. Successful use of forward currency contracts
will depend on the investment manager's skill in analyzing and predicting
currency values. Forward contracts may substantially change an Underlying Fund's
investment exposure to changes in currency exchange rates, and could result in
losses to the Underlying Fund if currencies do not perform as the investment
manager anticipates. For example, if a currency's value rose at a time when the
investment manager had hedged an Underlying Fund by selling that currency in
exchange for dollars, the Underlying Fund would be unable to participate in the
currency's appreciation. If the investment manager hedges currency exposure
through proxy hedges, an Underlying Fund could realize currency losses from the
hedge and the security position at the same time if the two currencies do not
move in tandem. Similarly, if the investment manager increases an Underlying
Fund's exposure to a foreign currency, and that currency's value declines, the
Underlying Fund will realize a loss. There is no assurance that the investment
manager's use of forward currency contracts will be advantageous to the
Underlying Funds or that it will hedge at an appropriate time.
FOREIGN CURRENCY CONVERSION
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to an Underlying Fund at one rate,
while offering a lesser rate of exchange should the Underlying Fund desire to
resell that currency to the dealer.
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PERFORMANCE INFORMATION
From time to time, each Portfolio may state its Classes' total return
in advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life-of-fund, if applicable) periods. Each
Portfolio may also advertise aggregate and average total return information of
its Classes over additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from
which, in the case of only Class A Shares, the
maximum front-end sales charge is deducted;
T = average annual total return;
n = number of years; and
ERV = redeemable value of the hypothetical $1,000 purchase
at the end of the period after the deduction of the
applicable CDSC, if any, with respect to Class B
Shares and Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC applicable to only certain redemptions of those shares will not be deducted
from any computation of total return. See the Prospectuses for the Fund Classes
for a description of the Limited CDSC and the limited instances in which it
applies. All references to a CDSC in this Performance Information section will
apply to Class B Shares or Class C Shares of the Portfolios.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, each Portfolio may present
total return information that does not reflect the deduction of the maximum
front-end sales charge or any applicable CDSC.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable activities and performances of the Portfolios and in
illustrating general financial planning principles. From time to time, certain
mutual fund performance ranking information, calculated and provided by these
organizations, may also be used in the promotion of sales of the Portfolios. Any
indices used are not managed for any investment goal, and a direct investment in
an index is not possible.
CDA Technologies, Inc., Lipper Analytical Services, Inc. and
Morningstar, Inc. are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.
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Ibbotson Associates, Inc. is a consulting firm that provides a variety
of historical data including total return, capital appreciation and
income on the stock market as well as other investment asset classes,
and inflation. With its permission, this information will be used
primarily for comparative purposes and to illustrate general financial
planning principles.
Interactive Data Corporation is a statistical access service that
maintains a database of various international industry indicators, such
as historical and current price/earning information, individual equity
and fixed-income price and return information.
Compustat Industrial Databases, a service of S&P, may also be used in
preparing performance and historical stock and bond market exhibits.
This firm maintains fundamental databases that provide financial,
statistical and market information covering more than 7,000 industrial
and non-industrial companies.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This
information, as well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative illustrations. In
addition, the performance of multiple indices compiled and maintained
by these firms may be combined to create a blended performance result
for comparative purposes. Generally, the indices selected will be
representative of the types of securities in which the Portfolios may
invest and the assumptions that were used in calculating the blended
performance will be described.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. In addition, current rate information on
municipal debt obligations of various durations, as reported daily by The Bond
Buyer, may also be used. The Bond Buyer is published daily and is an
industry-accepted source for current municipal bond market information.
From time to time, the Portfolios may quote actual total return
performance for each Class in advertising and other types of literature compared
to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees, offered by leading banks and thrifts as monitored by Bank
Rate Monitor, and those of generally-accepted corporate bond and government
security price indices of various durations prepared by Lehman Brothers and
Salomon Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be included. The
Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return from an
investment.
Total return performance for each Class of the Portfolios will reflect
the appreciation or depreciation of principal, reinvestment of income and any
capital gains distributions paid during any indicated period, and, in the case
of Class A Shares, the impact of the maximum front-end sales charge, if any,
paid on the illustrated investment amount, annualized. Performance of Class A
Shares may also be shown without reflecting the impact of any front-end sales
charge. The results will not reflect any income taxes, if applicable, payable by
shareholders on the reinvested distributions included in the calculations. The
performance of Class B Shares and Class C Shares will be calculated both with
the applicable CDSC included and excluded. The net asset values of the
Portfolios fluctuate so shares, when redeemed, may be worth more or less than
the original investment, and the Portfolios' results should not be considered a
guarantee of future performance.
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Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Trust and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Portfolios', and other Delaware
Group funds', investment disciplines employed in seeking their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
DOLLAR-COST AVERAGING
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Group offers three services -- Automatic Investing Plan, Direct Deposit Purchase
Plan and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
<TABLE>
<CAPTION>
NUMBER
INVESTMENT PRICE PER OF SHARES
AMOUNT SHARE PURCHASED
<S> <C> <C> <C>
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
$400 $37.50 48
</TABLE>
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
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Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund in the Delaware Group
of funds.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional shares of
the Portfolios, your investment is given yet another opportunity to grow. It's
called the Power of Compounding and the following chart illustrates just how
powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:
<TABLE>
<CAPTION>
7% Rate 9% Rate 11% Rate
of Return of Return of Return
--------- --------- ---------
<S> <C> <C> <C>
1 year $10,723 $10,938 $11,157
2 years $11,498 $11,964 $12,448
3 years $12,330 $13,086 $13,889
4 years $13,221 $14,314 $15,496
5 years $14,177 $15,657 $17,289
6 years $15,201 $17,126 $19,289
7 years $16,300 $18,732 $21,522
8 years $17,479 $20,489 $24,012
9 years $18,743 $22,411 $26,791
10 years $20,098 $24,514 $29,891
</TABLE>
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes or sales charges, are not intended to
be a projection of investment results and do not reflect the actual performance
results of any of the classes.
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TRADING PRACTICES AND BROKERAGE
Each Portfolio selects banks, brokers or dealers to execute
transactions for the purchase or sale of portfolio securities on the basis of
the Portfolio's judgment of the professional capability of such banks, brokers
or dealers to provide the service. The primary consideration is to have banks,
brokers or dealers execute transactions at best price and execution. Best price
and execution refers to many factors, including the price paid or received for a
security, the commission charged, the promptness and reliability of execution,
the confidentiality and placement accorded the order and other factors affecting
the overall benefit obtained by the account on the transaction. In most
instances, trades of fixed-income securities are made on a net basis where the
Portfolios either buy the securities directly from the dealer or sell them to
the dealer. In these instances, there is no direct commission charged but there
is a spread (the difference between the buy and sell price) which is the
equivalent of a commission. When a commission is paid, the Portfolio involved
pays reasonably competitive brokerage commission rates based upon the
professional knowledge of the Manager as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, a Portfolio
pays a minimal share transaction cost when the transaction presents no
difficulty.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making processes with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
the Portfolios' Investment Management Agreements higher commissions are
permitted to be paid to broker/dealers who provide brokerage and research
services than to broker/dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker/dealers
who provide such brokerage and research services, the Portfolios believe that
the commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to the Portfolios and to other funds in the
Delaware Group. Subject to best price and execution, commissions allocated to
brokers providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the
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accounts to participate in volume transactions will generally be beneficial to
the accounts and funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the security
that a particular account or fund may obtain, it is the opinion of the Manager
and the Trust's Board of Trustees that the advantages of combined orders
outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Portfolios may place orders with broker/dealers that have agreed
to defray certain expenses of the funds in the Delaware Group of funds such as
custodian fees, and may, at the request of the Distributor, give consideration
to sales of shares of such funds as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Portfolios.
PORTFOLIO TURNOVER
The rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate. Given the Portfolios' investment
objectives, their annual portfolio turnover rates are not expected to exceed
100%. A turnover rate of 100% would occur, for example, if all the investments
held by a Portfolio at the beginning of the year were replaced by the end of the
year. The degree of portfolio activity may affect taxes payable by the
Portfolios' shareholders. To the extent a Portfolio realizes gains on securities
held for less than six months, such gains are taxable to the shareholder or to
the Portfolio at ordinary income tax rates. The turnover rates also may be
affected by cash requirements from redemptions and repurchases of Portfolio
shares.
The portfolio turnover rate of the Portfolio is calculated by dividing
the lesser of purchases or sales of portfolio securities for the particular
fiscal year by the monthly average of the value of the portfolio securities
owned by the Portfolio during the particular fiscal year, exclusive of
securities whose maturities at the time of acquisition are one year or less.
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PURCHASING SHARES
The Distributor serves as the national distributor for each Portfolio's
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class - and has agreed to use its best efforts to sell shares of
each Portfolio. See the Prospectuses for additional information on how to
invest. Shares of the Portfolios are offered on a continuous basis, and may be
purchased through authorized investment dealers or directly by contacting the
Trust or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such classes
generally must be at least $100. The initial and subsequent minimum investments
for Class A Shares will be waived for purchases by officers, directors and
employees of any Delaware Group fund, the Manager or any of the its affiliates
if the purchases are made pursuant to a payroll deduction program. Shares
purchased pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to
Minors Act and shares purchased in connection with an Automatic Investing Plan
are subject to a minimum initial purchase of $250 and a minimum subsequent
purchase of $25. Accounts opened under the Delaware Group Asset Planner service
are subject to a minimum initial investment of $2,000 per Asset Planner Strategy
selected. There are no minimum purchase requirements for the Portfolios'
Institutional Classes, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. The Trust will reject any purchase order for
more than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares.
An investor may exceed these limitations by making cumulative purchases over a
period of time. An investor should keep in mind, however, that reduced front-end
sales charges apply to investments of $100,000 or more in Class A Shares, and
that Class A Shares are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly. The
Trust reserves the right to reject any order for the purchase of shares of
either Portfolio if in the opinion of management such rejection is in such
Portfolio's best interests.
The NASD has adopted Conduct Rules, as amended, relating to investment
company sales charges. The Trust and the Distributor intend to operate in
compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund Classes' Prospectuses.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
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Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Portfolio's assets and will
receive a proportionate interest in that Portfolio's income, before application,
as to Class A, Class B and Class C Shares, of any expenses, if any, under a
Portfolio's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
accounts including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by the Trust for any certificate issued. A shareholder may be subject to fees
for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact a Portfolio for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
ALTERNATIVE PURCHASE ARRANGEMENTS
The alternative purchase arrangements of Class A, Class B and Class C
Shares of each Portfolio permit investors to choose the method of purchasing
shares that is most suitable for their needs given the amount of their purchase,
the length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares of a Portfolio
and incur a front-end sales charge and annual 12b-1 Plan expenses of up to a
maximum of 0.30% of the average daily net assets of Class A Shares (currently,
no more than 0.25% of the average daily net assets of Class A Shares of
Strategic Income Fund, pursuant to Board action) or to purchase either Class B
or Class C Shares of a Portfolio and have the entire initial purchase amount
invested in the Portfolio with the investment thereafter subject to a CDSC and
annual 12b-1 Plan expenses. Class B Shares are subject to a CDSC if the shares
are redeemed within six years of purchase, and Class C Shares are subject to a
CDSC if the shares are redeemed within 12 months of purchase. Class B and Class
C Shares are each subject to annual 12b-1 Plan expenses of up to a maximum of 1%
(0.25% of which are service fees to be paid to the Distributor, dealers or
others for providing personal service and/or maintaining shareholder accounts)
of average daily net assets of the respective Class. Class B Shares will
automatically convert to Class A Shares at the end of approximately eight years
after purchase and, thereafter, be subject to annual 12b-1 Plan expenses of up
to a maximum of 0.30% of average daily net assets of such shares. Unlike Class B
Shares, Class C Shares do not convert to another class.
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CLASS A SHARES
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by the purchaser. See Special Purchase Features -- Class A
Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
CLASS A SHARES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DEALER'S
COMMISSION***
FRONT-END SALES CHARGE AS % OF AS % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED** PRICE
- --------------------------------------------------------------------------------------------------
INCOME BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Less than $100,000 4.75% 0.00% 0.00% 0.00% 4.00%
$100,000 but under $250,000 3.75 0.00 0.00 0.00 3.00
$250,000 but under $500,000 2.50 0.00 0.00 0.00 2.00
$500,000 but under $1,000,000* 2.00 0.00 0.00 0.00 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1,000,000 or more of
Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain shares that were purchased at net asset
value and triggered the payment of a dealer's commission.
** Based upon an initial net asset value of $0.00 per share of the respective
Class A Shares.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
A Portfolio must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such Portfolio. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of front-end
sales charges shown above. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of 1933
(the "1933 Act").
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Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to 0.15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
DEALER'S COMMISSION
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
<TABLE>
<CAPTION>
DEALER'S COMMISSION
(AS A PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT PURCHASED)
------------------ -----------------
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
</TABLE>
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectuses) may be aggregated with those of
Class A Shares of a Portfolio. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial advisers
should contact the Distributor concerning the applicability and calculation of
the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND CLASS C SHARES
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth below, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. See Waiver of Contingent Deferred Sales Charge - Class B and
Class C Shares under Redemption and Exchange in the Prospectuses for the Fund
Classes for a list of the instances in which the CDSC is waived.
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<PAGE> 132
The following table sets forth the rates of the CDSC for Class B Shares
of each Portfolio:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR AFTER PURCHASE MADE SUBJECT TO CHARGE)
------------------------ ------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
</TABLE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares, absent any applicable fee
waiver, will still be subject to the annual 12b-1 Plan expenses of up to 1% of
average daily net assets of those shares. At the end of approximately eight
years after purchase, the investor's Class B Shares will be automatically
converted into Class A Shares of the same Portfolio. See Automatic Conversion of
Class B Shares under Classes of Shares in the Fund Classes' Prospectuses. Such
conversion will constitute a tax-free exchange for federal income tax purposes.
See Taxes in the Prospectuses for the Fund Classes.
PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a
separate plan for each of the Class A Shares, Class B Shares and Class C Shares
of each Portfolio (the "Plans"). Each Plan permits the relevant Portfolio to pay
for certain distribution, promotional and related expenses involved in the
marketing of only the class of shares to which the Plan applies. The Plans do
not apply to Institutional Classes of shares. Such shares are not included in
calculating the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of shares of the Institutional Classes. Shareholders
of the Institutional Classes may not vote on matters affecting the Plans.
The Plans permit a Portfolio, pursuant to its Distribution Agreement,
to pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, absent any applicable fee waiver, each Portfolio may make
payments out of the assets of Class A, Class B and Class C Shares directly to
other unaffiliated parties, such as banks, who either aid in the distribution of
shares of, or provide services to, such classes.
The maximum aggregate fee payable by a Portfolio under its Plans, and
the Portfolios' Distribution Agreements, is on an annual basis, up to 0.30% of
the Class A Shares' average daily net assets for the year, and up to 1% (0.25%
of which are service fees to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and Class C Shares' average daily net assets for the year.
The Trust's Board of Trustees may reduce these amounts at any time.
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<PAGE> 133
Pursuant to Board action, the maximum aggregate fee payable by Class A
Shares 0.25%. While this describes the current basis for calculating the fees
which will be payable under the Class A Shares Plans, such Plans permit a full
0.30% on all Class A Shares' assets to be paid at any time following appropriate
Board approval.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best price and
execution, a Portfolio may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all been
approved by the Board of Trustees of the Trust, including a majority of the
trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the Plans, by
vote cast in person at a meeting duly called for the purpose of voting on the
Plans and such Agreements. Continuation of the Plans and the Distribution
Agreements, as amended, must be approved annually by the Board of Trustees in
the same manner as specified above.
Each year, the trustees must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares of each Portfolio and that there is a
reasonable likelihood of the Plan relating to a Fund Class providing a benefit
to that Class. The Plans and the Distribution Agreements, as amended, may be
terminated with respect to a Class at any time without penalty by a majority of
those trustees who are not "interested persons" or by a majority vote of the
outstanding voting securities of the relevant Fund Class. Any amendment
materially increasing the percentage payable under the Plans must likewise be
approved by a majority vote of the outstanding voting securities of the relevant
Fund Class, as well as by a majority vote of those trustees who are not
"interested persons." With respect to each Class A Shares' Plan, any material
increase in the maximum percentage payable thereunder must also be approved by a
majority of the outstanding voting securities of Class B of the same Portfolio.
Also, any other material amendment to the Plans must be approved by a majority
vote of the trustees including a majority of the noninterested trustees of the
Trust having no interest in the Plans. In addition, in order for the Plans to
remain effective, the selection and nomination of trustees who are not
"interested persons" of the Trust must be effected by the directors who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plans. Persons authorized to make payments under the
Plans must provide written reports at least quarterly to the Board of Trustees
for their review.
OTHER PAYMENTS TO DEALERS -- CLASS A, CLASS B AND CLASS C SHARES
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares. The Distributor may also pay a portion of the
expense of preapproved dealer advertisements promoting the sale of Delaware
Group fund shares.
SPECIAL PURCHASE FEATURES -- CLASS A SHARES
BUYING CLASS A SHARES AT NET ASSET VALUE
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
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<PAGE> 134
Current and former officers, trustees and employees of the Trust, any
other fund in the Delaware Group, the Manager, the Manager's affiliates, or any
of the Manager's affiliates that may in the future be created, legal counsel to
the funds and registered representatives and employees of broker/dealers who
have entered into Dealer's Agreements with the Distributor may purchase Class A
Shares of the Portfolios and any such class of shares of any of the other funds
in the Delaware Group, including any fund that may be created, at the net asset
value per share. Family members of such persons at their direction, and any
employee benefit plan established by any of the foregoing funds, corporations,
counsel or broker/dealers may also purchase Class A Shares at net asset value.
Class A Shares may also be purchased at net asset value by current and former
officers, directors and employees (and members of their families) of the
Dougherty Financial Group LLC. Purchases of Class A Shares may also be made by
clients of registered representatives of an authorized investment dealer at net
asset value within 12 months of a change of the registered representative's
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge, contingent deferred sales charge or other sales charge
has been assessed. Purchases of Class A Shares may also be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of shares
of Delaware Group funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates, may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment adviser
has entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Such purchasers are
required to sign a letter stating that the purchase is for investment only and
that the securities may not be resold except to the issuer. Such purchasers may
also be required to sign or deliver such other documents as the Trust may
reasonably require to establish eligibility for purchase at net asset value.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in the Delaware Group at net asset value.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers when they are not eligible to purchase shares of the institutional
class of a Portfolio; and any group retirement plan (excluding defined benefit
pension plans), or such plans of the same employer, that (i) has in excess of
$500,000 of plan assets invested in Class A Shares of Delaware Group funds and
in any stable value product available through the Delaware Group, or (ii) is
sponsored by an employer that has at any point after May 1, 1997 more than 100
employees while such plan has held Class A Shares of a Delaware Group fund and
such employer has properly represented to DIRSI in writing that it has the
requisite number of employees and has received written confirmation back from
DIRSI Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Portfolios must be notified in advance that the trade qualifies for
purchase at net asset value.
LETTER OF INTENTION
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or the Trust, which provides for the holding in escrow by the Transfer
Agent of 5% of the total amount of Class A Shares intended to be purchased until
such purchase is completed within the 13-month period. A Letter of Intention may
be dated to include shares purchased up to 90 days prior to the date the Letter
is signed. The 13-month period begins on the date of the earliest purchase. If
the intended investment is not completed, except as noted below, the purchaser
will be asked to pay an amount equal to the difference between the front-end
sales charge on Class A Shares purchased at the reduced rate and the front-end
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<PAGE> 135
sales charge otherwise applicable to the total shares purchased. If such payment
is not made within 20 days following the expiration of the 13-month period, the
Transfer Agent will surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference. Such purchasers may include the
value (at offering price at the level designated in their Letter of Intention)
of all their shares of the Portfolios and of any class of any of the other
mutual funds in the Delaware Group (except shares of any Delaware Group fund
which do not carry a front-end sales charge, CDSC or Limited CDSC, other than
shares of Delaware Group Premium Fund, Inc. beneficially owned in connection
with the ownership of variable insurance products, unless they were acquired
through an exchange from a Delaware Group fund which carried a front-end sales
charge, CDSC or Limited CDSC) previously purchased and still held as of the date
of their Letter of Intention toward the completion of such Letter.
Employers offering a Delaware Group retirement plan may also complete a
Letter of Intention to obtain a reduced front-end sales charge on investments in
Class A Shares made by the plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
plan establishment. The level and any reduction in front-end sales charge will
be based on actual plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of a Portfolio and
other Delaware Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
COMBINED PURCHASES PRIVILEGE
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Portfolios, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC). In addition, assets held by investment advisory clients of the
Manager or its affiliates in a stable value account may be combined with other
Delaware Group fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
RIGHT OF ACCUMULATION
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Portfolio,
as well as shares of any other class of any of the other Delaware Group funds
which offer such classes (except shares of any Delaware Group fund which do not
carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC). If, for example, any such purchaser has previously purchased
and still holds Class A Shares and/or shares of any other of the classes
described in the previous sentence with a value of $40,000 and
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<PAGE> 136
subsequently purchases $60,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $60,000 purchase would currently be 3.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
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12-MONTH REINVESTMENT PRIVILEGE
Holders of Class A Shares of a Portfolio (and of the Institutional
Classes holding shares which were acquired through an exchange from one of the
other mutual funds in the Delaware Group offered with a front-end sales charge)
who redeem such shares have one year from the date of redemption to reinvest all
or part of their redemption proceeds in Class A Shares of that Portfolio or in
Class A Shares of any of the other funds in the Delaware Group, subject to
applicable eligibility and minimum purchase requirements, in states where shares
of such other funds may be sold, at net asset value without the payment of a
front-end sales charge. This privilege does not extend to Class A Shares where
the redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required to pay
the applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to a redemption of either Class B Shares or Class C
Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Portfolios' shareholder servicing agent, about
the applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectuses) in connection with
the features described above.
GROUP INVESTMENT PLANS
Group Investment Plans that are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page _____, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Portfolio in which the
investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Group investment accounts if they
so notify the Portfolio in connection with each purchase. For other retirement
plans and special services, see Retirement Plans for the Fund Classes under
Investment Plans.
THE INSTITUTIONAL CLASSES
The Institutional Class of each Portfolio is available for purchase
only by: (a) retirement plans introduced by persons not associated with brokers
or dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager, or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager, or its affiliates and those having client relationships with
Delaware Investment Advisers, a division of the Manager, or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement accounts from such institutional
advisory accounts; (d) a bank, trust company and similar financial institution
investing for its own account or for the account of its trust customers for whom
such financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
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<PAGE> 138
$1,000,000 entrusted to the adviser for investment purposes, but only if the
adviser is not affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for such advisory
services.
Shares of the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Classes in which an investor has an account (based on the net asset value
in effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional
Classes of each Portfolio are reinvested in the accounts of the holders of such
shares (based on the net asset value in effect on the reinvestment date). A
confirmation of each distribution from realized securities profits, if any, will
be mailed to shareholders in the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Portfolio and class in which shares are being purchased. Such purchases, which
must meet the minimum subsequent purchase requirements set forth in the
Prospectuses and this Part B, are made, for Class A Shares at the public
offering price, and for Class B Shares, Class C Shares and Institutional Class
shares at the net asset value, at the end of the day of receipt. A reinvestment
plan may be terminated at any time. This plan does not assure a profit nor
protect against depreciation in a declining market.
REINVESTMENT OF DIVIDENDS IN OTHER DELAWARE GROUP FUNDS
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in the Delaware Group, including the Portfolios, in
states where their shares may be sold. Such investments will be at net asset
value at the close of business on the reinvestment date without any front-end
sales charge or service fee. The shareholder must notify the Transfer Agent in
writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the Prospectuses for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the
Portfolios, provided an account has been established. Dividends from Class A
Shares may not be directed to Class B Shares or Class C Shares. Dividends from
Class B Shares may only be directed to other Class B Shares and dividends from
Class C Shares may only be directed to other Class C Shares. See Appendix
C--Classes Offered in the Fund Classes' Prospectus for the funds in the Delaware
Group that are eligible for investment by holders of Portfolio shares.
Capital gains and/or dividend distributions to participants in the
following retirement plans are automatically reinvested into the same Delaware
Group fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE IRA,
SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans or 403(b)(7) or 457 Deferred Compensation Plans.
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INVESTING BY ELECTRONIC FUND TRANSFER
Direct Deposit Purchase Plan -- Investors may arrange for a Portfolio
to accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan -- Shareholders of Class A, Class B and Class
C Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Portfolio
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Portfolio from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Portfolio may liquidate sufficient shares from a shareholder's account to
reimburse the government or the private source. In the event there are
insufficient shares in the shareholder's account, the shareholder is expected to
reimburse the Portfolio.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Portfolio accounts. A Portfolio will
accept these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact the Trust
for proper instructions.
WEALTH BUILDER OPTION
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group. Shareholders of the Fund Classes may elect to
invest in one or more of the other mutual funds in the Delaware Group through
the Wealth Builder Option. See Wealth Builder Option and Redemption and Exchange
in the Prospectuses for the Fund Classes.
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Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectuses. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
DELAWARE GROUP ASSET PLANNER
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. Effective September 1, 1997, the Delaware Group
Asset Planner Service is only available to financial advisers or investment
dealers who have previously used this service. The Delaware Group Asset Planner
service offers a choice of four predesigned asset allocation strategies (each
with a different risk/reward profile) in predetermined percentages in Delaware
Group funds. With the help of a financial adviser, you may also design a
customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange in the Prospectus.
Also see Buying Class A Shares at Net Asset Value under Classes of Shares. The
minimum initial investment per Strategy is $2,000; subsequent investments must
be at least $100. Individual fund minimums do not apply to investments made
using the Asset Planner service. Class A, Class B and Class C Shares are
available through the Asset Planner service. Generally, only shares within the
same class may be used within the same Strategy. However, Class A Shares of the
Portfolio and of other funds in the Delaware Group may be used in the same
Strategy with consultant class shares that are offered by certain other Delaware
Group funds. See Appendix C - Classes Offered in the Prospectus for the funds in
the Delaware Group that offer consultant class shares.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number.
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Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
RETIREMENT PLANS FOR THE FUND CLASSES
An investment in either Portfolio may be suitable for tax-deferred
retirement plans. Among the retirement plans noted below, Class B Shares are
available for investment only by Individual Retirement Accounts, SIMPLE IRAs,
Simplified Employee Pension Plans, Salary Reduction Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange in the Prospectuses for the Fund Classes
for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans, other than Individual Retirement Accounts for
which there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Classes.
See The Institutional Classes, above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
IT IS ADVISABLE FOR AN INVESTOR CONSIDERING ANY ONE OF THE RETIREMENT
PLANS DESCRIBED BELOW TO CONSULT WITH AN ATTORNEY, ACCOUNTANT OR A QUALIFIED
RETIREMENT PLAN CONSULTANT. FOR FURTHER DETAILS, INCLUDING APPLICATIONS FOR ANY
OF THESE PLANS, CONTACT YOUR INVESTMENT DEALER OR THE DISTRIBUTOR.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLANS
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section 401(k),
profit sharing or money purchase pension plans. Contributions may be invested
only in Class A and Class C Shares.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
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A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or, for years prior to
1997, elects to be treated as having no compensation for the year. Investments
in each of the Fund Classes are permissible.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who are not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Portfolio. Purchases of $1 million or
more of Class A Shares qualify for purchase at net asset value but may, under
certain circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares, and Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares under Redemption and Exchange
in the Fund Classes' Prospectuses concerning the applicability of a CDSC upon
redemption.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
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See Appendix A -- IRA Information for additional IRA information.
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SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may be maintained by employers having 25 or fewer
employees. An employer may elect to make additional contributions to such
existing plans.
PROTOTYPE 401(k) DEFINED CONTRIBUTION PLAN
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in only
Class A Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 00.
DEFERRED COMPENSATION PLAN FOR PUBLIC SCHOOLS AND NON-PROFIT ORGANIZATIONS
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page 00.
DEFERRED COMPENSATION PLAN FOR STATE AND LOCAL GOVERNMENT EMPLOYEES ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on page
00.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors are
limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required. Class B Shares are
not available for purchase by such plans.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Portfolio in which shares are being purchased after
receipt of the order by the Portfolio or its agent. Orders for purchases of
Class B Shares, Class C Shares and the Institutional Classes are effected at the
net asset value per share next calculated after receipt of the order by the
Portfolio in which shares are being purchased or its agent. Selling dealers have
the responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the Portfolios will
generally be closed, pricing calculations will not be made and purchase and
redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, will be included in
each Portfolio's financial statements which will be incorporated by reference
into Part B.
Each Portfolio's net asset value per share is computed by adding the
value of all the securities and other assets in the portfolio, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and fees
are accrued daily. In determining a Portfolio's total net assets, portfolio
securities listed or traded on a national securities exchange, except for bonds,
are valued at the last sale price on the exchange upon which such securities are
primarily traded. Securities not traded on a particular day, over-the-counter
securities and government and agency securities are valued at the mean value
between bid and asked prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Foreign currencies and the prices of foreign securities denominated
in foreign currencies are translated to U.S. Dollars based on rates in effect as
of 12 p.m., Eastern time. Use of a pricing service has been approved by the
Board of Trustees. Prices provided by a pricing service take into account
appropriate factors such as institutional trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. If no quotations are available, all other
securities and assets are valued at fair value as determined in good faith and
in a method approved by the Board of Trustees.
The net asset values of all outstanding shares of each class of a
Portfolio will be computed on a pro-rata basis for each outstanding share based
on the proportionate participation in that Portfolio represented by the value of
shares of that class. All income earned and expenses incurred by a Portfolio
will be borne on a pro-rata basis by each outstanding share of a class, based on
each class' percentage in that Portfolio represented by the value of shares of
such classes, except that the Institutional Class will not incur any of the
expenses under the Trust's 12b-1 Plans and the Class A, Class B and Class C
Shares of each Portfolio alone will bear the 12b-1 Plan expenses payable under
their respective Plans. Due to the specific distribution expenses and other
costs that will be allocable to each class, the NAV of each class of a Portfolio
will vary.
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REDEMPTION AND REPURCHASE
Any shareholder may require a Portfolio to redeem shares by sending a
WRITTEN REQUEST, signed by the record owner or owners exactly as the shares are
registered, to the Portfolio at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. Each Portfolio reserves
the right to reject a signature guarantee supplied by an eligible institution
based on its creditworthiness. The Portfolios may request further documentation
from corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of Portfolio shares, the Distributor, acting
as agent of the Portfolios, offers to repurchase Portfolio shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the respective Portfolio or its agent, subject to any applicable CDSC or Limited
CDSC. This is computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price and Net Asset Value.
The Portfolios and the Distributor end their business days at 5 p.m., Eastern
time. This offer is discretionary and may be completely withdrawn without
further notice by the Distributor.
Orders for the repurchase of Portfolio shares which are submitted to
the Distributor prior to the close of its business day will be executed at the
net asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectuses for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Except for the applicable CDSC or Limited
CDSC and, with respect to the expedited payment by wire described below for
which, in the case of the Fund Classes, there is currently a $7.50 bank wiring
cost, neither the Portfolios nor the Portfolios' Distributor charges a fee for
redemptions or repurchases, but such fees could be charged at any time in the
future.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
Each Portfolio will process written or telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. A Portfolio will honor redemption requests as to shares for which a
check was tendered as payment, but a Portfolio will not mail or wire the
proceeds until it is reasonably satisfied that the check has cleared. This
potential delay can be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Portfolio involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Portfolio or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Portfolio of securities owned by it is not reasonably
practical, or it is not reasonably practical for a Portfolio fairly to value its
assets, or in the event that the SEC has provided for such suspension for the
protection of shareholders, a Portfolio may postpone payment or suspend the
right of redemption or repurchase. In such case, the shareholder may withdraw
the request for redemption or leave it standing as a request for redemption at
the net asset value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Trust
has elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Portfolio is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of such Portfolio
during any 90-day period for any one shareholder.
The value of a Portfolio's investments is subject to changing market
prices. Thus, a shareholder reselling shares to a Portfolio may sustain either a
gain or loss, depending upon the price paid and the price received for such
shares.
SMALL ACCOUNTS
Before a Portfolio involuntarily redeems shares from an account that,
under the circumstances listed in the relevant Prospectus, has remained below
the minimum amounts required by the Portfolio's Prospectuses and sends the
proceeds to the shareholder, the shareholder will be notified in writing that
the value of the shares in the account is less than the minimum required and
will be allowed 60 days from the date of notice to make an additional investment
to meet the required minimum. See The Conditions of Your Purchase under How to
Buy Shares in the Prospectuses. Any redemption in an inactive account
established with a minimum investment may trigger mandatory redemption. No CDSC
or Limited CDSC will apply to the redemptions described in this paragraph.
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* * *
Each Portfolio has made available certain redemption privileges, as
described below. The Portfolios reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
EXPEDITED TELEPHONE REDEMPTIONS
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which certificates
have not been issued may call the Shareholder Service Center at 800-523-1918 or,
in the case of shareholders of the Institutional Classes, their Client Services
Representative at 800-828-5052 prior to the time the offering price and net
asset value are determined, as noted above, and have the proceeds mailed to them
at the address of record. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant Portfolio before the request is
received. Payment will be made by wire or check to the bank account designated
on the authorization form as follows:
1. PAYMENT BY WIRE: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be wired
on the next business day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A. which will
be deducted from the withdrawal proceeds each time the shareholder requests a
redemption from Class A Shares, Class B Shares and Class C Shares. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account.
2. PAYMENT BY CHECK: Request a check be mailed to the bank account designated on
the authorization form. Redemption proceeds will normally be mailed the next
business day, but no later than seven days, from the date of the telephone
request. This procedure will take longer than the Payment by Wire option (1
above) because of the extra time necessary for the mailing and clearing of the
check after the bank receives it.
REDEMPTION REQUIREMENTS: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Portfolio and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The Portfolios
reserve the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
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If expedited payment under these procedures could adversely affect a
Portfolio, the Portfolio may take up to seven days to pay the shareholder.
Neither the Portfolios nor the Portfolios' Transfer Agent is
responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Portfolio shares which are
reasonably believed to be genuine. With respect to such telephone transactions,
each Portfolio will follow reasonable procedures to confirm that instructions
communicated by telephone are genuine (including verification of a form of
personal identification) as, if it does not, such Portfolio or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
transactions. Telephone instructions received by shareholders of the Fund
Classes are generally tape recorded. A written confirmation will be provided for
all purchase, exchange and redemption transactions initiated by telephone.
SYSTEMATIC WITHDRAWAL PLANS
Shareholders of Class A, Class B and Class C Shares of who own or
purchase $5,000 or more of shares at the offering price, or net asset value, as
applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Portfolios do not recommend any
specific amount of withdrawal. This $5,000 minimum does not apply for a
Portfolio's prototype retirement plans. Shares purchased with the initial
investment and through reinvestment of cash dividends and realized securities
profits distributions will be credited to the shareholder's account and
sufficient full and fractional shares will be redeemed at the net asset value
calculated on the third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may, in time, be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal
Plan may be subject to a Limited CDSC if the purchase was made at net asset
value and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be
subject to a CDSC, unless the annual amount selected to be withdrawn is less
than 12% of the account balance on the date that the Systematic Withdrawal Plan
was established. See Waiver of Contingent Deferred Sales Charge - Class B and
Class C Shares and Waiver of Limited Contingent Deferred Sales Charge - Class A
Shares under Redemption and Exchange in the Prospectuses for the Fund Classes.
Shareholders should consult their financial advisers to determine whether a
Systematic Withdrawal Plan would be suitable for them.
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An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Portfolios reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Classes.
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DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
The Income and Balanced Portfolios will normally make payments from net
investment income, if any, on a quarterly basis. The Growth Portfolio will
normally make payments from net investment income, if any, on a annual basis.
Payments from net realized securities profits of a Portfolio, if any, will
normally be distributed annually in the quarter following the close of the
fiscal year.
Each Class of shares of a Portfolio will share proportionately in the
investment income and expenses of that Portfolio, except that Class A Shares,
Class B Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares of the same
Class of the respective Portfolio at net asset value, unless, in the case of
shareholders of the Fund Classes, an election to receive dividends in cash has
been made. Payment by check of cash dividends will ordinarily be mailed within
three business days after the payable date. Dividend payments of $1.00 or less
will be automatically reinvested, notwithstanding a shareholder's election to
receive dividends in cash. If such a shareholder's dividends increase to greater
than $1.00, the shareholder would have to file a new election in order to begin
receiving dividends in cash again. If a shareholder redeems an entire account,
all dividends accrued to the time of the withdrawal will be paid by separate
check at the end of that particular monthly dividend period, consistent with the
payment and mailing schedule described above. Any check in payment of dividends
or other distributions which cannot be delivered by the United States Post
Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. A Portfolio may deduct
from a shareholder's account the costs of the Portfolio's effort to locate a
shareholder if a shareholder's mail is returned by the United States Post Office
or the Portfolio is otherwise unable to locate the shareholder or verify the
shareholder's mailing address. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for their
location services.
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TAXES
Dividends from investment income and short-term capital gains
distributions are treated by shareholders as ordinary income for federal income
tax purposes. Distributions of long-term capital gains, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time an
investor has held such shares, and these gains are currently taxed at long-term
capital gain rates. The tax status of dividends and distributions paid to
shareholders will not be affected by whether they are paid in cash or in
additional shares. Persons not subject to tax will not be required to pay taxes
on distributions.
A portion of each Portfolio's dividends may qualify for the
dividends-received deduction for corporations provided in the federal income tax
law. The portion of dividends paid by each Fund that so qualifies will be
designated each year in a notice to that Portfolio's shareholders, and cannot
exceed the gross amount of dividends received by the Portfolio from domestic
(U.S.) corporations that would have qualified for the dividends-received
deduction in the hands of the Portfolio if the Portfolio was a regular
corporation. The availability of the dividends-received deduction is subject to
certain holding period and debt financing restrictions imposed under the Code on
the corporation claiming the deduction.
Shareholders will be notified annually by the Trust as to the federal
income tax status of dividends and distributions.
Distributions may also be subject to state and local taxes;
shareholders are advised to consult with their tax advisers in this regard.
Shares of each Portfolio will be exempt from Pennsylvania county personal
property taxes.
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ASSET ALLOCATION AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Portfolios, subject to the
supervision and direction of the Trust's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. As of September 30, 1997, the Manager and its
affiliates in the Delaware Group, including its affiliate Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in assets in
various institutional or separately managed (approximately $00,000,000,000) and
investment company (approximately $00,000,000,000) accounts.
The Asset Allocation Agreement for each Portfolio is dated __________
and was approved by the initial shareholder on ____________. Each Agreement has
an initial term of two years and may be renewed each year only so long as such
renewal and continuance are specifically approved at least annually by the Board
of Trustees or by vote of a majority of the outstanding voting securities of the
Portfolio to which the Agreement relates, and only if the terms and the renewal
thereof have been approved by the vote of a majority of the trustees of the
Trust who are not parties thereto or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. Each
Agreement is terminable without penalty on 60 days' notice by the trustees of
the Trust or by the Manager. Each Agreement will terminate automatically in the
event of its assignment.
The Manager is paid an annual Asset Allocation Fee equal to 0.25%
(currently waived to 0.10%) of average daily net assets of each of the
Portfolios.
Except for those expenses borne by the Manager under the Asset
Allocation Agreements and the Distributor under the Distribution Agreements, the
Portfolios are responsible for all of their own expenses. Among others, these
include a Portfolio's proportionate share of rent and certain other
administrative expenses; the investment management fees; transfer and dividend
disbursing agent fees and costs; custodian expenses; federal and state
securities registration fees; proxy costs; and the costs of preparing
prospectuses and reports sent to shareholders. The ratios for Class A Shares,
Class B Shares and Class C Shares reflect the impact of their respective 12b-1
Plans.
The Manager has elected voluntarily to waive that portion, if any, of
the annual Asset Allocation Fees payable by the Portfolios and to pay the
Portfolios' expenses to the extent necessary to ensure that the "Total Operating
Expenses" of the Portfolios do not exceed 1.20% (exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and applicable 12b-1 expenses)
during the commencement of the public offering of the Portfolios through June
30, 1998.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of each Portfolio's
shares under separate Distribution Agreements. The Distributor is an affiliate
of the Manager and bears all of the costs of promotion and distribution, except
for payments by each Portfolio on behalf of its Class A Shares, Class B Shares
and Class C Shares under the 12b-1 Plan for each such class.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Portfolios' shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement. The Transfer Agent also provides
accounting services to the Portfolios pursuant to the terms of a separate Fund
Accounting Agreement. The Transfer Agent is also an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
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OFFICERS AND TRUSTEES
The business and affairs of the Trust are managed under the direction
of its Board of Trustees.
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. DMH and the
Manager are now indirect, wholly owned subsidiaries, and subject to the ultimate
control, of Lincoln National. Lincoln National, with headquarters in Fort Wayne,
Indiana, is a diversified organization with operations in many aspects of the
financial services industry, including insurance and investment management.
Certain officers and trustees of the Trust hold identical positions in
each of the other funds in the Delaware Group. Trustees and principal officers
of the Trust are noted below along with their ages and their business experience
for the past five years. Unless otherwise noted, the address of each officer and
trustee is One Commerce Square, Philadelphia, PA 19103.
*WAYNE A. STORK (60)
Chairman and Director of the Trust and each of the other 33 investment
companies in the Delaware Group and Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer, Director and/or Trustee
of DMH Corp., Delaware International Holdings Ltd., Delaware
Distributors, Inc. and Founders Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd. and Delaware Management Holdings, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
- ----------
* Trustee affiliated with the Trust's investment manager and considered an
"interested person" as defined in the 1940 Act.
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RICHARD G. UNRUH, JR. (58)
Executive Vice President of the Trust (upon effectiveness of the initial
Registration Statement), each of the other 33 investment companies in the
Delaware Group, Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Executive Vice President and Director of Delaware Management Company, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
PAUL E. SUCKOW (50)
Executive Vice President/Chief Investment Officer, Fixed Income of the Trust
(upon effectiveness of the initial Registration Statement), each of the
other 33 investment companies in the Delaware Group, Delaware Management
Company, Inc. and Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation.
Director of HYPPCO Finance Company Ltd.
Before returning to the Delaware Group in 1993, Mr. Suckow was Executive
Vice President and Director of Fixed Income for Oppenheimer Management
Corporation, New York, NY from 1985 to 1992. Prior to that, Mr. Suckow was
a fixed-income portfolio manager for the Delaware Group.
WALTER P. BABICH (70)
Director and/or Trustee of the Trust (upon effectiveness of the initial
Registration Statement) and each of the other 33 investment companies in
the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.
ANTHONY D. KNERR (58)
Director and/or Trustee of the Trust (upon effectiveness of the initial
Registration Statement) and each of the other 33 investment companies in
the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also
a lecturer in English at the University. In addition, Mr. Knerr was
Chairman of The Publishing Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.
ANN R. LEVEN (56)
Director and/or Trustee of the Trust (upon effectiveness of the initial
Registration Statement) and each of the other 33 investment companies in
the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was
Adjunct Professor of Columbia Business School.
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W. THACHER LONGSTRETH (76)
Director and/or Trustee of the Trust (upon effectiveness of the initial
Registration Statement) and each of the other 33 investment companies in
the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
THOMAS F. MADISON (61)
Director and/or Trustee of the Trust (upon effectiveness of the initial
Registration Statement) and each of the other 33 investment companies in
the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications Holdings,
Inc. since 1996. From February to September 1994, Mr. Madison served as
Vice Chairman--Office of the CEO of The Minnesota Mutual Life Insurance
Company and from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.
*JEFFREY J. NICK (44)
President, Chief Executive Officer, Director and/or Trustee of the Trust and
the 33 other investment companies in the Delaware Group.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. From 1992 to 1996, Mr. Nick was Managing
Director of Lincoln National UK plc and from 1989 to 1992, he was Senior
Vice President responsible for corporate planning and development for
Lincoln National Corporation.
CHARLES E. PECK (71)
Director and/or Trustee of the Trust (upon effectiveness of the initial
Registration Statement) and each of the other 32 investment companies in
the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
- ----------
* Trustee affiliated with the Trust's investment manager and considered an
"interested person" as defined in the 1940 Act.
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*DAVID K. DOWNES (57)
Executive Vice President/Chief Operating Officer/Chief Financial Officer and
Trustee of the Trust.
Executive Vice President/Chief Operating Officer/Chief Financial Officer of
each of the other 33 investment companies in the Delaware Group, Delaware
Management Holdings, Inc, Founders CBO Corporation, Delaware Capital
Management, Inc. and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of Delaware Management Company, Inc., DMH Corp., Delaware
Distributors, Inc., Founders Holdings, Inc. and Delaware International
Holdings Ltd.
President/Chief Executive Officer/Chief Financial Officer and Director of
Delaware Service Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware Management Trust
Company and Delaware Investment & Retirement Services, Inc.
Director of Delaware International Advisers Ltd. Before joining the Delaware
Group in 1992, Mr. Downes was Chief Administrative Officer, Chief
Financial Officer and Treasurer of Equitable Capital Management
Corporation, New York, from December 1985 through August 1992, Executive
Vice President from December 1985 through March 1992, and Vice Chairman
from March 1992 through August 1992.
*GEORGE M. CHAMBERLAIN, JR. (50)
Senior Vice President, Secretary and General Counsel and Director of the
Trust.
Senior Vice President, Secretary and General Counsel of each of the other 33
investment companies in the Delaware Group, Delaware Distributors, L.P.
and Delaware Management Holdings, Inc.
Senior Vice President, Secretary, General Counsel and Director of DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc., Delaware Investment &
Retirement Services, Inc. and Delaware Capital Management, Inc.
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various capacities
at different times within the Delaware organization.
JOSEPH H. HASTINGS (47)
Senior Vice President/Corporate Controller of the Trust (upon effectiveness
of the initial Registration Statement), each of the other 33 investment
companies in the Delaware Group and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Capital Management, Inc. and Delaware
International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief Financial
Officer for Prudential Residential Services, L.P., New York, NY from 1989
to 1992. Prior to that, Mr. Hastings served as Controller and Treasurer
for Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
- ----------
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* Trustee affiliated with the Trust's investment manager and considered an
"interested person" as defined in the 1940 Act.
MICHAEL P. BISHOF (35)
Senior Vice President/Treasurer of the Trust (upon effectiveness of the
initial Registration Statement), each of the other 33 investment companies
in the Delaware Group, Delaware Distributors, Inc. and Founders Holdings,
Inc.
Senior Vice President/Investment Accounting of Delaware Management Company,
Inc. and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of
Delaware Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS
First Boston Investment Management, New York, NY from 1993 to 1994 and an
Assistant Vice President for Equitable Capital Management Corporation, New
York, NY from 1987 to 1993.
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The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation expected to be
received from the Trust during its fiscal year and the total compensation
expected to be received from all Delaware Group funds during the Trust's fiscal
year and an estimate of annual benefits to be received upon retirement under the
Delaware Group Retirement Plan for Directors/Trustees as of September 30, 1998.
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
BENEFITS ANNUAL FROM ALL 34
AGGREGATE ACCRUED BENEFITS DELAWARE
COMPENSATION EXPECTED AS PART UPON GROUP INVESTMENT
TO BE RECEIVED FROM OF THE TRUST RETIREMENT COMPANIES
NAME THE TRUST
<S> <C> <C> <C> <C>
W. Thacher Longstreth $0,000 None $38,500 $00,000
Ann R. Leven $0,000 None $38,500 $00,000
Walter P. Babich $0,000 None $38,500 $00,000
Anthony D. Knerr $0,000 None $38,500 $00,000
Charles E. Peck $0,000 None $38,500 $00,000
Thomas F. Madison $0,000 None $38,500 $00,000
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his or
her retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of the
number of years that such person served as a director or the remainder of
such person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to directors of
each fund at the time of such person's retirement. If an eligible director
retired as of September 30, 1997, he or she would be entitled to annual
payments totaling $38,500, in the aggregate, from all of the funds in the
Delaware Group, based on the number of funds in the Delaware Group as of
that date.
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EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in the Delaware Group are set forth
in the relevant prospectuses for such classes. The following supplements that
information. The Funds may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
TELEPHONE EXCHANGE PRIVILEGE
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the relevant Portfolio receives written notice
from the shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional Classes, their Client Services Representative at 800-828-5052,
to effect an exchange. The shareholder's current Portfolio account number must
be identified, as well as the registration of the account, the share or dollar
amount to be exchanged and the fund into which the exchange is to be made.
Requests received on any day after the time the offering price and net asset
value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Portfolios reserve the
right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
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As described in the Portfolios' Prospectuses, neither the Portfolios
nor the Transfer Agent is responsible for any shareholder loss incurred in
acting upon written or telephone instructions for redemption or exchange of
Portfolio shares which are reasonably believed to be genuine.
RIGHT TO REFUSE TIMING ACCOUNTS
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), each Portfolio will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. Each Portfolio reserves the right to temporarily
or permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Portfolio within two weeks of an earlier
exchange request out of the Portfolio, or (ii) makes more than two exchanges out
of the Portfolio per calendar quarter, or (iii) exchanges shares equal in value
to at least $5 million, or more than 1/4 of 1% of the Portfolio's net assets.
Accounts under common ownership or control, including accounts administered so
as to redeem or purchase shares based upon certain predetermined market
indicators, will be aggregated for purposes of the exchange limits.
RESTRICTIONS ON TIMED EXCHANGES
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. Each Portfolio reserves the right to apply these
same restrictions to the account(s) of any person whose transactions seem to
follow a timing pattern (as described above).
Each Portfolio also reserves the right to refuse the purchase side of
an exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Portfolio would be unable to invest effectively in accordance with
its investment objectives and policies, or would otherwise potentially be
adversely affected. A shareholder's purchase exchanges may be restricted or
refused if a Portfolio receives or anticipates simultaneous orders affecting
significant portions of the Portfolio's assets. In particular, a pattern of
exchanges that coincide with a "market timing" strategy may be disruptive to a
Portfolio and therefore may be refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Group funds:
DELAWARE FUND seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. DEVON FUND
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
TREND FUND seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
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SMALL CAP VALUE FUND seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
DELCAP FUND seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
DECATUR INCOME FUND seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. DECATUR TOTAL RETURN FUND
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
BLUE CHIP FUND seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. QUANTUM FUND seeks to achieve long-term capital appreciation.
It seeks to achieve this objective by investing primarily in equity securities
of medium- to large-sized companies expected to grow over time that meet the
Fund's "Social Criteria" strategy.
U.S. GOVERNMENT FUND seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
DELCHESTER FUND seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. STRATEGIC INCOME FUND seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities.
LIMITED-TERM GOVERNMENT FUND seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. U.S. GOVERNMENT MONEY FUND seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
DELAWARE CASH RESERVE seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
TAX-FREE USA FUND seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. TAX-FREE
INSURED FUND invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. TAX-FREE USA INTERMEDIATE FUND seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
TAX-FREE MONEY FUND seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
TAX-FREE PENNSYLVANIA FUND seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital. TAX-FREE NEW
JERSEY FUND seeks a high level of current interest income exempt from federal
income tax and New Jersey state and
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local taxes, consistent with preservation of capital. TAX-FREE OHIO FUND seeks a
high level of current interest income exempt from federal income tax and Ohio
state and local taxes, consistent with preservation of capital.
INTERNATIONAL EQUITY FUND seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. GLOBAL BOND FUND
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. GLOBAL ASSETS FUND seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth. EMERGING MARKETS FUND
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
U.S. GROWTH FUND seeks to maximize capital appreciation by investing
in companies of all sizes which have low dividend yields, strong balance sheets
and high expected earnings growth rates relative to their industry. OVERSEAS
EQUITY FUND seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. NEW PACIFIC FUND seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
DELAWARE GROUP PREMIUM FUND, INC. offers 15 funds available exclusively
as funding vehicles for certain insurance company separate accounts. DECATUR
TOTAL RETURN SERIES seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. DELCHESTER SERIES seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. CAPITAL RESERVES SERIES seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
CASH RESERVE SERIES seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DELCAP SERIES seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. DELAWARE SERIES seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. INTERNATIONAL
EQUITY SERIES seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. VALUE SERIES seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
TREND SERIES seeks long-term capital appreciation by investing primarily in
small-cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. GLOBAL BOND
SERIES seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. STRATEGIC INCOME SERIES seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
DEVON SERIES seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. EMERGING MARKETS SERIES seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. CONVERTIBLE SECURITIES SERIES seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. QUANTUM
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<PAGE> 165
SERIES seeks to achieve long-term capital appreciation by investing primarily in
equity securities of medium to large-sized companies expected to grow over time
that meet the Series' "Social Criteria" strategy.
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES FUND seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
DELAWARE-VOYAGEUR TAX-FREE ARIZONA INSURED FUND seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. DELAWARE-VOYAGEUR
MINNESOTA INSURED FUND seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE MINNESOTA INTERMEDIATE FUND seeks to provide
a high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
DELAWARE-VOYAGEUR TAX-FREE CALIFORNIA INSURED FUND seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE FLORIDA INSURED FUND seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
DELAWARE-VOYAGEUR TAX-FREE FLORIDA FUND seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. DELAWARE-VOYAGEUR
TAX-FREE KANSAS FUND seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas Intangible
personal property tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE MISSOURI INSURED FUND seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of CAPITAL. DELAWARE-VOYAGEUR
TAX-FREE NEW MEXICO FUND seeks to provide a high level of current income exempt
from federal income tax and the New Mexico personal income tax, consistent with
the preservation of capital. DELAWARE-VOYAGEUR TAX-FREE OREGON INSURED FUND
seeks to provide a high level of current income exempt from federal income tax
and the Oregon personal income tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE UTAH FUND seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. DELAWARE-VOYAGEUR TAX-FREE WASHINGTON INSURED FUND seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE FLORIDA INTERMEDIATE FUND seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible personal property
tax. The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
DELAWARE-VOYAGEUR TAX-FREE ARIZONA FUND seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. DELAWARE-VOYAGEUR TAX-FREE
CALIFORNIA FUND seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. DELAWARE-VOYAGEUR TAX-FREE IOWA FUND seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the
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preservation of capital. DELAWARE-VOYAGEUR TAX-FREE IDAHO FUND seeks to provide
a high level of current income exempt from federal income tax and the Idaho
personal income tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR MINNESOTA HIGH YIELD MUNICIPAL BOND FUND seeks to provide a
high level of current income exempt from federal income tax and the Minnesota
personal income tax primarily through investment in medium and lower grade
municipal obligations. NATIONAL HIGH YIELD MUNICIPAL FUND seeks to provide a
high level of income exempt from federal income tax, primarily through
investment in medium and lower grade municipal obligations. DELAWARE-VOYAGEUR
TAX-FREE NEW YORK FUND seeks to provide a high level of current income exempt
from federal income tax and the personal income tax of the state of New York and
the city of New York, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE WISCONSIN FUND seeks to provide a high level of
current income exempt from federal income tax and the Wisconsin personal income
tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE COLORADO FUND seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
AGGRESSIVE GROWTH FUND seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
GROWTH STOCK FUND has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. TAX-EFFICIENT EQUITY FUND seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
DELAWARE-VOYAGEUR TAX-FREE MINNESOTA FUND seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. DELAWARE-VOYAGEUR
TAX-FREE NORTH DAKOTA FUND seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the Delaware Group funds,
including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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GENERAL INFORMATION
The Manager is the investment manager of the Portfolios. The Manager
also provides investment management services to certain of the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions of the Portfolios are
made independently from those of the other funds and accounts, investment
decisions for such other funds and accounts may be made at the same time as
investment decisions for the Portfolios.
The Manager, or Delaware International Advisers Ltd., also manages the
investment options for Delaware Medallion[sm] III Variable Annuity. Medallion is
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware
Medallion offers 15 different investment series ranging from domestic equity
funds, international equity and bond funds and domestic fixed income funds. Each
investment series available through Medallion utilizes an investment strategy
and discipline the same as or similar to one of the Delaware Group mutual funds
available outside the annuity. See Delaware Group Premium Fund, Inc., above.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager or its affiliates, are permitted to engage in personal
securities transactions subject to the exceptions set forth in Rule 17j-1 and
the following general restrictions and procedures: (1) certain blackout periods
apply to personal securities transactions of those persons; (2) transactions
must receive advance clearance and must be completed on the same day as the
clearance is received; (3) certain persons are prohibited from investing in
initial public offerings of securities and other restrictions apply to
investments in private placements of securities; (4) opening positions may only
be closed-out at a profit after a 60-day holding period has elapsed; and (5) the
Compliance Officer must be informed periodically of all securities transactions
and duplicate copies of brokerage confirmations and account statements must be
supplied to the Compliance Officer.
The Distributor acts as national distributor for each Portfolio and for
the other mutual funds in the Delaware Group.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Trust and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
the Portfolios for providing these services consisting of an annual per account
charge, in each case, of $11.00 plus, in each case, transaction charges for
particular services according to a schedule. Compensation is fixed each year and
approved by the Board of Trustees, including a majority of the disinterested
trustees. The Transfer Agent also provides accounting services to the
Portfolios. Those services include performing all functions related to
calculating each Portfolio's net asset value and providing all financial
reporting services, regulatory compliance testing and other related accounting
services. For its services, the Transfer Agent is paid a fee based on total
assets of all funds in the Delaware Group for which it provides such accounting
services. Such fee is equal to 0.25% multiplied by the total amount of assets in
the complex for which the Transfer Agent furnishes accounting services, where
such aggregate complex assets are $10 billion or less, and 0.20% of assets if
such aggregate complex assets exceed $10 billion. The fees are charged to each
fund, including the Portfolios, on an aggregate pro-rata basis. The asset-based
fee payable to the Transfer Agent is subject to a minimum fee calculated by
determining the total number of investment portfolios and associated classes.
The Manager and its affiliates own the names "Delaware Group" and
"Foundation Funds." Under certain circumstances, including the termination of
the Trust's advisory relationships with the Manager or its distribution
relationships with the Distributor, the Manager and its affiliates could cause
the Trust to delete the words "Delaware Group" and "Foundation Funds" from the
Trust's name.
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<PAGE> 168
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of each Fund's securities and cash. As custodian for a
Portfolio, Chase maintains a separate account or accounts for the Portfolio;
receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Portfolio; and collects and
receives income and other payments and distributions on account of the
Portfolio's portfolio securities.
SHAREHOLDER AND TRUSTEE LIABILITY
The Declaration of Trust provides that the trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
The legality of the issuance of the shares offered hereby, has been
passed upon for the Trust by Stradley, Ronon, Stevens & Young, LLP,
Philadelphia, Pennsylvania.
CAPITALIZATION
The Trust currently offers three portfolios of shares. Each Portfolio
currently offers four classes of shares and has a present unlimited authorized
number of shares of beneficial interest with no par value allocated to each
Class. All shares have equal voting rights, except as noted below, no preemptive
rights, are fully transferable and, when issued, are fully paid and
nonassessable.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
represent a proportionate interest in the assets of each Portfolio of the Trust
and have the same voting and other rights and preferences, except that shares of
Institutional Classes may not vote on matters affecting the Portfolios'
Distribution Plans under Rule 12b-1. Similarly, as a general matter,
shareholders of Class A Shares, Class B Shares and Class C Shares may vote only
on matters affecting the 12b-1 Plan that relates to the class of shares that
they hold. However, shareholders of Class B Shares must be given a vote on any
material increase in the 12b-1 fees payable by Class A Shares under the Plans
for the Portfolios. General expenses of each Portfolio will be allocated on a
pro-rata basis to the Classes according to asset size, except that expenses of
the 12b-1 Plans of Class A, Class B and Class C Shares will be allocated solely
to those classes.
NONCUMULATIVE VOTING
THE TRUST'S SHARES HAVE NONCUMULATIVE VOTING RIGHTS WHICH MEANS THAT
THE HOLDERS OF MORE THAN 50% OF THE SHARES OF THE TRUST VOTING FOR THE ELECTION
OF TRUSTEES CAN ELECT ALL THE TRUSTEES IF THEY CHOOSE TO DO SO, AND, IN SUCH
EVENT, THE HOLDERS OF THE REMAINING SHARES WILL NOT BE ABLE TO ELECT ANY
TRUSTEES.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
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APPENDIX A--IRA INFORMATION
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers adjusted
gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who were not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
As illustrated in the following tables, maintaining an IRA remains a
valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with
its tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
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<PAGE> 170
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 10% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any sales
charges or fees. Of course, earnings accumulated in your IRA will be subject to
tax upon withdrawal. If you choose a mutual fund with a fluctuating net asset
value, like the Portfolios, your bottom line at retirement could be lower--it
could also be much higher.
$2,000 INVESTED ANNUALLY ASSUMING A 10% ANNUALIZED RETURN
15% Tax Bracket Single -- $0 - $24,650
Joint -- $0 - $41,200
<TABLE>
<CAPTION>
HOW
MUCH
CUMULATIVE HOW MUCH YOU HAVE
END OF INVESTMENT YOU HAVE WITH FULL
YEAR AMOUNT WITHOUT IRA IRA DEDUCTION
<S> <C> <C> <C>
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704
</TABLE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10% less
15%)]
28% Tax Bracket Single -- $24,651 - $59,750
Joint -- $41,201 - $99,600
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less
28%)]
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[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 10%]
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<PAGE> 172
31% Tax Bracket Single -- $59,751 - $124,650
Joint -- $99,601 - $151,750
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less
31%)] [With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning
10%]
36% Tax Bracket* Single -- $124,651 - $271,050
Joint -- $151,751 - $271,050
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less
36%)] [With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning
10%]
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<PAGE> 173
39.6% Tax Bracket* Single -- over $271,050
Joint -- over $271,050
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less
39.6%)] [With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%)
earning 10%]
- ----------
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $271,050. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
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<PAGE> 174
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
<TABLE>
<S> <C>
After 5 years $ 3,528 more
10 years $ 6,113
20 years $17,228
30 years $47,295
</TABLE>
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return,
compounded monthly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
<TABLE>
<CAPTION>
8% 10%
-- ---
<S> <C> <C>
10 years $ 31,828 $ 36,018
30 years 259,288 397,466
</TABLE>
The statistical exhibits above are for illustration purposes only and
do not reflect the actual Portfolio performance either in the past or in the
future.
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FINANCIAL STATEMENTS
Ernst & Young LLP will serve as the independent auditors for the Trust
and, in its capacity as such, will audit the annual financial statements of each
of the Portfolios.
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SUBJECT TO CHANGE
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
DECEMBER 31, 1997
DELAWARE GROUP FOUNDATION FUNDS
1818 Market Street, Philadelphia, PA 19103
Delaware Group Foundation Funds (the "Trust") is an open-end management
investment company with three separate Portfolios: the Income Portfolio, the
Balanced Portfolio and the Growth Portfolio. Each Portfolio is in effect a
separate fund issuing its own shares. The investment objectives and principal
policies of the Portfolios are described below. See Investment Objectives and
Policies. Although each Portfolio will constantly strive to attain its
objective, there can be no assurance that it will be attained.
The Portfolios will invest in open-end investment companies (mutual
funds) that are members of the Delaware Group of Mutual Funds (individually, an
"Underlying Fund" and collectively, the "Underlying Funds"). The Underlying
Funds include funds investing in U.S. and foreign stocks, bonds, and money
market instruments. In addition, if the Trust receives an exemptive order from
the Securities and Exchange Commission ("SEC"), the Portfolios may, to the
extent consistent with their respective investment objectives, invest in the
same securities that the Underlying Funds may invest in. At any point in time,
it can be expected that each Portfolio will invest in a different combination of
securities and Underlying Funds, reflecting the different investment objectives
and levels of risk and return each Portfolio seeks.
This Prospectus relates to the Portfolios and their Institutional Class
Shares and sets forth information that you should read and consider before you
invest. Please retain it for future reference. A Statement of Additional
Information ("Part B" of the Trust's registration statement), dated December 31,
1997, as it may be amended from time to time, contains additional information
about the Trust and has been filed with the Securities and Exchange Commission.
Part B is incorporated by reference into this Prospectus and is available,
without charge, by writing to the Trust at the above address or by calling 1-
800-523-4640. The Portfolios' financial statements, when available, appear in
the Trust's Annual Report, which will accompany any response to requests for
Part B.
<PAGE> 177
Each Portfolio also offers Class A, B and C Shares. Shares of these
classes are subject to sales charges and other expenses, which may affect their
performance. A prospectus for these classes can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling 800-523-4640.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE PORTFOLIOS
ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT
UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
SHARES OF THE PORTFOLIOS ARE NOT BANK OR CREDIT UNION DEPOSITS.
<PAGE> 178
TABLE OF CONTENTS
COVER PAGE
SYNOPSIS
SUMMARY OF EXPENSES
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES
SUITABILITY
INVESTMENT STRATEGY
INVESTMENTS OF THE UNDERLYING FUNDS
CLASSES OF SHARES
HOW TO BUY SHARES
REDEMPTION AND EXCHANGE
DIVIDENDS AND DISTRIBUTIONS
TAXES
CALCULATION OF NET ASSET VALUE PER SHARE
MANAGEMENT OF THE PORTFOLIOS
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
APPENDIX A - RATINGS
<PAGE> 179
SYNOPSIS
INVESTMENT OBJECTIVES
The investment objective of the Income Portfolio is to seek a combination
of current income and preservation of capital with capital appreciation as a
secondary objective. The investment objective of the Balanced Portfolio is to
seek capital appreciation with current income as a secondary objective. The
investment objective of the Growth Portfolio is to seek long term capital
growth. Each Portfolio has different levels of risk and return. For further
details, see Investment Objectives and Policies and Other Investment Policies.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Each Portfolio invests in Underlying Funds in the Delaware Group of Mutual
Funds, and may, if the Trust receives an exemptive order from the SEC, invest in
the same securities as those in which the Underlying Funds invest, and is
therefore subject to the same risks as those attendant to the Underlying Funds.
See Investment Objectives and Policies and Other Investment Policies and Risk
Considerations.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to each Portfolio, subject to the supervision and direction
of the Company's Board of Trustees. The Manager and certain of its affiliates
also provide investment management services to the Underlying Funds and certain
of the other funds in the Delaware Group. Delaware Distributors, L.P. (the
"Distributor"), an affiliate of the Manager, is the national distributor for
each Portfolio and for all of the other mutual funds in the Delaware Group,
including the Underlying Funds. Delaware Service Company, Inc. (the "Transfer
Agent"), an affiliate of the Manager, is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for each Portfolio and for
all of the other mutual funds in the Delaware Group, including the Underlying
Funds. See Summary of Expenses and Management of the Portfolios for further
information regarding the Manager, the Distributor and the Transfer Agent and
the fees payable to these entities by each of the Portfolios.
PURCHASE PRICE
Shares of each Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge, and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Classes
of Shares.
REDEMPTION AND EXCHANGE
Shares of each Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
OPEN-END INVESTMENT COMPANY
The Trust, which was organized as a Delaware Business Trust on October 00,
1997, is an open-end management investment company. Each Portfolio is
non-diversified as defined by the Investment Company Act of 1940 (the "1940
Act"). See Shares under Management of the Portfolios.
<PAGE> 180
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Portfolio's Institutional Class Shares follows:
<TABLE>
<CAPTION>
INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................... None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price)................................. None
Exchange Fees................................................. None(1)
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- -------------------------------------------------------------------------------------------------------------------
Management Fees............................................... 0.10%(2)
(after waivers)
12b-1 Fees.................................................... None
Other Operating Expenses...................................... 1.10%(3)
------
Total Operating Expenses................................. 1.20%(4)
======
(after waivers)
</TABLE>
(1) Exchanges are subject to the requirements of each fund and a front-end
sales charge may apply.
(2) The Manager has elected voluntarily to waive that portion, if any, of
the annual Asset Allocation Fees payable by the Portfolios and to
reimburse the Portfolios to the extent necessary to ensure that the
"Total Operating Expenses" of the Portfolios do not exceed 1.20%
(exclusive of taxes, interest, brokerage commissions and extraordinary
expenses) during the commencement of the public offering of the
Portfolios through June 30, 1998. If the voluntary expense waivers and
reimbursements were not in effect, it is estimated that the "Total
Operating Expenses" as a percentage of average daily net assets would
be 1.67% for each Portfolio's Institutional Class, respectively,
reflecting Asset Allocation Fees of 0.25% for each Portfolio
(3) "Other Operating Expenses" are based on estimated amounts for the
current fiscal year.
(4) The Portfolios will indirectly bear their pro rata share of the
expenses of the Underlying Funds in which they invest. See Management
of the Portfolios for the expense ratios for each of the Underlying
Funds' most current fiscal year.
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return and (2) redemption and no redemption at the end of each time
period. The following example assumes the voluntary waiver of the asset
allocation fee by the Manager as discussed in this Prospectus.
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<PAGE> 181
INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
ASSUMING REDEMPTION
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Institutional Class $000 $000
Shares
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
FINANCIAL HIGHLIGHTS
Financial Highlights for the Portfolios are not included because, as of the date
of this Prospectus, the Portfolios had no operating history.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Income Portfolio is to seek a
combination of current income and preservation of capital with capital
appreciation as a secondary objective. It seeks to achieve this objective by
investing in a mix of fixed income and domestic equity securities, including
fixed income and domestic equity Underlying Funds. The Income Portfolio will
generally invest at least 45% of its portfolio in fixed income securities and
20% in domestic equity securities.
The investment objective of the Balanced Portfolio is to seek capital
appreciation with current income as a secondary objective. The Balanced
Portfolio seeks to achieve its objective by investing primarily in domestic
equity and fixed income securities, including domestic equity and fixed income
Underlying Funds. The Balanced Portfolio may also invest in international equity
and fixed income securities, including international equity and fixed income
Underlying Funds. The Balanced Portfolio will generally invest at least 25% of
its net assets in fixed income securities, including fixed-income Underlying
Funds.
3
<PAGE> 182
The investment objective of the Growth Portfolio is to seek long term
capital growth. The Growth Portfolio seeks to achieve this objective by
investing primarily in equity securities, including equity Underlying Funds,
and, to a lesser extent, in fixed income securities, including fixed-income
Underlying Funds. The equity securities may include international securities,
including international Underlying Funds.
Each Portfolio will pursue its investment objective through active
asset allocation implemented primarily with investments in a combination of the
Underlying Funds. If the Trust receives an exemptive order from the SEC, the
Portfolios may also separately invest directly in the same securities as those
in which the Underlying Funds may invest, to the extent consistent with each
Portfolio's investment objectives. The investment objective of each Portfolio is
considered a "fundamental policy," which means that it may not be changed
without approval of a Portfolio's shareholders. There is no assurance that a
Portfolio will achieve its objective.
SUITABILITY
The Trust consists of three separate Portfolios. The Portfolios pursue
different investment objectives, with different levels of risk and return. Each
Portfolio is designed to be a long-term investment. The descriptions below
compare the three Portfolios' levels of risk and return relative to one another
and are not intended to imply any particular absolute level of risk or return
for any Portfolio.
INCOME PORTFOLIO (Wealth Preservation Phase - Lower Risk Tolerance)
May be appropriate for the investor in the pre-Retirement/Retirement phase (55+
yrs.) or the investor looking for reduced portfolio risk and/or an increase in
current income.
BALANCED PORTFOLIO (Wealth Accumulation Phase - Moderate Risk
Tolerance) May be appropriate for the investor looking for the capital
appreciation potential of the stock market and the income potential of the bond
market.
GROWTH PORTFOLIO (Earlier Wealth Accumulation Phase - Higher Risk
Tolerance) May be appropriate for the investor looking for long term capital
growth with no need for current income.
INVESTMENT STRATEGY
The Portfolios will invest primarily in open-end investment companies
(mutual funds) that are members of the Delaware Group of Funds (individually, an
"Underlying Fund" and collectively, the "Underlying Funds"), as well as, if the
Trust receives an exemptive order from the SEC, the same kinds of securities as
those in which the Underlying Funds may invest, to the extent consistent with
each Portfolio's investment objectives. The Underlying Funds include funds
investing in U.S. and foreign stocks, bonds, and money market instruments. At
any point in time, it can be expected that each Portfolio will invest in a
different combination of securities and Underlying Funds, reflecting the
different investment objectives and levels of risk and return that each
Portfolio seeks. In allocating the Portfolios' assets, the Manager will evaluate
the expected return of the Underlying Funds, the volatility of the Underlying
Funds (i.e., the variability of returns from one period to the next), and the
correlation of the Underlying Funds (i.e. the degree to which the Underlying
Funds move together).
The allocation of the assets of each Portfolio will be determined by
the Manager. The Manager is the investment manager for each Portfolio. The
Manager or its affiliates also serve as the investment manager to each
Underlying Fund. In determining the asset allocation of the Portfolios, the
Manager will
4
<PAGE> 183
establish an allocation according to asset classes and will implement such
allocation through investment in an appropriate combination of securities and
Underlying Funds.
The Underlying Funds that will be considered for investment by each
Portfolio are listed below, grouped within broad asset classes. The asset class
headings below are provided for convenience and are approximate in nature. For
more detailed information on the investment policies of each Underlying Fund,
see Investment Policies of the Underlying Funds. The list of Underlying Funds
may change from time to time, and Underlying Funds may be added or deleted upon
the recommendation of the Manager without shareholder approval.
UNDERLYING FUND
U.S. EQUITY
Aggressive Growth Fund
Blue Chip Fund
Decatur Total Return Fund
DelCap Fund
Devon Fund
Small Cap Value Fund
Trend Fund
U.S. Growth Fund
INTERNATIONAL EQUITY
Emerging Markets Fund
International Equity Fund
International Small Cap Fund
New Pacific Fund
FIXED INCOME
Delchester Fund
Global Bond Fund
Limited-Term Government Fund
U.S. Government Fund
MONEY MARKET
Delaware Cash Reserve
U.S. Government Money Fund
Under normal circumstances, it can generally be anticipated that of the
three Portfolios, the Growth Portfolio will hold a higher percentage of its
assets in U.S. equity and international securities (including Underlying Funds
which invest primarily in those securities) than will the Balanced Portfolio,
which in turn will hold a higher percentage in such securities and Underlying
Funds than will the Income Portfolio. Likewise, it can generally be anticipated
that of the three Portfolios, the Income Portfolio will hold a higher percentage
of its assets in fixed-income securities (including Underlying Funds which
invest primarily in those securities) than will the Balanced Portfolio, which in
turn will hold a higher percentage in such securities and Underlying Funds than
will the Growth Portfolio.
5
<PAGE> 184
The percentage ranges targeted for each Portfolio by broad asset class
are set forth below. The percentage ranges applicable to each asset class for
each Portfolio may be changed from time to time by the Manager without the
approval of shareholders.
PERCENTAGE RANGES OF INVESTMENT IN ASSET CLASSES
<TABLE>
<CAPTION>
ASSET CLASS INCOME PORTFOLIO BALANCED PORTFOLIO GROWTH PORTFOLIO
<S> <C> <C> <C>
U.S. Equity 20%-50% 35%-65% 45%-75%
International Equity 0%-10% 5%-15% 10%-30%
Fixed Income 45%-75% 25%-55% 05%-35%
Money Market 0%-35% 0%-35% 0%-35%
</TABLE>
A Portfolio will generally at all times be invested in at least four
Underlying Funds, consistent with the table above. Any Portfolio may invest up
to 100% of its total assets in cash, money market instruments or the Cash
Reserve or U.S. Government Money Funds for temporary, defensive purposes.
PURCHASES OF SHARES OF THE UNDERLYING FUNDS
To the extent the Portfolios invest in Underlying Funds, they will
invest only in Institutional Class Shares of such Underlying Funds. Accordingly,
the Portfolios will not pay any sales load or 12b-1 service or distribution fees
in connection with their investments in shares of the Underlying Funds. The
Portfolios, however, will indirectly bear their pro rata share of the fees and
expenses incurred by the Underlying Funds that are applicable to holders of
Institutional Class Shares. The investment returns of each Portfolio, therefore,
will be net of the expenses of the Underlying Funds in which it is invested.
DIRECT INVESTMENT IN SECURITIES AND OTHER INVESTMENT STRATEGIES
The Trust has applied for an exemptive order from the SEC to permit the
Portfolios to invest directly in the same securities which the Underlying Funds
may invest. Until such order is granted, the Portfolios will only invest in the
Underlying Funds and such other securities as are expressly permitted by the
1940 Act. There is no guarantee that the SEC will grant such an order. In the
event this order is granted, each Portfolio may, to the extent consistent with
its investment objective, invest its assets directly in the same types of
securities as those in which the Underlying Funds invest. In addition, if the
order is granted, each Portfolio may, to the extent consistent with its
investment objective, engage directly in the same types of investment strategies
as those in which each Underlying Fund may engage. Each Portfolio would use such
investment strategies to hedge investment positions, including investments
directly in securities and investments in the Underlying Funds, to protect the
Portfolio against a decline in an Underlying Fund's value. Each Portfolio does
not intend to engage in these investment strategies for non-hedging purposes
such that more than 5% of its assets will be exposed. For a description of these
securities and investment strategies, see Investment Policies of the Underlying
Funds.
6
<PAGE> 185
RISK FACTORS
The value of the Portfolios' shares will increase as the value of the
securities owned by the Portfolios increases and will decrease as the value of
the Portfolios' investments decrease. In addition, the Portfolios' share prices
and yields will fluctuate in response to movements in the securities markets as
a whole. Over time, the value of an investment in the Growth Portfolio is
generally expected to fluctuate more than an investment in the Balanced
Portfolio, which in turn is generally expected to fluctuate more over time then
an investment in the Income Portfolio.
Each Portfolio's assets may be primarily invested in a combination of
the Underlying Funds. As a result, each Portfolio's investment performance may
be directly related to the investment performance of the Underlying Funds held
by it. The ability of each Portfolio to meet its investment objective may thus
be directly related to the ability of the Underlying Funds to meet their
objectives as well as the allocation among those Underlying Funds by the
Manager. There can be no assurance that the investment objective of any
Portfolio or Underlying Fund will be achieved.
The Underlying Funds may engage in a variety of investment strategies
which involve certain risks. Moreover, each Portfolio may, if the Trust is
granted an exemptive order by the SEC, to the extent consistent with its
investment objectives, invest in the same securities and employ the same
investment strategies as any of the Underlying Funds. The Portfolios may
therefore be subject to some of the risks resulting from these strategies. The
Portfolios, to the extent consistent with their investment objectives, and
certain of the Underlying Funds may purchase foreign securities; purchase high
yielding, high risk debt securities (commonly referred to as "junk bonds");
enter into foreign currency transactions; engage in options transactions;
engage in futures contracts and options on futures; purchase zero coupon bonds
and pay-in-kind bonds; purchase restricted and illiquid securities; enter into
forward roll transactions; purchase securities on a when-issued or delayed
delivery basis; enter into repurchase agreements; borrow money; loan portfolio
securities and engage in various other investment strategies. Further
information on these investment strategies can be found under Other Investment
Policies and Risk Considerations and in Part B.
Each Portfolio is considered a non-diversified investment company under
the regulations which govern mutual funds because it may invest in a limited
number of securities and Underlying Funds. As a result, each Portfolio may be
subject to greater risk with respect to its individual portfolio than a fund
that is more broadly diversified among a number of issuers. However, most of the
Underlying Funds themselves are diversified investment companies. The Portfolios
do not intend to concentrate in any particular industry, sector or foreign
government security (except for investment companies, to the extent that it is
considered an industry or sector).
* * *
For additional information about each Portfolio's investment policies
and certain risks associated with investments in certain types of securities,
see Other Investment Policies and Risk Considerations.
7
<PAGE> 186
INVESTMENTS OF THE UNDERLYING FUNDS
The following is a summary of the investment objectives and strategies
of the Underlying Funds and the types of securities in which they may invest.
The investment objectives of the Underlying Funds are fundamental policies and
there is no assurance that they will achieve their respective investment
objectives. Each Underlying Fund will constantly strive to achieve its
objectives and, in investing to do so, may hold securities for any period of
time. To the extent that an Underlying Fund (other than a Money Market Fund)
engages in short-term trading in attempting to achieve its objectives, it may
increase its portfolio turnover rate and incur larger portfolio transaction
expenses (including brokerage commissions) and other expenses than might
otherwise be the case. Additional investment strategies with respect to the
Underlying Funds are described in Other Investment Policies and Risk
Considerations and in Part B, as well as in the prospectuses of each Underlying
Fund. For a free copy of a prospectus of any of the Underlying Funds, call
1-800-523-4640 or write to the Trust at the address given above. Except where
noted, the Manager serves as investment manager for each of the Underlying
Funds.
U.S. EQUITY FUNDS
As described below, the following Underlying Funds invest primarily in
equity securities of companies located or conducting their business primarily in
the United States.
Aggressive Growth Fund. The investment objective of Aggressive Growth Fund is
long-term capital appreciation which the Aggressive Growth Fund attempts to
achieve by investing primarily in equity securities of companies which the
Manager believes have the potential for high earnings growth. Although the
Aggressive Growth Fund, in seeking its objective, may receive current income
from dividends and interest, income is only an incidental consideration in the
selection of the Aggressive Growth Fund's investments. The Aggressive Growth
Fund seeks to achieve its investment objective by investing primarily (at least
65% of its total assets) in equity securities (including convertible securities)
of companies which the Manager believes have the potential for high earnings
growth and which are U.S. companies with stock market capitalizations of at
least $300 million. The Aggressive Growth Fund has been designed to provide
investors with potentially greater long-term rewards than provided by an
investment in a fund that seeks capital appreciation from common stocks with
more established earnings histories.
The Aggressive Growth Fund will invest in equity securities of
companies the Manager believes to be undervalued and to have the potential for
high earnings growth. Companies in which the Aggressive Growth Fund invests
generally will meet one or more of the following criteria: high historical
earnings-per-share (EPS) growth; high projected future EPS growth; an increase
in research analyst earnings estimates; attractive relative price to earnings
ratios; and high relative discounted cash flows. In selecting the Aggressive
Growth Fund's investments, the Manager also focuses on companies with capable
management teams, strong industry positions, sound capital structures, high
returns on equity, high reinvestment rates and conservative financial accounting
policies.
In pursuing its objective, the Aggressive Growth Fund anticipates that
it will invest substantially all, and under normal conditions not less than 65%,
of its assets in common stocks, preferred stocks, convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks and warrants or
rights. To the extent that the Aggressive Growth Fund invests in convertible
debt securities, those
8
<PAGE> 187
securities will be purchased on the basis of their equity characteristics, and
ratings, if any, of those securities will not be an important factor in their
selection.
At no time will the investments of the Aggressive Growth Fund in bank
obligations, including time deposits, exceed 25% of the value of the Aggressive
Growth Fund's assets.
Blue Chip Fund. The investment objective of Blue Chip Fund is to achieve
long-term capital appreciation. Current income is a secondary objective. It
seeks to achieve these objectives by investing primarily in equity securities
and securities that are convertible into equity securities. The sub-adviser,
Vantage Global Advisors, Inc. ("Vantage"), an affiliate of the Manager, will
invest in companies which it believes exhibit growth potential that
significantly exceeds the average anticipated growth rate of companies included
in the Standard and Poor's 500 Index ("S&P 500"). Under normal market
conditions, at least 65% of the total assets of Blue Chip Fund will be in
companies determined by Vantage to be "Blue Chip." Generally, the median market
capitalization of companies targeted for investment by Blue Chip Fund will be
greater than $5 billion. For investment purposes, however, "Blue Chip" companies
are those whose market capitalization is greater than $2.5 billion at the time
of investment.
Vantage believes "Blue Chip" companies have characteristics which are
desirable in seeking to achieve the investment objectives of Blue Chip Fund. For
example, such companies tend to have a lengthy history of profit growth and
dividend payment, and a reputation for quality management structure, products
and service. Securities of "Blue Chip" companies generally are considered to be
highly liquid, because compared to those of lesser capitalized companies, more
shares of these securities are outstanding in the marketplace and their trading
volume tends to be higher.
While it is anticipated that Blue Chip Fund will invest principally in
common stock and securities that are convertible into common stock, Blue Chip
Fund may invest in all available types of equity securities, including without
limitation, preferred stock and warrants. Investments in equity securities other
than common stock or securities that are convertible into common stock will be
made when such securities are more attractively priced relative to the
underlying common stock. Such investments may be made in any proportion deemed
prudent under existing market and economic conditions. Convertible securities
include preferred stock and debentures that pay a stated interest rate or
dividend and are convertible into common stock at an established ratio. These
securities, which are usually priced at a premium to their conversion value, may
allow Blue Chip Fund to receive current income while participating to some
extent in any appreciation in the underlying common stock. The value of a
convertible security tends to be affected by changes in interest rates as well
as factors affecting the market value of the underlying common stock.
Up to 20% of Blue Chip Fund's total assets may be invested directly or
indirectly in securities of issuers domiciled in foreign countries, including
investments in American, European and Global Depositary Receipts. ("ADRs",
"EDRs" and "GDRs," respectively or, collectively, "Depositary Receipts"). Blue
Chip Fund may enter into options and futures transactions for hedging purposes
to attempt to counterbalance portfolio volatility.
Decatur Total Return Fund. The investment objective of Decatur Total Return Fund
is to seek to achieve long-term growth. It seeks to achieve its objective by
investing primarily in securities that provide the
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<PAGE> 188
potential for income and capital appreciation without undue risk to principal.
The Decatur Total Return Fund seeks to provide shareholders with a current
return while allowing them to participate in the capital gains potential
associated with equity investments.
The Decatur Total Return Fund generally invests in common stocks and
income-producing securities that are convertible into common stocks. The Manager
looks for securities having a better dividend yield than the average of the
Standard & Poor's ("S&P") 500 Stock Index, as well as capital gains potential.
All available types of appropriate securities are under continuous
study. The Decatur Total Return Fund may invest in all classes of securities,
bonds and preferred and common stocks in any proportion deemed prudent under
existing market and economic conditions. In seeking to obtain its objective, the
Decatur Total Return Fund may hold securities for any period of time. For
temporary, defensive purposes, it may hold a substantial portion of its assets
in cash or short-term obligations.
Income-producing convertible securities include preferred stock and
debentures that pay a stated or variable interest rate or dividend and are
convertible into common stock at an established ratio. These securities, which
are usually priced at a premium to their conversion value, may allow the Decatur
Total Return Fund to receive current income while participating to some extent
in any appreciation in the underlying common stock. The value of a convertible
security tends to be affected by changes in interest rates, as well as factors
affecting the market value of the underlying common stock.
DelCap Fund. The investment objective of DelCap Fund is long-term capital
appreciation. DelCap Fund's strategy is to invest primarily in common stocks
that, in the judgment of the Manager, are of superior quality and in securities
that are convertible into such common stocks. DelCap Fund will attempt to
achieve its objective by purchasing securities issued by companies whose
earnings the Manager believes will grow more rapidly than the average of those
listed in the S&P 500 Stock Index. The Manager's emphasis will be on the
securities of companies that, in its judgment, have the characteristics
supporting such earnings growth. This judgment will be based on, among other
things, the financial strength of the company, the expertise of its management,
the growth potential of the company within the industry and the growth potential
of the industry itself. The focus will be on those securities of companies the
Manager believes have established themselves within their industry while
maintaining growth potential.
While the Manager believes its objective may best be achieved by
investing in common stock, DelCap Fund may also invest in other securities
including, but not limited to, convertible securities, warrants, preferred
stock, bonds and foreign securities. Any specific investment will be dependent
upon the judgment of the Manager. DelCap Fund may make foreign investments
through the purchase and sale of sponsored or unsponsored ADRs.
Devon Fund. The investment objective of Devon Fund is to seek current income and
capital appreciation. The Devon Fund will seek to achieve its objective by
investing primarily in income-producing common stocks, with a focus on common
stocks that the Manager believes have the potential for above average dividend
increases over time. Under normal circumstances, the Devon Fund will generally
invest at least 65% of its total assets in dividend paying common stocks.
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In selecting stocks for the Devon Fund, the Manager will focus
primarily on dividend paying common stocks issued by companies with market
capitalizations in excess of $100 million, but is not precluded from purchasing
shares of companies with market capitalizations of less than $100 million. In
seeking stocks with potential for above average dividend increases, the Manager
will consider such factors as the historical growth rate of a dividend, the
frequency of prior dividend increases, the issuing company's potential to
generate cash flows, and the price/earnings multiple of the stock relative to
the market. The Manager will generally avoid stocks that it believes are
overvalued and may select stocks with current dividend yields that are lower
than the current yield of the Standard & Poor's 500 Stock Index ("S&P 500") in
exchange for anticipated dividend growth.
While the Manager believes that the Devon Fund's objective may best be
attained by investing in common stocks, the Devon Fund may also invest in other
securities including, but not limited to, convertible and preferred securities,
rights and warrants to purchase common stock, and various types of fixed-income
securities, such as U.S. government and government agency securities, corporate
debt securities and bank obligations, and may also engage in futures
transactions. The Devon Fund may also invest in foreign securities.
Small Cap Value Fund. The investment objective of Small Cap Value Fund is
capital appreciation. The strategy will be to invest primarily in common stocks
and securities convertible into common stocks which, in the opinion of the
Manager, have market values which appear low relative to their underlying value
or future earnings and growth potential. Small Cap Value Fund is designed
primarily for capital appreciation; providing current income is not an
objective. Any income produced is expected to be minimal.
Securities will be purchased that the Manager believes to be
undervalued in relation to asset value or long-term earning power of the
companies. The Manager may also invest in securities of companies where current
or anticipated favorable changes within a company provide an opportunity for
capital appreciation. The Manager's emphasis will be on securities of companies
that may be temporarily out of favor or whose value is not yet recognized by the
market.
While not a fundamental policy, under normal market conditions the
Small Cap Value Fund intends to invest at least 65% of its net assets in
securities issued by small cap companies, those currently having a market
capitalization generally of less than $1.5 billion. As a general matter, small
cap companies may have more limited product lines, markets and financial
resources than large cap companies. In addition, securities of small cap
companies, generally, may trade less frequently (and with a lesser volume), may
be more volatile and may be somewhat less liquid than securities issued by
larger capitalization companies.
The Manager will consider the financial strength of the company, the
nature of its management and any developments affecting the security, the
company or the industry. Securities may be out of favor due to a variety of
factors, such as lack of an institutional following, or unfavorable developments
affecting the issuer of the securities, such as poor earning reports, dividend
reductions or cyclical economic or business conditions. Other securities
considered by the Manager would include those of companies where current or
anticipated favorable changes such as a new product or service, technological
breakthrough, management change, projected takeovers, changes in capitalization
or redefinition of future corporate operations provide an opportunity for
capital appreciation. The Manager will also consider securities where trading
patterns suggest that significant positions are being accumulated by officers of
the company, outside investors or the company itself. The Manager feels it may
uncover situations where those who have a vested interest in the company feel
the securities are undervalued and have appreciation potential.
While the Manager believes that Small Cap Value Fund's objective may
best be attained by investing in common stocks, it may also invest in other
securities including, but not limited to, convertible
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securities, warrants, preferred stocks, bonds and foreign securities. Although
it is expected to receive relatively less emphasis, Small Cap Value Fund may
also invest in fixed-income securities without regard to a minimum grade level
in pursuit of its objective where there are favorable changes in a company's
earnings or growth potential or where general economic conditions and the
interest rate environment provide an opportunity for declining interest rates
and consequent appreciation in these securities. Lower rated high yield, high
risk bonds are sometimes referred to as "junk bonds." The strategies employed
are dependent upon the judgment of the Manager.
If the Manager believes that market conditions warrant, Small Cap Value
Fund may employ options strategies. Small Cap Value Fund may write covered call
options on individual issues as well as write call options on stock indices. It
may also purchase put options on individual issues and on stock indices. The
Manager will employ these techniques in an attempt to protect appreciation
attained, to offset capital losses and to take advantage of the liquidity
available in the option markets. The ability to hedge effectively using options
on stock indices will depend, in part, on the correlation between the
composition of the index and Small Cap Value Fund's portfolio as well as the
price movement of individual securities. Small Cap Value Fund does not currently
intend to write or purchase stock index options. While there is no limit on the
amount of Small Cap Value Fund's assets which may be invested in covered call
options, it will not invest more than 2% of its net assets in put options. Small
Cap Value Fund will only use exchange-traded options. It may enter into futures
contracts and buy and sell options on futures contracts relating to securities,
securities indices or interest rates.
Although it will receive relatively minor emphasis in pursuit of its
objective, Small Cap Value Fund may also purchase, at times, lower rated or
unrated corporate bonds without regard to a grade minimum, which may be
considered speculative and may increase the portfolio's credit risk. Although
Small Cap Value Fund will not ordinarily purchase bonds rated below B by Moody's
or S&P (i.e., high-yield, high-risk fixed-income securities), it may do so if
the Manager believes that capital appreciation is likely. Small Cap Value Fund
will not invest more than 25% of its net assets in bonds rated below B.
Investing in such lower rated debt securities may involve certain risks not
typically associated with higher rated securities. Such bonds, commonly referred
to as "junk bonds," are considered very speculative and may possibly be in
default or have interest payments in arrears.
Trend Fund. The investment objective of Trend Fund is long-term capital
appreciation. The strategy is to invest primarily in the common stocks and
securities convertible into common stocks of emerging and other growth-oriented
companies that, in the judgment of the Manager, are responsive to changes within
the marketplace and have the fundamental characteristics to support growth.
Income is not an objective of Trend Fund.
Trend Fund will seek to identify changing and dominant trends within
the economy, the political arena and our society. It will purchase securities
which the Manager believes will benefit from these trends and which have the
fundamentals to exploit them. The fundamentals include managerial skills,
product development and sales and earnings.
Trend Fund may purchase privately placed securities the resale of which
is restricted under applicable securities laws. Such securities may offer a
higher return than comparably registered securities but involve some additional
risk as they can be resold only in privately negotiated transactions,
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in accordance with an exemption from the registration requirements under
applicable securities laws or after registration.
Trend Fund may invest in repurchase agreements, but will not normally
do so except to invest excess cash balances. Trend Fund may also invest in
foreign securities. For hedging purposes, Trend Fund may engage in options
activity and enter into futures contracts and options on futures contracts.
U.S. Growth Fund. The U.S. Growth Fund's fundamental investment objective is to
seek to maximize capital appreciation by investing in companies of all sizes
which have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry. The Manager or sub-adviser, Lynch &
Mayer, Inc. ("Lynch & Mayer"), an affiliate of the Manager, will seek
investments in companies of all sizes that the Manager or sub-adviser believes
have earnings that may be expected to grow faster than the U.S. economy in
general. Such companies may offer the possibility of accelerated earnings growth
because of management changes, new products or structural changes in the
economy. In addition, those companies with relatively high rates of return on
invested capital may be able to finance future growth from internal sources.
Income derived from securities in such companies will be only an incidental
consideration of U.S. Growth Fund.
The U.S. Growth Fund intends to invest primarily in common stocks
believed by the Manager or sub-adviser to have appreciation potential. However,
common stock is not always the class of security that provides the greatest
possibility for appreciation. The U.S. Growth Fund may invest up to 35% of its
assets in debt securities, bonds, convertible bonds, preferred stock and
convertible preferred stock. The U.S. Growth Fund may also invest up to 10% of
its assets in securities rated lower than Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P") if, in the opinion
of the Manager or sub-adviser, doing so would further U.S. Growth Fund's
objective. Lower-rated or unrated securities, commonly referred to as "junk
bonds," are more likely to react to developments affecting market and credit
risk than are more highly rated securities, which react primarily to movements
in the general level of interest rates. The U.S. Growth Fund may invest up to
20% of its assets in foreign securities.
INTERNATIONAL EQUITY FUNDS
As described below, the following Underlying Funds invest primarily in
equity securities of companies located or conducting their business primarily in
foreign countries.
Emerging Markets Fund. The investment objective of Emerging Markets Fund is to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of issuers located or operating in
emerging countries. Under normal circumstances, at least 65% of Emerging
Market's Fund's assets will be invested in equity securities of issuers
organized or having a majority of their assets or deriving a majority of their
operating income in at least three different emerging market countries. It will
attempt to achieve its objective by investing in a broad range of equity
securities, including common stocks, preferred stocks, convertible securities
and warrants issued by companies located or operating in emerging countries. It
is managed by Delaware International Advisers Ltd. ("Delaware International"),
an affiliate of the Manager.
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Emerging Markets Fund considers an "emerging country" to be any country
which is generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation, as well as countries that are classified by
the United Nations or otherwise regarded by their authorities as developing. In
addition, any country that is included in the IFC Free Index or MSCI EMF Index
will be considered to be an "emerging country." As of the date of this
Prospectus, there are more than 130 countries which, in Delaware International's
judgment, are generally considered to be emerging or developing countries by the
international financial community, approximately 40 of which currently have
stock markets. Within this group of developing or emerging countries are
included almost every nation in the world, except the United States, Canada,
Japan, Australia, New Zealand and most nations located in Western and Northern
Europe.
Currently, investing in many emerging countries is not feasible, or
may, in Delaware International's opinion, involve unacceptable political risks.
Emerging Markets Fund will focus its investments in those emerging countries
where Delaware International considers the economies to be developing strongly
and where the markets are becoming more sophisticated. Delaware International
believes that investment opportunities may result from an evolving long-term
international trend favoring more market-oriented economies, a trend that may
particularly benefit certain countries having developing markets. This trend may
be facilitated by local or international political, economic or financial
developments that could benefit the capital markets in such countries.
In considering possible emerging countries in which Emerging Markets
Fund may invest, Delaware International will place particular emphasis on
certain factors, such as economic conditions (including growth trends, inflation
rates and trade balances), regulatory and currency controls, accounting
standards and political and social conditions. It is currently anticipated that
the countries in which Emerging Markets Fund may invest will include, but not be
limited to, Argentina, Brazil, Chile, China, Columbia, Czech Republic, Egypt,
Greece, Hong Kong, Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kenya,
Korea, Malaysia, Mexico, Nigeria, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, South Africa, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela
and Zimbabwe. As markets in other emerging countries develop, Delaware
International expects to expand and further diversify the countries in which the
Emerging Markets Fund invests.
Although not an exclusive list of criteria to be considered by Delaware
International, an emerging country equity security is one issued by a company
that, in the opinion of Delaware International, exhibits one or more of the
following characteristics: (i) its principal securities trading market is an
emerging country, as defined above; (ii) while traded in any market, alone or on
a consolidated basis, the company derives 50% or more of its annual revenues
from either goods produced, sales made or services performed in emerging
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging country. Determinations as to eligibility will be made by
Delaware International based on publicly available information and inquiries
made of the companies.
Emerging Markets Fund may invest in Depositary Receipts, and in both
open-end and listed or unlisted closed-end investment companies, as well as
unregistered investment companies. The Emerging Markets Fund may also invest in
convertible preferred stocks that offer enhanced yield features, such as
Preferred Equity Redemption Cumulative Stock, and certain other non-traditional
equity securities.
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The Emerging Markets may invest up to 35% of its net assets in
fixed-income securities issued by emerging country companies, and foreign
governments, their agencies, instrumentalities or political subdivisions, all of
which may be high yield, high risk fixed-income securities rated lower than BBB
by S&P and Baa by Moody's or, if unrated, are considered by Delaware
International to be of equivalent quality and which present special investment
risks. Such securities are commonly referred to as "junk bonds." Emerging
Markets Fund may also invest in Brady Bonds and zero coupon securities.
International Equity Fund. The investment objective of the International Equity
Fund is to achieve long-term growth without undue risk to principal. It seeks to
achieve this objective by investing primarily in securities that provide the
potential for capital appreciation and income. As an international fund,
International Equity Fund may invest in securities issued in any currency and
may hold foreign currency. Under normal circumstances, at least 65% of
International Equity Fund's assets will be invested in the securities of issuers
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three different countries outside of the
United States. Securities of issuers within a given country may be denominated
in the currency of another country or in multinational currency units such as
the European Currency Unit ("ECU"). International Equity Fund is managed by
Delaware International.
International Equity Fund will attempt to achieve its objective by
investing in a broad range of equity securities including common stocks,
preferred stocks, convertible securities and warrants. Delaware International
will employ a dividend discount analysis across country boundaries and will also
use a purchasing power parity approach to identify currencies and markets that
are overvalued or undervalued relative to the U.S. dollar.
With a dividend discount analysis, Delaware International looks at
future anticipated dividends and discounts the value of those dividends back to
what they would be worth if they were being paid today. Delaware International
uses this technique to attempt to compare the value of different investments.
With a purchasing power parity approach, Delaware International attempts to
identify the amount of goods and services that a dollar will buy in the United
States and compare that to the amount of a foreign currency required to buy the
same amount of goods and services in another country. When the dollar buys less,
the foreign currency may be considered to be overvalued. When the dollar buys
more, the currency may be considered to be undervalued. Eventually, currencies
should trade at levels that should make it possible for the dollar to buy the
same amount of goods and services overseas as in the United States.
International Equity Fund may also invest in sponsored or unsponsored ADRs or
EDRs.
While International Equity Fund may purchase securities in any foreign
country, developed and underdeveloped, or emerging market countries, it is
currently anticipated that the countries in which International Equity Fund may
invest will include, but not be limited to, Canada, Germany, the United Kingdom,
France, the Netherlands, Belgium, Spain, Switzerland, Japan, Australia, Hong
Kong, and Singapore/Malaysia. With respect to certain countries, investments by
an investment company may only be made through investments in closed-end
investment companies that in turn are authorized to invest in the securities of
such countries. Any investment International Equity Fund may make in other
investment companies is limited in amount by the 1940 Act and would involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies.
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Although International Equity Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. It will, however, from time to time,
purchase or sell foreign currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. International Equity Fund may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through entering into
contracts to purchase or sell foreign currencies at a future date (i.e., a
"forward foreign currency" contract or "forward" contract). The International
Equity Fund will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. The International
Equity Fund also may purchase and write put and call options on foreign
currencies (trade on U.S. and foreign exchanges or over-the-counter) for hedging
purposes to protect against declines in the U.S. dollar cost of foreign
securities held by International Equity Fund and against increases in the U.S.
dollar cost of such securities to be acquired.
International Small Cap Fund. The investment objective of International Small
Cap Fund is to achieve long-term capital appreciation. This Fund seeks to
achieve its objective by investing primarily in equity securities of smaller
non-U.S. companies, which may include companies located or operating in
established or emerging countries. International Small Cap Fund is an
international fund. Under normal circumstances, at least 65% of International
Small Cap Fund's total assets will be invested in equity securities of companies
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three different countries outside of the
United States. The current market capitalization of the companies in which
International Small Cap Fund intends to invest primarily generally will be $1.5
billion or less (at the time of purchase). International Small Cap Fund is
managed by Delaware International.
The equity securities in which International Small Cap Fund may invest
include common stocks, preferred stocks, rights or warrants to purchase common
stocks and securities convertible into common stocks. International Small Cap
Fund may also invest in foreign companies through sponsored or unsponsored
American Depositary Receipts, European Depositary Receipts or Global Depositary
Receipts ("Depositary Receipts"), which are receipts typically issued by a bank
or trust company evidencing ownership of underlying securities issued by a
foreign company. By focusing on smaller, non-U.S. companies, International Small
Cap Fund seeks to identify equity securities of emerging and other
growth-oriented companies which in the opinion of Delaware International, are
responsive to changes within their markets, and have the fundamental
characteristics to support growth. Delaware International will seek to identify
changing and dominant trends within the relevant markets, and will purchase
securities of companies which it believes will benefit from these trends. In
addition, Delaware International will consider the financial strength of the
company, the nature of its management, and any developments affecting the
company or its industry. Delaware International may invest in smaller
capitalization companies that may be temporarily out of favor or overlooked by
securities analysts and whose value, therefore, may not yet be fully recognized
by the market. See Special Risk Considerations Small Company Investment Risks.
While International Small Cap Fund may purchase securities in any
foreign country, developed and underdeveloped, or emerging market countries, it
is currently anticipated that the countries in which International Small Cap
Fund may invest will include, but not be limited to, Canada, Germany, the United
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Kingdom, France, the Netherlands, Belgium, Spain, Switzerland, Japan, Australia,
Hong Kong and Singapore/Malaysia as well as Indonesia, Korea, the Philippines,
Taiwan and Thailand. With respect to certain countries, investments by an
investment company may only be made through investments in closed-end investment
companies that in turn are authorized to invest in the securities of such
countries. See Investment Company Securities under Other Investment Policies and
Risk Considerations.
In selecting investments for International Small Cap Fund, Delaware
International will employ a dividend discount analysis across country boundaries
and will also use a purchasing power parity approach to identify currencies and
markets that are overvalued or undervalued relative to the U.S. dollar. Delaware
International uses the dividend discount analysis to compare the value of
different investments. Using this technique, Delaware International looks at
future anticipated dividends and discounts the value of those dividends back to
what they would be worth if they were being paid today. With a purchasing parity
approach, Delaware International attempts to identify the amount of goods and
services that a dollar will buy in the United States and compare that to the
amount of a foreign currency required to buy the same amount of goods and
services in another country. Eventually, currencies should trade at levels that
should make it possible for the dollar to buy the same amount of goods and
services overseas as in the United States. When the dollar buys less, the
foreign currency may be considered to be overvalued. When the dollar buys more,
the currency may be considered to be undervalued.
International Small Cap Fund may invest in both open-end and listed or
unlisted closed-end investment companies, as well as unregistered investment
companies. See Investment Company Securities under Other Investment Policies and
Risk Considerations. International Small Cap Fund may also invest in convertible
preferred stocks that offer enhanced yield features, such as Preferred Equity
Redemption Cumulative Stock, and certain other non-traditional equity
securities.
International Small Cap Fund may invest up to 15% of its net assets in
fixed-income securities issued by emerging country companies, and foreign
governments, their agencies, instrumentalities or political subdivisions, all of
which may be high yield, high risk fixed-income securities rated lower than BBB
by Standard & Poor's Ratings Group ("S&P") and Baa by Moody's Investors
Services, Inc. ("Moody's") or, if unrated, are considered by Delaware
International to be of equivalent quality and which present special investment
risks. International Small Cap Fund may also invest in Brady Bonds.
See High Yield, High Risk Securities and Special Risk Considerations.
For temporary defensive purposes, International Small Cap Fund may
invest all or a substantial portion of its assets in high quality debt
instruments issued by foreign governments, their agencies, instrumentalities or
political subdivisions, the U.S. government, its agencies or instrumentalities
(and which are backed by the full faith and credit of the U.S. government), or
issued by foreign or U.S. companies. For example, International Small Cap Fund
may invest in U.S. fixed-income markets when Delaware International believes
that the global equity markets are excessively volatile or overvalued so that
International Small Cap Fund's objective cannot be achieved in such markets. Any
corporate debt obligations will be rated AA or better by S&P, or Aa or better by
Moody's, or if unrated, will be determined to be of comparable quality by
Delaware International. International Small Cap Fund may also invest in the
securities listed above pending investment of proceeds from new sales of Fund
shares and to maintain sufficient cash to meet redemption requests.
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New Pacific Fund. New Pacific Fund's investment objective is to seek to maximize
long-term capital appreciation by investing primarily in equity securities of
companies domiciled or having their principal business activities in countries
located in the Pacific Basin. John Govett & Company Limited ("John Govett")
serves as sub-adviser for New Pacific Fund.
The New Pacific Fund will invest in companies of varying size, measured
by assets, sales and capitalization. It will invest in companies in one or more
of the following Pacific Basin countries: Australia, Pakistan, China,
Philippines, Hong Kong, Singapore, India, South Korea, Indonesia, Sri Lanka,
Japan, Taiwan, Malaysia, Thailand, and New Zealand.
New Pacific Fund may invest in companies located in other countries or
regions in the Pacific Basin as those economies and markets become more
accessible. While New Pacific Fund will generally have investments in companies
located in at least three different countries or regions, it may from time to
time have investments only in one or a few countries or regions.
New Pacific Fund invests in common stock and may invest in other
securities with equity characteristics, consisting of trust or limited
partnership interests, preferred stock, rights and warrants. It may also invest
in convertible securities, consisting of debt securities or preferred stock that
may be converted into common stock or that carry the right to purchase common
stock. New Pacific Fund may invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign and domestic
over-the-counter markets and may invest in restricted or unlisted securities.
Under normal circumstances, at least 65% of New Pacific Fund's assets
will be invested in equity securities of foreign issuers located in the Pacific
Basin. It may invest in securities of companies located in, or governments of,
developing countries within the Pacific Basin. New Pacific Fund may invest up to
35% of its assets in securities of U.S. issuers. In addition, it may be invested
in short-term debt instruments to meet anticipated day-to-day operating expenses
and liquidity requirements.
FIXED INCOME FUNDS
As described below, the following Underlying Funds invest primarily in
fixed income securities.
Delchester Fund. The investment objective of the Delchester Fund is to seek the
highest current income which the Manager believes is consistent with prudent
investment management. The strategy is to invest primarily in those securities
having a liberal and consistent yield and those tending to reduce the risk of
market fluctuations. Delchester Fund will invest at least 80% of its assets at
the time of purchase in:
(1) Corporate Bonds. Delchester Fund will invest in both rated and
unrated bonds. Unrated bonds may be more speculative in nature
than rated bonds;
(2) Securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities; and
(3) Commercial paper of companies rated A-1 or A-2 by S&P or rated
P-1 or P-2 by Moody's.
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Delchester Fund must invest the remaining assets, if any, in
income-producing securities, including common stocks and preferred stocks, some
of which may have convertible features or attached warrants.
In the long run, Delchester Fund's assets are expected to be invested
primarily in unrated corporate bonds and bonds rated BBB or lower by S&P or Baa
or lower by Moody's and in unrated corporate bonds. See Appendix A to this
Prospectus for more rating information. Investing in these so-called "junk" or
"high-yield" bonds entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved in investment grade
bonds. Such bonds are sometimes issued by companies whose earnings at the time
of issuance are less than the projected debt service on the junk bonds.
Global Bond Fund. The investment objective of it Global Bond Fund is to achieve
current income consistent with the preservation of investors' principal. It
seeks to achieve this objective by investing primarily in fixed-income
securities that may also provide the potential for capital appreciation. As is a
global fund, under normal circumstances, at least 65% of its assets will be
invested in the fixed-income securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating income in
at least three different countries, one of which may be the United States.
Global Bond Fund may invest in securities issued in any currency and may hold
foreign currency. Securities of issuers within a given country may be
denominated in the currency of another country or in multinational currency
units such as the ECU. Global Bond Fund is managed by Delaware International.
Global Bond Fund will attempt to achieve its objective by investing at
least 65% of its assets in a broad range of fixed-income securities, including
foreign and U.S. government securities and debt obligations of foreign and U.S.
companies which are generally rated A or better by S&P or Moody's, or if
unrated, are deemed to be of comparable quality by Delaware International. It
may also invest in zero coupon bonds and in the debt securities of supranational
entities denominated in any currency. Generally, the value of fixed-income
securities moves inversely to the movement of market interest rates. The value
of Global Bond Fund's portfolio securities and, thus, an investor's shares will
be affected by changes in such rates.
Zero coupon bonds are debt obligations which do not entitle the holder
to any periodic payments of interest prior to maturity or a specified date when
the securities begin paying current interest, and therefore are issued and
traded at a discount from their face amounts or par value. A supranational
entity is an entity established or financially supported by the national
governments of one or more countries to promote reconstruction or development.
Examples of supranational entities include, among others, the World Bank, the
European Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and the
Asian Development Bank. For increased safety, Global Bond Fund currently
anticipates that a large percentage of its assets will be invested in U.S. and
foreign government securities and securities of supranational entities.
With respect to U.S. government securities, Global Bond Fund may invest
only in securities issued or guaranteed as to the payment of principal and
interest by the U.S. government, and those of its agencies or instrumentalities
which are backed by the full faith and credit of the United States. Direct
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obligations of the U.S. government which are available for purchase by the
Global Bond Fund include bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These obligations differ mainly in interest rates, maturities
and dates of issuance. Agencies whose obligations are backed by the full faith
and credit of the United States include the Farmers Home Administration, Federal
Financing Bank and others.
With respect to securities issued by foreign governments, their
agencies, instrumentalities or political subdivisions, the Global Bond Fund will
generally invest in such securities if they have been rated AAA or AA by S&P or
Aaa or Aa by Moody's or, if unrated, have been determined by Delaware
International to be of comparable quality. Global Bond Fund may also invest in
sponsored or unsponsored American Depositary Receipts or European Depositary
Receipts. While Global Bond Fund may purchase securities of issuers in any
foreign country, developed and underdeveloped, or emerging market countries, it
is currently anticipated that the countries in which Global Bond Fund may invest
will include, but not be limited to, Canada, Germany, the United Kingdom,
France, the Netherlands, Belgium, Spain, Switzerland, Ireland, Denmark,
Portugal, Italy, Austria, Norway, Sweden, Finland, Luxembourg, Japan and
Australia. With respect to certain countries, investments by an investment
company may only be made through investments in closed-end investment companies
that in turn are authorized to invest in the securities of such countries. Any
investment Global Bond Fund may make in other investment companies is limited in
amount by the 1940 Act and would involve the indirect payment of a portion of
the expenses, including advisory fees, of such other investment companies.
From time to time, the Global Bond Fund may find opportunities to
pursue its objective outside of the fixed-income markets, but in no event will
such investments exceed 5% of Global Bond Fund's net assets. Global Bond Fund
may invest in restricted securities, including securities eligible for resale
without registration pursuant to Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). It may invest no more than 10% of the value of its net
assets in illiquid securities. Global Bond Fund will not concentrate its
investments in any particular industry, which means that it will not invest 25%
or more of its total assets in any one industry.
It is anticipated that the average weighted maturity of the portfolio
will be in the five-to-ten year range. If, however, Delaware International
anticipates a declining interest rate environment, the average weighted maturity
may be extended past ten years. Conversely, if Delaware International
anticipates a rising rate environment, the average weighted maturity may be
shortened to less than five years.
In order to attempt to protect Global Bond Fund's investments from
interest rate fluctuations, it may engage in interest rate swaps. Global Bond
Fund intends to use interest rate swaps as a hedge and not as a speculative
investment. Interest rate swaps involve the exchange by Global Bond Fund with
another party of their respective rights to receive interest, e.g., an exchange
of fixed rate payments for floating rate payments. For example, if Global Bond
Fund holds an interest-paying security whose interest rate is reset once a year,
it may swap the right to receive interest at this fixed rate for the right to
receive interest at a rate that is reset daily. Such a swap position would
offset changes in the value of the underlying security because of subsequent
changes in interest rates. This would protect Global Bond Fund from a decline in
the value of the underlying security due to rising rates, but would also limit
its ability to benefit from falling interest rates.
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Global Bond Fund may enter into interest rate swaps on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or its liabilities, and will usually enter into interest rate swaps on a
net basis, i.e., the two payment streams are netted out, with Global Bond Fund
receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these hedging transactions are entered into for
non-speculative purposes and not for the purpose of leveraging its investments,
Delaware International and Global Bond Fund believe such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. The net amount of the excess, if any, of
Global Bond Fund's obligations over its entitlement with respect to each
interest rate swap will be accrued on a daily basis and an amount of cash or
high-quality liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Custodian Bank. If Global Bond Fund enters into an interest rate swap on other
than a net basis, it would maintain a segregated account in the full amount
accrued on a daily basis of Global Bond Fund's obligations with respect to the
swap.
Limited-Term Government Fund. Limited-Term Government Fund seeks to provide a
high stable level of income, while attempting to minimize fluctuations in
principal and provide maximum liquidity. It seeks to do this by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. Limited-Term Government Fund may also
invest up to 20% of its assets in corporate notes and bonds, certificates of
deposit and obligations of both U.S. and foreign banks, commercial paper and
certain asset-back securities. Limited-Term Government Fund is not a money
market fund. A money market fund is designed for stability of principal;
consequently, the level of income fluctuates. Limited-Term Government Fund is
designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
The level of income will vary depending on interest rates and the
portfolio. However, since longer term rates are generally less volatile than
short-term rates, the level of income for Limited-Term Government Fund may tend
to be less volatile than, for example, a money market fund. Limited-Term
Government Fund attempts to provide yields higher than those available in money
market funds or bank money market accounts by extending its portfolio
maturities. By extending average maturity, Limited-Term Government Fund seeks
higher income than may be available from money market securities but may also
experience greater principal fluctuation.
Limited-Term Government Fund seeks to reduce the effects of interest
rate volatility on principal by keeping the average effective maturity (as that
term is defined in Part B) to no more than five years. If in the judgment of the
Manager rates are low, it will tend to shorten the average effective maturity to
three years or less. Conversely, if in its judgment rates are high, it will tend
to extend the average effective maturity to as high as five years. The Manager
will increase the proportion of short-term instruments when short-term yields
are higher. The Manager may purchase individual securities with a remaining
maturity of up to fifteen years.
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Limited-Term Government Fund will invest primarily in securities
issued or guaranteed by the U.S. government (e.g., Treasury Bills and Notes),
its agencies (e.g., Federal Housing Administration) or instrumentalities (e.g.,
Federal Home Loan Bank) or government-sponsored corporations (e.g., Federal
National Mortgage Association), as well as repurchase agreements and publicly-
and privately-issued mortgage-backed securities collateralized by such
securities. It may invest up to 20% of its assets in: (1) corporate notes and
bonds rated A or above; (2) certificates of deposit and obligations of both U.S.
and foreign banks if they have assets of at least one billion dollars; (3)
commercial paper rated P-1 by Moody's and/or A-1 by S&P's and (4) securities
which are backed by assets such as receivables on home equity and credit loans,
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or financial receivables
currently available or which may be developed in the future. All such securities
must be rated in the highest rating category by a reputable credit rating agency
(e.g., AAA by S&P or Aaa by Moody's).
To achieve its objective, Limited-Term Government Fund may use certain
hedging techniques at the Manager's discretion to protect it's principal value.
Limited-Term Government Fund may purchase put options, write secured put
options, write covered call options, purchase call options and enter into
closing transactions. It may also invest in futures contracts and options on
such futures contracts subject to certain limitations.
Limited-Term Government Fund may invest up to 35% of its assets in
securities issued by certain private, nongovernment corporations, such as
financial institutions, if the securities are fully collateralized at the time
of issuance by securities or certificates issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs). Limited-Term Government Fund
may also invest in securities which are backed by assets such as receivables on
home equity and credit card loans, and receivables on automobile, mobile home
and recreational vehicle loans, wholesale dealer floor plans and leases or other
loans or financial receivables currently available or which may be developed in
the future. All such securities must be rated in the highest rating category by
a reputable credit rating agency (e.g., AAA by S&P or Aaa by Moody's).
Limited-Term Government Fund may also use repurchase agreements which
are at least 100% collateralized by securities in which Limited-Term Government
Fund can invest directly. Repurchase agreements may be used to invest cash on a
temporary basis. Limited-Term Government Fund may loan up to 25% of its assets
to qualified broker/dealers or institutional investors for their use relating to
short sales or other security transactions. Limited-Term Government Fund may
invest in restricted securities, including Rule 144A securities. Limited-Term
Government may invest no more than 10% of the value of its net assets in
illiquid securities.
U.S. Government Fund. The objective of U.S. Government Fund is high current
income consistent with safety of principal by investing primarily in debt
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These include securities issued or backed by U.S. government
agencies and government-sponsored corporations which may not be backed by the
full faith and credit of the U.S. government, such as the Export-Import Bank,
Federal Housing Authority, Federal National Mortgage Association and Federal
Home Loan Banks and mortgage-backed securities issued by non-government entities
but collateralized by securities of the U.S. government, its agencies and
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instrumentalities. The weighted average maturity will be approximately 10 years.
Although these securities are issued or guaranteed as to principal and interest
by the U.S. government or its agencies or instrumentalities, the market value of
these securities, upon which daily net asset value is based, may fluctuate and
is not guaranteed.
U.S. government securities include U.S. Treasury securities consisting
of Treasury Bills, Treasury Notes and Treasury bonds. Some of the other
government securities in which U.S. Government Fund may invest include
securities of the Federal Housing Administration, the Government National
Mortgage Association, the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such securities usually range from three
months to 30 years.
U.S. Government Fund may also invest up to 20% of its assets in: (1)
corporate notes and bonds rated A or above; (2) certificates of deposit and
obligations of both U.S. and foreign banks if they have assets of at least one
billion dollars; (3) commercial paper rated P-1 by Moody's and/or A-1 by S& P;
and (4) asset-backed securities rated Aaa by Moody's or AAA by S&P.
U.S. Government Fund may invest in certificates of the Government
National Mortgage Association ("GNMA"). GNMA Certificates are mortgage-backed
securities. It may also invest in securities issued by certain private,
non-government corporations, such as financial institutions, if the securities
are fully collateralized at the time of issuance by securities or certificates
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Two principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs). U.S.
Government Fund may invest in securities which are backed by assets such as
receivables on home equity and credit loans, receivables regarding automobile,
mobile home and recreational vehicle loans, wholesale dealer floor plans and
leases or other loans or financial receivables currently available or which may
be developed in the future. All such securities must be rated in the highest
rating category by a reputable credit rating agency (e.g., AAA by S&P or Aaa by
Moody's).
U.S. Government Fund may use repurchase agreements which are at least
100% collateralized by securities in which it can invest directly. Repurchase
agreements may be used to invest cash on a temporary basis. U.S. Government Fund
may purchase put options, write secured put options, write covered call options,
purchase call options and enter into closing transactions. It may invest in
futures contracts and options on such futures contracts subject to certain
limitations. U.S. Government Fund may invest in restricted securities, including
Rule 144A securities. U.S. Government Fund may invest no more than 10% of the
value of its net assets in illiquid securities. U.S. Government Fund may loan up
to 25% of its assets to qualified broker/dealers or institutional investors for
their use relating to short sales or other security transactions.
MONEY MARKET FUNDS
As described below, the following Underlying Funds invest primarily in
money market instruments.
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Cash Reserve Fund. As a money market fund, Cash Reserve Fund's investment
objective is to seek to provide maximum current income, while preserving
principal and maintaining liquidity, by investing at least 80% of its assets in
a diversified portfolio of money market securities and managing the portfolio to
maintain a constant $10 per share value. While Cash Reserve Fund will make every
effort to maintain a fixed net asset value of $10 per share, there can be no
assurance that this objective will be achieved.
Cash Reserve Fund limits its investments to those which its Board of
Directors has determined present minimal credit risks and are of high quality
and which will otherwise meet the maturity, quality and diversification
conditions with which taxable money market funds must comply.
Cash Reserve Fund's investments include securities issued or guaranteed
by the U.S. government (e.g., Treasury Bills and Notes) or by the credit of its
agencies or instrumentalities (e.g., Federal Housing Administration and Federal
Home Loan Bank). It may invest in the certificates of deposit and obligations of
both U.S. and foreign banks if they have assets of at least one billion dollars
in accordance with the maturity, quality and diversification conditions with
which taxable money market funds must comply. It also may purchase commercial
paper and other corporate obligations; if such a security or, as relevant, its
issuer, is considered to be rated, at the time of the proposed purchase, it or,
as relevant, its issuer, must be so rated in one of the two highest rating
categories (e.g., for commercial paper, A-2 or better by S&P and P-2 or better
by Moody's; and, for other corporate obligations, AA or better by S&P and Aa or
better by Moody's) by at least two nationally-recognized statistical rating
organizations approved by the Board of Directors or, if such security is not so
rated, the purchase of the security must be approved or ratified by the Board of
Directors in accordance with the maturity, quality and diversification
conditions with which taxable money market funds must comply. Appendix A
describes the ratings of S&P and Moody's.
Cash Reserve Fund maintains an average maturity of not more than 90
days. Also, it does not purchase any instruments with an effective remaining
maturity of more than 13 months. Cash Reserve Fund intends to hold its
investments until maturity, but may sell them prior to maturity for a number of
reasons. These reasons include: to shorten or lengthen the average maturity, to
increase the yield, to maintain the quality of the portfolio or to maintain a
stable share value. If there were a national credit crisis, an issuer were to
become insolvent or interest rates were to rise, principal values could be
adversely affected. Investments in foreign banks and overseas branches of U.S.
banks may be subject to less stringent regulations and different risks than U.S.
domestic banks.
U.S. Government Money Fund. As a money market fund, the U.S. Government Money
Fund's investment objective is to provide maximum current income, while
preserving principal and maintaining liquidity. It seeks to do this by investing
only in short-term securities issued or guaranteed as to principal and interest
by the U.S. government, its agencies or instrumentalities, and repurchase
agreements secured by such permitted investments. All securities purchased by
U.S. Government Money Fund mature within 13 months from the date of purchase,
although repurchase agreements may be collateralized by securities maturing in
more than 13 months. U.S. Government Money Fund maintains an average maturity of
not more than 90 days.
U.S. Government Money Fund limits its investments to those which the
Board of Directors has determined present minimal credit risks and are of high
quality and which are otherwise in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must
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comply. U.S. Government Money Fund attempts to manage the portfolio to maintain
a constant net asset value of $1.00 per share. While U.S. Government Money Fund
will make every effort to maintain a fixed net asset value of $1.00 per share,
there can be no assurance that this objective will be achieved. U.S. Government
Money Fund intends to hold its investments until maturity, but may sell them
prior to maturity for a number of reasons. These reasons include: to shorten or
lengthen the average maturity, to increase the yield, to maintain the quality of
the portfolio or to maintain a stable share value.
U.S. Government Money Fund's investments include direct obligations
issued by the U.S. Treasury which include bills, notes and bonds which differ
from each other principally in interest rates, maturities and dates of issuance.
These issues, plus some federal agency obligations, are guaranteed by the full
faith and credit of the U.S. government. Examples include Federal Housing
Administration, Farmers Home Administration, Government National Mortgage
Association and Export-Import Bank of the United States. Other federal agency
obligations only have the guarantee of the agency. Examples include Federal Home
Loan Banks, Federal Land Banks, Federal Home Loan Mortgage Corporation, The
Tennessee Valley Authority and the International Bank for Reconstruction and
Development. Although obligations of agencies and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on such obligations is generally backed directly or indirectly by the U.S.
government. This support can range from the backing of the full faith and credit
of the United States, to U.S. Treasury guarantees, or to the backing solely of
the issuing agency or instrumentality itself.
U.S. Government Money Fund may invest up to 10% of its assets, together
with any other illiquid investments, in fully-insured deposits maturing in 60
days or less from members of the FDIC. U.S. Government Money Fund may also use
repurchase agreements which are at least 100% collateralized by securities in
which it can invest directly. Repurchase agreements may be used to invest cash
on a short-term basis. Under a repurchase agreement, U.S. Government Money Fund
acquires ownership and possession of a security, and the seller agrees to buy
the security back at a specified time and higher price. If the seller is unable
to repurchase the security, U.S. Government Money Fund could experience delays
and losses in liquidating the securities. To minimize this possibility, it
considers the creditworthiness of banks and dealers when entering into
repurchase agreements. U.S. Government Money Fund may borrow money as a
temporary measure for extraordinary purposes or to facilitate redemptions, but
it does not presently intend to do so. U.S. Government Money Fund may invest in
restricted securities, including Rule 144A securities. U.S. Government Money
Fund may invest no more than 10% of the value of its net assets in illiquid
securities. The Manager determines whether or not individual Rule 144A
Securities are liquid for purposes of the U.S. Government Money Fund's 10%
limitation on investments in illiquid assets.
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CLASSES OF SHARES
The Distributor serves as the national distributor for each Portfolio.
Shares of the Classes may be purchased directly by contacting a Portfolio or its
agent or through authorized investment dealers. All purchases of shares of each
Class are at net asset value. There is no front-end or contingent deferred sales
charge.
INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH DIRECTIONS
PROVIDED BY THE EMPLOYER. EMPLOYEES CONSIDERING PURCHASING SHARES OF THE CLASSES
AS PART OF THEIR RETIREMENT PROGRAM SHOULD CONTACT THEIR EMPLOYER FOR DETAILS.
Shares of each Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
CLASS A SHARES CLASS B SHARES AND CLASS C SHARES
In addition to offering Institutional Class Shares, each Portfolio also
offers Class A Shares, Class B Shares and Class C Shares, which are described in
a separate prospectus. Class A Shares, Class B Shares and Class C Shares may be
purchased through authorized investment dealers or directly by contacting a
Portfolio or the Distributor. Class A Shares carry a front-end sales charge and
have annual 12b-1 expenses equal to a maximum of 0.30%. The maximum front-end
sales charge as a percentage of the offering price is 4.75% and is reduced on
certain transactions of $100,000 or more. Class B and Class C Shares have no
front-end sales charge but are subject to annual 12b-1 expenses equal to a
maximum of 1%. Shares of Class B and C and certain shares of Class A may be
subject to a contingent deferred sales charge upon redemption. To obtain a
prospectus relating to such classes, contact the Distributor by writing to the
address on the cover of this Prospectus or by calling 800-523-4640.
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HOW TO BUY SHARES
Each Portfolio makes it easy to invest by mail, by wire, by exchange
and by arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Classes.
INVESTING DIRECTLY BY MAIL
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to the specific Portfolio and Class selected, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Portfolio and Class selected. Your check should
be identified with your name(s) and account number.
INVESTING DIRECTLY BY WIRE
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the class in which you are
investing).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement account, an
appropriate retirement plan application, to the specific Portfolio and Class
selected, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Classes, you may write and authorize
an exchange of part or all of your investment into a Portfolio. However, Class B
Shares and Class C Shares of the Portfolios and the Class B Shares and the Class
C Shares of the other funds in the Delaware Group offering such classes of
shares may not be exchanged into the Classes. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-5052 for more
information. See Redemption and Exchange for more complete information
concerning your exchange privileges.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of Portfolio shares through most investment
dealers who, as part of the service they provide, must promptly transmit orders
to the Portfolios. They may charge for this service.
PURCHASE PRICE AND EFFECTIVE DATE
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
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The effective date of a purchase is the date the order is received by a
Portfolio, its agent or designee. The effective date of a direct purchase is the
day your wire, electronic transfer or check is received, unless it is received
after the time the share price is determined, as noted above. Purchase orders
received after such time will be effective the next business day.
THE CONDITIONS OF YOUR PURCHASE
Each Portfolio reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. Each Portfolio can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Group. Each Portfolio reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Portfolio also reserves the right, upon 60 days' written notice,
to involuntarily redeem accounts that remain under $250 as a result of
redemptions.
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REDEMPTION AND EXCHANGE
REDEMPTION AND EXCHANGE REQUESTS MADE ON BEHALF OF PARTICIPANTS IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH DIRECTIONS
PROVIDED BY THE EMPLOYER. EMPLOYEES SHOULD THEREFORE CONTACT THEIR EMPLOYER FOR
DETAILS.
Your shares will be redeemed or exchanged based on the net asset value
next determined after a Portfolio receives your request in good order. For
example, redemption and exchange requests received in good order after the time
the net asset value of shares is determined will be processed on the next
business day. See Purchase Price and Effective Date under How to Buy Shares.
Except as otherwise noted below, for a redemption request to be in "good order,"
you must provide your Class account number, account registration, and the total
number of shares or dollar amount of the transaction. With regard to exchanges,
you must also provide the name of the fund in which you want to invest the
proceeds. Exchange instructions and redemption requests must be signed by the
record owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling a Portfolio at 800-828-5052. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Each Portfolio will process written and telephone redemption requests
to the extent that the purchase orders for the shares being redeemed have
already settled. Each Portfolio will honor redemption requests as to shares for
which a check was tendered as payment, but no Portfolio will mail or wire the
proceeds until it is reasonably satisfied that the check has cleared, which may
take up to 15 days from the purchase date. You can avoid this potential delay if
you purchase shares by wiring Federal Funds. Each Portfolio reserves the right
to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
Shares of the Classes may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Classes, such exchange will be exchanged at
net asset value. Shares of the Classes may not be exchanged into the Class B
Shares or Class C Shares of the funds in the Delaware Group. Each Portfolio may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by a Portfolio or the Distributor for redeeming or exchanging your
shares although, in the case of an exchange, a sales charge may apply. You may
also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
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All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the a Portfolio or its
agent.
WRITTEN REDEMPTION AND EXCHANGE
You can write to a Portfolio at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange of any or
all of your shares into another mutual fund in the Delaware Group, subject to
the same conditions and limitations as other exchanges noted above. The request
must be signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, a Portfolio requires a signature
by all owners of the account and may require a signature guarantee. Each
signature guarantee must be supplied by an eligible guarantor institution. Each
Portfolio reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. Each Portfolio may require
further documentation from corporations, executors, retirement plans,
administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate(s)
must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify a Portfolio in writing that you do not
wish to have such services available with respect to your account. Each
Portfolio reserves the right to modify, terminate or suspend these procedures
upon 60 days' written notice to shareholders. It may be difficult to reach a
Portfolio by telephone during periods when market or economic conditions lead to
an unusually large volume of telephone requests.
Neither a Portfolio nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Portfolio shares which are reasonably believed to be
genuine. With respect to such telephone transactions, a Portfolio will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, a Portfolio or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging
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shares by telephone, you are acknowledging prior receipt of a prospectus for the
fund into which your shares are being exchanged.
TELEPHONE REDEMPTION-CHECK TO YOUR ADDRESS OF RECORD
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the redemption request.
TELEPHONE REDEMPTION-PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There are
no fees for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative prior to
the time the net asset value is determined, as noted above.
TELEPHONE EXCHANGE
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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DIVIDENDS AND DISTRIBUTIONS
The Income and Balanced Portfolios will normally make payments from net
investment income, if any, on a quarterly basis. The Growth Portfolio will
normally make payments from net investment income, if any, on a annual basis.
Payments from net realized securities profits of a Portfolio, if any, will
normally be distributed annually in the quarter following the close of the
fiscal year.
Each class of each Portfolio will share proportionately in the
investment income and expenses of that Portfolio, except that a Class will not
incur any distribution fees under the 12b-1 Plans which apply to Class A, B and
C Shares.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Portfolio.
Each Portfolio has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, a
Portfolio will not be subject to federal income tax, or to any excise tax, to
the extent its earnings are distributed as provided in the Code.
Each Portfolio intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net investment
income or net short-term capital gains will be taxable to those investors who
are subject to income taxes as ordinary income, whether received in cash or in
additional shares. For corporate investors, dividends from net investment income
will generally qualify in part for the corporate dividends-received deduction.
The portion of dividends paid by a Portfolio that so qualifies will be
designated each year in a notice from the Portfolio to the Portfolio's
shareholders.
Distributions paid by a Portfolio from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in that Portfolio. The Portfolios do not seek
to realize any particular amount of capital gains during a year; rather,
realized gains are a by-product of Portfolio management activities.
Consequently, capital gains distributions may be expected to vary considerably
from year to year. Also, for those investors subject to tax, if purchases of
shares in a Portfolio are made shortly before the record date for a dividend or
capital gains distribution, a portion of the investment will be returned as a
taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November, or December to shareholders
of record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Portfolios and received by the
shareholder on December 31 of the year declared.
The sale of shares of a Portfolio is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Portfolios and any other fund in the Delaware Group. Any loss
incurred on a sale or exchange of Portfolio shares that had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares. All or a portion of
the sales charge incurred in acquiring a Portfolio's shares will be excluded
from the federal tax basis of any of such shares sold or exchanged within 90
days of their purchase (for purposes of determining gain or loss upon sale of
such shares) if the sale proceeds are reinvested in that Portfolio or in another
fund in the Delaware Group of funds and a sales charge that would otherwise
apply to the reinvestment is reduced or eliminated. Any portion of such sales
charge excluded from the tax basis of the shares sold will be added to the tax
basis of the shares acquired in the reinvestment.
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In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of each Portfolio are exempt from
Pennsylvania county personal property taxes.
Each year, the Trust will mail to you information on the tax status of
each Portfolio's dividends and distributions. Shareholders will also receive
each year information as to the portion of dividend income, if any, that is
derived from U.S. government securities that are exempt from state income tax.
Of course, shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by a Portfolio.
The Trust is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Taxes in Part B for additional information on tax matters relating
to each Portfolio and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The purchase and redemption price of each Class is the net asset value
("NAV") per share of Class shares next computed after the order is received. The
NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The net asset values of all outstanding shares of each class of a
Portfolio will be computed on a pro-rata basis for each outstanding share based
on the proportionate participation in that Portfolio represented by the value of
shares of that class. All income earned and expenses incurred by a Portfolio
will be borne on a pro-rata basis by each outstanding share of a class, based on
each class' percentage in that Portfolio represented by the value of shares of
such classes, except that the Institutional Class will not incur any of the
expenses under the Trust's 12b-1 Plans and the Class A, Class B and Class C
Shares of each Portfolio alone will bear the 12b-1 Plan expenses payable under
their respective Plans. Due to the specific distribution expenses and other
costs that will be allocable to each class, the NAV of each class of a Portfolio
will vary.
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MANAGEMENT OF THE PORTFOLIOS
TRUSTEES
The business and affairs of the Trust are managed under the direction
of its Board of Trustees. Part B contains additional information regarding the
Trust's trustees and officers.
INVESTMENT MANAGER
The Manager furnishes asset allocation services to each Portfolio.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On September 30, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International, were managing in
the aggregate more than $00 billion in assets in the various institutional or
separately managed (approximately $00 billion) and investment company
(approximately $00 billion) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
The Manager manages each Portfolio's assets by allocating the
Portfolio's assets among the Underlying Funds. Such management services include
monitoring the Underlying Funds in order to determine whether they are investing
their assets in a manner that is consistent with the asset classes targeted for
investment by each Portfolio. The Manager also administers the Trust's affairs
and pays the salaries of all the trustees, officers and employees of the Trust
who are affiliated with the Manager. For these services, the Manager is paid an
annual Asset Allocation Fee equal to 0.25% (currently waived to 0.10%) of
average daily net assets of each of the Portfolios.
Each Portfolio, as a shareholder in the Underlying Funds, will
indirectly bear its proportionate share of any management fees and other
expenses paid by the Underlying Funds. The investment adviser, sub-adviser
(where applicable) and the management fee (as an annual percentage of net assets
before fee waivers) and expense ratio for the most recent fiscal year for each
of the Institutional Class shares of the Underlying Funds are set forth below:
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<TABLE>
<CAPTION>
UNDERLYING FUND ADVISER SUB-ADVISER** FEE RATE EXPENSE RATIO
<S> <C> <C> <C> <C>
Aggressive Growth Manager 1.00% 0.90%(6)
Blue Chip Manager Vantage* 0.65%(1) 1.20%
Decatur Total Return Manager 0.57%(2) 0.81%
Delcap Manager 0.75% 1.05%
Devon Manager 0.60%(3) 0.95%(6)
Small Cap Value Manager 0.75% 1.15%
Trend Manager 0.75% 1.08%
U.S. Growth Manager Lynch & Mayer* 0.70% 1.50%(6)
Emerging Markets Delaware International* 1.25% 1.70%(6)
International Equity Delaware International* 0.75% 1.55%(6)
International Small Cap Delaware International* 1.25% 1.70%(6)
New Pacific Manager John Govett 0.80% 1.50%
Delchester Manager 0.59%(4) 0.79%
Global Bond Delaware International* 0.75% 0.95%(6)
Limited-Term Gov't Manager 0.50% 0.78%
U.S. Government Manager 0.60% 0.86%
Delaware Cash Reserve Manager 0.49%(5) 0.88%
U.S. Government Money Manager 0.50% 0.74%(6)
</TABLE>
* Affiliate of the Manager.
** Fees payable by the Manager to a Sub-Adviser have no effect on the management
fees payable by an Underlying Fund.
1. Under the Investment Management Agreement for Blue Chip Fund, the Manager is
paid an annual fee equal to 0.65% on the first $500 million of average daily net
assets, 0.625% on the next $500 million and 0.60% on the average daily net
assets in excess of $1 billion.
2. Under the Investment Management Agreement for Decatur Total Return Fund, the
Manager is paid an annual fee equal to 0.60% on the first $500 million of
average daily net assets, 0.575% on the next $250 million of average
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daily net assets and 0.55% on the average daily net assets in excess of $750
million, less all directors fees paid by the fund.
3. Under the Investment Management Agreement for Devon Fund, the Manager is paid
an annual fee equal to 0.60% on the first $500 million of average daily net
assets and 0.50% on the average daily net assets in excess of $500 million.
4. Under the Investment Management Agreement for Delchester Fund, the Manager is
paid an annual fee equal to 0.60% on the first $500 million of average daily net
assets, 0.575% on the next $250 million of average daily net assets and 0.55% on
the average daily net assets in excess of $750 million, less all directors fees
paid by the fund.
5. Under the Investment Management Agreement for Delaware Cash Reserve, the
Manager is paid an annual fee equal to 0.50% on the first $500 million of
average daily net assets, 0.475% on the next $250 million of average daily net
assets, 0.45% on the next $250 million of average daily net assets, 0.425% on
the next $250 million of average daily net assets, 0.375% on the next $250
million of average daily net assets, 0.325% on the next $250 million of average
daily net assets, 0.30% on the next $250 million of average daily net assets and
0.275% on the average daily net assets in excess of $2 billion, less all
directors fees paid by the fund.
6. Reflects voluntary waivers and payments of fees by the investment manager.
PORTFOLIO MANAGER
J. Paul Dokas serves as portfolio manager of each of the Portfolios.
Mr. Dokas holds a BBA in Business from Loyola College and an MBA in Business
from the University of Maryland. Prior to joining the Delaware Group in 1997, he
was a Director of Trust Investments for Bell Atlantic Corporation in
Philadelphia. Mr. Dokas is a CFA charterholder.
PORTFOLIO TRADING PRACTICES
No commissions are paid directly by the Portfolios upon the purchase or
sale of Underlying Fund shares. The Portfolios normally will not invest for
short-term trading purposes. However, each Portfolio may sell its shares of an
Underlying Fund without regard to the length of time they have been held. The
degree of portfolio activity may affect taxes payable by the Portfolios'
shareholders to the extent that net capital gains are realized. Given the
Portfolios' investment objectives, their annual portfolio turnover rates are not
expected to exceed 100%. A turnover rate of 100% would occur, for example, if
all the investments held by a Portfolio at the beginning of the year were
replaced by the end of the year.
Because the Manager must consider the interests of the Portfolios as
well as those of the Underlying Funds, the Boards of Trustees/Directors of the
Trust and the Underlying Funds have established Asset Allocation Guidelines
("Guidelines") for the Manager. Pursuant to these Guidelines, under normal
market and economic conditions, the Portfolios' portfolio manager will seek to
provide as much advance notice as is practical to the portfolio manager of an
Underlying Fund of allocation transactions that may affect the Underlying Fund.
In addition, the Portfolios' portfolio manager will normally attempt to avoid
excessive allocation transactions involving any particular Underlying Fund in
any one calendar quarter.
A Portfolio uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be placed
with brokers or dealers who provide brokerage and research
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services to the Manager or its advisory clients. These services may be used by
the Manager in servicing any of its accounts. Subject to best price and
execution, a Portfolio may consider a broker/dealer's sales of shares of funds
in the Delaware Group of funds in placing portfolio orders and may place orders
with broker/dealers that have agreed to defray certain expenses of such funds,
such as custodian fees.
PERFORMANCE INFORMATION
From time to time, the Portfolios may quote total return performance of
their respective Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten-year or life-of-fund periods, as relevant. Each Portfolio may also advertise
aggregate and average total return information concerning a Class over
additional periods of time.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time. Past performance is not a guarantee of future results.
DISTRIBUTION (12b-1) AND SERVICE
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of each Portfolios' shares under separate Distribution Agreements
with the Trust.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Portfolios
under an Agreement. The Transfer Agent also provides accounting services to the
Portfolios pursuant to the terms of a separate Fund Accounting Agreement.
Certain recordkeeping and other shareholder services that otherwise would be
performed by the Transfer Agent may be performed by certain other entities and
the Transfer Agent may elect to enter into an agreement to pay such other
entities for those services. In addition, participant account maintenance fees
may be assessed for certain recordkeeping provided as part of retirement plan
and administration service packages. These fees are based on the number of
participants in the plan and the various services selected. Fees will be quoted
upon request and are subject to change.
The trustees annually review fees paid to the Distributor and the
Transfer Agent. The Distributor and the Transfer Agent are also indirect, wholly
owned subsidiaries of DMH.
EXPENSES
Each Portfolio is responsible for all of its own expenses other than
those borne by the Manager under the Asset Allocation Agreements and those borne
by the Distributor under the Distribution Agreements.
SHARES
The Trust is an open-end management investment company. Each Portfolio
is non-diversified, as defined by the 1940 Act. Commonly known as a mutual fund,
the Trust was organized as a Delaware Business Trust on October 00, 1997. The
Trust currently offers three series of shares: the Income, Balanced and Growth
Portfolios. Portfolio shares have a par value of $0.01, equal voting rights,
except as noted below, and are equal in all other respects. Each Portfolio will
vote separately on any matter
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which affects only that Portfolio. Shares of each Portfolio have a priority over
shares of any other series of the Trust in the assets and income of that
Portfolio.
The Trust's shares have noncumulative voting rights, which means that
the holders of more than 50% of the Trust's shares voting for the election of
trustees can elect 100% of the trustees if they choose to do so. Under Delaware
law and the Trust's Declaration of Trust, the Trust is not required, and does
not intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of the Trust's outstanding shares may request that a special meeting be
called to consider the removal of a trustee.
Shares of each Class represent proportionate interests in the assets of
the respective Portfolio and have the same voting and other rights and
preferences as the other classes of that Portfolio, except that shares of the
Institutional Classes are not subject to, and may not vote on, matters affecting
the Distribution Plans under Rule 12b-1 relating to the Class A, Class B and
Class C Shares. Similarly, as a general matter, the shareholders of the Class A
Shares, Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However, the
Class B Shares of a Portfolio may vote on any proposal to increase materially
the fees to be paid by that Portfolio under the 12b-1 Plan relating to the Class
A Shares.
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OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Discussed below are other investment policies and risk considerations
relating to the Underlying Funds. In addition, if the Trust receives an
exemptive order from the SEC, each Portfolio may, to the extent consistent
with its investment objectives, invest in any of the securities in which an
Underlying Fund may invest and may pursue any of the same strategies as an
Underlying Fund.
HIGH-YIELD, HIGH RISK SECURITIES
The Delchester Fund will invest primarily in, and Decatur Total Return,
U.S. Growth, Small Cap Value and Emerging Markets Funds may invest in, high
risk, high yield securities, commonly known as "junk bonds." These securities
entail the following risks:
Youth and Volatility of the High-Yield Market. Although the market for
high-yield bonds has been in existence for many years, including periods of
economic downturns, the high-yield market grew rapidly during the long economic
expansion which took place in the United States during the 1980s. During that
economic expansion, the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially during that economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield bonds, would adversely
affect the value of outstanding bonds and would adversely affect the ability of
high-yield issuers to repay principal and interest. Those analysts cite
volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield bonds,
an increase in the number of high-yield bond defaults and corresponding
volatility in an Underlying Fund's net asset value. At times in the past,
uncertainty and volatility in the high-yield market resulted in volatility in
certain Underlying Funds' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or
other factors, an Underlying Fund experiences substantial net redemptions of the
Underlying Fund's shares for a sustained period of time (i.e., more shares are
redeemed than are purchased), it may be required to sell securities without
regard to the investment merits of the securities to be sold. If the Underlying
Fund sells a substantial number of securities to generate proceeds for
redemptions, its asset base will decrease and its expense ratio may increase.
Liquidity and Valuation. The secondary market for high-yield securities
is currently dominated by institutional investors, including mutual funds and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse affect on an
Underlying Fund's ability to dispose of particular issues, when necessary, to
meet it's liquidity needs or in response to a specific economic event, such as
the deterioration in the creditworthiness of the issuer. In addition, a less
liquid secondary market makes it more difficult for the Fund to obtain precise
valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role
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in valuing high-yield securities than is normally the case. The secondary market
for high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. Such Underlying Fund's privately
placed high-yield securities are particularly susceptible to the liquidity and
valuation risks outlined above.
Legislative and Regulatory Action and Proposals. There are a variety of
legislative actions which have been taken or which are considered from time to
time by the United States Congress which could adversely affect the market for
high-yield bonds. For example, Congressional legislation limited the
deductibility of interest paid on certain high-yield bonds used to finance
corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield
issues, could reduce the number of new high-yield securities being issued and
could make it more difficult for the Portfolio to attain its investment
objective.
Zero Coupon Bonds and Pay-in-Kind Bonds. Global Bond, Delchester and
Emerging Markets may invest in zero coupon bonds or pay-in-kind ("PIK) bonds.
Zero coupon bonds and PIK bonds are generally considered to be more
interest-sensitive than income-bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to the Underlying Fund. For example, an
Underlying Fund accrues, and is required to distribute to shareholders, income
on its zero coupon bonds. However, the Underlying Fund may not receive the cash
associated with this income until the bonds are sold or mature. If the
Underlying Fund did not have sufficient cash to make the required distribution
of accrued income, the it could be required to sell other securities in its
portfolio or to borrow to generate the cash required.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Consistent with their respective objectives, Aggressive Growth, Blue
Chip, Decatur Total Return, U.S. Growth, Devon and New Pacific Funds may invest
in U.S. government securities and corporate debt obligations on a when-issued or
delayed delivery basis. Such transactions involve commitments to buy a new issue
with settlement up to 60 days later. The average settlement date for when-issued
or delayed delivery securities purchased by such Underlying Funds is generally
between 30 and 45 days. During the time between the commitment and settlement,
an Underlying Fund does not accrue interest, but the market value of the bonds
may fluctuate. This can result in the Underlying Fund's share value increasing
or decreasing. The Underlying Funds will not ordinarily sell when-issued or
delayed delivery securities prior to settlement. If an Underlying Funds invest
in securities of this type, they will maintain a segregated account to pay for
them and mark the account to market daily.
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MORTGAGE-BACKED SECURITIES
Devon, U.S. Government and Limited-Term Government Funds may invest in
mortgage-backed securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or government sponsored corporations or those
issued by certain private, non-government corporations, such as financial
institutions. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Such private-backed
securities may be 100% collateralized at the time of issuance by securities
issued or guaranteed by the U.S. government, its agencies, or instrumentalities
(so-called "agency mortgage-backed securities") or may not be so collateralized
(so-called "non-agency mortgage-backed securities"). The aforementioned
Underlying Funds may invest in agency and non-agency mortgage-backed securities.
Non-agency mortgage-backed securities may comprise up to 20% of such Underlying
Funds' respective assets, but all non-agency mortgage-backed securities must (i)
be rated at the time of purchase in the four top rating categories by a
nationally-recognized statistical rating organization (e.g., BBB or better by
Standard & Poor's Ratings Group ("S&P") or Baa or better by Moody's Investors
Service, Inc. ("Moody's")) and (ii) represent interests in whole-loan mortgages,
multi-family mortgages, commercial mortgages or other mortgage collateral
supported by a first mortgage lien on real estate. Non-agency mortgage-backed
securities are subject to the interest rate and prepayment risks to which other
CMOs and REMICs issued by private issuers are subject. Non-agency
mortgage-backed securities may also be subject to a greater risk of loss of
interest and principal because they are not collateralized by securities issued
or guaranteed by the U.S. government. In addition, timely information concerning
the loans underlying these securities may not be as readily available and the
market for these securities may be less liquid than the market for other CMOs
and REMICs.
ASSET-BACKED SECURITIES
Devon, U.S. Government, Limited-Term Government and Delaware Cash Reserve
Funds may invest in securities which are backed by assets such as receivables on
home equity and credit loans, receivables regarding automobile, mobile home and
recreational vehicle loans, wholesale dealer floor plans and leases or other
loans or financial receivables currently available or which may be developed in
the future. For these Underlying Funds, all such securities must be rated in one
of the four highest rating categories by a reputable rating agency (e.g., BBB or
better by S&P or Baa or better by Moody's). It is Cash
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Reserve 's current policy to limit asset-backed investments to those rated in
the highest rating category by a reputable rating agency (e.g., AAA by S&P or
Aaa by Moody's) and represented by interests in credit card receivables,
wholesale dealer floor plans, home equity loans and automobile loans.
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued.
The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets.
Such rate of payments may be affected by economic and various other factors such
as changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. See Mortgage-Backed
Securities, above. Such asset-backed securities do, however, involve certain
risks not associated with mortgage-backed securities, including the risk that
security interests cannot be adequately or in many cases ever established, and
other risks which may be peculiar to particular classes of collateral. For
example, with respect to credit card receivables, a number of state and federal
consumer credit laws give debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the outstanding balance. In the case of
automobile receivables, there is a risk that the holders may not have either a
proper or first security interest in all of the obligations backing such
receivables due to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore, recoveries on
repossessed collateral may not always be available to support payments on the
securities.
REITs
Devon Fund may invest in REITs. REITs are pooled investment vehicles
which invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as equity REITs, mortgage
REITs or a combination of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property and derive income primarily
from the collection of rents. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive income from the
collection of interest payments. Like investment companies, REITs are not taxed
on income distributed to shareholders provided they comply with several
requirements in the Code. REITs are subject to substantial cash flow dependency,
defaults by borrowers, self-liquidation, and the risk of failing to qualify for
tax-free pass-through of income under the Code, and/or to maintain exemptions
from the 1940 Act.
FOREIGN SECURITIES AND FOREIGN CURRENCY TRANSACTIONS
The Underlying Funds in the International Equity category invest their
assets primarily in securities of foreign issuers, and the Global Bond Fund will
invest at least 65% of its assets in fixed-income securities of issuers
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three different countries, one of which may
be the United States. Blue
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Chip, Devon, DelCap and Small Cap Value Funds may also invest a portion of their
assets in securities of issuers organized or having a majority of their assets
in or deriving a majority of their operating income outside the United States.
In connection with investments in foreign securities, such Underlying Funds may,
from time to time, conduct foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or through entering into contracts to purchase or sell foreign currencies
at a future date (i.e., a "forward foreign currency" contract or "forward"
contract). Such Underlying Funds will engage in these foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. Investing in foreign securities and, in
conjunction therewith, engaging in foreign currency transactions present special
considerations not presented by investments in securities issued by United
States companies.
The risk involved in investing in foreign securities include the
possibility of expropriation, nationalization or confiscatory taxation, taxation
of income earned in foreign nations or other taxes imposed with respect to
investments in foreign nations, foreign exchange control (which may include
suspension of the ability to transfer currency from a given country), default in
foreign government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations. In addition, in many countries, there is less publicly available
information about issuers than is available in reports about companies in the
United States, and the information that is available is often of lesser quality
than information available on U.S. companies. Foreign companies are not subject
to uniform accounting, auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to United
States companies. Further, such Underlying Funds may encounter difficulty or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Commission rates on securities transactions in foreign countries, which are
sometimes fixed rather than subject to negotiation as in the United States, are
likely to be higher. Moreover, the settlement period of securities transactions
in foreign markets may be longer than in domestic markets. In many foreign
countries, there is less government supervision and regulation of business and
industry practices, stock exchanges, brokers and listed companies than in the
United States. The foreign securities markets of many of the countries in which
such Underlying Funds may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Emerging Markets. Compared to the United States and other developed
countries, emerging countries may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade a
small number of securities. Prices on these exchanges tend to be volatile and,
in the past, securities in these countries have offered greater potential for
gain (as well as loss) than securities of companies located in developed
countries. Further, investments by foreign investors (such as the Emerging
Markets Fund) are subject to a variety of restrictions in many emerging
countries. These restrictions may take the form of prior governmental approval,
limits on the amount or type of securities held by foreigners, and limits on the
types of companies in which foreigners may invest. Additional restrictions may
be imposed at any time by these or other countries in which such Underlying
Funds invests. In addition, the repatriation of both investment income and
capital from several foreign countries is restricted and controlled under
certain regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging countries, Delaware International and the Manager do not
believe that any current repatriation restrictions would affect its decision to
invest in such countries. Countries such as those in which the
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aforementioned Underlying Funds may invest have historically experienced and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations or currency depreciation, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and unemployment.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, its
government's policy towards the International Monetary Fund, the World Bank and
other international agencies and the political constraints to which a government
debtor may be subject.
With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or government-related
issuer to make timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of payments, including
export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. To the extent that a country receives
payment for its exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely affected.
The issuers of the emerging market country government and
government-related high yield securities in which such Underlying Funds may
invest have in the past experienced substantial difficulties in servicing their
external debt obligations, which have led to defaults on certain obligations and
the restructuring of certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling interest and principal
payments by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to Brady Bonds, and obtaining new
credit to finance interest payments. Holders of certain foreign government and
government-related high yield securities may be requested to participate in the
restructuring of such obligations and to extend further loans to their issuers.
There can be no assurance that the Brady Bonds and other foreign government and
government-related high yield securities in which such Underlying Funds may
invest will not be subject to similar defaults or restructuring arrangements
which may adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
Foreign Currency Transactions. Underlying Funds which invest in foreign
securities may also purchase options and forward contracts in foreign currency
for hedging purposes in connection with such foreign securities transactions. As
in the case of other kinds of options, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and such Underlying Funds could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates, although, in the event of rate movements
adverse to the Underlying Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs.
A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract, agreed upon by the parties, at a
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price set at the time of the contract. Such Underlying Funds may enter into
forward contracts to "lock in" the price of a security it has agreed to purchase
or sell, in terms of U.S. dollars or other currencies in which the transaction
will be consummated. By entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars or foreign currency, of the amount of
foreign currency involved in the underlying security transaction, the Underlying
Funds will be able to protect itself against a possible loss resulting from an
adverse change in currency exchange rates during the period between the date the
security is purchased or sold and the date on which payment is made or received.
When such Underlying Fund's investment manager believes that the
currency of a particular country may suffer a significant decline against the
U.S. dollar or against another currency, the Underlying Fund may enter into a
forward foreign currency contract to sell, for a fixed amount of U.S. dollars or
other appropriate currency, the amount of foreign currency approximating the
value of some or all of the Underlying Fund's securities denominated in such
foreign currency.
An Underlying Fund will not enter into forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Underlying Fund to deliver an amount of foreign currency in excess
of the value of the Underlying Fund's securities or other assets denominated in
that currency.
At the maturity of a forward contract, the Underlying Funds may either
sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency. The Underlying Fund may realize a gain or loss from
currency transactions.
The precise matching of forward contract amounts and the value of the
securities involved is generally not possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
strategy is highly uncertain.
It is impossible to forecast the market value of portfolio securities
at the expiration of the contract. Accordingly, it may be necessary for the
Underlying Fund to purchase additional foreign currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Underlying Fund is obligated to deliver
(and if a decision is made to sell the security and make delivery of the foreign
currency). Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Underlying Fund is
obligated to deliver.
Such Underlying Funds also may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter)
for hedging purposes to protect against declines in the U.S. dollar cost of
foreign securities held by the Underlying Funds and against increases in the
U.S. dollar cost of such securities to be acquired. Call options on foreign
currency written by the Underlying Fund will be covered, which means that the
Fund will own the underlying foreign currency. With respect to put options on
foreign currency written by the Underlying Fund, the Underlying Fund will
establish a segregated account with its custodian bank consisting of cash, U.S.
government securities
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or other high-grade liquid debt securities in an amount equal to the amount the
Underlying Fund will be required to pay upon exercise of the put.
Such Underlying Funds may enter into contracts for the purchase or sale
for future delivery of securities or foreign currencies. The principal purpose
of the purchase or sale of futures contracts for the Underlying Fund is to
protect the Underlying Fund against the fluctuations in interest or exchange
rates which otherwise might adversely affect the value of the Underlying Fund's
portfolio securities or adversely affect the prices of securities which the
Underlying Fund intends to purchase at a later date without actually buying or
selling such securities.
Depositary Receipts. The aforementioned Underlying Funds may make
foreign investments through the purchase and sale of sponsored or unsponsored
American, European and Global Depositary Receipts. Depositary Receipts are
receipts typically issued by a U.S. or foreign bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
"Sponsored" Depositary Receipts are issued jointly by the issuer of the
underlying security and a depository, whereas "unsponsored" Depositary Receipts
are issued without participation of the issuer of the deposited security.
Holders of unsponsored Depositary Receipts generally bear all the costs of such
facilities and the depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities. Therefore, there may not be a
correlation between information concerning the issuer of the security and the
market value of an unsponsored Depositary Receipt.
OPTIONS
To achieve their investment objectives, Aggressive Growth, Blue Chip,
Decatur Total Return, U.S. Growth, Devon, DelCap, Small Cap Value, Emerging
Markets, International Equity, International Small Cap New Pacific, U.S.
Government, Global Bond and Limited-Term Government Funds use certain hedging
techniques. These techniques will be used at the respective investment manager's
discretion to protect the Underlying Funds' principal value.
Such Underlying Funds may purchase put options, write covered call
options and enter into closing transactions in connection therewith in respect
of securities in which they may invest. Such Underlying Funds may also purchase
call options and enter into related closing transactions, or may write covered
put options. In purchasing put and call options, the premium paid by the
Underlying Fund, plus any transaction costs, will reduce any benefit realized by
the Underlying Fund upon exercise of the option.
Purchasing a put option gives the Underlying Fund the right to sell one
of its securities for an agreed price up to an agreed date. The advantage is
that the Underlying Fund can be protected should the market value of the
security decline. However, the Underlying Fund must pay a premium for this
right, whether it exercises it or not.
Writing a covered call option obligates the Underlying Fund to sell one
of its securities for an agreed price up to an agreed date. The advantage is
that the Underlying Fund receives premium income, which may offset the cost of
purchasing put options. However, the Underlying Fund may lose the
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potential market appreciation of the security if the respective investment
manager's judgment is wrong and interest rates fall or stock prices rise.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed upon date. The
advantage is that the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy.
Closing transactions essentially let the Underlying Fund offset a put
option or call option prior to its exercise or expiration. If it cannot effect a
closing transaction, it may have to hold a security it would otherwise sell with
a potential decline in net asset value, or deliver a security it might want to
hold.
These Underlying Funds may use both exchange-traded and over-the-
counter options. Certain over-the-counter options may be illiquid. These
Underlying Funds will only invest in such options to the extent consistent with
their limit on investments in illiquid securities.
These Underlying Funds may write call options and purchase put options
on stock indices and enter into closing transactions in connection therewith.
Such Underlying Funds also may purchase call options on stock indices and enter
into closing transactions in connection therewith. No such Underlying Fund will
engage in transactions on stock indices for speculative purposes. Writing or
purchasing a call option on stock indices is similar to the writing or
purchasing of a call option on an individual stock. Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Stock indices used will include, but will not be limited to,
the S&P 100 and the S&P Over-the-Counter 250. The ability to hedge effectively
using options on stock indices will depend on the degree to which price
movements in the underlying index correlate with price movements in the
portfolio securities of, as the case may be, the applicable Underlying Fund.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
For hedging purposes, each of the Aggressive Growth, International
Equity, International Small Cap, Small Cap Value, Trend, Global Bond, Devon,
Blue Chip, Decatur Total Return, U.S. Growth, New Pacific, U.S. Government,
Limited-Term Government and Emerging Markets Funds may enter into futures
contracts relating to securities, securities indices or interest rates. In
addition, the International Equity, International Small Cap, Global Bond, Devon,
Blue Chip and Emerging Markets Funds may enter into futures transactions
relating to foreign currency.
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement at a stated time
in the future for a fixed price. By its terms, a futures contract provides for a
specified settlement date on which, in the case of the majority of interest rate
and foreign currency futures contracts, the fixed-income securities or currency
underlying the contract are delivered by the seller and paid for by the
purchaser, or on which, in the case of securities index futures contracts and
certain interest rate and foreign currency futures contracts, the difference
between the price at which the contract was entered into and the contract's
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transaction. In
addition, futures contracts call for settlement only on the expiration date, and
cannot be "exercised" at any other time during their term.
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The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with or on behalf of the broker as "initial margin" as a good faith
deposit. Subsequent payments to and from the broker, referred to as "variation
margin," are made on a daily basis as the value of the index or instrument
underlying the futures contract fluctuates, making positions in the futures
contract more or less valuable, a process known as "marking to the market."
A futures contract may be purchased or sold only on an exchange, known
as a "contract market," designated by the Commodity Futures Trading Commission
for the trading of such contract, and only through a registered futures
commission merchant which is a member of such contract market. A commission must
be paid on each completed purchase and sale transaction. The contract market
clearing house guarantees the performance of each party to a futures contract,
by in effect taking the opposite side of such contract. At any time prior to the
expiration of a futures contract, a trader may elect to close out its position
by taking an opposite position on the contract market on which the position was
entered into, subject to the availability of a secondary market, which will
operate to terminate the initial position. At that time, a final determination
of variation margin is made and any loss experienced by the trader is required
to be paid to the contract market clearing house while any profit due to the
trader must be delivered to it.
Interest rate futures contracts currently are traded on a variety of
fixed-income securities, including long-term U.S. Treasury Bonds, U.S. Treasury
Notes, GNMA modified pass-through mortgage-backed securities, U.S. Treasury
Bills, bank certificates of deposit and commercial paper. In addition, interest
rate futures contracts include contracts on indexes of municipal securities.
Foreign currency futures contracts currently are traded on the British pound,
Canadian dollar, Japanese yen, Swiss franc, German mark and on Eurodollar
deposits.
A securities index or municipal bond index futures contract provides
for the making and acceptance of a cash settlement in much the same manner as
the settlement of an option on a securities index. The types of indexes
underlying securities index futures contracts are essentially the same as those
underlying securities index options, as described above. The index underlying a
municipal bond index futures contract is a broad based index of municipal
securities designed to reflect movements in the municipal securities market as a
whole. The index assigns weighted values to the securities included in the index
and its composition is changed periodically.
Such Underlying Funds may also purchase and write options on the types
of futures contracts that they can invest in.
A call option on a futures contract provides the holder with the right
to purchase, or enter into a "long" position in, the underlying futures
contract. A put option on a futures contract provides the holder with the right
to sell, or enter into a "short" position in, the underlying futures contract.
In both cases, the option provides for a fixed exercise price up to a stated
expiration date. Upon exercise of the option by the holder, the contract market
clearing house establishes a corresponding short position for the writer of the
option, in the case of a call option, or a corresponding long position in the
case of a put option and the writer delivers to the holder the accumulated
balance in the writer's margin account which represents the
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amount by which the market price of the futures contract at exercise exceeds, in
the case of a call, or is less than, in the case of a put, the exercise price of
the option on the futures contract. In the event that an option written by the
Underlying Fund is exercised, the Underlying Fund will be subject to all the
risks associated with the trading of futures contracts, such as payment of
variation market deposits. In addition, the writer of an option on a futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a futures contract, a securities index, a
security or foreign currency, becomes worthless to the holder when it expires.
Upon exercise of an option, the exchange or contract market clearing house
assigns exercise notices on a random basis to those of its members which have
written options of the same series and with the same expiration date. A
brokerage firm receiving such notices then assigns them on a random basis to
those of its customers which have written options of the same series and
expiration date. A writer therefore has no control over whether an option will
be exercised against it, nor over the timing of such exercise.
To the extent that interest or exchange rates or securities prices move
in an unexpected direction, the Underlying Fund may not achieve the anticipated
benefits of investing in futures contracts and options thereon, or may realize a
loss. To the extent that the Underlying Fund purchases an option on a futures
contract and fails to exercise the option prior to the exercise date, it will
suffer a loss of the premium paid. Further, the possible lack of a secondary
market could prevent the Underlying Fund from closing out its positions relating
to futures.
BORROWINGS
Each Underlying Fund except Delaware Cash Reserve and U.S. Government,
Limited-Term Government and U.S. Government Money Funds may borrow money as a
temporary measure for extraordinary purposes or to facilitate redemptions. Such
Underlying Funds will not borrow money in excess of one-third of the value of
their net assets. These Underlying Funds have no intention of increasing their
net income through borrowing. Any borrowing will be done from a bank and, to the
extent that such borrowing exceeds 5% of the value of such Underlying Fund's net
assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, the Underlying Funds shall,
within three days thereafter (not including Sunday or holidays) or such longer
period as the U.S. Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of their borrowings to an extent that the asset
coverage of such borrowings shall be at least 300%. An Underlying Fund will not
purchase investment securities while it has an outstanding borrowing. See Part B
for additional possible restrictions on borrowing.
REPURCHASE AGREEMENTS
The Underlying Funds may invest in repurchase agreements. Each
Underlying Fund may enter into repurchase agreements with broker/dealers or
banks which are deemed creditworthy by the
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respective investment manager under guidelines approved by the Board of
Directors. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Underlying Fund) acquires ownership of a security and the
seller agrees to repurchase the security at a future time and set price, thereby
determining the yield during the purchaser's holding period. The value of the
securities subject to the repurchase agreement is marked to market daily. In the
event of a bankruptcy or other default of the seller, the Underlying Fund could
experience delays and expenses in liquidating the underlying securities.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. Each Underlying Fund may
invest cash balances in joint repurchase agreements in accordance with the terms
of the Order and subject to the conditions described above.
PORTFOLIO LOAN TRANSACTIONS
Each Underlying Fund, except for Cash Reserve and U.S. Government
Money, may, from time to time, lend securities (but not in excess of 25% of its
assets) from its portfolio to brokers, dealers and financial institutions and
receive collateral in cash or short-term U.S. government securities. While the
loan is outstanding, this collateral will be maintained at all times in an
account equal to at least 100% of the current market value of the loaned
securities plus accrued interest. Such cash collateral will be invested in
short-term securities, the income from which will increase the return of the
Underlying Fund.
The major risk to which the Underlying Funds would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Underlying Funds will only enter
into loan arrangements after a review of all pertinent facts by the respective
investment manager, subject to overall supervision by the Board of Directors,
including the creditworthiness of the borrowing broker, dealer or institution
and then only if the consideration to be received from such loans would justify
the risk. Creditworthiness will be monitored on an ongoing basis by the
respective investment manager.
LIQUIDITY AND RULE 144A SECURITIES
In order to assure that each Underlying Fund has sufficient liquidity,
no Underlying Fund may invest more than 10% of its net assets in illiquid assets
(15% for Blue Chip Fund), including repurchase agreements maturing in more than
seven days. While maintaining oversight, the Board of Directors has delegated to
the respective investment manager the day-to-day functions of determining
whether or not individual securities eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") of the Securities Act of 1933
("1933 Act") are liquid for purposes of the limitation on investments in
illiquid assets. Rule 144A permits many privately placed and legally restricted
securities to be freely traded among certain institutional buyers such as the
Underlying Funds. The Board has instructed the managers to consider the
following factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). Investing in Rule 144A
Securities could have the effect of increasing the level of illiquidity of an
Underlying Fund to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities.
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If the respective manager determines that a Rule 144A Security which
was previously determined to be liquid is no longer liquid and, as a result, the
applicable Underlying Fund's holdings of illiquid securities exceed the
Underlying Fund's limit on investment in such securities, the respective manager
will determine what action shall be taken to ensure that the Underlying Fund
continues to adhere to such limitation.
INVESTMENT COMPANY SECURITIES
Any investments that the Underlying Funds in the Aggressive Growth,
International Equity, International Small Cap, Emerging Markets or the Global
Bond Funds may make in either closed-end or unregistered investment companies
will be limited by the 1940 Act, and would involve an indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies.
CONVERTIBLE AND NON-TRADITIONAL EQUITY SECURITIES
Blue Chip, U.S. Growth, Devon and New Pacific Funds may invest in
convertible securities. A convertible security is a security which may be
converted at a stated price within a specified period of time into a certain
quantity of the common stock of the same or a different issuer. Convertible
securities are senior to common stocks in a corporation's capital structure,
although convertible securities are usually subordinated to similar
nonconvertible securities. Convertible securities provide a fixed-income stream
and the opportunity, through its conversion feature, to participate in the
capital appreciation resulting from a market price advance in the convertible
security's underlying common stock. Just as with debt securities, convertible
securities tend to increase in market value when interest rates decline and tend
to decrease in value when interest rates rise. However, the price of a
convertible security is also influenced by the market value of the security's
underlying common stock and tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines.
The aforementioned Underlying Funds may invest in convertible preferred
stocks that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stock ("PERCS"), which provide an investor with the opportunity to
earn higher dividend income than is available on a company's common stock. A
PERCS is a preferred stock which generally features a mandatory conversion date,
as well as a capital appreciation limit which is usually expressed in terms of a
stated price. Upon the conversion date, most PERCS convert into common stock of
the issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after a predetermined number of years the issuer's
common stock is trading at a price below that set by the capital appreciation
limit, each PERCS would convert to one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.
The aforementioned Underlying Funds may also invest in other enhanced
convertible securities. These include but are not limited to ACES (Automatically
Convertible Equity Securities), PEPS
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(Participating Equity Preferred Stock), PRIDES (Preferred Redeemable Increased
Dividend Equity Securities), SAILS (Stock Appreciation Income Linked
Securities), TECONS (Term Convertible Notes), QICS (Quarterly Income Cumulative
Securities) and DECS (Dividend Enhanced Convertible Securities). ACES, PEPS,
PRIDES, SAILS, TECONS, QICS and DECS generally have the following features: they
are company-issued convertible preferred stock; unlike PERCS, they do not have
capital appreciation limits; they seek to provide the investor with high current
income, with some prospect of future capital appreciation; they are typically
issued with three to four-year maturities; they typically have some built-in
call protection for the first two to three years; investors have the right to
convert them into shares of common stock at a preset conversion ratio or hold
them until maturity; and upon maturity, they will automatically convert to
either cash or a specified number of shares of common stock.
TEMPORARY DEFENSIVE MEASURES
Each Underlying Fund (other than the Money Market Funds) may hold cash
or invest in short-term debt securities and other money market instruments when,
in the Manager's opinion, such holdings are prudent for temporary defensive
purposes given then prevailing market conditions. An Underlying Fund may also
invest in such instruments pending investment by the Underlying Fund of proceeds
from the sale of portfolio securities or proceeds from new sales of its shares
pending investment in other types of securities or to maintain sufficient
liquidity to meet redemptions. All such short-term investments will be of the
highest quality as determined by a nationally-recognized statistical rating
organization (e.g., AAA by S&P or Aaa by Moody's or, if unrated, judged to be of
comparable quality as determined by the Manager. Certain Funds may also invest
in corporate bonds of investment grade quality (rated not less than BBB or S&P
or Baa by Moody's) for temporary, defensive purposes. Securities rated BBB or
Baa are regarded as having speculative characteristics.
U.S. GOVERNMENT SECURITIES
All of the Underlying Funds may invest in securities of the U.S.
government. Securities guaranteed by the U.S. government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
(2) federal agency obligations guaranteed as to principal and interest by the
U.S. Treasury (such as GNMA certificates and Federal Housing Administration
debentures). For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of the
highest possible credit quality. Such securities are subject to variations in
market value due to fluctuations in interest rates, but if held to maturity are
deemed to be free of credit risk for the life of the investment.
Securities issued by U.S. government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; and others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to, Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
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QUALITY RESTRICTIONS
The Money Market Funds limit their investments to those which their
Board of Directors have determined present minimal credit risks and are of high
quality and which are otherwise in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must comply.
The Money Market Funds' investments include direct obligations issued
by the U.S. Treasury which include bills, notes and bonds which differ from each
other principally in interest rates, maturities and dates of issuance. These
issues, plus some federal agency obligations, are guaranteed by the full faith
and credit of the U.S. government. Examples include Federal Housing
Administration, Farmers Home Administration, Government National Mortgage
Association and Export-Import Bank of the United States. Other federal agency
obligations only have the guarantee of the agency. Examples include Federal Home
Loan Banks, Federal Land Banks, Federal Home Loan Mortgage Corporation, The
Tennessee Valley Authority and the International Bank for Reconstruction and
Development. Although obligations of agencies and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on such obligations is generally backed directly or indirectly by the U.S.
government. This support can range from the backing of the full faith and credit
of the United States, to U.S. Treasury guarantees, or to the backing solely of
the issuing agency or instrumentality itself.
Cash Reserve Fund's investments also include certificates of deposit
and obligations of both U.S. and foreign banks if they have assets of at least
one billion dollars in accordance with the maturity, quality and diversification
conditions with which taxable money market funds must comply. Cash Reserve Fund
may also purchase commercial paper and other corporate obligations; if a
security or, as relevant, its issuer is considered to be rated at the time of
the proposed purchase it, or, as relevant, its issuer must be so rated in one of
the two highest rating categories (e.g., for commercial paper, A-2 or better by
S&P and P-2 or better by Moody's; and, for other corporate obligations, AA or
better by S&P and Aa or better by Moody's) by at least two nationally-recognized
statistical rating organizations approved by the Board of Directors or, if such
security is not so rated, the purchase of the security must be approved or
ratified by the Board of Directors in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must comply.
Appendix A describes the ratings of S&P and Moody's.
MATURITY RESTRICTIONS
The Money Market Funds maintain an average maturity of not more than 90
days. Also, they do not purchase any instruments with an effective remaining
maturity of more than 13 months.
SMALL TO MEDIUM-SIZED COMPANIES
The Small/Mid Cap U.S. Equity Funds invest their assets in equity
securities of small to medium-sized companies. These stocks have historically
been more volatile in price than larger capitalization stocks, such as those
included in the S&P 500 Index. This is because, among other things, smaller
companies have a lower degree of liquidity and tend to have a greater
sensitivity to changing economic conditions. These companies may have narrow
product lines, markets or financial resources, or may depend on a limited
management group. The companies' securities may trade less frequently and have a
smaller trading volume. The securities may be traded only in the
over-the-counter markets or on a regional securities exchange. In addition to
exhibiting greater volatility, smaller capitalization securities
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may, to some degree, fluctuate independently of the stocks of larger
capitalization companies. For example, the stocks of smaller capitalization
companies may decline in price as the price of larger company stocks rise, or
vice versa.
GNMA SECURITIES
U.S. Government Fund may invest in certificates of the Government
National Mortgage Association ("GNMA"). GNMA Certificates are mortgage-backed
securities. Each Certificate evidences an interest in a specific pool of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Scheduled payments
of principal and interest are made to the registered holders of GNMA
Certificates. The GNMA Certificates in which U.S. Government Fund will invest
are of the modified pass-through type. U.S. Government GNMA guarantees the
timely payment of monthly installments of principal and interest on modified
pass-through Certificates at the time such payments are due, whether or not such
amounts are collected by the issuer on the underlying mortgages. The National
Housing Act provides that the full faith and credit of the United States is
pledged to the timely payment of principal and interest by GNMA of amounts due
on these GNMA Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of prepayments of
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, and have the effect of reducing future payments. Due to the GNMA
guarantee, foreclosures impose no risk to principal investments.
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the average
life of the type of mortgages backing the majority of GNMA Certificates is
approximately 12 years. For this reason, it is standard practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than 12 years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Prepayments generally occur
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when interest rates have fallen. Reinvestments of prepayments will be at lower
rates. Historically, actual average life has been consistent with the 12-year
assumption referred to above. The actual yield of each GNMA Certificate is
influenced by the prepayment experience of the mortgage pool underlying the
Certificates and may differ from the yield based on the assumed average life.
Interest on GNMA Certificates is paid monthly rather than semi-annually as for
traditional bonds.
SPECIAL RISK CONSIDERATIONS
Shareholders should understand that all investments involve risk and
there can be no guarantee against loss resulting from an investment in a
Portfolio, nor can there be any assurance that the Portfolio's investment
objective will be attained.
The use of interest rate swaps by the Global Bond, U.S. Growth and New
Pacific Funds involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If such Underlying
Fund's investment adviser is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment performance of the
Underlying Funds will be less favorable than it would have been if this
investment technique were never used. Interest rate swaps do not involve the
delivery of securities or other underlying assets or principal. Thus, if the
other party to an interest rate swap defaults, the Underlying Funds' risk of
loss consists of the net amount of interest payments that the Underlying Fund is
contractually entitled to receive.
While the Global Bond and Emerging Markets Funds intend to seek to
qualify as "diversified" investment companies under provisions of Subchapter M
of the Code, they will not be diversified for purposes of the 1940 Act. Thus,
while at least 50% of each Underlying Funds' total assets will be represented by
cash, cash items, and other securities limited in respect of any one issuer to
an amount not greater than 5% of such Underlying Funds' total assets, it will
not satisfy the 1940 Act requirement in this respect, which applies that test to
75% of the Underlying Funds' assets. A nondiversified portfolio is believed to
be subject to greater risk because adverse effects on the portfolio's security
holdings may affect a larger portion of the overall assets.
OTHER INVESTMENT POLICIES
Each Portfolio may invest up to 100% of its assets directly in cash,
money market instruments or in Delaware Cash Reserve or U.S. Government Money
Fund, for temporary, defensive purposes, such as during periods of market
instability.
Each Portfolio anticipates that its annual portfolio turnover rate
generally will not exceed 100%. A Portfolio may purchase or sell its portfolio
securities to: (a) accommodate purchases and sales of its shares; (b) change the
percentage of its assets invested in securities or in the Underlying Funds in
response to market conditions; and (c) maintain or modify the allocation of its
assets among the Underlying Funds. High turnover rates with respect to the
Underlying Funds may result in higher expenses being incurred by the Portfolios.
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Each Portfolio's investment objective, its designation as an open-end
investment company and certain other policies of the Portfolios may not be
changed unless authorized by the vote of a majority of the Portfolios'
outstanding voting securities, as defined in the 1940 Act. Part B lists other
more specific investment restrictions of the Portfolios which may not be changed
without a majority shareholder vote. A brief discussion of those factors that
materially affected the Portfolios' performance during its most recently
completed fiscal year will appear in the Portfolios' Annual Report. The
remaining investment policies are not fundamental and may be changed by the
Board of Trustees of the Trust without a shareholder vote.
RATINGS
Appendix A describes the ratings of S&P and Moody's.
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APPENDIX A -- RATINGS
BONDS
Excerpts from Moody's description of its bond ratings: Aaa--judged to be the
best quality. They carry the smallest degree of investment risk; Aa--judged to
be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; Ba--judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
Excerpts from Fitch's description of its bond ratings:
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events; AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+; A--Bonds
considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
that bonds with higher ratings; BBB--Bonds considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment.
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<PAGE> 238
The likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings; BB--Bonds are considered
speculative. The obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in satisfying its
debt service requirements; B--Bonds are considered highly speculative. While
bonds in this class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue; CCC--Bonds have certain
identifiable characteristics which, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and economic
environment; CC--Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time; C--Bonds are in imminent default in
payment of interest or principal; and DDD, DD AND D--Bonds are in default on
interest and/or principal payments. Such bonds are extremely speculative and
should be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest potential for
recovery on these bonds, and "D" represents the lowest potential for recovery.
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the "AAA" category.
COMMERCIAL PAPER
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper ratings:
A-1--judged to be the highest investment grade category possessing the highest
relative strength; A-2--investment grade category possessing less relative
strength than the highest rating.
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PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - N/A
Part B - N/A
(b) Exhibits:
(1) Declaration of Trust.
(a) Declaration of Trust attached as Exhibit
(2) By-Laws.
(a) By-Laws attached as Exhibit.
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of All Instruments Defining the Rights of Holders.
(a) Declaration of Trust. Declaration of Trust
(October 1997) attached as Exhibit 24(b)(1)(a)
(b) By-Laws. By-Laws attached as
Exhibit 24(b)(2)(a).
(5) Asset Allocation Agreement.
(a) Proposed Asset Allocation Agreement (____,
1997) between Delaware Management Company, Inc.
and the Registrant on behalf of each Portfolio
attached as Exhibit.
(6) (a) Distribution Agreement. Proposed Distribution
Agreement (_____,1997) between Delaware
Distributors, L.P. and the Registrant on behalf
of each Portfolio attached as Exhibit.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as
amended November 1995) included as Module.
(c) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) included as Module.
(d) Mutual Fund Agreement for the Delaware Group of
Funds (as amended November 1995) included as
Module.
<PAGE> 240
PART C - Other Information
(Continued)
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing Plan
(November 17, 1994) included as Module.
(b) Amendment to Profit Sharing Plan (December 21, 1995)
included as Module.
(8) Custodian Agreement.
(a) Form of Custodian Agreement (______, 1997) between
The Chase Manhattan Bank and the Registrant on
behalf of each Portfolio included as Module.
(9) Other Material Contracts.
(a) Proposed Shareholders Services Agreement
(_____, 1997) between Delaware Service Company, Inc. and
the Registrant on behalf of each Portfolio attached as
Exhibit.
(b) Proposed Fund Accounting Agreement
( _____, 1997) between Delaware Service Company,
Inc. and the Registrant on behalf of each
Portfolio included as Module.
(i) Proposed Amendment to Schedule A of the
Fund Accounting Agreement attached as
Exhibit.
(10) Opinion of Counsel. To be filed by Pre-Effective
Amendment.
(11) Consent of Auditors. Inapplicable.
(12-13) Inapplicable.
(14) Model Plans. To be filed by Pre-Effective Amendment.
(15) Plans under Rule 12b-1.
(a) Proposed Plan under Rule 12b-1 for Class A attached
as Exhibit.
(b) Proposed Plan under Rule 12b-1 for Class B attached
as Exhibit.
(c) Proposed Plan under Rule 12b-1 for Class C attached
as Exhibit.
(16) Schedules of Computation for each Performance Quotation.
Inapplicable.
(17) Financial Data Schedules. Inapplicable.
(18) Plan Under Rule 18f-3. Attached as Exhibit.
(a) Proposed Amended Appendix A to Plan under Rule
18f-3 attached as Exhibit.
(19) Other: Trustees' Power of Attorney. To be filed by
Pre-Effective Amendment.
Item 25. Persons Controlled by or under Common Control with
Registrant. None.
Item 26. Number of Holders of Securities. None.
<PAGE> 241
(Continued)
PART C - Other Information
Item 27. Indemnification.
Section 2. Indemnification and Limitation of Liability. To the
fullest extent that limitations on the liability of
Trustees and officers are permitted by the DBTA, the
officers and Trustees shall not be responsible or liable
in any event for any act or omission of: any agent or
employee of the Trust; any Investment Adviser or
Principal Underwriter of the Trust; or with respect to
each Trustee and officer, the act or omission of any
other Trustee or officer, respectively. The Trust, out
of the Trust Property, shall indemnify and hold harmless
each and every officer and Trustee from and against any
and all claims and demands whatsoever arising out of or
related to each officer's and Trustee's performance of
his or her duties as an officer or Trustee of the Trust.
This limitation on liability applies to events occurring
at the time a person serves as a Trustee or officer of
the Trust whether or not such person is a Trustee or
officer at the time of any proceeding in which liability
is asserted. Nothing herein contained shall indemnify,
hold harmless or protect any officer or Trustee from or
against any liability to the Trust or any Shareholder to
which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or document whatsoever
issued, executed or done by or on behalf of the Trust,
the officers or the Trustees or any of them in
connection with the Trust shall be conclusively deemed
to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or
Trustee, and/or officers or officer, and such Trustees
or Trustee, or officers or officer, as applicable, shall
not be personally liable therefore, except as described
in the last sentence of the first paragraph of this
Section 2 of this Article VII.
Section 3. Officers and Trustees' Good Faith Action, Expert Advice,
No Bond or Surety. The exercise by the Trustees of
their powers and discretions hereunder shall be binding
upon everyone interested. An officer or Trustee shall
be liable to the Trust and to any Shareholder solely for
his or her own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of the office of officer or Trustee, but
shall not be liable for errors of judgment or mistakes
of fact or law. The officers and Trustees may obtain
the advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust.
No such officer or Trustee shall be liable for any act
or omission in accordance with such advice and no
inference concerning liability shall arise from a
failure to follow such advice. The officers and
Trustees shall not be required to give any bond as such,
nor any surety if a bond is required.
Section 4. Insurance. The officers and Trustees shall be entitled
and have the authority to the fullest extent permitted
by law to purchase with Trust Property insurance for
liability and for all expenses reasonably incurred or
paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in
which he or she becomes involved by virtue of his or her
capacity or former capacity with the Trust, whether or
not the Trust would have the power to indemnify him or
her against such liability under the provisions of this
Article.
Section 2. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of
this Article, "agent" means any person who is or was a
trustee, officer, employee or other agent of this Trust
or is or was serving at the request of this Trust as a
trustee, director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint
venture, trust or other enterprise or was a
PART C - Other Information
(Continued)
<PAGE> 242
trustee, director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor
of another enterprise at the request of such predecessor
entity; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes
without limitation attorney's fees and any expenses of
establishing a right to indemnification under this
Article.
Section 3. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify
any person who was or is a party or is threatened to be
made a party to any proceeding (other than an action by
or in the right of this Trust) by reason of the fact
that such person is or was an agent of this Trust,
against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in
connection with such proceeding if that person acted in
good faith and in a manner that that person reasonably
believed to be in the best interests of this Trust and
in the case of a criminal proceeding, had no reasonable
cause to believe the conduct of that person was
unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or plea of nolo
contenders or its equivalent shall not of itself create
a presumption that the person did not act in good faith
or in a manner which the person reasonably believed to
be in the best interests of this Trust or that the
person had reasonable cause to believe that the person's
conduct was unlawful.
Section 4. ACTIONS BY TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a
party to any threatened, pending or completed action by
or in the right of this Trust to procure a judgment in
its favor by reason of the fact that the person is or
was an agent of this Trust, against expenses actually
and reasonably incurred by that person in connection
with the defense or settlement of that action if that
person acted in good faith, in a manner that person
believed to be in the best interests of this Trust and
with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use
under similar circumstances.
Section 5. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, there shall
be no right to indemnification for any liability arising
by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties
involved in the conduct of the agent's office with this
Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which
that person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless
and only to the extent that the court in which that
action was brought shall determine upon application that
in view of all the circumstances of the case, that
person was not liable by reason of the disabling conduct
set forth in the preceding paragraph and is fairly and
reasonably entitled to indemnity for the expenses which
the court shall determine; or
(b) In respect of any claim, issue, or matter as to which
that person shall have been adjudged to be liable on the
basis that personal benefit was improperly received by
him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court
approval, or of expenses incurred in defending a
threatened or pending action which is settled or
otherwise disposed of without court approval, unless the
required approval set forth in Section 6 of this Article
is obtained.
PART C - Other Information
(Continued)
<PAGE> 243
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this Trust has been successful on the merits in
defense of any proceeding referred to in Sections 2 or 3
of this Article or in defense of any claim, issue or
matter therein, before the court or other body before
whom the proceeding was brought, the agent shall be
indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided
that the Board of Trustees, including a majority who are
disinterested, non-party trustees, also determines that
based upon a review of the facts, the agent was not
liable by reason of the disabling conduct referred to in
Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of
this Article, any indemnification under this Article
shall be made by this Trust only if authorized in the
specific case on a determination that indemnification of
the agent is proper in the circumstances because the
agent has met the applicable standard of conduct set
forth in Sections 2 or 3 of this Article and is not
prohibited from indemnification because of the disabling
conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who
are not parties to the proceeding and are not interested
persons of the Trust (as defined in the Investment
Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the
final disposition of the proceeding on receipt of an
undertaking by or on behalf of the agent to repay the
amount of the advance unless it shall be determined
ultimately that the agent is entitled to be indemnified
as authorized in this Article, provided the agent
provides a security for his undertaking, or a majority
of a quorum of the disinterested, non-party trustees, or
an independent legal counsel in a written opinion,
determine that based on a review of readily available
facts, there is reason to believe that said agent
ultimately will be found entitled to indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to
which persons other than trustees and officers of this
Trust or any subsidiary hereof may be entitled by
contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Sections
5 or 6, in any circumstances where it appears:
(a) That it would be inconsistent with a provision of the
Agreement and Declaration of Trust, a resolution of the
shareholders, or an agreement which prohibits or
otherwise limits indemnification which was in effect at
the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were
incurred or other amounts were paid; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
<PAGE> 244
PART C - Other Information
(Continued)
Section 10. INSURANCE. Upon and in the event of a determination by
the Board of Trustees of this Trust to purchase such
insurance, this Trust shall purchase and maintain
insurance on behalf of any agent of this Trust against
any liability asserted against or incurred by the agent
in such capacity or arising out of the agent's status as
such, but only to the extent that this Trust would have
the power to indemnify the agent against that liability
under the provisions of this Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does
not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee
benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as
defined in Section 1 of this Article. Nothing contained
in this Article shall limit any right to indemnification
to which such a trustee, investment manager, or other
fiduciary may be entitled by contract or otherwise which
shall be enforceable to the extent permitted by
applicable law other than this Article.
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") serves as investment
manager to the Registrant and also serves as investment manager or sub-adviser
to certain of the other funds in the Delaware Group (Delaware Group Equity
Funds I, Inc., Delaware Group Equity Funds II, Inc., Delaware Group Equity
Funds III, Inc., Delaware Group Equity Funds IV, Inc., Delaware Group Equity
Funds V, Inc., Delaware Group Income Funds, Inc., Delaware Group Government
Fund, Inc., Delaware Group Limited-Term Government Funds, Inc., Delaware Group
Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc., Delaware Group State
Tax-Free Income Trust, Delaware Group Tax-Free Money Fund, Inc., Delaware Group
Premium Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware
Pooled Trust, Inc., Delaware Group Adviser Funds, Inc., Delaware Group Dividend
and Income Fund, Inc., Delaware Group Global Dividend and Income Fund, Inc.,
Voyageur Tax-Free Funds, Inc., Voyageur Intermediate Tax-Free Funds, Inc.,
Voyageur Insured Funds, Inc., Voyageur Funds, Inc., Voyageur Investment Trust,
Voyageur Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual
Funds II, Inc., Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal
Income Fund, Inc., Voyageur Colorado Insured Municipal Income Fund, Inc.,
Voyageur Florida Insured Municipal Income Fund, Voyageur Minnesota Municipal
Fund, Inc., Voyageur Minnesota Municipal Fund II, Inc. and Voyageur Minnesota
Municipal Fund III, Inc.) and provides investment advisory services to
institutional accounts, primarily retirement plans and endowment funds. In
addition, certain directors of the Manager also serve as directors/trustees of
the other Delaware Group funds, and certain officers are also officers of these
other funds. A company owned by the Manager's parent company acts as principal
underwriter to the mutual funds in the Delaware Group (see Item 29 below) and
another such company acts as the shareholder services, dividend disbursing,
accounting servicing and transfer agent for all of the mutual funds in the
Delaware Group.
<PAGE> 245
PART C - Other Information
(Continued)
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware International
Holdings Ltd., Delaware Distributors, Inc.,
Delvoy, Inc. and Founders Holdings, Inc.;
Chairman, Chief Executive Officer and Director of
Delaware Management Holdings, Inc. and Delaware
International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other
funds in the Delaware Group and Delaware Capital
Management, Inc.; Chairman of Delaware
Distributors, L.P.; and Director of Delaware
Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President
of the Registrant (upon effectiveness of this
Registration Statement) and each of the other
funds in the Delaware Group; Delaware Management
Holdings, Inc. and Delaware Capital Management,
Inc; and Director of Delaware International
Advisers Ltd.
Board of Directors, Chairman of Finance Committee,
Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors,
Chairman of Finance Committee, AAA Mid Atlantic,
Inc. since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Metron, Inc. since 1995,
11911 Freedom Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of the Registrant (upon effectiveness
of this Registration Statement) and each of the
other funds in the Delaware Group, Delaware
Management Company, Inc. and Delaware Management
Holdings, Inc.; Executive Vice President and
Director of Founders Holdings, Inc.; Executive
Vice President of Delaware Capital Management,
Inc.; and Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 246
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
David K. Downes Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.; Executive
Vice President, Chief Operating Officer and Chief
Financial Officer and Trustee of the Registrant;
Executive Vice President, Chief Operating Officer
and Chief Financial Officer of each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., Founders CBO Corporation, Delaware
Capital Management, Inc., Delvoy, Inc. and
Delaware Distributors, L.P.; President, Chief
Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.;
Chairman, Chief Executive Officer and Director of
Delaware Investment & Retirement Services, Inc.;
Chairman and Director of Delaware Management Trust
Company; Director of Delaware International
Advisers Ltd.; and Vice President of Lincoln Funds
Corporation
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square,
PA
George M. Senior Vice President, General Counsel, Secretary
Chamberlain, Jr. and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc., Delvoy, Inc.
and Delaware Investment & Retirement Services,
Inc.; Senior Vice President, Secretary, General
Counsel and Trustee of the Registrant; Senior Vice
President, Secretary and General Counsel of each
of the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Management
Holdings, Inc.; Executive Vice President,
Secretary, General Counsel and Director of
Delaware Management Trust Company; Secretary and
Director of Delaware International Holdings Ltd.;
Director of Delaware International Advisers Ltd.;
Secretary of Lincoln Funds Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 247
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
Richard J. Flannery Senior Vice President/Corporate and
International Affairs the Registrant (upon
effectiveness of this Registration Statement),
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P.,
Delaware Management Trust Company, Delaware
Capital Management, Inc., Delaware Service
Company, Inc. and Delaware Investment &
Retirement Services, Inc.; Senior Vice
President/ Corporate and International Affairs
and Director of Founders Holdings, Inc., Delvoy,
Inc. and Delaware International Holdings Ltd.;
Senior Vice President of Founders CBO
Corporation; and Director of Delaware
International Advisers Ltd. and Delaware
Voyageur Holding, Inc.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton,
PA
Michael P. Bishof Senior Vice President and Treasurer of the
Registrant (upon effectiveness of this
Registration Statement), each of the other funds
in the Delaware Group and Founders Holdings,
Inc.; Senior Vice President/Investment
Accounting of Delaware Management Company, Inc.
and Delaware Service Company, Inc.; Senior Vice
President and Treasurer/ Manager, Investment
Accounting of Delaware Distributors, L.P.;
Assistant Treasurer of Founders CBO Corporation;
and Senior Vice President and Manager of
Investment Accounting of Delaware International
Holdings Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 248
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc. and Delaware
International Holdings Ltd.; Senior Vice
President/Corporate Controller of the Registrant
(upon effectiveness of this Registration
Statement), each of the other funds in the
Delaware Group and Founders Holdings, Inc.;
Executive Vice President, Chief Financial
Officer and Treasurer of Delaware Management
Trust Company; Chief Financial Officer and
Treasurer of Delaware Investment & Retirement
Services, Inc.; Senior Vice President and
Treasurer of Delvoy, Inc.; Senior Vice
President/Assistant Treasurer of Founders CBO
Corporation; and Treasurer of Lincoln Funds
Corporation
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Investment
and Retirement Services, Inc. and Delaware
Service Company, Inc.; Senior Vice President/
Operations and Director of Delaware Management
Trust Company
James L. Shields Senior Vice President/Chief Information Officer
of Delaware Management Company, Inc., Delaware
Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant (upon
effectiveness of this Registration Statement)
and each of the other funds in the Delaware
Group, Delaware Management Company, Inc.,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware
Distributors Inc., Delaware Service Company,
Inc., Delaware Management Trust Company,
Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Vice President and
Assistant Secretary of Delvoy, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 249
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Richelle S. Maestro Vice President and Assistant Secretary of
Delaware Management Company, Inc., the
Registrant (upon effectiveness of this
Registration Statement), each of the other funds
in the Delaware Group, Delaware Management
Holdings, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., DMH Corp., Delaware Management
Trust Company, Delaware Capital Management,
Inc., Delaware Investment & Retirement Services,
Inc., Delvoy, Inc. and Founders Holdings, Inc.;
Secretary of Founders CBO Corporation; and
Assistant Secretary of Delaware International
Holdings Ltd.
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
Richard Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc. and Delaware Management
Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Inc., the
Registrant (upon effectiveness of this
Registration Statement), each of the other funds
in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delvoy, Inc.,
Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
Steven T. Lampe(2) Vice President/Taxation of Delaware Management
Company, Inc., the Registrant (upon
effectiveness of this Registration Statement),
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company,
Founders Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc.,
Delvoy, Inc. and Delaware Investment &
Retirement Services, Inc.
Christopher Adams(3) Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 250
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Dennis J. Mara(4) Vice President/Acquisitions of Delaware
Management Company, Inc.
Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Inc., the Registrant (upon
effectiveness of this Registration Statement),
each of the other funds in the Delaware Group,
DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Delvoy,
Inc., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal Registrations of Delaware
Management Company, Inc., the Registrant (upon
effectiveness of this Registration Statement),
each of the other funds in the Delaware Group,
Delaware Distributors, L.P. and Delaware
Distributors, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and
Treasurer, Assistant Secretary and Director of
Founders CBO Corporation
Paul A. Matlack Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and
President and Director of Founders CBO
Corporation.
Gary A. Reed Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in
the Delaware Group and Delaware Capital
Management, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 251
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Patrick P. Coyne Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in
the Delaware Group and Delaware Capital
Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in
the Delaware Group
Mitchell L. Conery(5) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the tax-exempt and fixed income funds in the
Delaware Group
George H. Burwell Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group and
Delaware Capital Management, Inc.
Gerald S. Frey(6) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
Christopher Beck(7) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
Elizabeth H. Howell(8) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Minnesota
Intermediate, Delaware-Voyageur Minnesota
Insured, Delaware-Voyageur Tax-Free Minnesota,
Delaware-Voyageur Tax-Free Idaho,
Delaware-Voyageur Tax-Free Kansas,
Delaware-Voyageur Tax-Free Missouri, Delaware-
Voyageur Tax-Free Oregon, Delaware-Voyageur
Tax-Free Washington, Delaware-Voyageur Tax-Free
Iowa and Delaware-Voyageur Tax-Free Wisconsin
Funds.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 252
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
Andrew M. McCullagh(9) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Arizona Insured,
Delaware-Voyageur Tax-Free Arizona,
Delaware-Voyageur Tax-Free California Insured,
Delaware-Voyageur Tax-Free Colorado,
Delaware-Voyageur Tax-Free New Mexico,
Delaware-Voyageur Tax-Free North Dakota and
Delaware-Voyageur Tax-Free Utah Funds.
Babak Zenouzi Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds and the closed-end funds in the
Delaware Group
Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the
tax-exempt and fixed income funds in the
Delaware Group
Marshall T. Bassett Vice President/Portfolio Manager of Delaware
Management Company, Inc.
John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Inc.
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX MANAGER, Price Waterhouse LLP prior to October 1995.
3 SENIOR ASSOCIATE, FAS, Coopers & Lybrand LLP prior to October 1995.
4 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
5 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
6 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
7 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
8 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May
1997.
9 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 253
PART C - Other Information
(Continued)
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------------- -------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman/ President/
Chief Executive Officer/Chief Investment Officer
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Senior Vice President, Executive Vice
Chief Administrative Officer President/Chief
and Chief Financial Officer Operating Officer/Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Terrence P. Cunningham Senior Vice President/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Dana B. Hall Senior Vice President/ None
Key Accounts
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 254
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------------- -------------------------
<S> <C> <C>
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product Management
Stephen H. Slack Senior Vice President/Wholesaler None
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
and International Affairs Corporate and International Affairs
(upon effectiveness of this Registration Statement)
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager - Wire/ Regional Channel
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice Manager, Investment Accounting
President/Treasurer
(upon effectiveness of this Registration Statement)
Eric E. Miller Vice President/Assistant Secretary/ Vice President/
Deputy General Counsel Assistant Secretary/Deputy General Counsel
(upon effectiveness of this Registration Statement)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 255
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ----------------------- ------------------------
<S> <C> <C>
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
(upon effectiveness of this Registration Statement)
Steven T. Lampe Vice President/Taxation Vice President/Taxation
(upon effectiveness of this Registration Statement)
Joseph H. Hastings Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
(upon effectiveness of this Registration Statement)
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
(upon effectiveness of this Registration Statement)
Rosemary E. Milner Vice President/Legal Registrations Vice President/Legal Registrations
(upon effectiveness of this Registration Statement)
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 256
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------------- -------------------------
<S> <C> <C>
Jerome J. Alrutz Vice President/Retail Sales None
Joanne A. Mettenheimer Vice President/New Business None
Development
Scott Metzger Vice President/Business Development None
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/ National Accounts None
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Zina DeVassal Vice President/Financial Institutions None
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/ Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Susan T. Friestedt Vice President/Client Service None
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 257
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------------- -------------------------
<S> <C> <C>
Dale L. Kurtz Vice President/Marketing Support None
Holly W. Reimel Vice President/Manager, Key Accounts None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 258
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------------- -------------------------
<S> <C> <C>
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing Technology None
Scott Whitehouse Vice President/Wholesaler None
Frank C. Tonnemaker Vice President None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
<PAGE> 259
PART C - Other Information
(Continued)
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at
1818 Market Street, Philadelphia, PA 19103 or One Commerce
Square, Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) The Registrant hereby undertakes to file a
post-effective amendment, using financial statements
which need not be certified, within four to six
months from the initial public offering of shares of
the Income Portfolio, the Balanced Portfolio and the
Growth Portfolio.
(c) The Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a copy
of the Registrant's annual report to shareholders,
upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting
upon the question of removal of any trustee when
requested in writing to do so by the record holders
of not less than 10% of the outstanding shares.
<PAGE> 260
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 23rd day of October 1997.
DELAWARE GROUP FOUNDATION FUNDS
By /s/ Wayne A. Stork
----------------------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------- -------------------------------------------- ---------
<S> <C> <C>
/s/Wayne A. Stork Chairman of the Board and Trustee October 23, 1997
- -----------------------------------
Wayne A. Stork
/s/Jeffrey J. Nick President, Chief Executive Officer and October 23, 1997
- ----------------------------------- Trustee
Jeffrey J. Nick
Executive Vice President/Chief Operating
Officer/Chief Financial Officer and Trustee
(Principal Financial Officer and
/s/David K. Downes Principal Accounting Officer) October 23, 1997
- -----------------------------------
David K. Downes
/s/George M. Chamberlain Senior Vice President/Secretary/ October 23, 1997
- ----------------------------------- General Counsel and Trustee
George M. Chamberlain
</TABLE>
<PAGE> 261
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE> 262
INDEX TO EXHIBITS
Exhibit No. Exhibit
EX-99.B1A Declaration of Trust
EX-99.B2A By-Laws
EX-99.B5A Proposed Asset Allocation Agreement
EX-99.B6A Proposed Distribution Agreement
EX-99.B6B Form of Administration and Service Agreement
(Module Name
ADMIN_SER_AGREE)
EX-99.B6C Dealer's Agreement
(Module Name
DEALERS_AGREE)
EX-99.B6D Mutual Fund Agreement
(Module Name
MFAGMT95)
EX-99.B7A Amended and Restated Profit Sharing Plan
(Module Name
PROF_SHAR_PLAN)
EX-99.B7B Amendment to Profit Sharing Plan
(Module Name
AMEND_PROF_SHAR)
EX-99.B8A Form of Custodian Agreement
(Module Name
CHASE_CUST_AGR)
EX-99.B9A Proposed Shareholders Services Agreement
EX-99.B9B Proposed Fund Accounting Agreement
(Module Name
FUND_ACCT_AGT)
EX-99.B9B1 Proposed Amendment to Schedule A of the Fund Accounting
Agreement
<PAGE> 263
INDEX TO EXHIBITS
(continued)
Exhibit No. Exhibit
EX-99.B15A Proposed Plan under Rule 12b-1 for Class A
EX-99.B15B Proposed Plan under Rule 12b-1 for Class B
EX-99.B15C Proposed Plan under Rule 12b-1 for Class C
EX-99.B18 Proposed Plan under Rule 18f-3
EX-99.B18A Proposed Amended Appendix A to Plan under Rule 18f-3
<PAGE> 1
AGREEMENT AND DECLARATION OF TRUST
of
DELAWARE GROUP FOUNDATION FUNDS
a Delaware Business Trust
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I.
Name and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) The "1940 Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) "By-Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) The term "Commission" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) "DBTA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) "Declaration of Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) The term "Interested Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(h) "Investment Adviser" or "Adviser" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(i) "National Financial Emergency" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(j) "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(k) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Principal Underwriter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(l) "Series" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(m) "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(n) "Shareholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(o) The "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(p) The "Trust Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(q) "Trustees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II.
Purpose of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III.
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Division of Beneficial Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Ownership of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Investments in the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Status of Shares and Limitation of Personal Liability. . . . . . . . . . . . . . . . . . . . 9
Section 5. Power of Board of Trustees to Change Provisions Relating to Shares. . . . . . . . . . . . . . 9
Section 6. Establishment and Designation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Indemnification of Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV.
The Board of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Number, Election and Tenure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Effect of Death, Resignation, etc. of a Trustee. . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4. Payment of Expenses by the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5. Payment of Expenses by Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6. Ownership of Trust Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Service Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V.
Shareholders' Voting Powers and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 1. Voting Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Voting Power and Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3. Quorum and Required Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4. Action by Written Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5. Record Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6. Additional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI.
Net Asset Value, Distributions and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1. Determination of Net Asset Value, Net Income and Distributions. . . . . . . . . . . . . . . . 21
Section 2. Redemptions and Repurchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3. Redemptions at the Option of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII.
Compensation and Limitation of Liability of Officers and Trustees . . . . . . . . . . . . . . . . . . . . 23
Section 1. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2. Indemnification and Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3. Officers and Trustees' Good Faith Action, Expert Advice, No Bond or Surety. . . . . . . . . . 24
Section 4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII.
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 1. Liability of Third Persons Dealing with Trustees. . . . . . . . . . . . . . . . . . . . . . 25
Section 2. Termination of Trust or Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3. Merger and Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5. Filing of Copies, References, Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7. Provisions in Conflict with Law or Regulations. . . . . . . . . . . . . . . . . . . . . . . 27
Section 8. Business Trust Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9. Use of the Name "Delaware". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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<PAGE> 4
AGREEMENT AND DECLARATION OF TRUST
OF
DELAWARE GROUP FOUNDATION FUNDS
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and
entered into as of the date set forth below by the Trustees named hereunder for
the purpose of forming a Delaware business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that a Certificate
of Trust be filed with the Office of the Secretary of State of the State of
Delaware and do hereby declare that the Trustees will hold IN TRUST all cash,
securities and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same upon
the following terms and conditions for the pro rata benefit of the Shareholder
of Shares in this Trust.
ARTICLE I.
Name and Definitions
Section 1. Name. This trust shall be known as "Delaware
Group Foundation Funds" and the Trustees shall conduct the business of the
Trust under that name, or any other name as they may from time to time
determine.
Section 2. Definitions. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) The "1940 Act" means the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as adopted or amended from
time to time;
(b) "By-Laws" means the By-Laws of the Trust, as amended
from time to time and incorporated herein by reference;
(c) "Code" means the Internal Revenue Code of 1986, as
amended;
(d) The term "Commission" has the meaning given it in
Section 2(a)(7) of the 1940 Act;
<PAGE> 5
(e) "DBTA" means the Delaware Business Trust Act,
Delaware Code Annotated Title 12, Sections 3801 et seq., as amended from time
to time;
(f) "Declaration of Trust" means this Agreement and
Declaration of Trust, as amended or restated from time to time;
(g) The term "Interested Person" has the meaning given it
in Section 2(a)(19) of the 1940 Act;
(h) "Investment Adviser" or "Adviser" means a party
furnishing services to the Trust pursuant to any contract described in Article
IV, Section 7(a) hereof;
(i) "National Financial Emergency" means the whole or any
part of any period: (i) during which the New York Stock Exchange is closed
other than weekends and customary holiday closings; (ii) during which trading
on the New York Stock Exchange is restricted; (iii) during which an emergency
exists as a result of which disposal by the Trust of Trust Property is not
reasonably practicable or it is not reasonably practicable for the Trust fairly
to determine the value of its net assets; or (iv) during any other period when
the Commission may, for the protection of Shareholders, by order permit
suspension of the right of redemption or postponement of the date of payment on
redemption; provided that applicable rules and regulations of the Commission
shall govern as to whether the conditions prescribed in (ii), (iii) or (iv)
exist. The Board of Trustees may, in its discretion, declare that the
suspension relating to a national financial emergency shall terminate, as the
case may be, on the first business day on which the New York Stock Exchange
shall have reopened or the period specified in (ii), (iii) or (iv) shall have
expired (as to which, in the absence of an official ruling by the Commission,
the determination of the Board of Trustees shall be conclusive);
(j) "Person" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures, estates and
other entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof, whether domestic or foreign;
(k) The term "Principal Underwriter" has the meaning
given to it in Section 2(a)(29) of the 1940 Act;
(l) "Series" refers to each Series of Shares established
and designated under or in accordance with the provisions of Article III and
shall mean an entity such as that
2
<PAGE> 6
described in Section 18(f)(2) of the 1940 Act, and subject to Rule 18f-2
thereunder.
(m) "Shares" means the shares of beneficial interest into
which the beneficial interest in the Trust shall be divided from time to time,
and includes fractions of shares as well as whole shares;
(n) "Shareholder" means a record owner of outstanding
Shares and includes individuals, corporations, partnerships, trusts,
associations, joint ventures, estates and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof,
whether domestic or foreign;
(o) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as amended from time to
time;
(p) The "Trust Property" means any and all property, real
or personal, tangible or intangible, which is owned or held by or for the
account of the Trust, including, without limitation, the rights referenced in
Article VIII, Section 8 hereof;
(q) "Trustees" refers to the persons who have signed this
Agreement and Declaration of Trust, so long as they continue in office in
accordance with the terms hereof, and all other persons who may, from time to
time, be duly elected or appointed to serve on the Board of Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in their capacity as trustees
hereunder.
ARTICLE II.
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on
the business of a registered management investment company registered under the
1940 Act through one or more Series investing primarily in securities and, in
addition to any authority given by law, to exercise all of the powers and to do
any and all of the things as fully and to the same extent as any private
corporation organized for profit under the general corporation law of the State
of Delaware, now or hereafter in force, including, without limitation, the
following powers:
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(a) To invest and reinvest cash, to hold cash uninvested,
and to subscribe for, invest in, reinvest in, purchase or otherwise acquire,
own, hold, pledge, sell, assign, mortgage, transfer, exchange, distribute,
write options on, lend or otherwise deal in or dispose of contracts for the
future acquisition or delivery of fixed income or other securities, and
securities or property of every nature and kind, including, without limitation,
all types of bonds, debentures, stocks, preferred stocks, negotiable or
non-negotiable instruments, obligations, evidences of indebtedness,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, bankers' acceptances, and other securities of any kind, issued,
created guaranteed, or sponsored by any and all Persons, including, without
limitation, states, territories, and possessions of the United States and the
District of Columbia and any political subdivision, agency, or instrumentality
thereof, any foreign government or any political subdivision of the U.S.
Government or any foreign government, or any international instrumentality, or
by any bank or savings institution, or by any corporation or organization
organized under the laws of the United States or of any state, territory, or
possession thereof, or by any corporation or organization organized under any
foreign law, or in "when issued" contracts for any such securities, to change
the investments of the assets of the Trust;
(b) To exercise any and all rights, powers and privileges
with reference to or incident to ownership or interest, use and enjoyment of
any of such securities and other instruments or property of every kind and
description, including, but without limitation, the right, power and privilege
to own, vote, hold, purchase, sell, negotiate, assign, exchange, lend,
transfer, mortgage, hypothecate, lease, pledge or write options with respect to
or otherwise deal with, dispose of, use, exercise or enjoy any rights, title,
interest, powers or privileges under or with reference to any of such
securities and other instruments or property, the right to consent and
otherwise act with respect thereto, with power to designate one or more
Persons, to exercise any of said rights, powers, and privileges in respect of
any of said instruments, and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any of such
securities and other instruments or property.
(c) To sell, exchange, lend, pledge, mortgage,
hypothecate, lease or write options with respect to or otherwise deal in any
property rights relating to any or all of the assets of the Trust or any
Series, subject to any requirements of the 1940 Act;
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(d) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to
execute and deliver proxies or powers of attorney to such person or persons as
the Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees shall
deem proper;
(e) To exercise powers and right of subscription or
otherwise which in any manner arise out of ownership of securities;
(f) To hold any security or property in a form not
indicating that it is trust property, whether in bearer, unregistered or other
negotiable form, or in its own name or in the name of a custodian or
subcustodian or a nominee or nominees or otherwise or to authorize the
custodian or a subcustodian or a nominee or nominees to deposit the same in a
securities depository, subject in each case to proper safeguards according to
the usual practice of investment companies or any rules or regulations
applicable thereto;
(g) To consent to, or participate in, any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to
pay calls or subscriptions with respect to any security held in the Trust;
(h) To join with other security Shareholders in acting
through a committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in controversy, including but
not limited to claims for taxes;
(j) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(k) To endorse or guarantee the payment of any notes or
other obligations of any Person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof;
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(l) To purchase and pay for entirely out of Trust
Property such insurance as the Trustees may deem necessary or appropriate for
the conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust or payment of distributions and principal on
its portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, principal
underwriters, or independent contractors of the Trust, individually against all
claims and liabilities of every nature arising by reason of holding Shares,
holding, being or having held any such office or position, or by reason of any
action alleged to have been taken or omitted by any such Person as Trustee,
officer, employee, agent, investment adviser, principal underwriter, or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such Person against liability; and
(m) To adopt, establish and carry out pension,
profitsharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
(n) To purchase or otherwise acquire, own, hold, sell,
negotiate, exchange, assign, transfer, mortgage, pledge or otherwise deal with,
dispose of, use, exercise or enjoy, property of all kinds.
(o) To buy, sell, mortgage, encumber, hold, own,
exchange, rent or otherwise acquire and dispose of, and to develop, improve,
manage, subdivide, and generally to deal and trade in real property, improved
and unimproved, and wheresoever situated; and to build, erect, construct, alter
and maintain buildings, structures, and other improvements on real property.
(p) To borrow or raise moneys for any of the purposes of
the Trust, and to mortgage or pledge the whole or any part of the property and
franchises of the Trust, real, personal, and mixed, tangible or intangible, and
wheresoever situated.
(q) To enter into, make and perform contracts and
undertakings of every kind for any lawful purpose, without limit as to amount.
6
<PAGE> 10
(r) To issue, purchase, sell and transfer, reacquire,
hold, trade and deal in capital stock, bonds, debentures and other securities,
instruments or other property of the Trust, from time to time, to such extent
as the Board of Trustees shall, consistent with the provisions of this
Declaration of Trust, determine; and to repurchase, re-acquire and redeem, from
time to time, its Shares or, if any, the shares of its own capital stock,
bonds, debentures and other securities.
The Trust shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of its
Series. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
The foregoing clauses shall each be construed as purposes,
objects and powers, and it is hereby expressly provided that the foregoing
enumeration of specific purposes, objects and powers shall not be held to limit
or restrict in any manner the powers of the Trust, and that they are in
furtherance of, and in addition to, and not in limitation of, the general
powers conferred upon the Trust by the DBTA and the laws of the State of
Delaware or otherwise; nor shall the enumeration of one thing be deemed to
exclude another, although it be of like nature, not expressed.
ARTICLE III.
Shares
Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an unlimited number of
Shares without par value. The Trustees may authorize the division of Shares
into separate Series and the division of Series into separate classes of
Shares. The different Series shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees. If only one or no
Series or classes shall be established, the Shares shall have the rights and
preferences provided for herein and in Article III, Section 6 hereof to the
extent relevant and not otherwise provided for herein, and all references to
Series (and classes) shall be construed (as the context may require) to refer
to the Trust.
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<PAGE> 11
The Trustees shall have the power to issue Shares of the Trust from time to
time at prices that are not less than the net asset value thereof, for such
consideration and in such form as may be fixed from time to time pursuant to
the direction of the Board of Trustees.
Subject to the provisions of Section 6 of this Article III,
each Share shall have voting rights as provided in Article V hereof, and
holders of the Shares of any Series shall be entitled to receive dividends and
distributions, when, if and as declared with respect thereto in the manner
provided in Article IV, Section 3 hereof. No Share shall have any priority or
preference over any other Share of the same Series with respect to dividends or
distributions upon termination of the Trust or of such Series made pursuant to
Article VIII, Section 2 hereof. All dividends and distributions shall be made
ratably among all Shareholders of a particular class of Series from the Trust
Property held with respect to such Series according to the number of Shares or
such class of such Series held of record by such Shareholders on the record
date for any dividend or distribution or on the date of termination, as the
case may be. Shareholders shall have no preemptive or other right to subscribe
to new or additional Shares or other securities issued by the Trust or any
Series. The Trustees may from time to time divide or combine the Shares of any
particular Series into a greater or lesser number of Shares of that Series.
Such division or combination may not materially change the proportionate
beneficial interests of the Shares of that Series in the Trust Property held
with respect to that Series or materially affect the rights of Shares of any
other Series.
Section 2. Ownership of Shares. The ownership of Shares
shall be recorded on the books of the Trust or a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series or class. No certificates certifying the ownership of Shares shall be
issued except as the Board of Trustees may otherwise determine from time to
time. The Trustees may make such rules not inconsistent with the provisions of
the 1940 Act as they consider appropriate for the transfer of Shares of each
Series or class and similar matters. The record books of the Trust as kept by
the Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each Series or class and as to the
number of Shares of each Series or class held from time to time by each
Shareholder.
Section 3. Investments in the Trust. Investments may be
accepted by the Trust from such persons, at such times, on
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such terms, and for such consideration as the Trustees may, from time to time,
authorize. Each investment shall be credited to the individual Shareholder's
account in the form of full and fractional Shares of the Trust, in such Series
or class as the purchaser may select, at the net asset value per Share next
determined for such Series or class after receipt of the investment; provided,
however, that the Trustees may, in their sole discretion, impose a sales charge
upon investments in the Trust.
Section 4. Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving to
Shareholders only the rights provided in this Declaration of Trust. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto. The death of a Shareholder during the existence of the Trust shall not
operate to terminate the Trust, nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but entitles such representative only to the
rights of said deceased Shareholder under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part
of the Trust Property or right to call for a partition or division of the same
or for an accounting, nor shall the ownership of Shares constitute the
Shareholder as partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust, shall have any power to bind personally any
Shareholder, nor, except as specifically provided herein, to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay. As
provided in the DBTA, shareholders of the Trust shall be entitled to the same
limitation of personal liability extended to stockholders of a private
corporation organized for profit under the general corporation law of the State
of Delaware.
Section 5. Power of Board of Trustees to Change Provisions
Relating to Shares. Notwithstanding any other provisions of this Declaration
of Trust and without limiting the power of the Board of Trustees to amend this
Declaration of Trust; or the Certificate of Trust as provided elsewhere herein,
the Board of Trustees shall have the power to amend this Declaration of Trust,
or the Certificate of Trust, at any time and from time to time, in such manner
as the Board of Trustees may determine in its sole discretion, without the need
for Shareholders action, so as to add to, delete, replace or otherwise modify
any provisions relating to the Shares contained
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in this Declaration of Trust, provided that before adopting any such amendment
without Shareholders approval, the Board of Trustees shall determine that it is
consistent with the fair and equitable treatment of all Shareholders and that
Shareholders approval is not otherwise required by the 1940 Act or other
applicable law. If Shares have been issued, Shareholders approval shall be
required to adopt any amendments to this Declaration of Trust which would
adversely affect to a material degree the rights and preferences of the Shares
of any Series or class already issued; provided, however, that in the event
that the Board of Trustees determines that the Trust shall no longer be
operated as an investment company in accordance with the provisions of the 1940
Act, the Board of Trustees may adopt such amendments to this Declaration of
Trust to delete those terms the Board of Trustees identifies as being required
by the 1940 Act.
Subject to the foregoing Paragraph, the Board of Trustees may
amend the Declaration of Trust to amend any of the provisions set forth in
paragraphs (a) through (i) of Section 6 of this Article III.
The Board of Trustees shall have the power, in its discretion,
to make such elections as to the tax status of the Trust as may be permitted or
required under the Code as presently in effect or as amended, without the vote
of Shareholder.
Section 6. Establishment and Designation of Shares. The
establishment and designation of any Series or class of Shares shall be
effective upon the resolution by a majority of the then Trustees, adopting a
resolution which sets forth such establishment and designation and the relative
rights and preferences of such Series or class. Each such resolution shall be
incorporated herein by reference upon adoption.
Shares of each Series or class established pursuant to this
Section 6, unless otherwise provided in the resolution establishing such
Series, shall have the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof
from whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably be held with
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respect to that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits and proceeds thereof,
from whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets held with respect to" that
Series. In the event that there are any assets, income, earnings, profits and
proceeds thereof, funds or payments which are not readily identifiable as
assets held with respect to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as the Trustees,
in their sole discretion, deem fair and equitable, and any General Asset so
allocated to a particular Series shall be held with respect to that Series.
Each such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Held with Respect to a Particular
Series. The assets of the Trust held with respect to each particular Series
shall be charged against the liabilities of the Trust held with respect to that
Series and all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities of the Trust which are not readily
identifiable as being held with respect to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the
Series in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The liabilities, expenses, costs, charges,
and reserves so charged to a Series are herein referred to as "liabilities held
with respect to" that Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes. All Persons who have extended
credit which has been allocated to a particular Series, or who have a claim or
contract which has been allocated to any particular Series, shall look, and
shall be required by contract to look exclusively, to the assets of that
particular Series for payment of such credit, claim, or contract. In the
absence of an express contractual agreement so limiting the claims of such
creditors, claimants and contract providers, each creditor, claimant and
contract provider will be deemed nevertheless to have impliedly agreed to such
limitation unless an express provision to the contrary has been incorporated in
the written contract or other document establishing the claimant relationship.
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(c) Dividends, Distributions, Redemptions, and
Repurchases. Notwithstanding any other provisions of this Declaration of
Trust, including, without limitation, Article VI, no dividend or distribution
including, without limitation, any distribution paid upon termination of the
Trust or of any series or class with respect to, nor any redemption or
repurchase of, the Shares of any Series or class shall be effected by the Trust
other than from the assets held with respect to such Series, nor, except as
specifically provided in Section 7 of this Article III, shall any Shareholder
of any particular Series otherwise have any right or claim against the assets
held with respect to any other Series except to the extent that such
Shareholder has such a right or claim hereunder as a Shareholder of such other
Series. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholder.
(d) Voting. All Shares of the Trust entitled to vote on
a matter shall vote separately by Series and, if applicable, by class: that is,
the Shareholder of each Series or class shall have the right to approve or
disapprove matters affecting the Trust and each respective Series or class as
if the Series or classes were separate companies. There are, however, two
exceptions to voting by separate Series or classes. First, if the 1940 Act
requires all Shares of the Trust to be voted in the aggregate without
differentiation between the separate Series or classes, then all the Trust's
Shares shall be entitled to vote on a one-vote-per-Share basis. Second, if any
matter affects only the interests of some but not all Series or classes, then
only the Shareholders of such affected Series or classes shall be entitled to
vote on the matter.
(e) Equality. All the Shares of each particular Series
shall represent an equal proportionate undivided interest in the assets held
with respect to that Series (subject to the liabilities held with respect to
that Series and such rights and preferences as may have been established and
designated with respect to classes of Shares within such Series), and each
Share of any particular Series shall be equal to each other Share of that
Series.
(f) Fractions. Any fractional Share of a Series shall
carry proportionately all the rights and obligations of a whole share of that
Series, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
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(g) Exchange Privilege. The Trustees shall have the
authority to provide that the holders of Shares of any Series shall have the
right to exchange said Shares for Shares of one or more other Series of Shares
in accordance with such requirements and procedures as may be established by
the Trustees.
(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholder of any Series unless
otherwise required by applicable law, to combine the assets and liabilities
held with respect to any two or more series into assets and liabilities held
with respect to a single series.
(i) Elimination of Series. At any time that there are no
Shares outstanding of any particular Series or class previously established and
designated, the Trustees may by resolution of a majority of the then Trustees
abolish that Series or class and rescind the establishment and designation
thereof.
Section 7. Indemnification of Shareholder. If any
Shareholder or former Shareholder shall be exposed to liability by reason of a
claim or demand relating to his or her being or having been a Shareholder, and
not because of his or her acts or omissions, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators, or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled to be held harmless from and
indemnified out of the assets of the Trust against all loss and expense arising
from such claim or demand.
ARTICLE IV.
The Board of Trustees
Section 1. Number, Election and Tenure. The number of
Trustees constituting the Board of Trustees may be fixed from time to time by a
written instrument signed, or by resolution approved at a duly constituted
meeting, by a majority of the Board of Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1) nor more than fifteen
(15). The Board of Trustees, by action of a majority of the then Trustees at a
duly constituted meeting, may fill vacancies in the Board of Trustees or remove
Trustees with or without cause. Each Trustee shall serve during the continued
lifetime of the Trust until he or she dies, resigns, is declared bankrupt or
incompetent by a court of appropriate jurisdiction, or is
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removed, or, if sooner than any of such events, until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of his or her successor. Any Trustee may resign at any time
by written instrument signed by him or her and delivered to any officer of the
Trust or to a meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some later time. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
resigning and no Trustee removed shall have any right to any compensation for
any period following any such event or any right to damages on account of such
events or any actions taken in connection therewith following his or her
resignation or removal. The Shareholders may elect Trustees, including filling
any vacancies in the Board of Trustees, at any meeting of Shareholders called
by the Trustees for that purpose. A meeting of Shareholders for the purpose of
electing one or more Trustees may be called by the Trustees upon their own
vote.
Section 2. Effect of Death, Resignation, etc. of a Trustee.
The death, declination, resignation, retirement, removal, declaration as
bankrupt or incapacity of one or more Trustees, or of all of them, shall not
operate to terminate the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust. Whenever a vacancy in the
Board of Trustees shall occur, until such vacancy is filled as provided in
Article IV, Section 1, the Trustee(s) in office, regardless of the number,
shall have all the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by this Declaration of Trust. As conclusive
evidence of such vacancy, a written instrument certifying the existence of such
vacancy may be executed by an officer of the Trust or by a majority of the
Board of Trustees. In the event of the death, declination, resignation,
retirement, removal, declaration as bankrupt or incapacity of all of the then
Trustees within a short period of time and without the opportunity for at least
one Trustee being able to appoint additional Trustees to fill vacancies, the
Trust's Investment Adviser(s) is (are) empowered to appoint new Trustees
subject to the provisions of Section 16(a) of the 1940 Act.
Section 3. Powers. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the Board
of Trustees, and such Board shall have all powers necessary or convenient to
carry out that responsibility, including the power to engage in securities or
other transactions of all kinds on behalf of the Trust. Trustees in all
instances shall act as principals, and are and shall be free from the
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control of the Shareholder. The Trustees shall have full power and authority
to do any and all acts and to make and execute any and all contracts and
instruments that they may consider necessary or appropriate in connection with
the administration of the Trust. Without limiting the foregoing, the Trustees
may: adopt By-Laws not inconsistent with this Declaration of Trust providing
for the regulation and management of the affairs of the Trust and may amend and
repeal them; fill vacancies in or remove from their number, and may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees consisting of two or more Trustees which may exercise the
powers and authority of the Board of Trustees to the extent that the Trustees
determine; employ one or more custodians of the Trust Property and may
authorize such custodians to employ subcustodians and to deposit all or any
part of such Trust Property in a system or systems for the central handling of
securities or with a Federal Reserve Bank; retain a transfer agent, dividend
disbursing agent or a shareholder servicing agent, or both; provide for the
issuance and distribution of Shares by the Trust directly or through one or
more Principal Underwriters or otherwise; retain one or more Investment
Adviser(s); redeem, repurchase and transfer Shares pursuant to applicable law;
set record dates for the determination of Shareholders with respect to various
matters, in the manner provided in Article V, Section 5 of this Declaration of
Trust; declare and pay dividends and distributions to Shareholders from the
Trust Property; establish from time to time, in accordance with the provisions
of Article III, Section 6 hereof, any Series or class of Shares, each such
Series to operate as a separate and distinct investment medium and with
separately defined investment objectives and policies and distinct investment
purpose; and in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian, transfer, dividend disbursing
or shareholder servicing agent, Principal Underwriter or Investment Adviser.
Any determination as to what is in the best interests of the Trust made by the
Trustees in good faith shall be conclusive.
In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified or required by law, any action by the Board of Trustees
shall be deemed effective if approved or taken by a majority of the Trustees
then in office. Any action required or permitted to be taken at any meeting of
the Board of
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Trustees, or any committee thereof, may be taken without a meeting if a
majority of the members of the Board of Trustees or committee (as the case may
be) consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Trustees, or committee.
Section 4. Payment of Expenses by the Trust. The Trustees
are authorized to pay or cause to be paid out of the principal or income of the
Trust or Series or class, or partly out of the principal and partly out of
income, and to charge or allocate the same to, between or among such one or
more of the Series or classes that may be established or designated pursuant to
Article III, Section 6, as they deem fair, all expenses, fees, charges, taxes
and liabilities incurred by or arising in connection with the maintenance or
operation of the Trust or Series or class, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses, fees, charges, taxes and liabilities for the services of the Trust's
officers, employees, Investment Adviser, Principal Underwriter, auditors,
counsel, custodian, sub-custodian (if any), transfer agent, dividend disbursing
agent, shareholder servicing agent, and such other agents or independent
contractors and such other expenses, fees, charges, taxes and liabilities as
the Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholder. The Trustees
shall have the power, as frequently as they may determine, to cause each
Shareholder, or each Shareholder of any particular Series, to pay directly, in
advance or arrears, for charges of the Trust's custodian or transfer, dividend
disbursing, shareholder servicing or similar agent, an amount fixed from time
to time by the Trustees, by setting off such charges due from such Shareholder
from declared but unpaid dividends or distributions owed such Shareholder
and/or by reducing the number of Shares in the account of such Shareholder by
that number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.
Section 6. Ownership of Trust Property. Title to all of the
Trust Property shall at all times be considered to be vested in the Trust,
except that the Trustees shall have the power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in the
name of the Trust, or in the name of any other Person as nominee, on such terms
as the Trustees may determine. The right, title and interest of the Trustees
in the Trust Property shall vest automatically in each person who may hereafter
become a Trustee. Upon the resignation, removal, declaration of bankruptcy or
incompetence by a court of appropriate jurisdiction or death of a
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Trustee, he or she shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of
such Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may
be set forth in the By-Laws and/or the 1940 Act, the Trustees may, at any time
and from time to time, contract for exclusive or nonexclusive advisory,
management and/or administrative services for the Trust or for any Series with
any corporation, trust, association or other organization; and any such
contract may contain such other terms as the Trustees may determine, including
without limitation, authority for the Investment Adviser or administrator to
determine from time to time without prior consultation with the Trustees what
securities and other instruments or property shall be purchased or otherwise
acquired, owned, held, invested or reinvested in, sold, exchanged, transferred,
mortgaged, pledged, assigned, negotiated, or otherwise dealt with or disposed
of, and what portion, if any, of the Trust Property shall be held uninvested
and to make changes in the Trust's investments, or such other activities as may
specifically be delegated to such party.
(b) The Trustees may also, at any time and from time to
time, contract with any corporations, trusts, associations or other
organizations, appointing it or them the exclusive or nonexclusive distributor
or Principal Underwriter for the Shares of one or more of the Series or classes
or other securities to be issued by the Trust, or appointing it or them to act
as the custodian, transfer agent, dividend disbursing agent and/or shareholder
servicing agent for the Trust or one or more of the Series. Every such
contract shall comply with such requirements and restrictions as may be set
forth in the By-Laws, the 1940 Act or stipulated by resolution of the Trustees;
and any such contract may contain such other terms as the Trustees may
determine.
(c) The Trustees are further empowered, at any time and
from time to time, to contract with any Persons to provide such other services
to the Trust or one or more of its Series, as the Trustees determine to be in
the best interests of the Trust or one or more of its Series.
(d) The fact that:
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(i) any of the Shareholders, Trustees, employees
or officers of the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, adviser, principal
underwriter, distributor, or affiliate or agent of or for any
corporation, trust, association, or other organization, or for
any parent or affiliate of any organization with which an
advisory, management or administration contract, or principal
underwriter's or distributor's contract, or transfer, dividend
disbursing, shareholder servicing or other type of service
contract may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Holder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory, management or
administration contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or
other type of service contract may have been or may hereafter
be made also has an advisory, management or administration
contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other service
contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee, employee or officer of the Trust from voting upon or
executing the same, or create any liability or accountability to the Trust or
its Shareholders, provided approval of each such contract is made pursuant to
the requirements of the 1940 Act.
ARTICLE V.
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of
Article III, Section 6(d), the Shareholders shall have power to vote only (i)
for the election of Trustees, including the filling of any vacancies in the
Board of Trustees, as provided in Article IV, Section 1; (ii) with respect to
such additional matters relating to the Trust as may be required by this
Declaration of Trust, the By-Laws, any registration statement of the Trust with
the Commission or any state, or the 1940 Act; and
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(iii) on such other matters as the Trustees may consider necessary or
desirable. The Shareholder of each Share shall be entitled to one vote for
each full Share, and a fractional vote for each fractional Share, standing in
the Shareholder's name in the record books of the Trust as of the record date
selected by the Board. Shareholders shall not be entitled to cumulative voting
in the election of Trustees or on any other matter. Shares may be voted in
person or by proxy. With respect to any shareholder meeting, the Trustees may
act to permit the Trust to accept proxies by any electronic, telephonic,
computerized, telecommunications or other reasonable alternative to the
execution of a written instrument authorizing the proxy to act, provided the
shareholder's authorization is received within eleven (11) months before the
meeting. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest with the
challenger.
Section 2. Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purpose of electing Trustees
as provided in Article IV, Section 1 and for such other purposes as may be
prescribed by law, by this Declaration of Trust or by the By-Laws. Meetings of
the Shareholders may also be called by the Trustees from time to time for the
purpose of taking action upon any other matter deemed by the Trustees to be
necessary or desirable. A meeting of Shareholders may be held at any place
designated by the Trustees. Written notice of any meeting of Shareholders
shall be given or caused to be given by the Trustees by mailing such notice at
least seven (7) calendar days before such meeting, postage prepaid, stating the
time and place of the meeting, to each Shareholder at the Shareholder's address
as it appears on the records of the Trust on the record date. Whenever notice
of a meeting is required to be given to a Shareholder under this Declaration of
Trust or the By-Laws, a written waiver thereof, executed before or after the
meeting by such Shareholder or his or her attorney thereunto authorized and
filed with the records of the meeting, shall be deemed equivalent to such
notice.
Section 3. Quorum and Required Vote. Except when a larger
quorum is required by applicable law, by the By-Laws or by this Declaration of
Trust, thirty-three and one-third percent (33 1/3%) of the Shares entitled to
vote at such meeting shall constitute a quorum at a Shareholders' meeting.
When any one or
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more Series or classes is to vote as a single class separate from any other
Shares, thirty-three and one-third percent (33 1/3%)of the Shares of each such
Series or classes entitled to vote shall constitute a quorum at a Shareholder's
meeting of that Series. Any meeting of Shareholders may be adjourned from time
to time by a majority of votes cast by those Shareholders present in person or
by proxy and entitled to vote and properly cast upon the question of adjourning
a meeting to another date and time, whether or not a quorum is present, and the
meeting may be held as adjourned within a reasonable time after the date set
for the original meeting without further notice. Subject to the provisions of
Article III, Section 6(d), when a quorum is present at any meeting, a majority
of the votes cast shall decide any questions and a plurality shall elect a
Trustee, except when a larger vote is required by any provision of this
Declaration of Trust, by the By-Laws or by applicable law.
Section 4. Action by Written Consent. Any action which may
be taken by Shareholders may be taken without a meeting if Shareholders holding
a majority of the Shares entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust, by the By-Laws or by applicable law) and holding a
majority (or such larger proportion as aforesaid) of the Shares of any Series
or class entitled to vote separately on the matter, consent to the action in
writing and such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken
at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series or class who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than one hundred eighty (180) days before the
date of any meeting of Shareholders, as the record date for determining the
Shareholders of such Series or class having the right to notice of and to vote
at such meeting and any adjournment thereof, and in such case only Shareholders
of record on such record date shall have such right, notwithstanding any
transfer of Shares on the books of the Trust after the record date. For the
purpose of determining the Shareholders of any Series or class who are entitled
to receive payment of any dividend or of any other distribution, the Trustees
may from time to time fix a date, which shall be before the date for the
payment of such dividend or such other distribution, as the record date for
determining the Shareholders of such Series or class having the right to
receive such dividend or distribution.
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Nothing in this Section shall be construed as precluding the Trustees from
setting different record dates for different Series or classes.
Section 6. Additional Provisions. The By-Laws may include
further provisions for Shareholders' votes, meetings and related matters.
ARTICLE VI.
Net Asset Value, Distributions and Redemptions
Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to Article III, Section 6 hereof, the Board of Trustees
shall have the power to fix an initial offering price for the Shares of any
Series or class which shall yield to such Series or class not less than the net
asset value thereof, at which price the Shares of such Series or class shall be
offered initially for sale, and to determine from time to time thereafter the
offering price which shall yield to such Series or class not less than the net
asset value thereof from sales of the Shares of such Series or class; provided,
however, that no Shares of a Series or class shall be issued or sold for
consideration which shall yield to such Series or class than the net asset
value of the Shares of such Series or class next determined after the receipt
of the order (or at such other times set by the Board of Trustees), except in
the case of Shares of such Series or class issued in payment of a dividend
properly declared and payable.
Subject to Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-laws or
in a duly adopted vote of the Trustees such bases and time for determining the
per Share or net asset value of the Shares of any Series or net income
attributable to the Shares of any Series, or the declaration and payment of
dividends and distributions on the Shares of any Series, as they may deem
necessary or desirable.
Section 2. Redemptions and Repurchases. The Trust shall
purchase such Shares as are offered by any Shareholder for redemption, upon the
presentation of a proper instrument of transfer together with a request
directed to the Trust or a Person designated by the Trust that the Trust
purchase such Shares or in accordance with such other procedures for redemption
as the Trustees may from time to time authorize; and the Trust will pay
therefor the net asset value thereof, in accordance with the
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By-Laws and applicable law. Payment for said Shares shall be made by the Trust
to the Shareholder within seven days after the date on which the request is
made in proper form. The obligation set forth in this Section 2 is subject to
the provision that in the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if permitted by
the Rules of the Commission during periods when trading on the Exchange is
restricted or during any National Financial Emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets held with respect to
such Series or during any other period permitted by order of the Commission for
the protection of investors, such obligations may be suspended or postponed by
the Trustees. If certificates have been issued to a Shareholder, any such
request by such Shareholder must be accompanied by surrender of any outstanding
certificate or certificates for such Shares in form for transfer, together with
such proof of the authenticity of signatures as may reasonably be required on
such Shares and accompanied by proper stock transfer stamps, if applicable.
Payments for Shares so redeemed by the Trust shall be made in
cash, except payment for such Shares may, at the option of the Board of
Trustees, or such officer or officers as it may duly authorize in its complete
discretion, be made in kind or partially in cash and partially in kind. In
case of any payment in kind, the Board of Trustees, or its delegate, shall have
absolute discretion as to what security or securities of the Trust shall be
distributed in kind and the amount of the same; and the securities shall be
valued for purposes of distribution at the value at which they were appraised
in computing the then current net asset value of the Shares, provided that any
Shareholder who cannot legally acquire securities so distributed in kind by
reason of the prohibitions of the 1940 Act or the provisions of the Employee
Retirement Income Security Act ("ERISA") shall receive cash. Shareholders
shall bear the expenses of in-kind transactions, including, but not limited to,
transfer agency fees, custodian fees and costs of disposition of such
securities.
Payment for Shares so redeemed by the Trust shall be made by
the Trust as provided above within seven days after the date on which the
redemption request is received in good order; provided, however, that if
payment shall be made other than exclusively in cash, any securities to be
delivered as part of such payment shall be delivered as promptly as any
necessary transfers of such securities on the books of the several corporations
whose securities are to be delivered practicably can
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be made, which may not necessarily occur within such seven day period.
Moreover, redemptions may be suspended in the event of a National Financial
Emergency. In no case shall the Trust be liable for any delay of any
corporation or other Person in transferring securities selected for delivery as
all or part of any payment in kind.
The right of Shareholders to receive dividends or other
distributions on Shares may be set forth in a Plan adopted by the Trustees and
amended from time to time pursuant to Rule 18f-3 of the 1940 Act. The right of
any Shareholder of the Trust to receive dividends or other distributions on
Shares redeemed and all other rights of such Shareholder with respect to the
Shares so redeemed by the Trust, except the right of such Shareholder to
receive payment for such Shares, shall cease at the time as of which the
purchase price of such Shares shall have been fixed, as provided above.
Section 3. Redemptions at the Option of the Trust. The Board
of Trustees may, from time to time, without the vote or consent of
Shareholders, and subject to the 1940 Act or other applicable law, authorize
the closing of Shareholder accounts not meeting requirements as to minimum net
value or other criteria determined by the Trustees, according to policies
adopted by the Trustees. The Trust shall have the right at its option and at
any time to redeem Shares of any Shareholder at the net asset value thereof as
described in Section 1 of this Article VI: (i) to the extent that such
Shareholder owns Shares of a particular Series equal to or in excess of a
percentage of the outstanding Shares of that Series determined from time to
time by the Trustees; or (ii) to the extent that such Shareholder owns Shares
equal to or in excess of a percentage, determined from time to time by the
Trustees, of the outstanding Shares of the Trust or of any Series.
ARTICLE VII.
Compensation and Limitation of Liability of
Officers and Trustees
Section 1. Compensation. Except as set forth in the last
sentence of this Section 1, the Trustees may, from time to time, fix a
reasonable amount of compensation to be paid by the Trust to the Trustees and
officers of the Trust. Nothing herein shall in any way prevent the employment
of any Trustee for advisory, management, legal, accounting, investment banking
or
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other services and payment for the same by the Trust.
Section 2. Indemnification and Limitation of Liability. To
the fullest extent that limitations on the liability of Trustees and officers
are permitted by the DBTA, the officers and Trustees shall not be responsible
or liable in any event for any act or omission of: any agent or employee of the
Trust; any Investment Adviser or Principal Underwriter of the Trust; or with
respect to each Trustee and officer, the act or omission of any other Trustee
or officer, respectively. The Trust, out of the Trust Property, shall
indemnify and hold harmless each and every officer and Trustee from and against
any and all claims and demands whatsoever arising out of or related to each
officer's and Trustee's performance of his or her duties as an officer or
Trustee of the Trust. This limitation on liability applies to events occurring
at the time a person serves as a Trustee or officer of the Trust whether or not
such person is a Trustee or officer at the time of any proceeding in which
liability is asserted. Nothing herein contained shall indemnify, hold harmless
or protect any officer or Trustee from or against any liability to the Trust or
any Shareholder to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or document whatsoever issued, executed or done
by or on behalf of the Trust, the officers or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been issued,
executed or done only in or with respect to their or his or her capacity as
Trustees or Trustee, and/or officers or officer, and such Trustees or Trustee,
or officers or officer, as applicable, shall not be personally liable
therefore, except as described in the last sentence of the first paragraph of
this Section 2 of this Article VII.
Section 3. Officers and Trustees' Good Faith Action, Expert
Advice, No Bond or Surety. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested. An officer or
Trustee shall be liable to the Trust and to any Shareholder solely for his or
her own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of officer or Trustee, but
shall not be liable for errors of judgment or mistakes of fact or law. The
officers and Trustees may obtain the advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust. No such
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officer or Trustee shall be liable for any act or omission in accordance with
such advice and no inference concerning liability shall arise from a failure to
follow such advice. The officers and Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
Section 4. Insurance. The officers and Trustees shall be
entitled and have the authority to the fullest extent permitted by law to
purchase with Trust Property insurance for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in which he or she
becomes involved by virtue of his or her capacity or former capacity with the
Trust, whether or not the Trust would have the power to indemnify him or her
against such liability under the provisions of this Article.
ARTICLE VIII.
Miscellaneous
Section 1. Liability of Third Persons Dealing with Trustees.
No person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any actions made or to be made by the Trustees.
Section 2. Termination of Trust or Series. Unless terminated
as provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by vote of a majority of the Shares of each
Series entitled to vote, voting separately by Series, or by the Trustees by
written notice to the Shareholders. Any Series may be terminated at any time
by vote of a majority of the Shares of that Series or by the Trustees by
written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities held, severally, with respect to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets held,
severally, with respect to each Series (or the applicable Series, as the case
may be), to distributable form in cash or shares or other securities, or any
combination thereof, and distribute the proceeds held with respect to each
Series (or the applicable Series, as the case may be), to the
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<PAGE> 29
Shareholders of that Series, as a Series, ratably according to the
number of Shares of that Series held by the several Shareholders on the date of
termination.
Section 3. Merger and Consolidation. A majority of the
Trustees may cause (i) the Trust or one or more of its Series to the extent
consistent with applicable law to be merged into or consolidated with another
trust or company or Series thereof, (ii) the Shares of the Trust or any Series
to be converted into beneficial interests in another business trust (or series
thereof) created pursuant to this Section 3 of Article VIII, or (iii) the
Shares to be exchanged under or pursuant to any state or federal statute to the
extent permitted by law. If required under the 1940 Act or other applicable
law, such merger or consolidation, Share conversion or Share exchange shall be
authorized by a vote of Shareholders of the Trust as a whole, or any affected
Series, as may be applicable, in accordance with the procedures set forth in
Article V hereof; provided that in all respects not governed by statute or
applicable law, the Trustees shall have power to prescribe the procedure
necessary or appropriate to accomplish a sale of assets, merger or
consolidation including the power to create one or more separate business
trusts to which all or any part of the assets, liabilities, profits or losses
of the Trust may be transferred and to provide for the conversion of Shares of
the Trust or any Series into beneficial interests in such separate business
trust or trusts (or series thereof).
Section 4. Amendments.
Subject to the provisions of the second paragraph of this
Section 4, this Declaration of Trust may be restated and/or amended at any time
by an instrument in writing signed by a majority of the then Trustees and, if
required, by approval of such amendment by Shareholders in accordance with
Article V, Section 3 hereof. Any such restatement and/or amendment hereto
shall be effective immediately upon execution and approval. The Certificate of
Trust of the Trust may be restated and/or amended by a similar procedure, and
any such restatement and/or amendment shall be effective immediately upon
filing with the Office of the Secretary of State of the State of Delaware or
upon such future date as may be stated therein.
Notwithstanding the above, the Trust expressly reserves the
right to amend or repeal any provisions contained in this Declaration of Trust
or the Certificate of Trust, in accordance with the provisions of Section 5 of
Article III hereof, and all
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rights, contractual and otherwise, conferred upon Shareholders are granted
subject to such reservation.
Section 5. Filing of Copies, References, Headings. The
original or a copy of this Declaration of Trust and of each restatement and/or
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
restatements and/or amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such restatements and/or amendments. In this
Declaration of Trust and in any such restatements and/or amendments, references
to this instrument, and all expressions of similar effect to "herein," "hereof"
and "hereunder," shall be deemed to refer to this instrument as amended or
affected by any such restatements and/or amendments. Headings are placed
herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
instrument. Whenever the singular number is used herein, the same shall
include the plural; and the neuter, masculine and feminine genders shall
include each other, as applicable. This instrument may be executed in any
number of counterparts, each of which shall be deemed an original.
Section 6. Applicable Law. This Declaration of Trust is
created under and is to be governed by and construed and administered according
to the laws of the State of Delaware, the DBTA and the applicable provisions of
the 1940 Act and the Code. The Trust shall be a Delaware business trust
pursuant to the DBTA, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a business trust.
Section 7. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with the 1940 Act, the Code, the
DBTA, or with other applicable laws and regulations, the conflicting provision
shall be deemed not to have constituted a part of this Declaration of Trust
from the time when such provisions became inconsistent with such laws or
regulations; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration of
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Trust or render invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of this Declaration of Trust shall
be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
Section 8. Business Trust Only. It is the intention of the
Trustees to create a business trust pursuant to the DBTA, and thereby to create
the relationship of trustee and beneficial owners within the meaning of the
DBTA between the Trustees and each Shareholder. It is not the intention of the
Trustees to create a general or limited partnership, joint stock association,
corporation, bailment, or any form of legal relationship other than a business
trust pursuant to the DBTA. Nothing in this Declaration of Trust shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
Section 9. Use of the Names "Delaware" and "Foundation"
Funds. The Trust expressly agrees and acknowledges that the names "Delaware
Group" and "Foundation Funds" are the sole property of Delaware Management
Holdings, Inc. ("DMH"), and, with respect to the name "Delaware Group," that
similar names are used by funds in the investment business which are affiliated
with DMH. DMH has consented to the use by the Trust of the identifying words
"Delaware Group" and "Foundation Funds" and has granted to the Trust a
nonexclusive license to use the names "Delaware Group" and "Foundation Funds"
as part of the name of the Trust and the name of any Series of Shares. The
Trust further expressly agrees and acknowledges that the non-exclusive license
granted herein may be terminated by DMH if the Trust ceases to use an affiliate
of DMH as Investment Adviser or Delaware Distributors, L.P. ("DDLP") as
Principal Underwriter (or to use other affiliates or successors of DMH and DDLP
for such purposes). In such event, the non-exclusive license granted herein
may be revoked by DMH and the Trust shall cease using the names "Delaware
Group" and "Foundation Funds" as part of its name or the name of any Series of
Shares, unless otherwise consented to by DMH or any successor to its interests
in such names.
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IN WITNESS WHEREOF, the Trustees named below do hereby make and enter
into this Declaration of Trust as of the ___ day of October, 1997.
______________________________ _______________________________
Wayne A. Stork Jeffrey J. Nick
One Commerce Square One Commerce Square
2005 Market Street 2005 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
______________________________ _______________________________
David K. Downes George M. Chamberlain, Jr.
One Commerce Square One Commerce Square
2005 Market Street 2005 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS One Commerce Square,
Philadelphia, PA 19103.
<PAGE> 1
BY-LAWS
OF
DELAWARE GROUP FOUNDATION FUNDS
A Delaware Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal executive office of the
Trust shall be One Commerce Square, Philadelphia, Pennsylvania, 19103. The
Board of Trustees may, from time to time, change the location of the principal
executive office of the Trust at any place within or outside the State of
Delaware.
Section 2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held
at any place within or outside the State of Delaware designated by the Board of
Trustees. In the absence of any such designation by the Board of Trustees,
shareholders' meetings shall be held at the principal executive office of the
Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be
called at any time by the Board of Trustees or by the Chairman of the Board or
by the president. If the Trust is required under the Investment Company Act of
1940 to hold a shareholder meeting to elect trustees, the meeting shall be
deemed an "annual meeting" for that year for purposes of said Act.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings
of shareholders shall be sent or otherwise given in accordance with Section 4
of this Article II not less than seven (7) nor more than ninety-three (93) days
before the date of the meeting. The notice shall specify (i) the place, date
and hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the
notice are intended to be presented for election. Except with respect to
adjournments as provided herein, no business shall be transacted at such
meeting other than that specified in the notice.
<PAGE> 2
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of
any meeting of shareholders shall be given either personally or by first-class
mail, courier or telegraphic, facsimile, electronic mail or other written
communication, charges prepaid, addressed to the shareholder at the address of
that shareholder appearing on the books of the Trust or its transfer agent or
given by the shareholder to the Trust for the purpose of notice. If no such
address appears on the Trust's books or is given, notice shall be deemed to
have been given if sent to that shareholder by first-class mail, courier, or
telegraphic, facsimile, electronic mail or other written communication to the
Trust's principal executive office. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail, with a courier
or sent by telegram, facsimile, electronic mail or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust marked
to indicate that the notice to the shareholder cannot be delivered at that
address, all future notices or reports shall be deemed to have been duly given
without further mailing, or substantial equivalent thereof, if such notices
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary
or any transfer agent of the Trust giving the notice and shall be filed and
maintained in the records of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting,
whether or not a quorum is present, may be adjourned from time to time by a
majority of the shares voted by those shareholders present at that meeting,
either in person or by proxy.
When any meeting of shareholders is adjourned to another time or
place, notice need not be given of the adjourned meeting at which the
adjournment is taken, unless a new record date of the adjourned meeting is
fixed or unless the adjournment is for more than one hundred eighty (180) days
from the record date set for the original meeting, in which case the Board of
Trustees shall set a new record date. If notice of any such adjourned meeting
is required pursuant to the preceding sentence, it shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 3 and 4 of this Article II. At any adjourned
meeting, the Trust
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may transact any business which might have been transacted at the original
meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting
of shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot, provided, however, that any election for trustees
must be by ballot if demanded by any shareholder before the voting has begun.
On any matter other than elections of trustees, any shareholder may vote part
of the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, but if the shareholder fails to
specify the number of shares which the shareholder is voting affirmatively, it
will be conclusively presumed that the shareholder's approving vote is with
respect to the total shares that the shareholder is entitled to vote on such
proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though transacted at a meeting duly held
after regular call and notice if a quorum be present either in person or by
proxy. Attendance by a person at a meeting shall also constitute a waiver of
notice with respect to that person of that meeting, except with respect to that
person when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except with respect to that person that attendance at a meeting is
not a waiver of any right to object to the consideration of matters not
included in the notice of the meeting if that objection is expressly made at
the beginning of the meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any meeting of shareholders may be taken
without a meeting and without prior notice if a consent in writing setting
forth the action so taken is signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take that action at a meeting at which all shares entitled to vote on that
action were present and voted. All such consents shall be filed with the
Secretary of the Trust and shall be maintained in the Trust's records. Any
shareholder giving a written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy-holders may revoke the consent by a writing received by
the Secretary of the Trust before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written
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consent of all such shareholders shall not have been received, the Secretary
shall give prompt notice of the action approved by the shareholders without a
meeting. This notice shall be given in the manner specified in Section 4 of
this Article II.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of
any meeting or to vote or entitled to give consent to action without a meeting,
the Board of Trustees may fix in advance a record date which shall not be more
than one hundred eighty (180) days nor less than seven (7) days before the date
of any such meeting, as provided in the Declaration of Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day which is
five (5) business days next preceding to the day on which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to action in writing without a meeting, (i) when no prior action by the
Board of Trustees has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board of Trustees has been
taken, shall be at the close of business on the day on which the Board of
Trustees adopt the resolution relating to that action or the seventy-fifth
(75th) day before the date of such other action, whichever is later.
Section 10. PROXIES. Every person entitled to vote for trustees or
on any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Trust. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it before the vote pursuant to that proxy by a
writing delivered to the Trust stating that the proxy is revoked or by a
subsequent proxy executed by or attendance at the meeting and voting in person
by the person executing that proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the Trust before the vote
pursuant to that proxy is counted; provided, however, that no proxy shall be
valid after the expiration of eleven (11) months from the date of the proxy
unless otherwise provided in the proxy. The revocability of a
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proxy that states on its face that it is irrevocable shall be governed by the
provisions of the General Corporation Law of the State of Delaware.
Section 11. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Board of Trustees may appoint any person other than nominees
for office to act as inspector of election at the meeting or its adjournment.
If no inspector of election is so appointed, the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall, appoint
an inspector of election at the meeting. If any person appointed as inspector
fails to appear or fails or refuses to act, the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall, appoint a
person to fill the vacancy.
The inspector shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these By-Laws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the Trust shall be managed and all powers shall be exercised by or
under the direction of the Board of Trustees.
Section 2. NUMBER AND QUALIFICATION OF TRUSTEES. The exact number of
trustees shall be set forth in the Agreement and Declaration of Trust, until
changed by a duly adopted amendment to the Declaration of Trust.
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<PAGE> 6
Section 3. VACANCIES. Vacancies in the Board of Trustees may be
filled by a majority of the remaining trustees, though less than a quorum, or
by a sole remaining trustee, unless the Board of Trustees calls a meeting of
shareholders for the purposes of electing trustees. Notwithstanding the above,
whenever and for so long as the Trust is a participant in or otherwise has in
effect a Plan under which the Trust may be deemed to bear expenses of
distributing its shares as that practice is described in Rule 12b-1 under the
Investment Company Act of 1940, then the selection and nomination of the
trustees who are not interested persons of the Trust (as that term is defined
in the Investment Company Act of 1940) shall be, and is, committed to the
discretion of such disinterested trustees.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings
of the Board of Trustees may be held at any place within or outside the State
of Delaware that has been designated from time to time by resolution of the
Board. In the absence of such a designation, regular meetings shall be held at
the principal executive office of the Trust. Any meeting, regular or special,
may be held by conference telephone or similar communication equipment, so long
as all trustees participating in the meeting can hear one another and all such
trustees shall be deemed to be present in person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Trustees shall be held without call at such time as shall from time to time be
fixed by the Board of Trustees. Such regular meetings may be held without
notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Trustees for any purpose or purposes may be called at any time by the chairman
of the board or the president or any vice president or the secretary or any two
(2) trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail, courier
or telegram, charges prepaid, or by facsimile or electronic mail, addressed to
each trustee at that trustee's address as it is shown on the records of the
Trust. In case the notice is mailed, it shall be deposited in the United
States mail at least seven (7) days before the time of the holding of the
meeting. In case the notice is delivered personally, by telephone, by courier,
to the telegraph company, or by express mail, facsimile, electronic mail or
similar service, it shall be given at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the trustee or to a person at the
office of the trustee who the person giving the notice has reason to believe
will promptly communicate it to the trustee. The notice need not specify the
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purpose of the meeting or the place if the meeting is to be held at the
principal executive office of the Trust.
Section 7. QUORUM. A majority of the authorized number of trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to
the provisions of the Declaration of Trust. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of trustees if any action taken is approved by a least a majority of
the required quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given
to any trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any trustee who attends the meeting without protesting
before or at its commencement about the lack of notice to that trustee.
Section 9. ADJOURNMENT. A majority of the trustees present, whether
or not constituting a quorum, may adjourn any meeting to another time and
place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than seven (7) days, in which case notice of the time and place shall
be given before the time of the adjourned meeting in the manner specified in
Section 7 of this Article III to the trustees who were present at the time of
the adjournment.
Section 11. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Trustees may be taken without a meeting
if a majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a majority vote of the Board of
Trustees. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board of Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members
of committees may receive such compensation, if any, for their services and
such reimbursement of expenses as may be fixed or determined by resolution of
the Board of Trustees. This Section 12 shall not be construed to preclude any
trustee from
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serving the Trust in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation for those services.
Section 13. Upon retirement of a Trustee, the Board may elect him or
her to the position of Trustee Emeritus. Said Trustee Emeritus shall serve for
one year and may be re-elected by the Board from year to year thereafter. Said
Trustee Emeritus shall not vote at meetings of Trustees and shall not be held
responsible for actions of the Board but shall receive fees paid to Board
members for serving as such.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may, by
resolution adopted by a majority of the authorized number of trustees,
designate one or more committees, each consisting of two (2) or more trustees,
to serve at the pleasure of the Board. The Board may designate one or more
trustees as alternate members of any committee who may replace any absent
member at any meeting of the committee. Any committee to the extent provided
in the resolution of the Board, shall have the authority of the Board, except
with respect to:
(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the outstanding shares, or
requires approval by a majority of the entire Board or certain members of said
Board;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the trustees for serving on the
Board of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the
By-Laws or the adoption of new By-Laws; on the Board of Trustees or on any
committee;
(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or repealable; or
(f) the appointment of any other committees of the Board of
Trustees or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to
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substitute the committee and its members for the Board of Trustees and its
members, except that the time of regular meetings of committees may be
determined either by resolution of the Board of Trustees or by resolution of
the committee. Special meetings of committees may also be called by resolution
of the Board of Trustees, and notice of special meetings of committees shall
also be given to all alternate members who shall have the right to attend all
meetings of the committee. The Board of Trustees may adopt rules for the
government of any committee not inconsistent with the provisions of these
By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a chairman
of the board, a president and chief executive officer, one or more vice
presidents, a secretary, and a treasurer. The Trust may also have, at the
discretion of the Board of Trustees, one or more assistant vice presidents, one
or more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person, except
the offices of president and vice president.
Section 2. ELECTION OF OFFICERS. The officers of the Trust shall be
chosen by the Board of Trustees, and each shall serve at the pleasure of the
Board of Trustees, subject to the rights, if any, of an officer under any
contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint
and may empower the president to appoint such other officers as the business of
the Trust may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these By-Laws or as
the Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board of Trustees at any
regular or special meeting of the Board of Trustees, or by an officer upon whom
such power of removal may be conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights,
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if any, of the Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board shall,
if present, preside at meetings of the Board of Trustees and exercise and
perform such other powers and duties as may be from time to time assigned to
him by the Board of Trustees or prescribed by the By- Laws. The chairman shall
be a member ex officio of all standing committees. In the absence,
resignation, disability or death of the president, the chairman shall exercise
all the powers and perform all the duties of the president until his or her
return, or until such disability shall be removed or until a new president
shall have been elected.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the chairman of the board, the
president shall be the chief executive officer of the Trust and shall, subject
to the control of the Board of Trustees, have general supervision, direction
and control of the business and the officers of the Trust. In the absence of
the chairman of the board, he shall preside at all meetings of the shareholders
and at all meetings of the Board of Trustees. He shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Trustees or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, a vice president designated by the Board of
Trustees, shall perform all the duties of the president and when so acting
shall have all powers of and be subject to all the restrictions upon the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Trustees or by these By-Laws and the president or the chairman of
the board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept
at the principal executive office of the Trust or such other place as the Board
of Trustees may direct a book of minutes of all meetings and actions of
trustees, committees of trustees and shareholders with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
given, the names of those present at trustees' meetings or committee meetings,
the number of shares present or represented at shareholders' meetings, and the
proceedings.
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The secretary shall cause to be kept at the office of the Trust's
transfer agent or registrar, as determined by resolution of the Board of
Trustees, a share register or a duplicate share register showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings
of the shareholders and of the Board of Trustees required by these By-Laws or
by applicable law to be given and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.
Section 10. TREASURER. The treasurer shall be the chief financial
officer of the Trust and shall keep and maintain or cause to be kept and
maintained adequate and correct books and records of accounts of the properties
and business transactions of the Trust, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any trustee.
The treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositories as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the president and trustees,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these By- Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as
a trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of
such predecessor entity; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative; and "expenses" includes without limitation attorney's fees and
any expenses of establishing a right to
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indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify
any person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with such proceeding if that person acted in good faith
and in a manner that that person reasonably believed to be in the best
interests of this Trust and in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of that person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or
plea of nolo contenders or its equivalent shall not of itself create a
presumption that the person did not act in good faith or in a manner which the
person reasonably believed to be in the best interests of this Trust or that
the person had reasonable cause to believe that the person's conduct was
unlawful.
Section 3. ACTIONS BY TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that the person is or was an agent
of this Trust, against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if that person
acted in good faith, in a manner that person believed to be in the best
interests of this Trust and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, there shall be no right to
indemnification for any liability arising by reason of willful misfeasance, bad
faith, gross negligence, or the reckless disregard of the duties involved in
the conduct of the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this
Article:
(a) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the performance of that
person's duty to this Trust, unless and only to the extent that the court in
which that action was brought shall determine upon application that in view of
all the circumstances of the case, that person was not liable by reason of the
disabling conduct set forth in the preceding paragraph and is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
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(b) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that personal benefit
was improperly received by him, whether or not the benefit resulted from an
action taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action which is settled or
otherwise disposed of without court approval, unless the required approval set
forth in Section 6 of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim,
issue or matter therein, before the court or other body before whom the
proceeding was brought, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith, provided
that the Board of Trustees, including a majority who are disinterested,
non-party trustees, also determines that based upon a review of the facts, the
agent was not liable by reason of the disabling conduct referred to in Section
4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of
this Article, any indemnification under this Article shall be made by this
Trust only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article and is not prohibited from indemnification because of the disabling
conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not
parties to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided the
agent provides a security for his undertaking, or a majority of a quorum of the
disinterested, non-party trustees, or an independent legal counsel in a written
opinion, determine that based on a review of readily available facts, there is
reason to
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believe that said agent ultimately will be found entitled to indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
trustees and officers of this Trust or any subsidiary hereof may be entitled by
contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6, in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the
Agreement and Declaration of Trust, a resolution of the shareholders, or an
agreement which prohibits or otherwise limits indemnification which was in
effect at the time of accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other amounts were paid; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by
the Board of Trustees of this Trust to purchase such insurance, this Trust
shall purchase and maintain insurance on behalf of any agent of this Trust
against any liability asserted against or incurred by the agent in such
capacity or arising out of the agent's status as such, but only to the extent
that this Trust would have the power to indemnify the agent against that
liability under the provisions of this Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does
not apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person' s capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1
of this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust
shall keep at the office of its transfer agent or registrar a record of its
shareholders, giving the names and addresses of all shareholders and the number
and series of shares held by each shareholder.
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Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall
keep at its principal executive office the original or a copy of these By-Laws
as amended to date, which shall be open to inspection by the shareholders at
all reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Trustees and any committee or committees of the Board of Trustees
shall be kept at such place or places designated by the Board of Trustees or in
the absence of such designation, at the principal executive office of the
Trust. The minutes shall be kept in written form and the accounting books and
records shall be kept either in written form or in any other form capable of
being converted into written form. The minutes and accounting books and
records shall be open to inspection upon the written demand of any shareholder
or holder of a voting trust certificate at any reasonable time during usual
business hours for a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. The inspection may
be made in person or by an agent or attorney and shall include the right to
copy and make extracts.
Section 4. INSPECTION BY TRUSTEES. Every trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a trustee may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial statements
and any income statement of the Trust for each semi-annual period of each
fiscal year and accompanying balance sheet of the Trust as of the end of each
such period that has been prepared by the Trust shall be kept on file in the
principal executive office of the Trust for at least twelve (12) months and
each such statement shall be exhibited at all reasonable times to any
shareholder demanding an examination of any such statement or a copy shall be
mailed to any such shareholder.
The semi-annual income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
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ARTICLE VIII
DIVIDENDS
Section 1. Declaration of Dividends. Dividends upon the shares of
beneficial interest of the Trust may, subject to the provisions of the
Agreement and Declaration of Trust, if any, be declared by the Board of
Trustees at any regular or special meeting, pursuant to applicable law.
Dividends may be paid in cash, in property, or in shares of the Trust.
Section 2. Reserves. Before payment of any dividend there may be set
aside out of any funds of the Trust available for dividends such sum or sums as
the Board of Trustees may, from time to time, in its absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Trust, or for such other
purpose as the Board of Trustees shall deem to be in the best interests of the
Trust, and the Board of Trustees may abolish any such reserve in the manner in
which it was created.
ARTICLE IX
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed by such person or persons and in such manner as from time to time
shall be determined by resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates
for shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the chairman of the board or the
president or vice president and by the treasurer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the series or class of shares owned by the shareholders. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
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agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by the Trust with
the same effect as if that person were an officer, transfer agent or registrar
at the date of issue. Notwithstanding the foregoing, the Trust may adopt and
use a system of issuance, recordation and transfer of its shares by electronic
or other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4,
no new certificates for shares shall be issued to replace an old certificate
unless the latter is surrendered to the Trust and cancelled at the same time.
The Board of Trustees may in case any share certificate or certificate for any
other security is lost, stolen, or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Board of Trustees
may require, including a provision for indemnification of the Trust secured by
a bond or other adequate security sufficient to protect the Trust against any
claim that may be made against it, including any expense or liability on
account of the alleged loss, theft, or destruction of the certificate or the
issuance of the replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
The chairman of the board, the president or any vice president or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trusts, or other
entities, foreign or domestic, standing in the name of the Trust. The
authority granted may be exercised in person or by a proxy duly executed by
such designated person.
Section 6. TRANSFER OF SHARES. Shares of the Trust shall be
transferable only on the record books of the Trust by the person in whose name
such shares are registered, or by his or her duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Trust, its transfer agent or other duly
authorized agent. In case of transfers by executors, administrators, guardians
or other legal representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and remain with the
Trust, its transfer agent or other duly authorized agent. No transfer shall be
made unless and until the certificate issued to the transferor, if any, shall
be delivered to the Trust, its transfer agent or other duly authorized agent,
properly endorsed.
Section 7. HOLDERS OF RECORD. The Trust shall be entitled to treat
the holder of record of any share or shares as the owner thereof and,
accordingly, shall not be bound to recognize any
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equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not the Trust shall have express or other notice
thereof.
Section 8. FISCAL YEAR. The fiscal year of the Trust and each Series
thereof shall end on the last day of September each year. The fiscal year of
the Trust or any Series thereof may be refixed or changed from time to time by
resolution of the Trustees. The fiscal year of the Trust shall be the taxable
year of each Series of the Trust.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended
or repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Declaration of Trust or these By- Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of
shareholders as provided in Section 1 of this Article to adopt, amend or repeal
By-Laws, and except as otherwise provided by law or by the Declaration of
Trust, these By-Laws may be adopted, amended, or repealed by the Board of
Trustees.
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FORM OF AGREEMENT
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP______________
___________________ FUND
ASSET ALLOCATION AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP_______________ (the
"Fund"), a Delaware business trust, for the ___________________ FUND/SERIES
(the "Series"), and DELAWARE MANAGEMENT COMPANY, INC. (the "Investment
Manager"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and
WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, the Investment Manager serves as the investment manager for
other portfolios of the Fund, known as ___________, pursuant to an Investment
Management Agreement dated as of ________, [and the Fund desires to retain the
Investment Manager to serve as the investment manager for this Series effective
as of the date of this Agreement.]
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its
affairs, subject to the direction of the Board and officers of the Fund for the
period and on the terms hereinafter set forth. The Investment Manager hereby
accepts such employment and agrees during such period to render the services
and assume the obligations herein set forth for the compensation herein
provided. The Investment Manager shall, for all purposes herein, be deemed to
be an independent contractor, and shall, unless otherwise expressly provided
and authorized, have no authority to act for or represent the Fund in any way,
or in any way be deemed an agent of the Fund. The Investment Manager shall
regularly make decisions as to what securities to purchase and sell on behalf
of the Series, shall effect the purchase and sale of investments in furtherance
of the Series' objectives and policies, and shall furnish the Board of
Directors of the Fund with such information and reports regarding the Series'
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall
bear the expenses and salaries necessary and incidental thereto including, but
not in limitation of the foregoing, the costs incurred in: the maintenance of
its corporate existence; the maintenance of its own books, records and
procedures; dealing with its own shareholders; the payment of dividends;
transfer of stock, including issuance, redemption and repurchase of shares;
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<PAGE> 3
preparation of share certificates; reports and notices to shareholders; calling
and holding of shareholders' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes; and federal and
state registration fees. The Series shall bear all of its own organizational
costs.
Directors, officers and employees of the Investment Manager
may be directors, officers and employees of the funds of which Delaware
Management Company, Inc. is Investment Manager. Directors, officers and
employees of the Investment Manager who are directors, officers and/or
employees of the funds shall not receive any compensation from the funds for
acting in such dual capacity.
In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment
Manager may share facilities common to each, with appropriate proration of
expenses between them.
3. (a) The Fund shall place and execute its own orders for
the purchase and sale of domestic portfolio securities with broker/dealers.
Subject to the primary objective of obtaining the best available prices and
execution, the Fund will place orders for the purchase and sale of portfolio
securities with such broker/dealers selected from among those designated from
time to time by the Investment
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<PAGE> 4
Manager, who provide statistical, factual and financial information and
services to the Fund, to the Investment Manager, or to any other fund for which
the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides investment advisory services.
Broker/dealers who sell shares of the funds of which Delaware Management
Company, Inc. or Delaware International Advisers Ltd. is investment manager,
shall only receive orders for the purchase or sale of portfolio securities to
the extent that the placing of such orders is in compliance with the Rules of
the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a)
above and subject to such policies and procedures as may be adopted by the
Board of Directors and officers of the Fund, the Investment Manager may ask the
Fund, and the Fund may agree, to pay a member of an exchange, broker or dealer
an amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, in such instances where it, and the
Investment Manager, have determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such member, broker or dealer, viewed in terms of
either that particular transaction or the Investment Manager's overall
responsibilities with respect to the Fund and to other funds or other advisory
accounts for which the Investment Manager exercises investment discretion.
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<PAGE> 5
4. As compensation for the services to be rendered to the Fund by
the Investment Manager under the provisions of this Agreement, the Fund shall
pay to the Investment Manager monthly from the Series' assets a fee based on
the average daily net assets of the Series during the month. Such fee shall be
calculated in accordance with the following schedule.
Equivalent
Monthly Rate Annual Rate Average Daily Net Assets
- ------------ ----------- ------------------------
If this Agreement is terminated prior to the end of any
calendar month, the management fee shall be prorated for the portion of any
month in which this Agreement is in effect according to the proportion which
the number of calendar days during which the Agreement is in effect bears to
the number of calendar days in the month, and shall be payable within 10 days
after the date of termination.
5. The Investment Manager may, at its expense, select and
contract with one or more registered investment advisers (the "Sub- Adviser")
for the Fund to perform some or all of the services for the Series for which it
is responsible under this Agreement. Notwithstanding Paragraph 3 hereof, such
Sub-Adviser may be responsible for executing orders for the purchase and sale
of foreign portfolio securities. The Investment Manager will compensate any
Sub-Adviser for its services to the Fund. The Investment Manager may terminate
the services of any Sub-Adviser at any time in its sole discretion, and shall
at such time assume
-5-
<PAGE> 6
the responsibilities of such Sub-Adviser unless and until a successor
Sub-Adviser is selected.
6. The services to be rendered by the Investment Manager to the
Fund under the provisions of this Agreement are not to be deemed to be
exclusive, and the Investment Manager shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees,
agents and shareholders may engage in other businesses, may render investment
advisory services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
8. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of duties of the
Investment Manager to the Fund, the Investment Manager shall not be subject to
liabilities to the Fund or to any shareholder of the Fund for any action or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security, or otherwise.
9. This Agreement shall be executed and become effective as of
the date written below. It shall continue in effect for a period of two years
from such date and may be renewed thereafter
-6-
<PAGE> 7
only so long as such renewal and continuance is specifically approved at least
annually by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Series and only if the terms and the
renewal hereof have been approved by the vote of a majority of the Directors of
the Fund who are not parties hereto or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund at
any time, without the payment of a penalty, on sixty days' written notice to
the Investment Manager of the Fund's intention to do so, pursuant to action by
the Board of Directors of the Fund or pursuant to vote of a majority of the
outstanding voting securities of the Series. The Investment Manager may
terminate this Agreement at any time, without the payment of penalty, on sixty
days' written notice to the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Fund to pay to the Investment Manager the fee
provided in paragraph 4 hereof, prorated to the date of termination. This
Agreement shall automatically terminate in the event of its assignment.
10. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
-7-
<PAGE> 8
11. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities;" "interested persons;" and
"assignment" shall have the meanings defined in the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by having it signed by their duly authorized
officers as of the ____ day of _________, 199_.
DELAWARE GROUP ___________________
for the _____________________ FUND
By:_______________________________
Name: _______________________
Title: _______________________
Attest:___________________________
Name: ___________________
Title: ___________________
DELAWARE MANAGEMENT COMPANY, INC.
By:_______________________________
Name: _______________________
Title: _______________________
Attest:___________________________
Name: ___________________
Title: ___________________
-8-
<PAGE> 1
DELAWARE GROUP _______________________
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this ____ day of
_________________, 1997 by and between DELAWARE GROUP ________________________,
a ____________________ (the "Fund"), for the _________________________ series
(the "Series"), and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware
limited partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by
Federal and State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of
promoting the distribution of the securities of investment companies and, in
connection therewith and acting solely as agent for such investment companies
and not as principal, advertising, promoting, offering and selling their
securities to the public, and
WHEREAS, the Fund desires to enter into an agreement with the
Distributor on behalf of the Series, pursuant to which the Distributor shall
serves as the national distributor of the Series' ___________________ Fund A
Class ("Class A Shares"), ___________________ Fund B Class (the "Class B
Shares"), ___________________ Fund C Class (the "Class C Shares"), and
__________________ Fund Institutional Class (the "Institutional Class
Shares"), which Series and classes may do business under these or such other
names as the Board of Directors may designate from time to time, on the terms
and conditions set forth below,
<PAGE> 2
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution of
the Series' shares and, in connection therewith and as agent for the
Fund and not as principal, to advertise, promote, offer and sell the
Series' shares to the public.
2. (a) The Distributor agrees to serve as distributor of the Series'
shares and, as agent for the Fund and not as principal, to
advertise, promote and use its best efforts to sell the
Series' shares wherever their sale is legal, either through
dealers or otherwise, in such places and in such manner, not
inconsistent with the law and the provisions of this Agreement
and the Fund's Registration Statement under the Securities Act
of 1933, including the Prospectuses contained therein, and the
Statement of Additional Information contained therein as may
be mutually determined by the Fund and the Distributor from
time to time.
(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily
intended to result in the sale of that class of shares,
including, but not necessarily limited to, advertising,
compensation of underwriters, dealers and sales personnel, the
printing and mailing of sales literature and distribution of
that class of shares.
-2-
<PAGE> 3
(c) For its services as agent for the Class A Shares, Class B
Shares, and Class C Shares, the Distributor shall be entitled
to compensation on each sale or redemption, as appropriate, of
shares of such classes equal to any front-end or deferred
sales charge described in the Prospectus from time to time and
may allow concessions to dealers in such amounts and on such
terms as are therein set forth.
(d) For the Class A Shares, Class B Shares, and Class C Shares,
the Fund shall, in addition, compensate the Distributor for
its services as provided in the Distribution Plan as adopted
on behalf of the Class A Shares, Class B Shares, and Class C
Shares, respectively, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plans"), copies of which
as presently in force are attached hereto as, respectively,
Exhibit "A," "B," and "C."
3. (a) The Fund agrees to make available for sale by the Fund through
the Distributor all or such part of the authorized but
unissued shares of the Series as the Distributor shall require
from time to time, and except as provided in Paragraph 3(b)
hereof, the Fund will not sell Series' shares other than
through the efforts of the Distributor.
(b) The Fund reserves the right from time to time (1) to sell and
issue shares other than for cash; (2) to issue shares
-3-
<PAGE> 4
in exchange for substantially all of the assets of any
corporation or trust, or in exchange of shares of any
corporation or trust; (3) to pay stock dividends to its
shareholders, or to pay dividends in cash or stock at the
option of its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from time to
time in cash, or to split up or combine its outstanding shares
of common stock; (4) to offer shares for cash to its
stockholders as a whole, by the use of transferable rights or
otherwise, and to sell and issue shares pursuant to such
offers; and (5) to act as its own distributor in any
jurisdiction in which the Distributor is not registered as a
broker-dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company, and any and all Series' shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of
any instrument by which the Fund is bound, nor do they violate
any law or regulation of any body having jurisdiction over the
Fund or its property.
5. (a) The Fund will supply to the Distributor a conformed
copy of the Registration Statement, all amendments thereto,
-4-
<PAGE> 5
all exhibits, and each Prospectus and Statement of Additional
Information.
(b) The Fund will register or qualify the Series' shares for sale
in such states as is deemed desirable.
(c) The Fund, without expense to the Distributor,
(1) will give and continue to give such financial
statements and other information as may be required
by the SEC or the proper public bodies of the states
in which the Series' shares may be qualified;
(2) from time to time, will furnish to the Distributor as
soon as reasonably practicable true copies of its
periodic reports to stockholders;
(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such
advice in writing, (a) when any amendment or
supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for
amendments or supplements to the Registration
Statement or the Prospectuses or for additional
information, and (c) of the issuance by the SEC of
any Stop Order suspending the effectiveness of the
Registration Statement, or the initiation of any
proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order
suspending the effectiveness of the Registration
Statement, will make every reasonable effort to
obtain the lifting of such order at the earliest
possible moment;
(5) will from time to time, use its best effort to keep a
sufficient supply of Series' shares authorized, any
increases being subject to the approval of
shareholders as may be required;
(6) before filing any further amendment to the
Registration Statement or to any Prospectus, will
furnish to the Distributor copies of the proposed
amendment and will not, at any time, whether before
or after the effective date of the Registration
Statement, file any amendment to the Registration
Statement or supplement to any Prospectus of which
the Distributor shall
-5-
<PAGE> 6
not previously have been advised or to which the
Distributor shall reasonably object (based upon the
accuracy or completeness thereof) in writing;
(7) will continue to make available to its stockholders
(and forward copies to the Distributor) of such
periodic, interim and any other reports as are now,
or as hereafter may be, required by the provisions of
the Investment Company Act of 1940; and
(8) will, for the purpose of computing the offering price
of Series' shares, advise the Distributor within one
hour after the close of the New York Stock Exchange
(or as soon as practicable thereafter) on each
business day upon which the New York Stock Exchange
may be open of the net asset value per share of the
Series' shares of common stock outstanding,
determined in accordance with any applicable
provisions of law and the provisions of the Articles
of Incorporation, as amended, of the Fund as of the
close of business on such business day. In the event
that prices are to be calculated more than once
daily, the Fund will promptly advise the Distributor
of the time of each calculation and the price
computed at each such time.
6. The Distributor agrees to submit to the Fund, prior to its use, the
form of all sales literature proposed to be generally disseminated by
or for the Distributor, all advertisements proposed to be used by the
Distributor, all sales literature or advertisements prepared by or for
the Distributor for such dissemination or for use by others in
connection with the sale of the Series' shares, and the form of
dealers' sales contract the Distributor intends to use in connection
with sales of the Series' shares. The Distributor also agrees that the
Distributor will submit such sales literature and advertisements to
the NASD, SEC or other regulatory agency as from time to time may be
appropriate, considering practices then current in the industry. The
Distributor agrees not to
-6-
<PAGE> 7
use such form of dealers' sales contract or to use or to permit others
to use such sales literature or advertisements without the written
consent of the Fund if any regulatory agency expresses objection
thereto or if the Fund delivers to the Distributor a written objection
thereto.
7. The purchase price of each share sold hereunder shall be the offering
price per share mutually agreed upon by the parties hereto, and as
described in the Fund's Prospectuses, as amended from time to time,
determined in accordance with any applicable provision of law, the
provisions of its Articles of Incorporation and the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
8. The responsibility of the Distributor hereunder shall be limited to
the promotion of sales of Series' shares. The Distributor shall
undertake to promote such sales solely as agent of the Fund, and shall
not purchase or sell such shares as principal. Orders for Series'
shares and payment for such orders shall be directed to the Fund's
agent, Delaware Service Company, Inc. for acceptance on behalf of the
Fund. The Distributor is not empowered to approve orders for sales of
Series' shares or accept payment for such orders. Sales of Series'
shares shall be deemed to be made when and where accepted by Delaware
Service Company, Inc. on behalf of the Fund.
-7-
<PAGE> 8
9. With respect to the apportionment of costs between the Fund and the
Distributor of activities with which both are concerned, the following
will apply:
(a) The Fund and the Distributor will cooperate in preparing the
Registration Statements, the Prospectuses, the Statement of
Additional Information, and all amendments, supplements and
replacements thereto. The Fund will pay all costs incurred in
the preparation of the Fund's Registration Statement,
including typesetting, the costs incurred in printing and
mailing Prospectuses and Annual, Semi-Annual and other
financial reports to its own shareholders and fees and
expenses of counsel and accountants.
(b) The Distributor will pay the costs incurred in printing and
mailing copies of Prospectuses to prospective investors.
(c) The Distributor will pay advertising and promotional expenses,
including the costs of literature sent to prospective
investors.
(d) The Fund will pay the costs and fees incurred in registering
or qualifying the Series' shares with the various states and
with the SEC.
(e) The Distributor will pay the costs of any additional copies of
Fund financial and other reports and other Fund literature
supplied to the Distributor by the Fund for sales promotion
purposes.
-8-
<PAGE> 9
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor of
its obligations under this Agreement.
11. The Fund agrees to indemnify, defend and hold harmless from the assets
of the Series the Distributor and each person, if any, who controls
the Distributor within the meaning of Section 15 of the Securities Act
of 1933, from and against any and all losses, damages, or liabilities
to which, jointly or severally, the Distributor or such controlling
person may become subject, insofar as the losses, damages or
liabilities arise out of the performance of its duties hereunder
except that the Fund shall not be liable for indemnification of the
Distributor or any controlling person thereof for any liability to the
Fund or its security holders to which they would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in
the performance of their duties under this Agreement.
12. Copies of financial reports, Registration Statements and Prospectuses,
as well as demands, notices, requests, consents, waivers, and other
communications in writing which it may be necessary or desirable for
either party to deliver or furnish to the other will be duly delivered
or furnished, if delivered to such party at its address shown below
during regular business hours, or if sent to that party by registered
mail or by prepaid telegram filed with an office or with an agent of
Western Union or another nationally recognized telegraph
-9-
<PAGE> 10
service, in all cases within the time or times herein prescribed,
addressed to the recipient at 1818 Market Street, Philadelphia,
Pennsylvania 19103, or at such other address as the Fund or the
Distributor may designate in writing and furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in the
Investment Company Act of 1940, by the Distributor and shall terminate
automatically in the event of its attempted assignment by the
Distributor. This Agreement shall not be assigned by the Fund without
the written consent of the Distributor signed by its duly authorized
officers and delivered to the Fund. Except as specifically provided
in the indemnification provision contained in Paragraph 11 herein,
this Agreement and all conditions and provisions hereof are for the
sole and exclusive benefit of the parties hereto and their legal
successors and no express or implied provision of this Agreement is
intended or shall be construed to give any person other than the
parties hereto and their legal successors any legal or equitable
right, remedy or claim under or in respect of this Agreement or any
provisions herein contained.
14. (a) This Agreement shall remain in force for a period of two years
from the date hereof and from year to year thereafter, but
only so long as such continuance is specifically approved at
least annually by the Board of Directors or by vote of a
majority of the outstanding
-10-
<PAGE> 11
voting securities of the Series and only if the terms and the
renewal thereof have been approved by the vote of a majority of
the Directors of the Fund who are not parties hereto or
interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
(b) The Distributor may terminate this Agreement on written notice
to the Fund at any time in case the effectiveness of the
Registration Statement shall be suspended, or in case Stop
Order proceedings are initiated by the SEC in respect of the
Registration Statement and such proceedings are not withdrawn
or terminated within thirty days. The Distributor may also
terminate this Agreement at any time by giving the Fund
written notice of its intention to terminate the Agreement at
the expiration of three months from the date of delivery of
such written notice of intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at least
thirty days prior written notice to the Distributor (1) if
proceedings are commenced by the Distributor or any of its
partners for the Distributor's liquidation or dissolution or
the winding up of the Distributor's affairs; (2) if a receiver
or trustee of the Distributor or any of its property is
appointed and such appointment is not vacated within thirty
days thereafter; (3) if, due to any action by or before any
court or any federal or
-11-
<PAGE> 12
state commission, regulatory body, or administrative agency or
other governmental body, the Distributor shall be prevented
from selling securities in the United States or because of any
action or conduct on the Distributor's part, sales of the
shares are not qualified for sale. The Fund may also terminate
this Agreement at any time upon prior written notice to the
Distributor of its intention to so terminate at the expiration
of three months from the date of the delivery of such written
notice to the Distributor.
-12-
<PAGE> 13
15. The validity, interpretation and construction of this Agreement, and
of each part hereof, will be governed by the laws of the Commonwealth
of Pennsylvania.
16. In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of
the Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest:
___________________________ By:_____________________________
Name: Name:
Title: Title:
DELAWARE GROUP ________________,
____ for the ______________ FUND
Attest:
___________________________ By:_____________________________
Name: Name:
Title: Title:
-13-
<PAGE> 14
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP ________________________
______________________ FUND
______________ FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule l2b-l under the Investment Company Act of l940 (the "Act") by
Delaware Group ________________________ (the "Fund"), for the
______________________ Fund series (the "Series") on behalf of the
_____________________ Fund A Class ("Class"), which Fund, Series and Class may
do business under these or such other names as the Board of Trustees of the
Fund may designate from time to time. The Plan has been approved by a majority
of the Board of Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related thereto
("non-interested Trustees"), cast in person at a meeting called for the purpose
of voting on such Plan. Such approval by the Trustees included a determination
that in the exercise of reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Series and shareholders of the Class. The Plan
A-1
<PAGE> 15
has been approved by a majority of the outstanding voting securities
of the Class, as defined in the Act.
The Fund is a Delaware business trust organized under the laws
of the State of Delaware, is authorized to issue different series and classes
of securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution
Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee
not to exceed 0.3% (3/10 of l%) per annum of the Series' average daily net
assets represented by shares of the Class (the "Maximum Amount") as may be
determined by the Fund's Board of Trustees from time to time. Such monthly fee
shall be reduced by the aggregate sums paid by the Fund on behalf of the Series
to persons other than broker-dealers (the "Service Providers") who may,
pursuant to servicing agreements, provide to the Series services in the Series'
marketing of shares of the Class.
2. (a) The Distributor shall use the monies paid to
it pursuant to paragraph l above to furnish, or cause or encourage
A-2
<PAGE> 16
others to furnish, services and incentives in connection with the promotion,
offering and sale of Class shares and, where suitable and appropriate, the
retention of Class shares by shareholders.
(b) The Service Providers shall use the monies
paid respectively to them to reimburse themselves for the actual costs they
have incurred in confirming that their customers have received the Prospectus
and Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Fund, (2)
answering questions relating to their respective accounts, and (3) aiding in
maintaining the investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least
monthly on the amount and the use of the monies paid to it under the Plan. The
Service Providers shall inform the Fund monthly and in writing of the amounts
each claims under the Plan; both the Distributor and the Service Providers
shall furnish the Board of Trustees of the Fund with such other information as
the Board may reasonably request in connection with the payments made under the
Plan and the use thereof by the Distributor and the Service Providers,
respectively, in order to enable the Board to make an informed determination of
the amount of the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board
of Trustees of the Fund, for their review, on a quarterly basis, a
A-3
<PAGE> 17
written report of the amounts expended under the Plan and the purposes for
which such expenditures were made.
5. This Plan shall take effect at such time as the
Distributor shall notify the Fund in writing of the commencement of the Plan
(the "Commencement Date"); thereafter, the Plan shall continue in effect for a
period of more than one year from the Commencement Date only so long as such
continuance is specifically approved at least annually by a vote of the Board
of Trustees of the Fund, and of the non- interested Trustees, cast in person at
a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by
vote of a majority of the non-interested Trustees or by vote of a majority of
the outstanding voting securities of the Class.
(b) The Plan may not be amended to increase
materially the amount to be spent for distribution pursuant to paragraph l
thereof without approval by the shareholders of the Class.
7. All material amendments to this Plan shall be
approved by the non-interested Trustees in the manner described in paragraph 5
above.
8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Trustees shall be committed to the
discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "interested
A-4
<PAGE> 18
person(s)" and "vote of a majority of the outstanding voting securities,"
respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as
previously defined.
__________________, 1997
A-5
<PAGE> 19
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP _____________________________
__________________ FUND
__________ FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group _________________________ (the "Fund"), for the ______________________
Fund series (the "Series") on behalf of the ______________________ Fund B Class
(the "Class"), which Fund, Series and Class may do business under these or such
other names as the Board of Trustees of the Fund may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such
approval by the Trustees included a determination that in the exercise of
reasonable business judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Series and shareholders of
the Class. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
B-1
<PAGE> 20
The Fund is a Delaware business trust organized under the laws of the
State of Delaware, is authorized to issue different series and classes of
securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution
Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of Trustees from time to time.
(b) In addition to the amounts described in (a) above,
the Fund shall pay (i) to the Distributor for payment to dealers or others, or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph 1(a) above to assist in the distribution and promotion of
shares of the Class. Payments made to the Distributor
B-2
<PAGE> 21
under the Plan may be used for, among other things, preparation and
distribution of advertisements, sales literature and prospectuses and reports
used for sales purposes, as well as compensation related to sales and marketing
personnel, and holding special promotions. In addition, such fees may be used
to pay for advancing the commission costs to dealers with respect to the sale
of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b)
above shall be used to pay dealers or others for, among other things,
furnishing personal services and maintaining shareholder accounts, which
services include confirming that customers have received the Prospectus and
Statement of Additional Information, if applicable; assisting such customers in
maintaining proper records with the Fund; answering questions relating to their
respective accounts; and aiding in maintaining the investment of their
respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on
the amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor
and any others receiving fees under the Plan shall furnish the Board of
Trustees of the Fund with such other information as the Board may reasonably
request in connection with the payments made under the Plan and the use thereof
by the Distributor and others in order to enable the Board
B-3
<PAGE> 22
to make an informed determination of the amount of the Fund's payments and
whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of
Trustees of the Fund, for their review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the Distributor
shall notify the Fund of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Trustees of
the Fund, and of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Trustees or by vote of a majority of the
outstanding voting securities of the Class.
(b) The Plan may not be amended to increase materially
the amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination
of the Fund's non-interested Trustees shall be committed to the discretion of
such non-interested Trustees.
B-4
<PAGE> 23
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of
the Act shall govern the meaning of "interested person(s)" and "vote of a
majority of the outstanding voting securities," respectively, for the purposes
of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
____________________, 1997
B-5
<PAGE> 24
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP ___________________________
____________________________ FUND
___________________ FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group ____________________________ (the "Fund"), for the ________________ Fund
series (the "Series) on behalf of the __________________ Fund C Class (the
"Class"), which Fund, Series and Class may do business under these or such
other names as the Board of Trustees of the Fund may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such
approval by the Trustees included a determination that in the exercise of
reasonable business judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Series and shareholders of
the Class. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
C-1
<PAGE> 25
The Fund is a Delaware business trust organized under the laws of the
State of Delaware, is authorized to issue different series and classes of
securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution
Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Trustees from time to time.
(b) In addition to the amounts described in paragraph 1(a) above,
the Fund shall pay: (i) to the Distributor for payment to dealers or others or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor
C-2
<PAGE> 26
under the Plan may be used for, among other things, preparation and
distribution of advertisements, sales literature and prospectuses and reports
used for sales purposes, as well as compensation related to sales and marketing
personnel, and holding special promotions. In addition, such fees may be used
to pay for advancing the commission costs to dealers with respect to the sale
of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include
confirming that customers have received the Prospectus and Statement of
Additional Information, if applicable; assisting such customers in maintaining
proper records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective
customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor
and any others receiving fees under the Plan shall furnish the Board of
Trustees of the Fund with such other information as the Board may reasonably
request in connection with the payments made under the Plan and the use thereof
by the Distributor and others in order to enable the Board
C-3
<PAGE> 27
to make an informed determination of the amount of the Fund's payments and
whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Trustees of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one
year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Trustees of
the Fund, and of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount
to be spent for distribution pursuant to paragraph 1 thereof without approval
by the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
C-4
<PAGE> 28
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
_______________________, 1997
C-5
<PAGE> 1
<PAGE>
DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
<PAGE>
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
---------------------------
(Authorized Officer)
Date:
-------------------------
<PAGE> 1
<PAGE>
DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
<PAGE>
retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
-2-
<PAGE>
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
-3-
<PAGE>
reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
-4-
<PAGE>
You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
-5-
<PAGE>
between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
-6-
<PAGE>
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
- ----------------------------------
FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
- ----------------------------------
CITY/STATE/ZIP
<PAGE> 1
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co., Inc., will be at the public
offering price applicable to each order as set forth in the Prospectus. The
manner of computing the net asset value, the public offering price and the
effective time of orders received from you are described in the Prospectus for
each Fund. We reserve the right at any time, without notice, to suspend the sale
of Fund shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
<PAGE>
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
full by check payable to the Fund at its office within three business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1Plan") of the Investment Company Act of 1940 (the "1940 Act"), we
expect you will provide shareholder and administrative services to your
customers who own Fund shares, such as: answering inquiries regarding the Fund;
assisting in changing dividend options, account designations and addresses;
establishing and maintaining shareholder accounts and records; arranging for
bank wires; or such other services as the Fund may require to the extent
permitted by applicable statutes, rules or regulations. You will promptly answer
all written complaints received by you relating to Fund accounts or promptly
forward such complaints to us and assist us in answering such complaints. For
such services we will pay you a fee as set by us from time to time, based on a
portion of the net asset value of the accounts of your clients in the Fund. We
are permitted to make this payment under the terms of the 12b-1 Plan adopted by
2
<PAGE>
certain of the Funds, as such 12b-1 Plans may be in effect from time to time.
Each Fund reserves the right, at any time, to suspend payments under its 12b-1
Plan. You will furnish the Fund and us with such information as may be
reasonably requested by the Fund or its directors or trustees or by us with
respect to fees paid to you pursuant to this Agreement. In accordance with
interpretations and rulings to the Staff of the Commission, you will not charge
your customers any fees for services for which you are being compensated under a
12b-1 Plan of a Fund.
SALES OF NO-LOAD - NON 12b-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness you will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities and Exchange Act of 1934
(or other financial institution) and not otherwise required to register as a
broker or dealer under such Act. You agree to notify us promptly in writing if
this representation ceases to be true. You also agree that you will comply with
the rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, you
will be responsible in that relationship for insuring compliance with all laws
and regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states which we indicate Fund shares may
not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
3
<PAGE>
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional material with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The name of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
4
<PAGE>
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date: DELAWARE DISTRIBUTORS, L.P.
----------------------------
BY: DELAWARE DISTRIBUTORS, INC.
General Partner
BY:
--------------------------------
Accepted and Agreed to:
- ---------------------------------
(Name of Firm)
BY:
------------------------------
Name:
Title:
5
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURPOSE CLAUSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN . . . . . . . . . . . . . . 6
ARTICLE IV
CONTRIBUTIONS TO PLAN . . . . . . . . . . . . . . . . . 7
ARTICLE V
ALLOCATION OF CONTRIBUTIONS . . . . . . . . . . . . . . 12
ARTICLE VI
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX
OTHER SEPARATION FROM SERVICE . . . . . . . . . . . . . 16
ARTICLE X
METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . 26
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER
OR TERMINATION . . . . . . . . . . . . . . . . . . . . 29
(i)
<PAGE>
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XV
LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . 32
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES . . . . . . . . . . . . 36
(ii)
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
ARTICLE I
PURPOSE CLAUSE
--------------
This Profit Sharing Plan and the Trust Agreement forming a part hereof are
established for the benefit of the employees of Delaware Group Delaware Fund,
Inc. and the other investment companies of the Delaware Group of Funds to
promote in them a strong interest in the successful operation of the business
and to provide for them an opportunity for accumulation of funds for their
retirement benefit.
ARTICLE II
DEFINITIONS
-----------
When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:
2.1 "Administrative Committee" or "Committee" shall mean the Administrative
Committee with authority and responsibility to manage and direct the operation
and administration of this Plan. "Administrative Committee" shall be deemed to
also mean "Administrator" and "Plan Administrator" as defined in ERISA.
2.2 "Anniversary Date" shall mean the first day of each Plan Year.
2.3 "Beneficiary" shall mean the person or persons designated by a
Participant to receive benefits upon the death of said Participant pursuant to
Article VIII.
2.4 "Board of Directors" shall mean the Board of Directors of the Employer.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Effective Date" of the Plan shall mean October 1, 1983. The Effective
Date of this amended and restated Plan shall mean April 1, 1989, except where
indicated otherwise.
2.7 "Eligibility Computation Period" shall mean the period of twelve (12)
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<PAGE>
consecutive months beginning on the date an Employee first performs an Hour of
Service upon hire or rehire after a One Year Break in Service, and any Plan Year
following such date of hire or date of rehire following a One Year Break in
Service.
2.8 "Eligibility Year of Service" shall mean the Eligibility Computation
Period during which the Employee performs one thousand (1,000) or more Hours of
Service. Eligibility Years of Service shall include an Employee's prior service
with Delaware Management Company, Inc. or any Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or(c) of the Code.
2.9 "Employee" shall mean any person employed by the Employer or by any
affiliated Entity which adopts this Plan; provided, however, no person covered
by a collective bargaining agreement under which the Employer has participated
in good faith bargaining concerning retirement benefits shall be considered an
Employee for the purposes of this Plan. Any Leased Employee shall not be
considered an Employee for purposes of the Plan.
2.10 "Employer" shall mean Delaware Group Delaware Fund, Inc. and any other
affiliated investment company which adopts this Plan. Effective October 1, 1987,
and solely for purposes of determining periods of service for eligibility for
participation and vesting, the term "Employer" shall include any corporation
which is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in Section 414(c)
of the Code) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes the Employer; and any other Entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.
2.11 "Employer Contribution Account" shall mean a Participant's account
derived from Employer contributions and the earnings thereon.
2.12 "Entity" shall mean an individual, partnership, corporation or
unincorporated organization.
2.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the Regulations promulgated thereunder by either the Department of Labor or
Treasury.
2.14 "Hour of Service" shall mean:
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<PAGE>
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military service or leave of absence. No more than 501 Hours of Service
will be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period); and
(c) Each hour for which back pay, regardless of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
(d) Hours of Service will be calculated on the basis described in
Department of Labor Regulations Section 2530.200b-2(b) and (c).
(e) Solely for purposes of determining whether a Break in Service has
occurred, for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons will receive credit for the Hours
of Service which would otherwise have been credited to such individual. In the
event these hours cannot be determined, eight (8) Hours of Service per day will
be used. For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection with the
adoption of the child by such individual, or (iv) for purposes of caring for the
child for a period beginning immediately following such birth or placement.
However, in no event will the hours treated as Hours of Service under this
paragraph (e), by reason of any pregnancy or placement, exceed 501 hours. The
Hours of Service credited under this paragraph will be credited (i) in the Plan
Year in which the absence begins if the crediting is necessary to prevent a
Break in Service in that period, or (ii) in all other cases, in the following
Plan Year.
(f) Effective for Plan Years beginning on or after April 1, 1994, an
Employee shall be credited with 45 Hours of Service for each week for which he
would be required to be credited with at least one Hour of Service under
paragraphs (a)-(e) above.
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<PAGE>
2.15 "Leased Employee" shall mean any person described in Section 414(n) of
the Code who is not an employee of the Employer who, pursuant to an agreement
between the Employer and any other person, has performed service for the
Employer (or for any related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year and such services are of a type historically performed by
employees in the Employer's business field.
2.16 "Named Fiduciary" shall be the Administrative Committee and the
Trustee or Trustees serving from time to time and any other person who is
specifically so designated by the Board of Directors.
2.17 "Normal Retirement Date" shall mean the date on which a Participant
shall reach age 65.
2.18 "One Year Break in Service" or "Break in Service" shall mean a Plan
Year during which an Employee has or was separated from employment with Employer
and has completed 500 or less Hours of Service.
2.19 "Participant" shall mean any Employee who meets the eligibility
requirements under Article III or any Employee who is or may become eligible to
receive a benefit under the Plan or whose Beneficiaries may be eligible to
receive any such benefit.
2.20 "Participant Contribution Account" shall mean a Participant's account
derived from his voluntary contributions and the earnings thereon.
2.21 "Plan" shall mean the Employer's Profit Sharing Plan set forth in this
document and all subsequent amendments thereto.
2.22 "Plan Compensation" shall mean as of each Anniversary Date, the basic
compensation received by an Employee from the Employer during the preceding Plan
Year, including salary, draw, overtime and bonuses, but excluding contributions
to this or any other deferred compensation plan. Plan Compensation includes
salary reduction contributions paid by the Employer on the Employee's behalf to
a cafeteria plan, within the meaning of Section 125 of the Code, maintained by
the Employer. Effective for Plan Years beginning on or after April 1, 1994, Plan
Compensation shall mean the sum of (a) the total earnings which are received by
the Employee from the Employer for the preceding Plan Year and which are
required to be reported as wages on the Employee's Form W-2 (in the wages, tips
and other compensation box) and (b) the total amount contributed by the
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<PAGE>
Employer on behalf of the Employee pursuant to a salary reduction agreement
which is not includable in the gross income of the Employee under Sections 125
or 402 (e)(3) of the Code, but excluding all of the following items (even if
includable in gross income): reimbursements or other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation and welfare
benefits.
For Plan Years beginning on or after April 1, 1989, the Plan Compensation
of each Participant taken into account under the Plan shall not exceed $200,000,
as adjusted by the Secretary of the Treasury. In determining the Plan
Compensation of a Participant for purposes of the limitations set forth in the
preceding sentence, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected individuals in proportion to
each such individual's Plan Compensation as determined under this Section 2.22
prior to the application of this limitation. Effective for Plan Years beginning
on or after January 1, 1994, the Plan Compensation of a Participant shall not
exceed $150,000, as adjusted at the time and manner prescribed by Section 401
(a)(17)(B) of the Code.
2.23 "Plan Year" shall mean a twelve-month period beginning on April 1st
and ending on March 31st. For the Plan Years beginning before April 1, 1989 and
after December 31, 1986, the term Plan Year means a twelve month period
beginning October 1st and ending September 30th, except that the Plan Year
beginning October 1, 1988 is a short year which ends March 31, 1989.
2.24 "Total and Permanent Disability" shall mean incapacity, resulting from
injury or disease, of a Participant to perform any work for Employer and shall
be presumed permanent after the same has continued uninterrupted for six months
as certified by a qualified physician selected by the Administrative Committee.
2.25 "Trustee" or "Trustees" shall mean the trustee or trustees named in
the Trust Agreement attached hereto and forming a part hereof, or any successor
thereto.
2.26 "Trust Fund" or "Fund" shall mean all property held pursuant to the
Trust Agreement.
2.27 "Valuation Date" means the last day of each Plan Year and such other
quarterly, monthly or daily dates as determined by the Administrative Committee.
-8-
<PAGE>
2.28 "Year of Service" shall mean a Plan Year during which an Employee
completes at least 1,000 Hours of Service; provided, however, that for the
period from October 1, 1988 through March 31, 1990, an Employee shall be given
credit for a Year of Service if he completes 1,000 Hours of Service during the
period October 1, 1988 to September 30, 1989 and shall be given credit for an
additional Year of Service if he completes 1,000 Hours of Service during the
period April 1, 1989 to March 31, 1990. For purposes of determining a
Participant's nonforfeitable right to his Employer Contribution Account, Years
of Service shall include an Employee's prior service with Delaware Management
Company, Inc. or any other Entity required to be aggregated with Delaware
Management Company, Inc. under Sections 414(b) or (c) of the Code. An Employee
shall also receive credit for a Year of Service if he completes 1000 or more
Hours of Service during his initial Eligibility Computation Period.
2.29 Whenever used herein, the masculine provision includes the feminine
and the singular includes the plural.
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN
--------------------------
3.1 Each Employee who was a Participant on March 31, 1989 shall continue as
a Participant. Each other Employee shall be eligible to participate in this Plan
on the first day of the Plan Year within which he completes one Eligibility Year
of Service.
3.2 Any Participant who returns to service after a Break in Service shall
be admitted to the Plan as a Participant on his date of re-employment.
3.3 Within 60 days of each Anniversary Date of this Plan, the Employer
shall furnish the Administrator a list showing all eligible Employees, the date
of employment, the Years of Service, the Plan Compensation of each eligible
Employee and the date of termination of any terminated Employees.
3.4 Notwithstanding the provisions of Section 3.1 to the contrary, if an
Employee is employed by the Employer on March 31, 1989 and has completed by such
date 1,000 or more Hours of Service during an Eligibility Computation Period
which began on or before October 1, 1988, such Employee shall be eligible to
participate in the Plan on October 1, 1988.
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<PAGE>
ARTICLE IV
CONTRIBUTIONS TO PLAN
---------------------
4.1 Each participating Employer may contribute to the Plan's Trust Fund for
each taxable year an amount, if any, determined in accordance with a resolution
of the Board of Directors adopted before the date prescribed by law for filing
its Federal income tax return for such taxable year (including extensions
thereof); provided, however, that no contributions shall be made for any year in
excess of the amount deductible for such year under provisions of the Code and
regulations thereunder as then in effect. For Plan Years beginning on or after
April 1, 1989, the Employer may make contributions regardless of whether or not
it has Net Profits and Earnings for its tax year.
4.2 For Plan Years beginning before April 1, 1989, Net Profits and Earnings
in any one year of operations means the net income before provisions for Federal
and State income taxes as determined by the certified public accountants
employed by the Employer in accordance with generally accepted accounting
principles of open-end management investment companies.
4.3 For each taxable year, the contributions shall accrue on the
Anniversary Date thereof, but shall not be considered as accruing during the
said taxable year prior to the Anniversary Date thereof.
4.4 The Trust Fund shall not be diverted to any use other than the
exclusive benefit of eligible Employees and their Beneficiaries.
4.5 Effective August 1, 1991, a Participant may not make voluntary
contributions to his Participant Contribution Account. Prior to August 1, 1991,
a Participant may make voluntary contributions to his Participant Contribution
Account. Such contributions may be made by payroll deductions or in such other
manner and subject to such procedures as the Administrator may prescribe. No
Participant may contribute more than ten percent of his aggregate Plan
Compensation for all Plan Years during which he participated in the Plan.
4.6 Notwithstanding the provisions of Article IX, a Participant shall have
a nonforfeitable interest in all voluntary contributions made by him and in any
increase in his account attributable to such contributions.
4.7 A Participant shall have the right to withdraw the total amount of his
voluntary contributions at any time; provided, however, that such withdrawal
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<PAGE>
shall be permissible only with respect to the amount of such Participant's
voluntary contributions and not to any increase in his account attributable to
such contributions. No Participant shall be permitted to make withdrawals of
his voluntary contributions more than four times in any one calendar year.
Effective as of the date of adoption of this amended and restated Plan, a
Participant shall be permitted to make withdrawals as frequently as monthly of
all or a portion of his voluntary contributions, including the earnings
thereon.
4.8 The Fund may accept rollover contributions on behalf of an Employee
(including an Employee who has not satisfied the requirements to be eligible to
participate) from any other plan maintained for his benefit which satisfies the
requirements of a tax-qualified plan, or a rollover individual retirement
account; provided, however, that such rollovers are permitted by and effected in
accordance with the requirements of the Code. The Administrative Committee may
as a condition of acceptance of such rollovers demand such information, opinions
and statements as it deems necessary to assure that such rollovers conform to
the requirements of the federal tax laws.
4.9 An Employee for whom a rollover has been made shall be deemed a
Participant with respect to the amount contributed and shall have a
nonforfeitable interest in such amount and any increases attributable to it. Any
such rollovers shall be held in a special account for the Participant segregated
from other assets held by the fund. Such contributions will be administered and
distributed pursuant to the provisions of this Plan.
4.10 The following special non-discrimination rules pertaining to voluntary
contributions shall be applicable for Plan Years beginning on or after October
1, 1987 and before April 1, 1990.
(a) For any Plan Year, the Contribution Percentage for all Highly
Compensated Employees will not exceed the greater of (i) or (ii) as follows:
(i) The Contribution Percentage for all Non-Highly Compensated Employees,
times 1.25; or
(ii) The lesser of the Contribution Percentage for all Non-Highly
Compensated Employees, times 2.0, provided that the Contribution Percentage for
all Highly Compensated Employees may not exceed the Contribution Percentage for
all Non-Highly Compensated Employees by more than two (2) percentage points or
such lesser amount as the Secretary of Treasury will prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
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<PAGE>
(b) Distribution of Excess Aggregate Contributions.
(i) Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, will be distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess Aggregate Contributions were
allocated for the preceding Plan Year.
(ii) For the Plan Year beginning on October 1, 1987, the income or loss
allocable to Excess Aggregate Contributions shall be determined under any
reasonable method, which method shall be applied on a consistent basis for all
Participants. For Plan Years beginning after 1987, the income or loss allocable
to Excess Aggregate Contributions shall be the sum of (A) and (B) below:
(A) The income or loss for the Plan Year allocable to the Participant's
voluntary contribution Account multiplied by a fraction, the numerator of which
is the Participant's Excess Aggregate Contributions for the year, and the
denominator of which is the balance of the Participant's voluntary contribution
account as of the end of the Plan Year, minus income (or plus losses) allocable
to such account.
(B) The income or loss for the period between the end of the Plan Year and
the date of the distribution allocable to the Participant's voluntary
contribution account multiplied by the fraction described in (A), above.
In lieu of using the formula described in (B), the income or loss for the
period between the end of the Plan Year and the date of the distribution
allocable to Excess Aggregate Contributions for the year may be calculated under
the following alternative method, provided such method is applied on a
consistent basis for all Participants: ten percent (10%) of the amount
determined under (A), above, multiplied by the number of whole calendar months
that have elapsed since the end of the Plan Year. For this purpose, if a
distribution of Excess Aggregate Contributions is made after the 15th day of a
month, that month will be counted as a whole month.
(c) The following definitions apply for purposes of this Section 4.10.:
(i) "Contribution Percentage" means, for a group of Participants, the
average of the following ratios (calculated separately) for each Participant in
the group:
(A) The sum of voluntary contributions made on behalf of each Participant
for the Plan Year; over
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(B) The Participant's Compensation for that Plan Year, whether or not the
Participant was a Participant for the entire Plan Year.
The Contribution Percentage for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have voluntary employee
contributions or employer matching contributions allocated to his account under
two or more plans described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by the employer or
an entity that is required to be aggregated with the employer pursuant to
Sections 414(b), (c), (m), or (o) of the Code will be determined as if all such
contributions were made under a single plan. If a Highly Compensated Employee
participates in two or more arrangements described in Section 401(k) of the Code
that have different plan years, all such arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most Highly Compensated Employees,
the Contribution Percentage and compensation of such Participant will include
the Contribution Percentage and Compensation of Family Members, and such Family
Members will be disregarded in determining the Contribution Percentage for
Participants who are Non-Highly Compensated Employees.
Voluntary contributions will be considered made for a Plan Year if made by
the date specified in the applicable regulations and allocated to a
Participant's account for the Plan Year.
The determination and treatment of the Contribution Percentage of any
Participant will satisfy such other requirements as may be prescribed by
Secretary of the Treasury.
In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections only if
aggregated with this Plan, then this Section 4.10 will be applied by determining
the Contribution Percentages of eligible Participants as if all such plans were
a single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same plan year.
(ii) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of:
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(A) The aggregate Contribution Percentage amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year; over
(B) The maximum Contribution Percentage amounts permitted by the
Contribution Percentage limits set forth in this Section 4.10 (determined by
reducing contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such
percentages).
(iii) "Family Member" means an individual described in Section 414(q)(6)(B)
of the Code.
(iv) "Highly Compensated Employee" means a highly compensated active
employee or a highly compensated former employee, as described below.
A highly compensated active employee includes any employee who performs
service for the employer during the determination year and who, during the
look-back year: (i)received compensation from the employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation
from the employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(i) employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
employee is one of the 100 employees who received the most compensation from the
Employer during the determination year; and (ii) employees who are five percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii) above
during either a determination year or a look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back shall be the twelve (12)-month period immediately preceding the
determination year.
A highly compensated former employee includes any employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth (55th)
birthday.
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If an employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the ten (10) most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the five percent owner or top-ten (10) Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top-ten Highly Compensated Employee shall be treated as a
single employee receiving compensation and Plan contributions or benefits equal
to the sum of such compensation and contributions or benefits of the Family
Member and five percent owner or ten (10) most Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of employees in the top-paid group,
the top one hundred (100) employees, a five percent owner, the number of
employees treated as officers and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(v) "Compensation" means all of an Employee's compensation, as that term is
defined in Article XV, Limitations on Allocations, and shall include elective
contributions that are made by the Employer on behalf of the Employee and which
are not includable in income under Section 125 of the Code. Compensation shall
be subject to the limitation of Section 401(a)(17) of the Code.
ARTICLE V
ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 A separate and complete accounting shall be maintained for each
Participant which shall set forth the amount credited to or forfeited from his
Employer Contribution Account and his Participant Contribution Account. Employer
contributions and Participant contributions shall be allocated among investment
companies managed by Delaware Management Company, Inc. Each Participant shall
file a written notice with the Committee thereby making an election as to what
proportion of his contributions, including both contributions made by the
Employer and voluntary contributions, shall be allocated to the eligible
investment company funds, as announced from time to time by the Committee. Each
Participant shall have the right to change the investment allocation of his
contributions and his accumulated account balance, in accordance with rules and
procedures as announced from time to time by the Committee, provided changes are
subject to any limitations imposed on the right of exchange by the investment
media.
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5.2 The Employer's contributions and any forfeitures for each Plan Year
shall be credited to the Employer Contribution Accounts of Participants who are
employed by the Employer on the Anniversary Date and allocated in the proportion
that the Plan Compensation of each Participant bears to the total Plan
Compensation of all Participants for such Plan Year. A Participant who
terminates employment on the Anniversary Date shall be treated as employed by
the Employer on the Anniversary Date. All voluntary contributions made by a
Participant prior to August 1, 1991 shall be credited to his Participant
Contribution Account.
5.3 As of the Anniversary Date, each Participant's Employer Contribution
Account and his Participant Contribution Account shall be valued at its fair
market value. For the purposes of paying benefits to a Participant, his accounts
shall be valued on the most recent Valuation Date as determined by the
Administrative Committee.
5.4 Income when earned less expenses, if any, when charged, shall be
credited to or charged against each Participant's account, in accordance with
the self-directed investments selected by the Participant.
5.5 The Committee shall, as of each Anniversary Date, determine the total
amount of forfeitures which accrued during the Plan Year and shall add the
forfeited amount to the Employer's annual contribution for the purposes of
reallocation to the remaining Participants as provided in Section 5.2.
5.6 Any allocation made and credited to the account of a Participant under
this Article shall not cause such Participant to have any right, title or
interest in or to any assets of the Trust Fund except at the time or times, and
under the terms and conditions, expressly provided for in this Plan.
5.7 (a) In the case of a contribution to the Plan which is made by the
Employer because of a mistake of fact, the Employer may, within one year after
the payment of such contribution, withdraw such contribution from the Trust
Fund.
(b) Employer contributions to the Plan are expressly conditioned on the
deductibility of such contributions under Section 404 of the Code. To the extent
such contributions are disallowed, the Employer may, within one year of the
disallowance of the deduction, withdraw such contribution from the Trust Fund.
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ARTICLE VI
RETIREMENT BENEFITS
-------------------
6.1 Upon attaining Normal Retirement Date, a Participant shall have a fully
vested and nonforfeitable right to his entire Employer Contribution Account and
shall be entitled to retire and upon so retiring shall be entitled to the
commencement of the payment of his benefits, consisting of the balance of his
accounts, in accordance with the method of payment elected pursuant to Article
X.
6.2 A Participant who retires after his Normal Retirement Date shall
continue to be a Participant in the Plan until his actual retirement and shall
be eligible to share in the allocation of Employer contributions as provided in
Section 5.2.
ARTICLE VII
DISABILITY BENEFITS
-------------------
7.1 If the employment of a Participant has been terminated prior to his
retirement date because of Total and Permanent Disability, such Participant
shall be entitled to receive his entire Participant Contribution Account and his
entire Employer Contribution Account in accordance with the manner elected under
Article X.
7.2 Upon a Participant's cessation of Total and Permanent Disability and
upon his return to work for Employer before all of his account has been
distributed, no further payments shall be made therefrom by reason of the
disability. A Participant shall have no right or obligation to repay any amount
distributed to him pursuant to Section 7.1.
ARTICLE VIII
DEATH BENEFITS
--------------
8.1 Notwithstanding anything stated in the Plan to the contrary, if a
Participant dies prior to receiving the entire nonforfeitable amount credited to
his accounts, all such undistributed nonforfeitable amounts shall be paid to the
Participant's surviving spouse, unless there is no surviving spouse or the
surviving spouse consents in writing to the payment of death benefits to another
Beneficiary. A spouse's consent must satisfy the following requirements:
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(a) the consent must be in writing;
(b) the consent must be witnessed by a member of the Administrative
Committee or a notary public;
(c) the consent must approve a designation of a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the spouse expressly permits
designations by the Participant without any further spousal consent; and
(d) the consent acknowledges the effect of the Participant's designation of
Beneficiary. If a consent permits designations by the Participant without any
requirement of further consent by such spouse, it must acknowledge that the
spouse has the right to limit consent to a specific Beneficiary and that the
spouse voluntarily elects to relinquish such right.
Written consent of a spouse need not be obtained if the Participant
establishes to the satisfaction of the Committee that there is no spouse or that
the spouse cannot be located. Any such designation may be changed from time to
time by the Participant by filing a new designation with the Committee, provided
the spousal consent requirements above are satisfied.
8.2 Each Participant may file with the Committee a designation of
Beneficiary to receive amounts payable under this Plan upon his death. The
designation may be changed from time to time by the Participant, except that a
married Participant may not name a Beneficiary other than his spouse without a
written consent which satisfies the requirements of Section 8.1. If no
designation has been filed, or all designated Beneficiaries have predeceased the
Participant, then any amounts payable shall be paid to his surviving spouse. If
there is no surviving spouse, any amounts payable shall be paid to his estate.
8.3 If at, after or during the time when a benefit is payable to any
Beneficiary, the Administrative Committee, upon request of the Trustee or at its
own instance, mails by registered or certified mail to the Beneficiary at the
Beneficiary's last known address a written demand for his then address, or for
satisfactory evidence of his continued life or both, and, if the Beneficiary
shall fail to furnish the information to the Committee within 3 years from the
mailing of the demand, then the Committee shall distribute the remaining
benefits to the Beneficiary next entitled thereto under Section 8.3 above as if
the Beneficiary designated by the Participant or Section 8.3 were then deceased.
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ARTICLE IX
OTHER SEPARATION FROM SERVICE
-----------------------------
9.1 (a) If a Participant separates from service other than under Articles
VI, VII or VIII, he shall be entitled to receive a lump sum distribution of his
entire Participant Contribution Account and his entire nonforfeitable Employer
Contribution Account. Such distribution shall be made upon the written request
of the Participant and shall be made as soon as practicable following the
Participant's separation from service, but not later than the close of the
second Plan which such separation occurs.
(b) If the non-forfeitable portion of the Participant's Employer
Contribution Account and his Participant Contribution Account exceeds $3500 (or
ever exceeded $3500 at the time of an earlier distribution), and the Participant
does not consent in writing to receive a lump sum distribution of his accounts
by the close of the second Plan Year following his separation from service, no
distribution shall be made to the Participant until he attains his Normal
Retirement Date. Regardless of whether the Participant consents in writing, if
the non-forfeitable portion of the Participant's Employer Contribution Account
and Participant Contribution Account does not exceed $3500 (or did not exceed
$3500 at the time of a prior distribution), a lump sum distribution shall be
made to the Participant of the entire value of the non-forfeitable portion of
his accounts not later than the end of the second Plan Year following his
separation from service.
(c) If a distribution is made to the Participant of the nonforfeitable
portion of his Employer Contribution Account upon his separation from service,
the non-vested portion of his Account, if any, will be treated as a forfeiture
and reallocated to remaining Participants as provided in Section 5.2. If the
Participant does not receive a distribution of his Employer Contribution Account
upon his separation from service, such Account shall be held for the Participant
until he attains Normal Retirement Date and the non-vested portion of the
Account shall be treated as a forfeiture when the Participant sustains five
consecutive One Year Breaks in Service.
(d) In the event a Participant who is less than fully vested in his
Employer Contribution Account receives a distribution of his vested interest in
such Account upon his separation from service, and such Participant subsequently
returns to employment of the Employer, the Participant's Employer Contribution
Account will be restored to the value of the Account on the date of the
distribution if the Participant repays to the Trustees the full amount of such
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distribution before the earlier of five consecutive One-Year Breaks in Service
or five years after the Participant's date of reemployment. Restoration of the
forfeited amount of a Participant's Account shall be made from forfeitures or
Employer contributions.
9.2 (a) In the event a Participant separates from service with the Employer
for reasons other than retirement, disability, death or a layoff by the
Employer, he shall have a nonforfeitable right to the amount credited to his
Employer Contribution Account in accordance with the following schedule:
Completed Years of Service Percentage
-------------------------- ----------
At least But less than
0 1 0%
1 2 20%
2 3 40%
3 4 60%
4 5 80%
5 or more 100%
(b) A Participant shall have a wholly vested and nonforfeitable right to
his Employer Contribution Account upon separation from service on account of
retirement on or after the Normal Retirement Date, Total and Permanent
Disability, death while in the employ of the Employer or layoff by the Employer.
For purposes of this Section 9.2, the term "layoff" shall mean any involuntary
separation from service other than separation due to cause. If a Participant
separates from service with the Employer, the non-vested portion of his Employer
Contribution Account, if any, shall be forfeited upon the death of the
Participant.
(c) If the Employer amends the Plan in a manner which directly or
indirectly affects the computation of a Participant's nonforfeitable percentage,
each Participant who completes an Hour of Service in any Plan Year beginning
after December 31, 1988 and who has at least three Years of Service may elect
after the adoption of such amendment to have his nonforfeitable interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence the day the amendment is adopted
and shall end on later of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or the Committee.
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9.3 (a) In the case of a Participant who has a Break in Service, Years of
Service completed before such Break shall not be counted until the Participant
has completed a Year of Service for the purpose of determining his
nonforfeitable percentage of the amount credited to his Employer Contribution
Account after such Break in Service.
(b) Years of Service completed on reemployment and after separation from
service with the Employer in connection with which he has five consecutive One
Year Breaks in Service shall not be counted for purposes of determining such
Participant's nonforfeitable percentage right to amounts credited to his
Employer Contribution Account before such Break in Service.
ARTICLE X
METHOD OF PAYMENT
-----------------
10.1 At the request of a Participant, the form of benefit payments may be
one of the following in cash:
(a) in a lump sum payment; or
(b) in periodic, monthly, quarterly, semi-annual or annual installments
over a period certain not exceeding the Participant's life expectancy or the
joint life expectancy of the Participant and his designated Beneficiary. If
periodic installments are to be paid, a Participant's account shall be invested
in the investment company funds available under the Plan as designated by the
Participant.
If periodic installments are paid over the life expectancy of the
Participant or joint life expectancy of the Participant and a designated
Beneficiary, a Participant may elect, prior to the time distributions begin,
whether or not to have his life expectancy and his Beneficiary's life expectancy
(if the Beneficiary is his spouse) annually recalculated. In the absence of such
election, life expectancies will not be recalculated.
10.2 In no event shall payments of benefits under this Plan commence later
than sixty (60) days after the close of the Plan Year in which the latest of the
following events occur:
(a) the Participant attains age sixty-five (65); or
(b) the Participant completes ten years of participation in the Plan; or
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(c) the termination of the Participant's service with the Employer.
10.3 (a) Notwithstanding the other requirements of this Plan, distributions
on behalf of any Participant, including a five percent (5%) owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust Fund is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.
(iii) Such designation was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.
(iv) The Participant had accrued a benefit under the Plan as of December
31, 1983.
(v) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.
(b) A distribution upon death will not be covered by this Section unless
the information in the designation contains the required information described
above with the respect to the distributions to be made upon the death of the
Participant.
(c) For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (v) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code. Any changes in the
designation will be considered to be revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not named in the
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designation) under the designation will not be considered to be revocation
of the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, either
directly or indirectly (for example, by altering the relevant measuring life).
10.4 Required Distributions. All distributions required under this Section
10.4 shall be determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
(a) Required beginning date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
(b) Limits on Distribution Periods. As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(1) a period certain not extending beyond the life expectancy of the
Participant, or
(2) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
(c) Determination of amount to be distributed each year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the required
beginning date:
(1) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
beneficiary or (ii) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
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(3) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year, shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in (c)(i)(A) above as the
relevant divisor without regard to proposed regulations Section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.
(d) Death Distribution Provisions.
(1) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(2) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death except to the
extent that the Participant or his designated beneficiary elects to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;
(ii) if the designated beneficiary is the Participant's surviving spouse,
the date distributions are required to begin in accordance with (i) above shall
not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant died and (2)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.
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If the Participant has not made an election pursuant to Section 10.4(d)(2)
by the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 10.4(d), or (2) December 31 of the calendar year which contains the
fifth (5th) anniversary of the date of death of the Participant. If the
Participant has no designated beneficiary, or if the designated beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.
(3) For purposes of Section 10.4(d)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 10.4(d)(2), with the exception of subparagraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.
(4) For purposes of Section 10.4(d), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 10.4(d)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 10.4(d)(3) above).
(e) Definitions.
(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy will be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year and if life expectancy is being recalculated,
such succeeding calendar year.
(2) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(3) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 10.4(d) above.
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(4) Life expectancy. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the income tax regulations. Unless otherwise elected by the
Participant by the time distributions are required to begin, life expectancies
shall not be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse designated beneficiary may not be recalculated. A
spousal designated beneficiary may not elect to have his or her life expectancy
recalculated with respect to any distribution paid pursuant to Section
10.4(d)(2).
(5) Participant's benefit.
(i) The Participant's account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions or forfeitures
allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the second
distribution calendar year on or before the required beginning date, the amount
of the minimum distribution made in the second distribution calendar year shall
be treated as if it had been made in the immediately preceding distribution
calendar year.
(6) Required beginning date.
(i) General rule. The required beginning date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
(ii) Transitional rules. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) Non-five (5)-percent owners. The required beginning date of a
Participant who is not a five (5)-percent owner is the first day of April of the
calendar year following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
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(B) Five (5)-percent owners. The required beginning date of a Participant
who is a five (5)-percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains age 70 1/2, or
(II) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a five (5)-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a five (5)-percent
owner who attains age 70 1/2 during 1988 and who has not retired as of January
1, 1989, is April 1, 1990.
(iii) Five (5)-percent owner. A Participant is treated as a five
(5)-percent owner for purposes of this section if such Participant is a five
(5)-percent owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a five (5)-percent owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a five (5)-percent owner in a subsequent year.
10.5 Restrictions on Distributions Prior to Normal Retirement Date. If the
value of a Participant's vested account balance exceeds (or at the time of any
prior distribution exceeded) $3,500, the Participant must consent to any
distribution made to him before he attains the Normal Retirement Date. The
consent of the Participant shall be obtained in writing within the 90-day period
ending on the date benefits are paid. The Committee shall notify the Participant
of his right to defer any distribution until the Participant attains the Normal
Retirement Date (or would have attained the Normal Retirement Date if not
deceased). Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3) of the Code below, and shall be provided no
less than 30 days and no more than 90 days prior to the date benefits are paid.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy Sections 401(a)(9) or 415 of the Code. A
distribution may be paid to the Participant less than 30 days after the notice
described in this Section 10.5 is given to him, provided that the Administrative
Committee clearly informs the Participant that he has the right to a period of
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at least 30 days after receiving the notice to consider the decision of
whether or not to elect the distribution and the Participant, after receiving
the notice, affirmatively elects to receive a distribution. In addition, subject
to Section 10.7, upon termination of this Plan, the Participant's entire account
balance may be distributed without the Participant's consent to the Participant
or transferred to another defined contribution plan (other than an employee
stock ownership plan, as defined in Section 4975(e)(7) of the Code) within the
same controlled group as the Employer.
10.6 Withdrawals upon Attainment of Age 59-1/2. Upon the attainment of age
59-1/2, a Participant who is fully vested in his Employer Contribution Account
will be entitled to withdraw once a Plan Year all or any portion of his account
balance in a single sum. Any withdrawal by a Participant under this Section 10.6
will be made only after the Participant files a written request with the
Administrative Committee pursuant to such terms and conditions as the Committee
may prescribe.
10.7 Direct Rollovers
(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrative Committee to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
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retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE XI
ADMINISTRATION OF PLAN
----------------------
11.1 (a) This Plan shall be administered by a Committee which shall consist
of not less than two nor more than five members.
(b) The Committee shall serve without compensation from the Plan. Vacancies
may be filled by the Chief Executive Officer of Delaware Group Delaware Fund,
Inc. on an interim basis, until action to fill the vacancy is taken by the Board
of Directors of Delaware Group Delaware Fund, Inc.
(c) The Committee:
(1) shall act by affirmative vote of a majority of its members at a meeting
called with five days notice or in writing without a meeting;
(2) shall appoint a Secretary who may be but need not be one of its own
members. He shall keep complete records of the administration of the Plan;
(3) may authorize each and any one of its members to perform routine acts
and to sign documents on its behalf.
11.2 The Committee may appoint such persons or committees, employ such
attorneys, agents, accountants, investment managers, consultants, actuaries, and
other specialists as it deems necessary or desirable to advise or assist
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it in the performance of its duties hereunder and the Committee may rely upon
their respective written opinions or certificates. To the extent such persons
are empowered by written notification from the Committee to perform duties
defined in ERISA as fiduciary duties, such empowerment shall constitute a
delegation of fiduciary responsibility for purposes of determining the
co-fiduciary liability under ERISA. The Committee shall review the performance
of any such persons periodically.
11.3 Administration of the Plan shall consist of interpreting and carrying
out the provisions of this Plan. The Committee shall determine the eligibility
of Employees to participate in this Plan, their rights while Participants in
this Plan and the nature and amount of benefits to be received therefrom. The
Committee shall decide any disputes which may arise under this Plan and the
Trust Agreement. The Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions. Any
construction or interpretation of the Plan and any determination of fact in
administering the Plan made in good faith by the Committee shall be final and
conclusive for all Plan purposes. The Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
11.4 (a) The Committee shall prescribe a form for the presentation of
claims under the terms of this Plan and/or Trust Agreement.
(b) Upon presentation to the Committee of a claim on the prescribed form,
the Committee shall make a determination of the validity thereof. If the
determination is adverse to the claimant, the Committee shall furnish to the
claimant within 90 days after the receipt of the claim a written notice setting
forth the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent provisions of the Plan on which the
denial is based;
(3) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(4) Appropriate information as to the steps to be taken if the claimant
wishes to submit his or her claim for review.
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(c) In the event of a denial of a claim, the claimant or his duly
authorized representative may appeal such denial to the Committee for a full and
fair review of the adverse determination. Claimant's request for review must be
in writing and made to the Committee within 60 days after receipt by claimant of
the written notification required under Section 11.4(b); provided, however, such
60 day period shall be extended if circumstances so warrant. Claimant or his
duly authorized representative may submit issues and comments in writing which
shall be given full consideration by the Committee in his review.
(d) The Committee may, in its sole discretion, conduct a hearing. A request
for a hearing made by claimant will be given full consideration. At such
hearing, the claimant shall be entitled to appear and present evidence and be
represented by counsel.
(e) A decision on a request for review shall be made by the Committee not
later than 60 days after receipt of the request; provided, however, in the event
of a hearing or other special circumstances, such decision shall be made not
later than 120 days after receipt of such request. If it is necessary to extend
the period of time for making a decision beyond 60 days after the receipt of the
request, the claimant shall be notified in writing of the extension of time
prior to the beginning of such extension.
(f) The Committee's decision on review shall state in writing the specific
reasons and references to the Plan provisions on which it is based. Such
decision shall be promptly provided to the claimant. If the decision on review
is not furnished in accordance with the foregoing, the claim shall be deemed
denied on review.
11.5 The Committee shall have the power to allocate its responsibilities
among its several members, except that all matters involving the hearing of and
decision on the claims and the review of the determination of benefits shall be
made by the full Committee; provided, however, that no member of the Committee
shall participate in any matter relating solely to himself.
11.6 To the extent required by law, the Committee shall give notice in
writing to all interested parties of any amendment of this Plan and/or Trust
Agreement and of any application to any government agency for any determination
of the effect of any such amendment on the Plan within the jurisdiction of that
agency.
11.7 (a) The Committee shall administer the Plan and the Trust Agreement
forming a part thereof under uniform rules of general application.
(b) The Committee or any member thereof:
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(1) May serve under the Plan and/or the Trust Agreement in one or more
fiduciary capacities, as that term is defined in ERISA; and
(2) May resign by giving written notice thereof to the Chief Executive
Officer of Delaware Group Delaware Fund, Inc. not less than fifteen (15) days
before the effective date of such resignation; and
(3) May be removed at any time, without cause, by the Board of Directors of
Delaware Group Delaware Fund, Inc.
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER OR TERMINATION
-----------------------------------------------
12.1 Delaware Group Delaware Fund, Inc. may amend the Plan and the Trust
Agreement in any manner and at any time by action of its Board of Directors;
provided, however, that no amendment shall deprive any Participant or his
Beneficiary of any vested interest he may have hereunder unless the amendment is
for the purpose of conforming the Plan to the requirements of the Code or any
other applicable law. No amendment which affects the rights, responsibilities or
duties of the Trustee may be made without the Trustee's written consent. No
amendment shall be made to the Plan which has the effect of eliminating or
reducing an early retirement benefit or a retirement-type subsidy, eliminating
an optional form of benefit or decreasing a Participant's account balance with
respect to benefits attributable to service before the amendment. Further, if
the vesting schedule of the Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the date it
becomes effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer derived account balance will not be less
than his percentage computed under the Plan without regard to such amendment.
12.2 Any Participant on the effective date of an amendment who is not
actively participating in the Plan on such effective date shall not benefit from
an amendment unless otherwise required by law or unless such amendment is
specifically made applicable to such Participant.
12.3 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall be entitled to
a benefit after the merger, consolidation or transfer (if the Plan then
terminated) which is not less than the benefits he would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
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12.4 The Employer intends to continue the Plan indefinitely but reserves
the right to discontinue contributions, terminate or partially terminate the
Plan at any time. In the event of a complete discontinuance of contributions,
termination or partial termination of the Plan, the interests of all
Participants affected shall become nonforfeitable. Upon termination of the Plan,
the Employer shall in its complete discretion notify the Trustee to either hold
all assets of the Trust Fund and make payments in accordance with the terms of
the Plan or distribute to each Participant his net account balance in a lump sum
payment in cash or kind. The Employer's contribution to the Trust Fund or the
income thereof shall not be paid to, or shall not revert to Employer and shall
not be used for any purpose other than the exclusive benefit of the Participants
or their Beneficiaries.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 To the extent permitted by law, it is a condition of the Plan that the
benefits provided hereunder shall not be subject to assignment, anticipation,
alienation, attachment, levy or transfer, and any attempt to do so shall not be
recognized. The preceding sentence shall also apply to the creation, assignment
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in Section 414(p) of the Code. If
provided by the terms of a qualified domestic relations order, a distribution of
benefits may be made from the Plan to the alternate payee under such order in a
single lump sum as soon as practicable following the determination by the
Administrative Committee that the order constitutes a qualified domestic
relations order. Payment of benefits may be made to the alternate payee even
though the Participant identified in the order has not attained the earliest
retirement age under the Plan. For purposes of this Section 13.1, the "earliest
retirement age" means the earlier of (i) the date in which the Participant is
entitled to a distribution under the Plan or (ii) the later of the date the
Participant attains age 50 or the earliest date on which the Participant would
begin receiving benefits if the Participant separated from service.
13.2 Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of Employer or to interfere with the right of
the Employer to discharge any Employee at any time, nor shall it be deemed to
give the Employer the right to require any Employee to remain in its employ, nor
shall it interfere with the Employee's right to terminate his employment at any
time.
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13.3 All expenses incurred by the Trustees in the administration of the
Fund, including but not limited to the compensation of counsel, accountants,
Trustees, other agents or fiduciaries, shall be charged against the Employer,
unless otherwise paid by the Fund.
13.4 This Plan shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by ERISA as in
effect from time to time.
ARTICLE XIV
LOANS
-----
14.1 The Committee, in its sole discretion, may direct the Trustees to make
a loan to a Participant, who is a party-in-interest, as defined in Section 3(14)
of ERISA, from the Participant's account balance upon receipt of a written
request from the Participant. The total amount of any such loan (when added to
the outstanding balance of all other loans to the Participant under the Plan or
any other qualified plan of the Employer) shall not exceed the lesser of $50,000
or 50% of the Participant's vested account balance. The $50,000 limitation shall
be reduced by the excess, if any, of the highest outstanding balance of loans to
the Participant from the Plan during the one-year period ending on the day
before the date on which such loan was made over the outstanding balance of
loans from the Plan to the Participant on the date that such loan was made.
14.2 A request by a Participant for a loan shall be made in writing to the
Committee and shall specify the amount of the loan. The terms and conditions on
which the Committee shall approve loans under the Plan shall be applied on a
reasonably equivalent basis with respect to all Participants. If a Participant's
request for a loan is approved by the Committee, the Committee shall furnish the
Trustees with written instructions directing the Trustees to make the loan in a
lump sum payment of cash to the Participant. In making any loan payment under
this Article XIV, the Trustees shall be fully entitled to rely on the
instructions furnished by the Committee, and shall be under no duty to make any
inquiry or investigation with respect thereto.
14.3 Loans shall be made on such terms and subject to such limitations as
the Committee may prescribe from time to time, provided that any such loan shall
be evidenced by a written note, shall bear a reasonable rate of interest on the
unpaid principal thereof, shall be adequately secured, and shall be repaid by
the Participant over a period not to exceed five years.
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14.4 Any loan to a Participant under the Plan shall be secured by the
pledge of not more than 50% percent of the Participant's right, title and
interest in his vested account balance. Such pledge shall be evidenced by the
execution of a promissory note by the Participant.
14.5 The Committee shall have the sole responsibility for insuring that a
Participant timely makes all loan repayments, and for notifying the Trustees in
the event of any default by the Participant on the loan. Each loan repayment
shall be paid to the Trustees, and shall be accompanied by written instructions
from the Committee that identifies the Participant on whose behalf the loan
repayment is being made. Repayment of loans shall be made solely by means of
payroll deductions, or such other manner approved by the Committee.
14.6 In the event of a default by a Participant on a loan repayment, all
remaining principal payments on the loan shall be immediately due and payable.
The Committee shall be authorized (to the extent permitted by law) to take any
and all actions necessary and appropriate to enforce collection of an unpaid
loan. However, in the event of a default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.
14.7 Upon the occurrence of a Participant's retirement or death, or earlier
distribution of benefits, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust Fund
to which such Participant or his Beneficiary may be entitled and his vested
interest in his account shall be reduced.
14.8 A loan to a Participant shall be considered an investment of the
separate account(s) of the Participant from which the loan is made. All loan
repayments shall be credited to such separate account(s) and reinvested in the
investment company fund designated by the Participant.
14.9 A loan may not be made to a Participant who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Internal Revenue Code)
more than 5% of the outstanding stock of the Employer.
14.10 For loans granted or renewed on or after the last day of first Plan
Year beginning on or after January 1, 1989, the Committee shall issue written
loan guidelines, which shall form part of the Plan, describing the procedures
and conditions for making loans, and may revise those guidelines at any time,
and for any reason.
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ARTICLE XV
LIMITATIONS ON ALLOCATIONS
--------------------------
15.1 The provisions of this Article XV shall be effective for limitation
years beginning after December 31, 1986.
(a) Notwithstanding any provisions of this Plan to the contrary, the annual
additions which may be credited to a Participant's account for any limitation
year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan.
(b) As soon as is administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.
(c) In the event that it is determined that because of the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation or under other limited facts and circumstances permitted by the
Commissioner of the Internal Revenue Service, if there is an excess amount the
excess will be disposed of as follows:
(1) If the Participant is covered by the Plan at the end of the limitation
year, the excess amount shall be used to reduce employer contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary;
(2) If the Participant is not covered by the Plan at the end of the
limitation year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next limitation year, and each succeeding limitation year if
necessary;
(3) If a suspense account is in existence at any time during the limitation
year pursuant to this Section, it will not participate in the allocation of
investment gains and losses. The entire amount allocated to Participants from a
suspense account, including any such gains or other income or less any losses is
considered an annual addition.
(d) For the purpose of applying the limitations under this Article, all
defined contribution plans maintained by the employer are to be considered as a
single plan.
15.2 Definitions. For purposes of this Article only, the following
definitions and rules of interpretation will apply:
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(a) "annual additions" -- The sum of the following amounts credited to a
Participant's account for the limitation year:
(1) employer contributions;
(2) forfeitures;
(3) voluntary Employee contributions;
(4) amounts allocated after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(1) of the Code, which is part of a pension
or annuity maintained by the employer;
(5) amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit
fund as defined in Section 419(e) of the Code, maintained by the employer; and
(6) excess amounts applied under this Article in the limitation year to
reduce employer contributions.
(b) "compensation" -- a Participant's earned income, wages, salaries, and
fees for professional services and other amounts received (without regard to
whether an amount is paid in cash) for personal services actually rendered in
the course of employment with the employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the following:
(1) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension to
the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
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(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross income of the Employee);
and
(5) Any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is otherwise treated
as an annual addition; and
(6) Any amount otherwise treated as an annual addition under Section
415(i)(1) of the Code.
For purposes of applying the limitations of this Article, compensation for
a limitation year is the compensation actually paid or includable in gross
income during such year.
Notwithstanding the preceding sentence, compensation for a Participant who
is permanently and totally disabled (as defined in Section 37(e)(3) of the Code)
is the compensation such Participant would have received for the limitation year
if the Participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not an officer, an owner, or highly compensated, and contributions made on
behalf of such Participant are nonforfeitable when made.
(c) "employer" -- The Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined in Section 414(c) of the Code as modified by Section
415(h) of the Code), or affiliated service groups (as defined in Section 414(m)
of the Code) of which the adopting Employer is a part.
(d) "excess amount" -- The excess of the Participant's annual additions for
the limitation year over the maximum permissible amount.
(e) "limitation year" -- Effective April 2, 1989, the twelve-month period
beginning April 2 and ending April 1. Prior to April 2, 1989, the limitation
year is the twelve-month period from November 1 through the following October
31, except the limitation year beginning November 1, 1988 shall end April 1,
1989.
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(f) "maximum permissible amount" -- The lesser of $30,000 (or, if greater,
1/4 of the dollar limitation in effect under Section 415(b)(1)(A) of the Code)
or twenty-five percent (25%) of the Participant's compensation for the
limitation year.
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES
-------------------------------
16.1 Key employee. An Employee or former Employee, (or the Beneficiary of
such an Employee or former Employee) who at any time during the determination
period was:
(a) An officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year;
(b) One of the ten Employees having annual compensation from the Employer
of more than the limitation in effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(c) A person owning (or considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more then five percent (5%) of the total combined
voting power of ail stock of the Employer, or
(d) A person who has annual compensation from the Employer of more than
$150,000 and who would be described in (c) hereof if one percent (1%) were
substituted for five percent (5%).
For purposes of (a) above, no more than fifty (50) Employees (or, if lesser, the
greater of three or ten percent of the Employees will be treated as officers.)
For purposes of (b), if two Employees have the same interest in the Employer,
the Employee having greater annual compensation from the Employer will be
treated as having a larger interest. For purposes of this Article the term
"compensation" shall have the same meaning as provided for in Article XV.
The determination period is the Plan Year containing the determination date
as defined in Section 16.8, and the four (4) preceding Plan Years. The
determination of who is a key employee will be made in accordance with the rules
and regulations under Section 416(i)(1) of the Code.
16.2 Non-key employee. Any Employee who is not a key employee. In addition,
any Beneficiary of a non-key employee will be treated as a non-key employee.
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16.3 Permissive aggregation group. The required aggregation group of plans
plus any other plan or plans of the Employer, which considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
16.4 Required aggregation group.
(a) Each qualified plan of the Employer in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and
(b) Any other qualified plan of the Employer which enables a plan described
in (a) to meet the requirements of Sections 401 (a)(4) and 410 of the Code.
16.5 Top-heavy plan. This Plan is top-heavy for any Plan Year if any of the
following conditions exist;
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is part of a required aggregation group of plans but not
part of a permissive aggregation group and the top-heavy ratio for the required
aggregation group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a permissive aggregation group of plans and
the top-heavy ratio for the required aggregation group exceeds sixty percent
(60%) and the top-heavy ratio for the permissive aggregation group exceeds sixty
percent (60%).
16.6 Super top-heavy plan. For any Plan Year in which this Plan would be a
Top-Heavy Plan pursuant to Section 16.5 above if "ninety percent (90%)" were
substituted for "sixty percent (60%)" at each place where "sixty percent (60%)"
appears therein.
16.7 Top-heavy ratio.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and has not maintained any
defined benefit plan which during the five (5) year period ending on the
determination date has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the account balances of all key
employees as of the determination date (including any part of any account
balance distributed in the five (5) year period ending on the determination
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date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) Year
period ending on the determination date), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and maintains or has maintained
one or more defined benefit plans which during the five (5) year period ending
on the Determination Date has or has had any accrued benefits, the top-heavy
ratio for any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all key employees determined
in accordance with (2) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all key employees as of the
determination date, and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all
Participants as of the determination dates, all determined in accordance with
Section 416 of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an accrued benefit made in
the five year period ending on the determination date.
(c) For the purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is a non-key employee but who was a key employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top-heavy ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination dates
that fall within the same calendar year. If any individual has not received
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any compensation from any employer maintaining the plan (other than benefits
under the Plan) at any time during the five (5) year period ending on the
determination date, any accrued benefit for such individual (and the account
of such individual) will not be taken into account.
Effective for Plan Years beginning after December 31, 1986, the accrued
benefit of a Participant other than a key employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
16.8 Determination date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
16.9 Valuation date. The last day of the Plan Year.
16.10 Present value. Present value will be based upon the interest and
mortality rates specified in the Employer's defined benefit plan.
16.11 Minimum Allocation.
(a) If in any Plan Year the Plan is a Top Heavy Plan and the Employer does
not maintain any qualified defined benefit plan in addition to this Plan, except
as provided in (b) and (c) below, the Employer contributions and forfeitures
allocated on behalf of any Participant who is a non-key employee will not be
less than the lesser of three percent (3%) of such Participant's compensation or
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the key employee's compensation (as defined
in Section 15.2(b)), and as limited by Section 401(a)(17) of the Code, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contributions. This minimum
allocation will be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of the Participant's
failure to complete 1,000 Hours of Service. The minimum allocation (if any)
required under this paragraph (a) shall be made to this Plan only to the extent
such allocation is not made for the Participant under any other defined
contribution plan(s) maintained by the Employer.
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(b) In the event the Employer maintains a qualified defined benefit plan(s)
in addition to this Plan, the Employer will provide a minimum allocation at
least equal to five percent (5%) of compensation (as defined in Section 15.2(b))
to each non-key employee, entitled under (a) above to receive a minimum
allocation, who is covered under this Plan and the qualified defined benefit
plan(s). If this Plan enables a defined benefit plan to meet the requirements of
Section 401(a) or 410 of the Code, the minimum allocation described in (a) above
must be at least three percent (3%) of a Participant's compensation, regardless
of the largest percentage of Employer contributions and forfeitures of a key
employee's compensation.
(c) The provisions in (a) and (b) above will not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.
(d) The minimum allocation required under this Section 16.11 (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
IN WITNESS WHEREOF, Delaware Group Delaware Fund, Inc. has caused this
amended and restated Plan, effective April 1, 1989, to be executed by its duly
authorized officers and its corporate seal to be impressed hereon this 17th day
of November, 1994.
Attest: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/Brian F. Wruble
- ------------------------------ -------------------------
George M. Chamberlain, Jr. Brian F. Wruble
Senior Vice President/Secretary President and Chief
Executive Officer
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<PAGE> 1
AMENDMENT NO. 1
TO THE
SECOND AMENDMENT AND RESTATEMENT OF THE
PROFIT SHARING PLAN OF
DELAWARE GROUP DELAWARE FUND, INC.
EFFECTIVE APRIL 1, 1989
This Amendment is made this 21st day of December, 1995, by Delaware
Group Delaware fund, Inc. (the "Employer").
WITNESSETH:
-----------
WHEREAS, the Employer adopted the second amendment and restatement of
the Profit Sharing Plan of Delaware Management Company, Inc. (the "Plan"),
effective April 1, 1989; and
WHEREAS, the Employer desires to clarify the provisions of the Plan
pertaining to the crediting of service for vesting purposes.
NOW THEREFORE, Section 2.28 of the Plan is hereby amended as follows:
"2.28 "Year of Service" shall mean the completion by an Employee of
1,000 or more Hours of Service during his initial Eligibility
Computation Period and during any Plan Year, beginning with the Plan
Year which commences after the Employee first performs an Hour of
Service. However, for the period from October 1, 1988 through March 31,
1990, an Employee shall be given credit for a Year of Service if he
completes 1,000 Hours of Service during the period October 1, 1988 to
September 30, 1989 and shall be given credit for an additional Year of
Service if he completes 1,000 Hours of Service during the period April
1, 1989 to March 31, 1990. For purposes of determining a Participant's
nonforfeitable right to his Employer Contribution Account, Years of
Service shall include an Employee's prior service with Delaware
Management Company, Inc. or any other Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or (c) of
the Code."
IN WITNESS WHEREOF, the Employer has caused this Amendment to be
executed by its duly authorized officers and its corporate seal to be impressed
hereon the date first written above.
ATTEST: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/ Wayne A. Stork
- ------------------------------- -------------------------
Senior Vice President/Secretary Chairman
<PAGE> 1
CHASE
GLOBAL CUSTODY AGREEMENT
AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK, N.A.
(the "Bank") and those registered investment companies listed on Schedule A
hereto (each a Customer ) on behalf of certain of their respective series,
as listed on Schedule A (individually and collectively the Series ).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by
the Bank or its Subcustodian for the account of the Customer, which cash
shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest
bearing accounts. If interest bearing accounts are not available, such cash
may be held in non-interest bearing accounts. The Bank is authorized to
maintain cash balances on deposit for the Customer with itself or one of its
affiliates. Interest bearing accounts shall bear interest at such reasonable
rates of interest as may from time to time be paid on such accounts by the
Bank or its affiliates.
(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:
(x) In the event that during a given calendar month a Series has maintained
an average daily cash balance greater than zero, the Bank shall provide an
earnings credit against custody fees otherwise owing hereunder by such Series
during such calendar month in an amount equal to the product of (A) 75% of
the 90 day U.S. government Treasury bill rate as quoted in the Wall Street
Journal for the last Business Day (being a day on which the Bank is open
for the transaction of all its ordinary business) of such calendar month, (B)
the average daily cash balance for such month, and (C) the number of days in
such calendar month divided by 365.
(y) In the event that during a given calendar month a Series has maintained
an average daily cash balance less than or equal to zero, the Bank shall be
paid interest on such amount by such Series in an amount equal to the product
of (A) the Overnight Fed Funds Rate (as defined below) plus 25 basis points
for the last Business Day of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.
(z) For purposes of (y) above, the term Overnight Fed Funds Rate shall mean
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published by the Federal Reserve Bank of New York (with the rate for the
last Business Day of a given calendar month being the rate so published on
the Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given
calendar month, of such transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in their account
with any securities depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of
the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian except for safe custody or administration, (ii) the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration;
(iii) adequate records will be maintained identifying the assets held
pursuant to such agreement as belonging to the customers of the Bank; (iv)
subject to applicable law, Subcustodian shall permit independent public
accountants for Bank and customers of the Bank reasonable access to
Subcustodian s books and records as they pertain to the subcustody account in
connection with such accountants' examination of the books and records of
such account; and (v) the Bank will receive periodic reports with respect to
the safekeeping of assets in the subcustody account, including advices and/or
notifications of any transfers to or from such subcustody account. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
(e) Upon request of the Customer, the Bank shall deliver to the Customer
annually a report stating: (i) the identity of each Subcustodian then acting
on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian;
(ii) the countries in which each Subcustodian is located; and (iii) as long
as Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer s Board
of Directors/Trustees directly to approve its foreign custody arrangements,
such other information relating to such Subcustodians as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. As long as
Rule 17f-5 requires the Customer s Board of Directors/Trustees directly to
approve its foreign custody arrangements, the Bank shall also furnish
annually to the Customer information concerning such Subcustodians similar in
kind and scope as that furnished to the Customer in connection with the
initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware
of any such material adverse change in the normal course of its custodial
activities.
5. Deposit Account Transactions
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall
give Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).
(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends
the Bank a written exception or objection to any Bank statement within 180
days of receipt, the Customer shall be deemed to have approved such
statement.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which
the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies; Tax Reclaims.
a. Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Customer written notice (which
may be electronic) of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in Section
10 hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in Section 10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee
of a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for
forwarding to its customers. In addition, the Bank will follow coupon
payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which
the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.
The foregoing proxy voting services may be provided by Bank, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would
have been if it performed such services itself..
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer which the Bank
believes may be available to such Customer. Where such reports are available,
the Bank shall periodically report to Customer concerning the making of
applications for a reduction of withholding tax and refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Bank shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax will be deducted from U.S. source income. The Customer shall
provide to the Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any
third party, or as a result of the provision to the Bank or any third party
of inaccurate or misleading information or the withholding of material
information by the Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of the
Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this sub-
clause, the Bank shall have no responsibility with regard to the Customer's
tax position or status in any jurisdiction. Except as provided in Section
8(c)(ii) and pursuant to Instructions, the Bank shall take no action in the
servicing of the Customer s Securities which, in and of itself, creates a
taxable nexus for the Customer in any jurisdiction other than with respect to
interest, dividends and capital gains that may otherwise be subject to tax by
such jurisdiction with respect to a foreign investor not otherwise engaged in
a trade or business in such jurisdiction in a given taxable year. Bank shall
not be liable for any tax liability caused, directly or indirectly, by
Customer's actions or status in any jurisdiction.
(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any
revenue authority or any governmental body in relation to the Customer or the
Securities and/or Cash held for the Customer. This provision does not
authorize any other voluntary disclosure to any revenue authority or any
governmental body without the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. For
purposes hereof, reasonableness shall mean compliance with applicable
procedures.
Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be
confirmed in writing by any two Authorized Persons (which confirmation may
bear the facsimile signature of such Persons), but the Customer will hold the
Bank harmless for the failure of such Authorized Persons to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time; provided that, where the Bank receives
a telephone Instruction from an Authorized Person requiring the transfer of
cash, prior to executing such Instruction the Bank will, to confirm such
Instruction, call back any one of the individuals on a list of persons
authorized to confirm such oral transfer Instructions (which Person shall be
a person other than the initiator of the transfer Instruction) and the Bank
shall not execute the Instruction until it has received such confirmation.
Either party may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the Custody Account. The
Customer shall be responsible for safeguarding any testkeys, identification
codes or other security devices which the Bank shall make available to the
Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure
of a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event that
Securities are lost by reason of the failure of the Bank or its Subcustodian
to use reasonable care, the Bank shall be liable to the Customer based on the
market value of the property which is the subject of the loss on the date it
is replaced by the Bank and without reference to any special conditions or
circumstances, it being understood that for purposes of measuring damages
hereunder, the value of Securities which are sold by the Customer prior to
the replacement thereof shall be equal to the sale price thereof less the
expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the
Bank be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Bank
has been advised of the likelihood of such loss or damage and regardless of
the form of action. Subject to the Bank's obligations pursuant to Section 4(e)
hereof, the Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission
was in good faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any Customer document
which it reasonably believes in good faith to have been validly executed.
(b) The Bank shall hold Customer harmless from, and shall indemnify Customer
for, any loss, liability, claim or expense incurred by Customer (including,
but not limited to, Customer's reasonable legal fees) to the extent that such
loss, liability, claim or expense arises from the negligence or willful mis-
conduct on the part of the Bank or a Subcustodian; provided that, in no event
shall the Bank be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action. Subject to the Bank's obligations
pursuant to Section 4(e) hereof, the Bank will not be responsible for the
insolvency of any Subcustodian which is not a branch or affiliate of Bank.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than a
Security.
(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the
Customer or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments
are made pursuant to this Agreement;
(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the
Bank.
(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances
are such that the Bank may have a potential conflict of duty or interest
including the fact that the Bank or any of its affiliates may provide
brokerage services to other customers, act as financial advisor to the issuer
of Securities, act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material interest in
the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all
losses, liability, claims or demands arising directly or indirectly from any
such certifications.
(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during
normal business hours upon reasonable advance notice by Customer s
independent public accountants and by employees of Customer designated to the
Bank. All such materials shall, to the extent applicable, be maintained and
preserved in conformity with the Act and the rules and regulations
thereunder, including without limitation, SEC Rules 31a-1 and 31a-2. Subject
to restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.
This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under
this Agreement operates as a waiver, nor does any single or partial exercise
of any power or right preclude any other or further exercise, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
-------------------------------------
Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O Conner
or telex:
--------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by
the Customer, such 60 day period shall be extended for an additional period
as requested by Customer of up to 120 days.
Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes
one or more Series, shall constitute a termination hereof only with respect
to such deleted Series, shall be governed by the preceding provisions of
Section 14 as to the identification of a successor custodian and the delivery
of the Assets of the Series so deleted to such successor custodian, and shall
not affect the obligations of the Bank and the Customer hereunder with
respect to the other Series set forth in Schedule A, as amended from time to
time.
(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series and such Accounts
to which such obligation relates as though the Customer had separately
contracted with the Custodian by separate written instrument with respect to
each Series and its Accounts.
CUSTOMER
By: /s/ Michael P. Bishof
---------------------
Title Vice President and Treasurer
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
-----------------------
Title Vice President
STATE OF Pennsylvania)
: ss.
COUNTY OF Philadelphia)
On this 9th day of July, 1996, before me personally came Michael P. Bishof,
to me known, who being by me duly sworn, did depose and say that he resides
in Blue Bell, PA at 110 Spyglass Drive; that he is Vice President/Treasurer
of Delaware Group of Funds, the entity described in and which executed the
foregoing instrument; that he knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of
said entity, and that he signed his name thereto by like order.
/s/ Maritza H. Cruzado
-----------------------
Maritza H. Cruzado
Notary
Sworn to before me this 9th
day of July, 1996.
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 24th day of May, 1996, before me personally came Rosemary
Stidmon, to me known, who being by me duly sworn, did depose and say that she
resides in New Providence, NJ at 31 Sagamore Drive; that she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that she signed her name thereto
by like order.
Sworn to before me this 24th
day of May, 1996.
/s/ Laiyee Ng
- -------------
Laiyee Ng
Notary
Schedule A
Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund
March, 1996 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LUXEMBOURG
Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities)Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.
(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NETHERLANDS
ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND
National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN
Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES
The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND
For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial Banco Nacional Ultra Marino
de Lisboa Lisbon
Servico de Gestaode Titulos
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SLOVAK REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA
Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA
The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND
Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE> 1
FORM OF AGREEMENT
SUBJECT TO BOARD APPROVAL
[DELAWARE GROUP _____________________]
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this ____ day of _______________, 199__ by
and between [DELAWARE GROUP ___________________________] (the "Fund"), a
[Maryland Corporation], for the [_________________ series and the
__________________________ series (collectively "the Series"),] and DELAWARE
SERVICE COMPANY, INC. ("DSC"), a Delaware Corporation, each having its
principal office and place of business at 1818 Market Street, Philadelphia,
Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund and
Delaware Management Company, Inc. provide that the Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the costs
incurred in: the maintenance of its corporate existence; the maintenance of
its own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfers of stock, including issuance and redemption of
shares; reports and notices to stockholders; calling and holding of stockholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
<PAGE> 2
WHEREAS, the Fund and DSC desire to have a written agreement
concerning the performance of the foregoing services and providing compensation
therefor.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for
the Series to provide as agent for the Fund services as Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent and DSC hereby
accepts such appointment and agrees to provide the Fund, as its agent, the
services described herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to
DSC (or has given DSC an opportunity to examine) copies of, and DSC represents
that it has received from the Fund (or is otherwise familiar with), the
following documents:
(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto.
(b) The By-Laws of the Fund;
2
<PAGE> 3
(c) Any resolution or other action of the Fund or the
Board of Directors of the Fund establishing or affecting the rights, privileges
or other status of each class or series of shares of the Fund, including those
relating to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of
Directors of the Fund appointing DSC as Shareholder Services Agent for the
Series and authorizing the execution of this Agreement;
(e) The forms of share certificates of the Series in the
forms approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses
and Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for
the purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
3
<PAGE> 4
(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents
altering, adding, qualifying or repealing any document or authority called for
under this Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may
be required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified
copy of any resolution of the stockholders or the Board of Directors of the
Fund providing for a dividend, capital gains distribution, distribution of
capital, stock dividend, stock split or other similar action affecting the
authorization or issuance of shares of the Fund or the payment of dividends.
2.4 In the case of any recapitalization or other capital
adjustment requiring a change in the form of stock certificates or the books
recording the same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or
effecting such change;
(b) Written instructions from an authorized officer
implementing such change; and
(c) An opinion of counsel to the Fund as to the validity
of such action, if requested by DSC.
2.5 The Fund warrants the following:
4
<PAGE> 5
(a) The Fund is, or will be, a properly registered
investment company under the Investment Company Act of 1940 and any and all
Series' shares which it issues will be properly registered and lawfully issued
under applicable federal and state laws.
(b) The provisions of this contract do not violate the
terms of any instrument by which the Fund is bound; nor do they violate any law
or regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer
agent under the Securities and Exchange Act of 1934 and is duly authorized to
serve, and may lawfully serve as such.
(b) The provisions of this contract do not violate the
terms of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the
Fund's expense, a sufficient supply of blank stock certificates for the Series,
and from time to time will replenish such supply upon the request of DSC. The
Fund agrees to indemnify and exonerate, save and hold DSC harmless, from and
against any and all claims or demands that may be asserted against DSC
concerning the genuineness of any stock certificate supplied to DSC pursuant to
this Section.
5
<PAGE> 6
3.2 DSC shall safeguard, and shall account to the Fund, upon its
demand for, all such stock certificates: (a) as issued, showing to whom issued,
or (b) as unissued, establishing the safekeeping, cancellation or destruction
thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in
the officers authorized to sign stock certificates or in the form thereof. If
an officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by
DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine
the total shares to be issued and issue such shares by crediting shares to
accounts created and maintained in the registration forms provided; as
applicable, prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares
by debiting transferor-stockholder accounts and crediting such shares to
accounts created and/or maintained for transferee-stockholders; if applicable,
issue and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the
total shares redeemed and to be redeemed; determine the total redemption
payments made and to be made; redeem shares by debiting stockholder accounts;
as applicable receive and cancel stock
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<PAGE> 7
certificates for shares redeemed; and remit or cause to be remitted the
redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control
cash due and paid, shares issued and to be issued, cash remitted and to be
remitted and shares debited and credited to accounts; provide such notices,
instructions or authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Series, DSC shall
disburse and cause to be disbursed to stockholders of each Series dividends,
capital gains distributions or any payments from other sources as directed by
the Fund. In connection therewith, but not in the limitation thereof, DSC
shall:
(a) Calculate the total disbursement due and payable and
the disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each
stockholder, as aforesaid, to be disbursed in cash; prepare and mail checks
therefor.
(c) Calculate the total disbursement for each stockholder
of each Series, as aforesaid, for which Series' shares are to be issued and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
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<PAGE> 8
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the
receipt of DSC from the Fund, or from any federal or state agency or authority,
written notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Series, DSC shall
provide those services ancillary to, but in implementation of, the services
provided under Sections I through V hereof, and those generally defined and
accepted as shareholder services. In connection therewith, but not in
limitation thereof, DSC shall:
(a) Except where instructed in writing by the Fund not to
do so, and where in compliance with applicable law, accept orders on behalf of
the Fund; receive and process investments and applications; remit to the Fund
or its custodian payments for shares acquired and to be issued; and direct the
issuance of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail
stockholder account information, mail Series stockholder reports and Series
prospectuses.
8
<PAGE> 9
(d) Prepare and mail proxies and material for Fund
stockholder meetings,
receive and process proxies from stockholders, and deliver such proxies as
directed by the Fund.
(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans,
including activities not otherwise provided in Section I through V of this
Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may,
at the Fund's expense, consult with counsel for the Fund or its own counsel
with respect to any matter arising in connection with the performance of its
duties hereunder, and shall not be liable for any action taken or omitted by it
in good faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors
and omissions and reasonable bond coverage for fraud.
9
<PAGE> 10
7.5 Upon notice thereof to the Fund, DSC may employ others to
provide services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services
hereunder may be used to perform similar services to other funds of the
Delaware Group and to others, and may be used to perform other services for the
Fund, the other funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the
rules and regulations thereunder. Further, the parties intend that the
processes, procedures, safeguards and controls employed should be those
generally applied and accepted for the type services provided hereunder by
other institutions providing the same or similar services, and, those which
should provide efficient, safe and economical services so as to promote
promptness and accuracy and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common
ownership and close management ties with the Fund's investment advisor and the
Fund's distributor and serves the other funds of the Delaware Group (DSC having
been originally established to provide the services hereunder for the funds of
the Delaware Group), advantages and benefits to the Fund in the employment of
DSC hereunder can be available which may not generally be available to it from
others providing similar services.
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<PAGE> 11
8.2 The Fund and DSC further acknowledge that the compensation by
the Fund to DSC is intended to induce DSC to provide services under this
Agreement of a nature and quality which the Board of Directors of the Fund,
including a majority who are not parties to this Agreement or interested person
of the parties hereto, has determined after due consideration to be necessary
for the conduct of the business of the Fund, in the best interests of the Fund,
the Series and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined
in accordance with Schedule A hereto as it shall be amended from time to time
as provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC
shall provide, such information as the Board may reasonably require to evaluate
the basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigation or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the
11
<PAGE> 12
Fund's affairs in accordance herewith or in accordance with Guidelines or
instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the
date first written above if approved by a vote of the Board of Directors of the
Fund, including an affirmative vote of a majority of the non-interested members
of the Board, cast in person at a meeting called for the purpose of voting on
such approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors
of the Fund, including an affirmative vote of the majority of the non-
interested members of the Board cast in person at a meeting called for the
purpose of voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
ATTEST:_________________________ By:_____________________________
Title:
[DELAWARE GROUP _______________]
for its [_________________ and
____________________]
12
<PAGE> 13
ATTEST:____________________________ By:____________________________
Title:
13
<PAGE> 14
FORM OF SCHEDULE A
SCHEDULE A
[DELAWARE GROUP ____________________]
(THE "FUND")
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
1. Delaware Service Company, Inc. ("DSC") will determine and report to
the Fund, at least annually, the compensation for services to be
provided to the Fund for DSC's forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or transaction, as may be applicable, for
services provided. DSC will bill, and the Fund will pay, such
compensation monthly.
3. For the period commencing on January 1, 1997, the charge will consist
of two charges for all the Funds in the Delaware Group, except the
Delaware Group Premium Fund, Inc. and the Delaware Pooled Trust, Inc.
(other than with respect to The Real Estate Investment Trust
Portfolio), an annual charge and a per transaction charge for each
account on the transfer agent's records and each account on an
automated retirement processing system. These charges are as follows:
A. ANNUAL CHARGE
<TABLE>
<S> <C> <C>
Daily Dividend Funds $11.00 Per Annum
Other Funds $5.50 Per Annum
Merrill Lynch - Omnibus Accounts*
Regular Accounts $16.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $19.00 Per Annum
Networked Accounts $3.00 - 6.00 Per Annum
</TABLE>
<PAGE> 15
SCHEDULE A
[DELAWARE GROUP __________________________]
(THE "FUND")
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
CONTINUED
B. TRANSACTION CHARGE
<TABLE>
<CAPTION>
Transaction Charge
----------- ------
<S> <C>
1. Dividend Payment $0.25
2. New Account $6.00
3. Purchase:
a. Wire $8.00
b. Automated $1.50
c. Other $2.60
4. Transfer $8.00
5. Certificate Issuance $4.00
6. Liquidations
a. Wires $12.25
b. Drafts $0.75
c. Money Market Regular $4.50
d. Other Regular $4.50
7. Exchanges
a. Dividend Exchanges $3.00
b. Other $10.00
</TABLE>
4. For the period commencing January 1, 1997, DSC's compensation for
providing services to the Delaware Group Premium Fund, Inc. (the
"Premium Fund") will be $50,000
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<PAGE> 16
annually. DSC will bill, and the Premium Fund will pay, such
compensation monthly, allocated among the current Series of the
Premium Fund based on the relative percentage of assets of each Series
at the time of billing and adjusted appropriately to reflect the
length of time a particular Series is in operation during any billing
period.
5. For the period commencing January 1, 1997, DSC's compensation for
providing services to the Portfolios (other than The Real Estate
Investment Trust Portfolio) of Delaware Pooled Trust, Inc. (the
"Trust") will be $25,000 annually. DSC will bill, and the Trust will
pay, such compensation monthly allocated among the current Portfolios
(other than The Real Estate Investment Trust Portfolio) of the Trust
based on the relative percentage of assets of each Portfolio at the
time of billing and adjusted appropriately to reflect the length of
time a particular Portfolio is in operation during any billing period.
* Effective January 1, 1998 for existing funds and July 1,
1997 for new funds.
3
<PAGE> 1
<PAGE>
PROPOSED AGREEMENT
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP OF FUNDS
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1996 by and between
the registered investment companies in the Delaware Group listed on Schedule A,
which Schedule may be amended from time to time as provided in Section 8 hereof
(each corporation or common law or business trust, hereinafter referred to as a
"Company," and all such entities collectively hereinafter referred to as, the
"Companies"), on behalf of the portfolio(s) of securities of such Companies
listed on Schedule A, which Schedule may be amended from time to time (when used
in this Agreement in the context of a Company that offers only a single
portfolio/series of shares, the term "Portfolio" shall be a reference to such
Company, and when used in the context of a Company that offers multiple
portfolios/series of shares, shall be a reference to each portfolio/series of
such Company) and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware
corporation, having its principal office and place of business at 1818 Market
Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the
Companies with respect to each Portfolio and either Delaware
Management Company, Inc. or its U.K. affiliate, Delaware
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<PAGE>
International Advisers Ltd., provide, in part, that each Portfolio shall conduct
its business and affairs and shall bear the expenses necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
with respect to accounting services; and
WHEREAS, the services to be provided under this agreement
previously were provided by employees of the Companies; and
WHEREAS, the Companies and DSC desire to have a written agreement
concerning the performance of accounting services for each Portfolio and
providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 The Companies hereby appoint DSC the accounting
agent ("Accounting Agent") for all of the classes of each Portfolio, to provide
such accounting services as are set forth herein and DSC hereby accepts such
appointment and agrees to provide the Companies, as their agent, the services
described herein.
Section 1.2 The Companies shall pay DSC and DSC shall accept,
for the services provided hereunder, the compensation provided for in Section VI
hereof. The Companies
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<PAGE>
also shall reimburse DSC for expenses incurred or advanced by it for the
Companies in connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Each Company represents that it has provided or
made available to DSC (or has given DSC an opportunity to examine) copies of,
and, DSC represents that it has received from the Companies (or is otherwise
familiar with), the following documents:
A. The Articles of Incorporation or Agreement and
Declaration of Trust or other document, as relevant, evidencing each Company's
form of organization and any current amendments thereto;
B. The By-Laws or Procedural Guidelines of each
Company;
C. Any resolution or other action of each Company or
the Board of Directors or Trustees of each Company establishing or affecting the
rights, privileges or other status of any class of shares of a Portfolio, or
altering or abolishing any such class;
D. A certified copy of a resolution of the Board of
Directors or Trustees of each Company appointing DSC as Accounting Agent for
each Portfolio and authorizing the execution of this Agreement or an amendment
to Schedule A of this Agreement;
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<PAGE>
E. A copy of each Company's currently effective
prospectus[es] and Statement[s] of Additional Information under the Securities
Act of 1933, if effective;
F. A certified copy of any resolution of the Board of
Directors or Trustees of each Company authorizing any person to give
instructions to DSC under this Agreement (with a specimen signature of such
person if not already provided), setting forth the scope of such authority; and
G. Any amendment, revocation or other document
altering, adding, qualifying or repealing any document or authority called for
under this Section 2.1.
Section 2.2 Each Company and DSC may consult as to forms or
documents that may be required in performing services hereunder.
Section 2.3 Each Company warrants the following:
A. The Company is, or will be, a properly registered
investment company under the Investment Company Act of 1940 (the "1940 Act") and
any and all shares of a Portfolio which it issues will be properly registered
and lawfully issued under applicable federal and state laws.
B. The provisions of this contract do not violate the
terms of any instrument by which the Company or the Company on behalf of a
Portfolio is bound; nor do they violate any law or regulation of any body having
jurisdiction over the Company or its property.
Section 2.4 DSC warrants the following:
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<PAGE>
A. The provisions of this contract do not violate the
terms of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. SERVICES TO BE PROVIDED BY DSC
Section 3.1 Daily Net Asset Value ("NAV") Calculation. As
Accounting Agent for each Portfolio of the Companies, DSC will perform all
functions necessary to provide daily Portfolio NAV calculations, including:
A. Maintaining each Portfolio's securities portfolio
history by:
1. recording portfolio purchases and sales;
2. recording corporate actions and capital
changes relating to portfolio securities;
3. accruing interest, dividends and
expenses; and
4. maintaining the income history for
securities purchased by a Portfolio.
B. Determining distributions to Portfolio
shareholders;
C. Recording and reconciling shareholder activity
including:
1. recording subscription, liquidations and
dividend reinvestments;
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<PAGE>
2. recording settlements of shareholder
activity; and
3. reconciling Portfolio shares outstanding
to the records maintained by DSC, as transfer agent of the Portfolio.
D. Valuing a Portfolio's securities portfolio which
includes determining the NAVs for all classes of the Portfolio;
E. Disseminating Portfolio NAVs and dividends to
interested parties (including the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Investment Company Institute ("ICI"),
Morningstar, and Lipper Analytical Services, Inc. ("Lipper")); and
F. Resolving pricing and/or custody discrepancies.
Section 3.2 Financial Reporting. As Accounting Agent, DSC
shall perform financial reporting services for each Portfolio, which shall
include:
A. The preparation of semi-annual and annual reports
for shareholders which involves the performance of the following functions:
1. preparing all statements of net assets,
statements of operations and statements of changes in net assets for the
Portfolio;
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<PAGE>
2. preparing footnotes to financial
statements for the Portfolio;
3. preparing workpapers for each Company's
annual audit by its independent public accountants; and
4. coordinating the annual audit by each
Company's independent public accountants.
B. Reporting to the ICI in response to requests for
monthly and other periodic information;
C. Performing statistical reporting, which includes
daily, monthly, quarterly and annual reports for Lipper, Weisenberger and other
third party reporting agencies; and
D. Furnishing financial information for any
additional required SEC reporting, such as the preparation of financial
information for each Company's reporting on Form N-SAR, the furnishing of
financial information for each Company's prospectus[es] and statement[s] of
additional information, and the financial information required for each
Company's annual Rule 24f-2 notice filing;
Section 3.3 Compliance Testing. DSC will monitor, test and
prepare and maintain supporting schedules which evidence compliance with the
definitional and distribution requirements under the Internal Revenue Code of
1986, as amended ("IRC"), including the following:
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<PAGE>
A. The requirement to be registered at all times
during the taxable year under the 1940 Act (IRC ss.851(a));
B. The annual ninety percent gross income test (IRC
ss.851(b)(2));
C. The short/short (thirty percent) gross income test
(IRC ss.851(b)(3));
D. The quarterly IRC industry diversification tests
(IRC ss.ss.851(b)(4) and 817(h)); and
E. The 90% distribution requirements (IRC ss.852(a)).
Section 3.4 Other Services. In addition to the above, DSC, in
its capacity as Accounting Agent for the Company, will perform the following
services:
A. The calculation of required Portfolio monthly
yields and total return calculations in accordance with the prescribed rules of
the U.S. Securities and Exchange Commission;
B. Providing the financial information necessary for
the preparation of all federal and state tax returns and ancillary schedules,
including:
1. year-end excise tax distributions; and
2. compliance with Subchapter M and Section
4982 of the IRC;
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<PAGE>
C. Performing special tax reporting to shareholders,
including the preparation of reports which reflect income earned by each
Portfolio by state, exempt income and distributions that qualify for the
corporate dividends received deduction;
D. The preparation of expense and budget figures for
each Portfolio, including the maintenance of detailed records pertaining to
expense accruals and payments and adjusting reports to reflect accrual
adjustments;
E. The preparation of reports for Board of Directors'
or Trustees' meetings;
F. Coordination of the custody relationships;
G. Facilitating security settlements;
H. Performance of required foreign security
accounting functions;
I. Performance of daily cash reconciliations for each
Portfolio;
J. Providing identified reports to portfolio managers
including:
1. providing portfolio holdings and security
valuation reports;
2. preparing cash forecasts and
reconciliations as mutually agreed upon; and
3. preparing income projections.
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<PAGE>
IV. PERFORMANCE OF DUTIES
Section 4.1 DSC may request or receive instructions from a
Company and may, at a Portfolio's expense, consult with counsel for the Company
or its own counsel, with respect to any matter arising in connection with the
performance of its duties hereunder, and shall not be liable for any action
taken or omitted by it in good faith in accordance with such instructions or
opinions of counsel.
Section 4.2 DSC shall maintain reasonable insurance coverage
for errors and omissions and reasonable bond coverage for fraud.
Section 4.3 Upon notice thereof to a Company, DSC may employ
others to provide services to DSC in its performance of this Agreement.
Section 4.4 Personnel and facilities of DSC used to perform
services hereunder may be used to perform similar services to all Companies of
the Delaware Group and their Portfolios and to others, and may be used to
perform other services for all of the Companies of the Delaware Group and
others.
Section 4.5 The Companies and DSC may, from time to time, set
forth in writing at the Companies' expense certain guidelines to be applicable
to the services hereunder.
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<PAGE>
V. ACCOUNTS AND RECORDS
Section 5.1 The parties hereto agree and acknowledge that the
accounts and records maintained by DSC with respect to a Portfolio shall be the
property of such Portfolio, and shall be made available to the relevant Company
promptly upon request and shall be maintained for the periods prescribed in Rule
31a-2 under the Investment Company Act of 1940 or such longer period as shall be
agreed to by the parties hereto, at such Portfolio's expense.
VI. COMPENSATION
Section 6.1 The Companies and DSC acknowledge that the
compensation to be paid hereunder to DSC is intended to induce DSC to provide
services under this Agreement of a nature and quality which the Boards of
Directors or Trustees of the Companies, including a majority who are not parties
to this Agreement or interested person of the parties hereto, have determined
after due consideration to be necessary for the conduct of the business of a
Portfolio in the best interests of a Portfolio and its shareholders.
Section 6.2 Compensation by a Portfolio hereunder shall be
determined in accordance with Schedule B hereto as it shall be amended from time
to time as provided for herein and which is incorporated herein as a part
hereof.
Section 6.3 Compensation as provided in Schedule B shall be
reviewed and approved for each Portfolio in the manner
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<PAGE>
set forth in Section 8.1 hereof by the Boards of Directors or Trustees of the
Companies at least annually and may be reviewed and approved more frequently at
the request of either party. The Boards may request and DSC shall provide such
information as the Boards may reasonably require to evaluate the basis of and
approve the compensation.
VII. STANDARD OF CARE
Section 7.1 The Companies on behalf of each Portfolio
acknowledge that DSC shall not be liable for, and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
performance of its duties under this contract, agree to indemnify DSC against,
any claim or deficiency arising from the performance of DSC's duties hereunder,
including DSC's costs, counsel fees and expenses incurred in investigating or
defending any such claim or any administrative or other proceeding, and
acknowledge that any risk of loss or damage arising from the conduct of a
Portfolio's affairs in accordance herewith or in accordance with guidelines or
instructions given hereunder, shall be borne by the Portfolio. The
indemnification provided for in this Section 7.1 shall be made Portfolio by
Portfolio so that DSC is only entitled to indemnification from a Company on
behalf of a Portfolio for actions arising from the performance of DSC's duties
as to that Portfolio.
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<PAGE>
VIII. CONTRACTUAL STATUS
Section 8.1 This Agreement shall be executed and become
effective as to a Company with regard to a Portfolio listed on Schedule A as of
the date first written above if approved by a vote of such Company's Board of
Directors or Trustees, including an affirmative vote of a majority of the non-
interested members of the Board of such Company, cast in person at a meeting
called for the purpose of voting on such approval. It shall continue in effect
for an indeterminate period, and is subject to termination as to a Company on
behalf of a Portfolio or DSC, as the case may be, on sixty (60) days notice by
either that Company or DSC, unless earlier terminated or amended by agreement
among the parties. A Company shall be permitted to terminate this Agreement as
to a Portfolio on sixty (60) days notice to DSC. Compensation under this
Agreement by a Portfolio shall require approval by a majority vote of the Board
of Directors or Trustees of such Portfolio's Company, including an affirmative
vote of the majority of the non-interested members of such Board cast in person
at a meeting called for the purpose of voting such approval.
Section 8.2 This Agreement shall become effective as to any
Company or Portfolio not included on Schedule A as of the date first written
above, but desiring to participate in this Agreement, on such date as an amended
Schedule A adding such new Company or Portfolio to such Schedule is executed by
DSC and such new Company or a Company on behalf of a new Portfolio following
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<PAGE>
approval by the Company or by the Company on behalf of a new Portfolio desiring
to be included in this Agreement in accordance with the method specified in
Section 8.1. Any such amended Schedule A shall not affect the validity of this
Agreement as between DSC and the other Companies which have executed this
Agreement or any subsequent amendment to Schedule A of this Agreement.
Section 8.3 This Agreement may not be assigned by DSC without
the approval of all of the Companies.
Section 8.4 This Agreement shall be governed by the laws of
the Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
/s/ David K. Downes
By:_____________________________________
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP DELCHESTER HIGH-YIELD
BOND FUND, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
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<PAGE>
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
/s/Wayne A. Stork
By:_____________________________________
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
/s/ Wayne A. Stork
By:_____________________________________
Wayne A. Stork, Chairman
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<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Delchester High-Yield Bond Fund, Inc.
- --------
* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
-17-
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
-18-
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: August 19, 1996
-19-
<PAGE>
SCHEDULE B
COMPENSATION
Fee Schedule for The Delaware Group of Funds
Part 1 -- Fees for Existing Portfolios
Existing Portfolios are those so designated on Schedule A to the Fund Accounting
Agreement between Delaware Service Company, Inc. and the Delaware Group of Funds
dated as of August 19, 1996 ("Agreement").
Annual Asset Based Fees
First $10 Billion of Aggregate
Complex Net Assets 2.5 Basis Points
Aggregate Complex Net Assets
over $10 Billion 2.0 Basis Points
Annual asset based fees will be charged at a rate of 2.5 basis points for the
first $10 Billion of Aggregate Complex Net Assets. Aggregate Complex Net Assets
over $10 Billion will be charged at a rate of 2.0 basis points. These fees will
be charged to a Portfolio on an aggregated pro rated basis.
Annual Minimum Fees
Domestic Equity Portfolio $35,000
Domestic Fixed Income Portfolio $45,000
International Series Portfolio $70,000
Per Class of Share Fee $ 4,000
There is an annual minimum fee that will be charged only if the annual asset
based fee is less than the calculation for the minimum fee. This fee is based on
the type and the number of classes per Portfolio. For an equity Portfolio
$35,000 will be charged; for a fixed income Portfolio $45,000 will be charged,
and for an international Portfolio $70,000 will be charged. For each class of
shares, $4,000 will be charged, such amount to be prorated over a period of less
than a year for any classes added after April 30, 1996. A total of all minimum
fees will be compared to the total asset based fee to determine which fee is
higher and, subsequently, will be used to bill the Companies.
Part 2 -- Fees for New Portfolios
For each Portfolio designated as a New Portfolio on Schedule A to the Agreement,
there will be a fee of 2.0 basis points, providing that the Delaware complex net
assets are above $10 Billion (the
<PAGE>
rate would be 2.5 basis points if under $10 Billion and then 2.0 basis points
once the net assets cross $10 Billion), or an annual minimum fee calculated in
the manner described above, whichever is higher. This new fee would be added to
the total of Existing Portfolio fees and then pro rated. Fees shall not be
charged for New Portfolios included on Schedule A until such Portfolios shall
have commenced operations.
Dated as of: August 19, 1996
-21-
<PAGE> 1
AMENDMENT NO. ___
TO
SCHEDULE A
OF
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Foundation Funds (New)
Income Porfolio (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
__________________________
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule
B to that Fund Accounting Agreement between Delaware Service Company, Inc. and
the Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on
behalf of such Portfolio hereof shall be a New Portfolio for purposes of
Schedule B to the Agreement.
<PAGE> 2
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Equity Portfolio (New)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II (New)
2
<PAGE> 3
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group State Tax-Free Income Trust
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Tax-Free Pennsylvania Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
3
<PAGE> 4
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
<PAGE> 5
Dated as of October 14, 1997
DELAWARE SERVICE COMPANY, INC.
By: ________________________________
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: _______________________
Wayne A. Stork
Chairman
5
<PAGE> 1
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP
------------------------
FUND
---------------------
FUND A CLASS
-------------------
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule l2b-l under the Investment Company Act of l940 (the "Act") by Delaware
Group ________________________ (the "Fund"), for the ______________________
Fund series (the "Series") on behalf of the _____________________ Fund A Class
("Class"), which Fund, Series and Class may do business under these or such
other names as the Board of Trustees of the Fund may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such
approval by the Trustees included a determination that in the exercise of
reasonable business judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Series and shareholders of
the Class. The Plan has been approved by a majority of the outstanding voting
<PAGE> 2
securities of the Class, as defined in the Act.
The Fund is a Delaware business trust organized under the laws of the
State of Delaware, is authorized to issue different series and classes of
securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution
Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed 0.3%
(3/10 of l%) per annum of the Series' average daily net assets represented by
shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of Trustees from time to time. Such monthly fee shall be reduced by the
aggregate sums paid by the Fund on behalf of the Series to persons other than
broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares
of the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the
<PAGE> 3
promotion, offering and sale of Class shares and, where suitable and
appropriate, the retention of Class shares by shareholders.
(b) The Service Providers shall use the monies paid respectively to them
to reimburse themselves for the actual costs they have incurred in confirming
that their customers have received the Prospectus and Statement of Additional
Information, if applicable, and as a fee for (l) assisting such customers in
maintaining proper records with the Fund, (2) answering questions relating to
their respective accounts, and (3) aiding in maintaining the investment of their
respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the amount
and the use of the monies paid to it under the Plan. The Service Providers
shall inform the Fund monthly and in writing of the amounts each claims under
the Plan; both the Distributor and the Service Providers shall furnish the
Board of Trustees of the Fund with such other information as the Board may
reasonably request in connection with the payments made under the Plan and the
use thereof by the Distributor and the Service Providers, respectively, in
order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Trustees of the
Fund, for their review, on a quarterly basis, a written report of the amounts
expended under the Plan and the purposes for which such expenditures were made.
<PAGE> 4
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Trustees of
the Fund, and of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of the
non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to be
spent for distribution pursuant to paragraph l thereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of the
Fund's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the Act
shall govern the meaning of "interested person(s)" and "vote of a majority of
the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
___________________, 1997
<PAGE> 1
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP _____________________________
__________________ FUND
__________ FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by
Delaware Group _________________________ (the "Fund"), for the
______________________ Fund series (the "Series") on behalf of the
______________________ Fund B Class (the "Class"), which Fund, Series and Class
may do business under these or such other names as the Board of Trustees of the
Fund may designate from time to time. The Plan has been approved by a majority
of the Board of Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related thereto
("non-interested Trustees"), cast in person at a meeting called for the purpose
of voting on such Plan. Such approval by the Trustees included a determination
that in the exercise of reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Series and shareholders of the Class. The Plan has been approved by a vote
of the holders of a majority of the outstanding voting securities of the Class,
as defined in the Act.
The Fund is a Delaware business trust organized under the laws
of the State of Delaware, is authorized to issue different series and classes
of securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution
Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a
monthly fee not to exceed 0.75% (3/4 of 1%) per annum of the Series' average
daily net assets represented by shares of the Class as may be determined by the
Fund's Board of Trustees from time to time.
(b) In addition to the amounts described in (a)
above, the Fund shall pay (i) to the Distributor for payment to dealers or
others, or (ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%)
per annum of the Series' average daily net assets represented by shares of the
Class, as a service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to
it pursuant to paragraph 1(a) above to assist in the distribution and promotion
of shares of the Class. Payments made to the Distributor under the Plan may be
used for, among other things, preparation and
<PAGE> 2
distribution of advertisements, sales literature and prospectuses and reports
used for sales purposes, as well as compensation related to sales and marketing
personnel, and holding special promotions. In addition, such fees may be used
to pay for advancing the commission costs to dealers with respect to the sale
of Class shares.
(b) The monies to be paid pursuant to paragraph
1(b) above shall be used to pay dealers or others for, among other things,
furnishing personal services and maintaining shareholder accounts, which
services include confirming that customers have received the Prospectus and
Statement of Additional Information, if applicable; assisting such customers in
maintaining proper records with the Fund; answering questions relating to their
respective accounts; and aiding in maintaining the investment of their
respective customers in the Class.
3. The Distributor shall report to the Fund at least
monthly on the amount and the use of the monies paid to it under paragraph 1(a)
above. In addition, the Distributor and others shall inform the Fund monthly
and in writing of the amounts paid under paragraph 1(b) above; both the
Distributor and any others receiving fees under the Plan shall furnish the
Board of Trustees of the Fund with such other information as the Board may
reasonably request in connection with the payments made under the Plan and the
use thereof by the Distributor and others in order to enable the Board to make
an informed determination of the amount of the Fund's payments and whether the
Plan should be continued.
4. The officers of the Fund shall furnish to the Board
of Trustees of the Fund, for their review, on a quarterly basis, a written
report of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the
Distributor shall notify the Fund of the commencement of the Plan (the
"Commencement Date"); thereafter, the Plan shall continue in effect for a
period of more than one year from the Commencement Date only so long as such
continuance is specifically approved at least annually by a vote of the Board
of Trustees of the Fund, and of the non-interested Trustees, cast in person at
a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by
vote of a majority of the non-interested Trustees or by vote of a majority of
the outstanding voting securities of the Class.
(b) The Plan may not be amended to increase
materially the amount to be spent for distribution pursuant to paragraph 1
thereof without approval by the shareholders of the Class.
7. All material amendments to this Plan shall be
approved by the non-interested Trustees in the manner described in paragraph 5
above.
8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Trustees shall be committed to the
discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "interested
<PAGE> 3
person(s)" and "vote of a majority of the outstanding voting securities,"
respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as
previously defined.
____________________, 1997
<PAGE> 1
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP ___________________________
____________________________ FUND
____________________ FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by
Delaware Group ____________________________ (the "Fund"), for the
________________ Fund series (the "Series) on behalf of the __________________
Fund C Class (the "Class"), which Fund, Series and Class may do business under
these or such other names as the Board of Trustees of the Fund may designate
from time to time. The Plan has been approved by a majority of the Board of
Trustees, including a majority of the Trustees who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related thereto ("non-interested
Trustees"), cast in person at a meeting called for the purpose of voting on
such Plan. Such approval by the Trustees included a determination that in the
exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Series
and shareholders of the Class. The Plan has been approved by a vote of the
holders of a majority of the outstanding voting securities of the Class, as
defined in the Act.
The Fund is a Delaware business trust organized under the laws
of the State of Delaware, is authorized to issue different series and classes
of securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution
Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not
to exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Trustees from time to time.
(b) In addition to the amounts described in paragraph 1(a)
above, the Fund shall pay: (i) to the Distributor for payment to dealers or
others or (ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%)
per annum of the Series' average daily net assets represented by shares of the
Class, as a service fee pursuant to dealer or servicing agreements.
2.(a) The Distributor shall use the monies paid to it
pursuant to paragraph 1(a) above to assist in the distribution and promotion of
shares of the Class. Payments made to the Distributor under the Plan may be
used for, among other things, preparation and
<PAGE> 2
distribution of advertisements, sales literature and prospectuses and reports
used for sales purposes, as well as compensation related to sales and marketing
personnel, and holding special promotions. In addition, such fees may be used
to pay for advancing the commission costs to dealers with respect to the sale
of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above
shall be used to pay dealers or others for, among other things, furnishing
personal services and maintaining shareholder accounts, which services include
confirming that customers have received the Prospectus and Statement of
Additional Information, if applicable; assisting such customers in maintaining
proper records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective
customers in the Class.
3. The Distributor shall report to the Fund at least monthly
on the amount and the use of the monies paid to it under paragraph 1(a) above.
In addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor
and any others receiving fees under the Plan shall furnish the Board of
Trustees of the Fund with such other information as the Board may reasonably
request in connection with the payments made under the Plan and the use thereof
by the Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of
Trustees of the Fund, for their review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the
Distributor shall notify the Fund of the commencement of the Plan (the
"Commencement Date"); thereafter, the Plan shall continue in effect for a
period of more than one year from the Commencement Date only so long as such
continuance is specifically approved at least annually by a vote of the Board
of Trustees of the Fund, and of the non-interested Trustees, cast in person at
a meeting called for the purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a
majority of the non-interested Trustees or by vote of a majority of the
outstanding voting securities of the Class.
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.
7. All material amendments to this Plan shall be approved by
the non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Trustees shall be committed to the
discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "interested person(s)" and
"vote of a majority of the outstanding voting securities," respectively, for
the purposes of this Plan.
<PAGE> 3
This Plan shall take effect on the Commencement Date, as
previously defined.
_______________________, 1997
<PAGE> 1
THE DELAWARE GROUP OF FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
This Multiple Class Plan (the "Plan") has been
adopted by a majority of the Board of Directors of each of the investment
companies listed on Appendix A as may be amended from time to time (each
individually a "Fund," and collectively, the "Funds"), including a majority of
the Directors who are not interested persons of each Fund, pursuant to Rule
18f-3 under the Investment Company Act of 1940, as amended (the "Act"). The
Board of each Fund has determined that the Plan, including the allocation of
expenses, is in the best interests of the Fund as a whole, each series of
shares offered by such Fund (individually and collectively the "Series") where
the Fund offers its shares in multiple series, and each class of shares offered
by the Fund or Series, as relevant. The Plan sets forth the provisions
relating to the establishment of multiple classes of shares for each Fund and,
if relevant, its Series. To the extent that a subject matter set forth in this
Plan is covered by a Fund's Articles of Incorporation or By-Laws, such Articles
of Incorporation or By-Laws will control in the event of any inconsistencies
with descriptions contained in this Plan.
The term "Portfolio," when used in this Plan in the
context of a Fund that offers only a single series of shares, shall be a
reference to the Fund, and when used in the context of a Fund that offers
multiple series of shares, shall be a reference to each series of such Fund.
CLASSES
1. Appendix A to this Plan describes the classes to
be issued by each Portfolio and identifies the names of such classes.
FRONT-END SALES CHARGE
2. Class A shares carry a front-end sales charge as
described in the Funds' relevant prospectuses; and Class B, Class C and
Institutional Class shares are sold without a front-end sales charge.
<PAGE> 2
CONTINGENT DEFERRED SALES CHARGE
3. Class A shares are not subject to a contingent
deferred sales charge ("CDSC"), except as described in the Fund's relevant
prospectus.
4. Class B shares redeemed within six years of their
purchase shall be assessed a CDSC at the following rate: (i) 4.00% if shares
are redeemed within two years of purchase; (ii) 3.00% if shares are redeemed
during the third or fourth year following purchase; (iii) 2.00% if shares are
redeemed during the fifth year following purchase; (iv) 1.00% if shares are
redeemed during the sixth year following purchase; and (vi) 0% thereafter.
5. Class C shares redeemed within twelve months of
their purchase shall be assessed a CDSC at the rate of 1.00% of the lesser of
(i) the net asset value at the time of redemption, or (ii) the original net
asset value at the time of purchase.
6. The CDSC for each class is waived in certain
circumstances, as described in the Funds' relevant prospectuses. Shares that
are subject to a CDSC age one month at the end of the month in which the shares
were purchased, regardless of the specific date during the month that the
shares were purchased.
7. Institutional Class shares are not subject to a
CDSC.
RULE 12b-1 PLANS
8. In accordance with the Rule 12b-1 Plan for the
Class A shares of each Portfolio, the Fund shall pay to Delaware Distributors,
L.P. (the "Distributor") a monthly fee not to exceed 0.30% per annum of such
Portfolio's average daily net assets represented by Class A shares as may be
determined by the Fund's Board of Directors from time to time. The monthly fee
shall be reduced by the aggregate sums paid by or on behalf of such Portfolio
to persons other than broker-dealers (the "Service Providers") pursuant to
servicing agreements.
9. In accordance with the Rule 12b-1 Plan for the
Class B shares of each Portfolio, the Fund shall pay to the Distributor a
monthly fee not to exceed 0.75% per annum of such Portfolio's average daily net
assets represented by Class B shares as may be determined by the Fund's Board
of Directors from time to time. In addition to these amounts, the Fund shall
pay (i) to the Distributor for payment to dealers or others, or (ii) directly
to others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class B
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<PAGE> 3
shares, as a service fee pursuant to dealer or servicing agreements.
10. In accordance with the Rule 12b-1 Plan for the
Class C shares of each Portfolio, the Fund shall pay to the Distributor a
monthly fee not to exceed 0.75% per annum of such Portfolio's average daily net
assets represented by Class C shares as may be determined by the Fund's Board
of Directors from time to time. In addition to these amounts, the Fund shall
pay (i) to the Distributor for payment to dealers or others, or (ii) directly
to others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class C shares, as a service fee pursuant to
dealer or servicing agreements.
11. A Rule 12b-1 Plan has not been adopted for the
Institutional Class shares of any Portfolio.
ALLOCATION OF EXPENSES
12. The Fund shall allocate to each class of shares
of a Portfolio any fees and expenses incurred by the Fund in connection with
the distribution or servicing of such class of shares under a Rule 12b-1 Plan,
if any, adopted for such class. In addition, the Fund reserves the right,
subject to approval by the Fund's Board of Directors, to allocate fees and
expenses of the following nature to a particular class of shares of a Portfolio
(to the extent that such fees and expenses actually vary among each class of
shares or vary by types of services provided to each class of shares of the
Portfolio):
(i) transfer agency and other recordkeeping
costs;
(ii) Securities and Exchange Commission and blue
sky registration or qualification fees;
(iii) printing and postage expenses related to
printing and distributing class specific
materials, such as shareholder reports,
prospectuses and proxies to current
shareholders of a particular class or to
regulatory authorities with respect to such
class of shares;
(iv) audit or accounting fees or expenses relating
solely to such class;
(v) the expenses of administrative personnel and
services as required to support the
shareholders of such class;
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<PAGE> 4
(vi) litigation or other legal expenses relating
solely to such class of shares;
(vii) Directors' fees and expenses incurred as a
result of issues relating solely to such
class of shares; and
(viii) other expenses subsequently identified and
determined to be properly allocated to such
class of shares.
13. Except for any expenses that are allocated to a
particular class as described in paragraph 11 above, all expenses incurred by a
Portfolio will be allocated to each class of shares of such Portfolio on the
basis of the net asset value of each such class in relation to the net asset
value of the Portfolio.
ALLOCATION OF INCOME AND GAINS
14. Income and realized and unrealized capital gains
and losses of a Portfolio will be allocated to each class of shares of such
Portfolio on the basis of the net asset value of each such class in relation to
the net asset value of the Portfolio.
CONVERSIONS
15. (a) Except for shares acquired through a
reinvestment of dividends or distributions, Class B shares held for eight years
after purchase are eligible for automatic conversion into Class A shares of the
same Portfolio in accordance with the terms described in the relevant
prospectus. Class B shares acquired through a reinvestment of dividends or
distributions will convert into Class A shares of the same Portfolio pro rata
with the Class B shares that were not acquired through the reinvestment of
dividends and distributions.
(b) The automatic conversion feature of
Class B shares shall be suspended at any time that the Board of Directors of
the Fund determines that there is not available a reasonably satisfactory
opinion of counsel to the effect that (i) the assessment of the higher fee
under the Fund's Rule 12b-1 Plan for Class B does not result in the Fund's
dividends or distributions constituting a preferential dividend under the
Internal Revenue Code of 1986, as amended, and (ii) the conversion of Class B
shares into Class A shares does not constitute a taxable event under federal
income tax law. In addition, the Board of Directors of a Fund may suspend the
automatic conversion feature by determining that any other condition to
conversion set forth in the relevant prospectus, as amended from time to time,
is not satisfied.
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<PAGE> 5
(c) The Board of Directors of a Fund may
also suspend the automatic conversion of Class B shares if it determines that
suspension is appropriate to comply with the requirements of the Act, or any
rule or regulation issued thereunder, relating to voting by Class B
shareholders on the Fund's Rule 12b-1 Plan for Class A or, in the alternative,
the Board of Directors may provide Class B shareholders with alternative
conversion or exchange rights.
16. Class A, Class C and Institutional Class shares
do not have a conversion feature.
EXCHANGES
17. Exchanges are permitted between Class A Shares
and Institutional Class Shares of a Portfolio or of any other Portfolio in the
Delaware Group funds; Class B shares of a Portfolio may only be exchanged for
Class B shares of any other Portfolio in the Delaware Group; Class C shares of
a Portfolio may only be exchanged for Class C shares of any other Portfolio in
the Delaware Group. All exchanges are subject to the eligibility and minimum
purchase requirements set forth in the Funds' prospectuses. Exchanges cannot
be made between open-end and closed-end funds within the Delaware Group.
18. Each class will vote separately with respect to
the Rule 12b-1 Plan related to that class; provided, however, that Class B
shares of a Portfolio may vote on any proposal to materially increase the fees
to be paid by the Fund under the Rule 12b-1 Plan for the Class A shares of the
same Portfolio.
19. On an ongoing basis, the Directors, pursuant to
their fiduciary responsibilities under the Act and otherwise, will monitor the
Portfolio for the existence of any material conflicts between the interests of
all the classes of shares offered by such Portfolio. The Directors, including
a majority of the Directors who are not interested persons of the Fund, shall
take such action as is reasonably necessary to eliminate any such conflict that
may develop. The Manager and the Distributor shall be responsible for alerting
the Board to any material conflicts that arise.
20. As described more fully in the Funds' relevant
prospectuses, broker-dealers that sell shares of a Portfolio will be
compensated differently depending on which class of shares the investor
selects.
21. Each Fund reserves the right to increase,
decrease or waive the CDSC imposed on any existing or future class of shares of
a Portfolio within the ranges permissible under applicable rules and
regulations of the Securities and Exchange
-5-
<PAGE> 6
Commission (the "SEC") and the rules of the National Association of Securities
Dealers, Inc. (the "NASD"), as such rules may be amended or adopted from time
to time. Each Fund may in the future alter the terms of the existing classes
of such Portfolio or create new classes in compliance with applicable rules and
regulations of the SEC and the NASD.
22. All material amendments to this Plan must be
approved by a majority of the Directors of each Fund affected by such
amendments, including a majority of the Directors who are not interested
persons of the Fund.
Effective as of September 18, 1997
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<PAGE> 7
APPENDIX A
LIST OF FUNDS AND THEIR CLASSES
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 24, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
<PAGE> 8
Quantum Fund (Added February 24, 1997)
Quantum Fund A Class
Quantum Fund B Class
Quantum Fund C Class
Quantum Fund Institutional Class
3. Delaware Group Equity Funds III, Inc.
Trend Fund
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
4. Delaware Group Equity Funds V, Inc.
Value Fund
Value Fund A Class
Value Fund B Class
Value Fund C Class
Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
5. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
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<PAGE> 9
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
International Small Cap Series (Added July 21, 1997)
International Small Cap Fund A Class
International Small Cap Fund B Class
International Small Cap Fund C Class
International Small Cap Fund Institutional Class
Global Equity Series (Added July 21, 1997)
Global Equity Fund A Class
Global Equity Fund B Class
Global Equity Fund C Class
Global Equity Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
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<PAGE> 1
APPENDIX A
(AS REVISED _____________)
LIST OF FUNDS AND THEIR CLASSES
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds III, Inc. (Formerly Trend)
Trend Fund
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
3. Delaware Group Equity Funds V, Inc.
Value Fund
Value Fund A Class
Value Fund B Class
Value Fund C Class
Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
<PAGE> 2
4. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
5. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 24, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
Quantum Fund (Added February 24, 1997)
Quantum Fund A Class
Quantum Fund B Class
Quantum Fund C Class
Quantum Fund Institutional Class
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
<PAGE> 3
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
8. Delaware Pooled Trust, Inc.
The Real Estate Investment Trust Portfolio (added
October 14, 1997)
REIT Fund A Class
REIT Fund B Class
REIT Fund C Class
REIT Fund Institutional Class
<PAGE> 4
9. Delaware Group Foundation Funds
Income Portfolio
Income Fund A Class
Income Fund B Class
Income Fund C Class
Income Fund Institutional Class
Balanced Portfolio
Balanced Fund A Class
Balanced Fund B Class
Balanced Fund C Class
Balanced Fund Institutional Class
Growth Portfolio
Growth Fund A Class
Growth Fund B Class
Growth Fund C Class
Growth Fund Institutional Class
