DELAWARE GROUP FOUNDATION FUNDS, 485BPOS, 1998-11-30

DELAWARE GROUP FOUNDATION FUNDS
485BPOS, 1998-11-30

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
File No. 333-38801
File No. 811-8457

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 4 [X]
---
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 5
---

DELAWARE GROUP FOUNDATION FUNDS
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------

George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- ------------------------------------------------------------------------------
(Name and Address of Agent for Service)

Approximate Date of Public Offering: November 30, 1998
-----------------

It is proposed that this filing will become effective:

_____ immediately upon filing pursuant to paragraph (b)

__x__ on November 30, 1998 pursuant to paragraph (b)

_____ 60 days after filing pursuant to paragraph (a)(1)

_____ on (date) pursuant to paragraph (a)(1)

_____ 75 days after filing pursuant to paragraph (a)(2)

_____ on (date) pursuant to paragraph (a)(2) of Rule 485

<PAGE>

Title of Securities Being Registered
------------------------------------
The securities being registered are a number of individual classes of separate
series of shares of beneficial interest of Delaware Group Foundation Funds, a
Delaware business trust, as follows:

Balanced Portfolio
------------------
Balanced Portfolio A Class
Balanced Portfolio B Class
Balanced Portfolio C Class
Balanced Portfolio Institutional Class

Growth Portfolio
----------------
Growth Portfolio A Class
Growth Portfolio B Class
Growth Portfolio C Class
Growth Portfolio Institutional Class

Income Portfolio
----------------
Income Portfolio A Class
Income Portfolio B Class
Income Portfolio C Class
Income Portfolio Institutional Class

<PAGE>

--- C O N T E N T S ---

This Post-Effective Amendment No. 4 to Registration File No. 333-38801
includes the following:

1. Facing Page

2. Contents Page

3. Cross-Reference Sheets

4. Part A - Prospectuses

5. Part B - Statement of Additional Information

6. Part C - Other Information

7. Signatures

<PAGE>

CROSS-REFERENCE SHEET*

PART A
<TABLE>
<CAPTION>
Item No. Description Location in Prospectuses
- -------- ----------- ------------------------
<S> <C> <C> <C>
A Class/ Institutional
B Class/ Class
C Class

1 Cover Page................................... Cover Cover

2 Synopsis..................................... Synopsis; Synopsis;
Summary Summary
of Expenses of Expenses

3 Condensed Financial Information.............. Financial Financial
Highlights Highlights

4 General Description of Registrant ........... Investment Investment
Objective and Objective and
Policies; Classes of Policies; Classes of
Shares; Other Shares; Other
Investment Investment
Policies and Risk Policies and Risk
Considerations Considerations

5 Management of the Fund ...................... Management of Management of
the Portfolios the Portfolios

6 Capital Stock and Other Securities .......... The Delaware Dividends and
Difference; Dividends Distributions;
and Distributions; Taxes; Shares
Taxes; Shares (under (under Management
Management of the of the Portfolios)
Portfolios)

7 Purchase of Securities Being Offered......... Cover; Cover;
Classes of Shares; Classes of Shares;
How to Buy How to Buy
Shares; Calculation Shares;
of Offering Price Calculation of
and Net Asset Value Net Asset Value;
Per Share; Per Share;
Management of Management of
the Portfolios the Portfolios

</TABLE>

<PAGE>

CROSS-REFERENCE SHEET*

PART A
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
8 Redemption or Repurchase..................... Classes of Shares; Classes of Shares;
How to Buy How to Buy
Shares; Redemption Shares; Redemption
and Exchange and Exchange

9 Legal Proceedings............................ None None

</TABLE>

* This filing relates to the Registrant's A Class Shares, B Class Shares and C
Class Shares of the Balanced Portfolio, Growth Portfolio and Income Portfolio
which are described in one prospectus and the Institutional Classes of the
Balanced Portfolio, Growth Portfolio and Income Portfolio which are described in
a separate prospectus. The twelve Classes have a common Statement of Additional
Information and Part C.

<PAGE>

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 Policies, Portfolio
Techniques and Risk Considerations

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 .................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 Net
Asset Value; Redemption and
Repurchase

20 Tax Status..............................................Accounting and Tax Issues; Taxes

21 Underwriters ...........................................Purchasing Shares

22 Calculation of Performance Data.........................Performance Information

23 Financial Statements....................................Financial Statements

</TABLE>

<PAGE>

CROSS REFERENCE SHEET

PART C

Item No. Description Location 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>

Foundation Funds Prospectus
Income, Balanced And Growth Portfolios November 30, 1998
A Class/B Class/C Class

------------------------------------------------------------

1818 Market Street, Philadelphia, PA 19103

For Prospectus and Performance:
Nationwide 800-523-1918

Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918

Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500

Representatives of Financial Institutions:
Nationwide 800-659-2265

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 Investments Family 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, the Portfolios may, to the extent
consistent with their respective investment objectives, invest in the same
securities and employ the same investment strategies as any of the Underlying
Funds. 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.

-1-

<PAGE>

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 November 30, 1998, 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 (the "SEC"). 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 800-523-1918. The Portfolios' financial statements
appear in the Trust's Annual Report, which will accompany any response to
requests for Part B. The SEC also maintains a Web site (http://www.sec.gov)
that contains Part B, material we incorporated by reference, and other
information regarding registrants that electronically file with the SEC.

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.

-2-

<PAGE>

Table of Contents

COVER PAGE..................................................................
SYNOPSIS....................................................................
SUMMARY OF EXPENSES.........................................................
FINANCIAL HIGHLIGHTS........................................................
INVESTMENT OBJECTIVES AND POLICIES
Suitability................................................................
Investment Strategy........................................................
THE DELAWARE DIFFERENCE
Plans and Services.........................................................
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.........................................................

-3-

<PAGE>

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. 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 and Risk Considerations.

Risk Factors and Special Considerations
Each Portfolio invests in Underlying Funds in the Delaware Investments
Family of Mutual Funds, and may invest in the same securities and employ the
same investment strategies as any of the Underlying Funds, 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 Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to each Portfolio, subject to the supervision and direction
of the Trust'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 Investments family. 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 Investments family, 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
Investments family, 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 5.75% of the offering price. The sales charge is reduced on certain
transactions of at least $50,000 but under $1,000,000. For purchases of
$1,000,000 or more, the front-end sales charge is eliminated; if a dealer's
commission is paid in connection with those sales, a contingent deferred sales
charge ("Limited CDSC") of 1% will be imposed if shares are redeemed during the
first year after the purchase and 0.50% will be imposed if shares are redeemed
during the second year after the purchase. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange. Class A Shares are also 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) 5% if shares are redeemed during the first year after
purchase; (ii) 4% if shares are redeemed during the second year after purchase;
(iii) 3% if shares are redeemed during the third or fourth year following
purchase; (iv) 2% if shares are redeemed during the fifth year following
purchase; (v) 1% if shares are redeemed during the sixth year following
purchase; and (vi) 0% thereafter. 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.

-4-

<PAGE>

The price of each 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.

See Classes of Shares and Distribution (12b-1) and Service under
Management of the Portfolios.

Purchase Amounts
The minimum initial investment for any Class generally 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 the 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 $50,000 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. 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 next 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 additional charges for redemptions
or exchanges of Class B Shares 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 24,
1997, is an open-end management investment company. Each Portfolio is
nondiversified as defined by the Investment Company Act of 1940 (the "1940
Act"). See Shares under Management of the Portfolios.

-5-

<PAGE>

Summary of Expenses

A general comparison of the sales arrangements and other expenses
applicable to each Portfolio's Class A Shares, Class B Shares and Class C
Shares follows:

<TABLE>
<CAPTION>
Income Portfolio
Balanced Portfolio
Growth Portfolio
---------------------------------------
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- ---------------------------------------------------------------------- --------- ------------ ------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) .............................................................. 5.75% 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(1) 5.00%(2) 1.00%(3)

Redemption Fees(4) ................................................... None None None
</TABLE>

(1) Class A purchases of $1,000,000 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 Limited
CDSC of 1% will be imposed on certain redemptions made during the first year
after the purchase and 0.50% will be imposed on certain redemptions made
during the second year after the purchase. Additional Class A purchase
options involving the imposition of a CDSC may be permitted as described in
the Prospectus from time to time. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange under Classes of Shares.

(2) Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed
during the first year after purchase; (ii) 4% if shares are redeemed during
the second year after purchase; (iii) 3% if shares are redeemed during the
third or fourth year following purchase; (iv) 2% if shares are redeemed
during the fifth year following purchase; (v) 1% if shares are redeemed
during the sixth year following purchase; and (vi) 0% thereafter. See
Deferred Sales Charge Alternative -- Class B Shares under Classes of Shares.

(3) Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. See Level Sales Charge Alternative -- Class C Shares
under Classes of Shares.

(4) First Union National Bank currently charges $7.50 per redemption for
redemptions payable by wire.

-6-

<PAGE>

<TABLE>

<CAPTION>
Income Portfolio
Balanced Portfolio
Growth Portfolio
----------------------------------
Annual Operating Expenese
(as a percentage of average daily net assets Class A Class B Class C
after voluntary waivers and payments Shares Shares Shares
- --------------------------------------------------------------- --------- --------- ----------
<S> <C> <C> <C>
Management Fees (after waivers)(5) ............................ 0.00% 0.00% 0.00%

12b-1 Plan Expenses (including service fees)(6) ............... 0.25% 1.00% 1.00%

Other Operating Expenses (after payments)(7) .................. 0.55% 0.55% 0.55%
---- ---- ----
Total Operating Expenses (after waivers and payments) ......... 0.80% 1.55% 1.55%
==== ==== ====
</TABLE>

(5) The Manager has elected voluntarily to waive that portion, if any, of the
annual management fees ("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 0.55%
(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, 1999. 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 for each Class of the
Portfolios would be as follows, reflecting Asset Allocation Fees of 0.25%:

Class A Class B Class C
------- ------- -------
Income Portfolio 32.95% 33.70% 33.70%
Balanced Portfolio 12.87% 13.62% 13.62%
Growth Portfolio 14.36% 15.11% 15.11%

(6) 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.

(7) "Other Operating Expenses" are based on estimated amounts for the current
fiscal year. In the absence of voluntary expense payments, "Other Operating
Expenses" would be as follows:

Class A Class B Class C
------- ------- -------
Income Portfolio 32.45% 32.45% 32.45%
Balanced Portfolio 12.37% 12.37% 12.37%
Growth Portfolio 13.86% 13.86% 13.86%

-7-

<PAGE>

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. These fees and expenses, which are embedded in the prices
of the Underlying Fund shares purchased by the Portfolios, are in addition to
the fees and expenses of the Portfolios set forth above.

The following table sets forth the average aggregate total operating
expenses of the Underlying Funds:

Average Aggregate Total Fund Operating Expenses of Underlying Funds

-----------------------------------
Income Portfolio ............ 0.90%
-----------------------------------
Balanced Portfolio .......... 1.09%
-----------------------------------
Growth Portfolio ............ 1.16%
-----------------------------------

These figures are estimates and are based on static asset allocation
assumptions. Actual expenses will differ depending on the actual asset
allocations among the Underlying Funds in effect from time to time. These
figures are derived from the total operating expenses for the most recent
fiscal year for each of the Institutional Class shares of the Underlying Funds
set forth in the table below. Also set forth below is the investment adviser,
sub-adviser (where applicable) and the management fee (as an annual percentage
of net assets before fee waivers) for each of the Institutional Class shares of
the Underlying Funds.

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<PAGE>

Underlying Fund Information
<TABLE>

<CAPTION>
Management Total Expense
Underlying Fund Adviser Sub-Adviser** Fee Ratio***
- ------------------------------ ------------------------- ------------------- ------------ --------------
<S> <C> <C> <C> <C>
Aggressive Growth Manager 1.00% 1.50%(7)

Blue Chip Manager Vantage* 0.65%(1) 1.20%

Decatur Total Return Manager 0.57%(2) 0.83%

DelCap Manager 0.75% 1.10%

Devon Manager 0.60%(3) 1.12%(7)

Small Cap Value Manager 0.75% 1.09%

Real Estate Investment Trust Manager Lincoln National* 0.75% 0.86%(7)

Trend Manager 0.75% 1.09%

U.S. Growth Manager Lynch & Mayer* 0.70% 1.14%(7)

Emerging Markets Delaware International* 1.25% 1.70%(7)

International Equity Delaware International* 0.75% 1.40%(7)

International Small Cap Delaware International* 1.25% 1.25%(7)

New Pacific Manager AIB Govett 0.80% 1.50%

Delchester Manager 0.59%(4) 0.81%

High-Yield Opportunities Manager 0.65%(5) 0.84%(7)

Global Bond Delaware International* 0.75% 0.95%(7)

Limited-Term Government Manager 0.50% 0.83%

U.S. Government Manager 0.60% 0.90%

Delaware Cash Reserve Manager 0.49%(6) 0.88%

</TABLE>

* Affiliate of the Manager.

-9-

<PAGE>

** Fees payable by the Manager to a Sub-Adviser have no effect on the
management fees payable by an Underlying Fund.

*** Includes management and other fees.

(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.

(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 High-Yield Opportunities 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.

(6) 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.

(7) Reflects voluntary waivers and payments of fees by the investment manager.

-10-

<PAGE>

Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However, the
annual maintenance fee 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 Asset Planner in Part B.

For expense information about the Portfolios' Institutional Classes, see
the separate prospectus relating to those classes.

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 and payment of certain expenses by the Manager as
discussed in this Prospectus.

INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
- ----------------
Assuming No
Assuming Redemption Redemption
-------------------- -------------------
1 Year 3 Years 1 Year 3 Years
-------- --------- -------- --------
Class A Shares(1) ....... $65 $82 $65 $82
Class B Shares(2) ....... $66 $79 $16 $49
Class C Shares .......... $26 $49 $16 $49

(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, or other CDSC,
which has not been reflected in this calculation, may be imposed on certain
redemptions made within two years after a 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 will
be automatically converted into Class A Shares. The example above does not
assume conversion of Class B Shares since it reflects figures only for one
and three years. 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 investors in understanding
the various costs and expenses that they will bear directly or indirectly in
owning shares of the Portfolios.

-11-

<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights

The following financial highlights are derived from the financial statements of
Balanced Portfolio, Growth Portfolio and Income Portfolio of Delaware Group
Foundation Funds and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial statements,
related notes, and the report of Ernst & Young LLP, all of which are
incorporated by reference into Part B. Further information about the
Portfolios' performance is contained in their Annual Report to shareholders. A
copy of the Portfolios' Annual Report (including the report of Ernst & Young
LLP) may be obtained from Delaware Group Foundation Funds upon request at no
charge.
- --------------------------------------------------------------------------------

-12-

<PAGE>

<TABLE>
<CAPTION>
Balanced Portfolio Balanced Portfolio Balanced Portfolio
Class A Shares Class B Shares Class C Shares
-------------------- -------------------- ------------------
Period Period Period
12/31/97(1) 12/31/97(1) 12/31/97(1)
through through through
9/30/98 9/30/98 9/30/98
------------ ----------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .............................. $ 8.500 $ 8.500 $ 8.500

Income (Loss) From Investment Operations
Net Investment Income (2) ......................................... 0.153 0.104 0.104
Net Loss on Investments (both realized and unrealized) ............ (0.463) (0.444) (0.434)
---------- --------- ---------
Total From Investment Operations ................................. (0.310) (0.340) (0.330)
---------- --------- ---------
Less Dividends and Distributions
Dividends from Net Investment Income .............................. (0.060) (0.030) (0.030)
Distributions from Net Realized Gain on Investments................ none none none
---------- --------- ---------
Total Dividends and Distributions ................................. (0.060) (0.030) (0.030)
---------- --------- ---------
Net Asset Value, End of Period .................................... $ 8.130 $ 8.130 $ 8.130
========== ========= =========
- ----------------------

Total Return(3) ................................................... (3.68%) (4.02%) (3.90%)

- ----------------------

Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ......................... $ 972 $ 408 $ 694
Ratio of Expenses to Average Daily Net Assets ..................... 0.80% 1.55% 1.55%
Ratio of Expenses to Average Daily Net Assets Prior to Expense
Limitation ....................................................... 12.87% 13.62% 13.62%
Ratio of Net Investment Income to Average Daily Net Assets ........ 2.34% 1.59% 1.59%
Ratio of Net Investment Loss to Average Daily Net Assets
Prior to Expense Limitation ...................................... (9.73%) (10.48%) (10.48%)
Portfolio Turnover Rate ........................................... 73% 73% 73%

</TABLE>
- -------------------------
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized
(2) Per share information was based on the average shares outstanding method.
(3) Total return does not reflect the maximum front-end sales charge that is or
was in effect for Class A Shares. In addition, total return does not reflect
the Limited CDSC that varies from 0.50% -- 1% depending on the holding
period for Class A Shares, applicable to certain redemptions made within two
years after purchase, or the CDSC which varies from 1% -- 5% depending upon
the holding period for Class B Shares and 1% for Class C Shares redeemed
within 12 months from the date of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange and Contingent Deferred Sales Charge --
Class B Shares and Class C Shares under Classes of Shares. Total return
reflects the expense limitations referenced under Summary of Expenses and
Management of the Portfolios.

-13-

<PAGE>

<TABLE>
<CAPTION>
Growth Portfolio Growth Portfolio Growth Portfolio
Class A Shares Class B Shares Class C Shares
-------------------- -------------------- ------------------
Period Period Period
12/31/97(1) 12/31/97(1) 12/31/97(1)
through through through
9/30/98 9/30/98 9/30/98
------------ ----------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .............................. $ 8.500 $ 8.500 $ 8.500

Income (Loss) From Investment Operations
Net Investment Income (2) ......................................... 0.062 0.014 0.013
Net Loss on Investments (both realized and unrealized) ............ (0.392) (0.374) (0.373)
---------- --------- ---------
Total From Investment Operations ................................. (0.330) (0.360) (0.360)
---------- --------- ---------
Less Dividends and Distributions
Dividends from Net Investment Income .............................. none none none
Distributions from Net Realized Gain on Investments................ none none none
---------- --------- ---------
Total Dividends and Distributions ................................. none none none
---------- --------- ---------
Net Asset Value, End of Period .................................... $ 8.170 $ 8.140 $ 8.140
========== ========= =========
- ----------------------

Total Return(3) ................................................... (3.88%) (4.24%) (4.24%)

- ----------------------

Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ......................... $ 547 $ 885 $ 74
Ratio of Expenses to Average Daily Net Assets ..................... 0.80% 1.55% 1.55%
Ratio of Expenses to Average Daily Net Assets Prior to Expense
Limitation ....................................................... 14.36% 15.11% 15.11%
Ratio of Net Investment Income to Average Daily Net Assets ........ 0.96% 0.21% 0.21%
Ratio of Net Investment Loss to Average Daily Net Assets
Prior to Expense Limitation ...................................... (12.60%) (13.35%) (13.35%)
Portfolio Turnover Rate ........................................... 77% 77% 77%

</TABLE>

- -------------------------
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Does not reflect the Limited CDSC that varies from 0.50% -- 1% depending on
the holding period for Class A Shares, applicable to certain redemptions
made within two years after purchase, or the CDSC which varies from 1% -- 5%
depending upon the holding period for Class B Shares and 1% for Class C
Shares redeemed within 12 months from the date of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at
Net Asset Value under Redemption and Exchange and Contingent Deferred Sales
Charge -- Class B Shares and Class C Shares under Classes of Shares. Total
return reflects the expense limitations referenced under Summary of Expenses
and Management of the Portfolios.

-14-

<PAGE>

<TABLE>
<CAPTION>
Income Portfolio Income Portfolio Income Portfolio
Class A Shares Class B Shares Class C Shares
-------------------- -------------------- ------------------
Period Period Period
12/31/97(1) 12/31/97(1) 12/31/97(1)
through through through
9/30/98 9/30/98 9/30/98
------------ ----------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .............................. $ 8.500 $ 8.500 $ 8.500

Income (Loss) From Investment Operations
Net Investment Income (2) ......................................... 0.250 0.201 0.204
Net Loss on Investments (both realized and unrealized) ............ (0.350) (0.331) (0.334)
---------- --------- ---------
Total From Investment Operations .................................. (0.100) (0.130) (0.130)
---------- --------- ---------
Less Dividends and Distributions
Dividends from Net Investment Income .............................. (0.110) (0.080) (0.080)
Distributions from Net Realized Gain on Investments................ none none none
---------- --------- ---------
Total Dividends and Distributions ................................. (0.110) (0.080) (0.080)
---------- --------- ---------
Net Asset Value, End of Period .................................... $ 8.290 $ 8.290 $ 8.290
========== ========= =========
- ----------------------

Total Return(3) ................................................... (1.21%) (1.56%) (1.56%)

- ----------------------

Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ......................... $ 398 $ 26 $ 123
Ratio of Expenses to Average Daily Net Assets ..................... 0.80% 1.55% 1.55%
Ratio of Expenses to Average Daily Net Assets Prior to Expense
Limitation ....................................................... 32.95% 33.70% 33.70%
Ratio of Net Investment Income to Average Daily Net Assets ........ 3.80% 3.05% 3.05%
Ratio of Net Investment Loss to Average Daily Net Assets
Prior to Expense Limitation ...................................... (28.35%) (29.10%) (29.10%)
Portfolio Turnover Rate ........................................... 81% 81% 81%

</TABLE>

-15-

<PAGE>

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. It
seeks to achieve this objective by investing primarily in a mix of fixed-income
and domestic equity securities, including fixed-income and domestic equity
Underlying Funds, although it may invest up to 10% of its assets in
international equity securities, including international 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 and employ the same investment strategies as any of the
Underlying Funds, to the extent consistent with each Portfolio's investment
objective. The Portfolios will invest directly in securities or other
investment instruments for such purposes as avoiding undue disruption of the
activities of the Underlying Funds, hedging of the Portfolios' investment
positions, or making investments in asset classes not available in the
Underlying Funds. While it is anticipated that at most times the Portfolios
will be invested primarily in the Underlying Funds, it is possible, from time
to time, for the Portfolios to be substantially invested directly in
securities. The investment objective of each Portfolio is considered a
"non-fundamental policy," which means that it may 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.

-16-

<PAGE>

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 the Underlying Funds, as well as
invest in the same kinds of securities and employ the same investment
strategies as any of the Underlying Funds, 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, the volatility (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 FUNDS

U.S. Equity International Equity
Aggressive Growth Fund Emerging Markets Fund
Blue Chip Fund International Equity Fund
Decatur Total Return Fund International Small Cap Fund
DelCap Fund New Pacific Fund
Devon Fund
Small Cap Value Fund Fixed-Income
The Real Estate Investment Delchester Fund
Trust Portfolio Global Bond Fund
Trend Fund Limited-Term Government Fund
U.S. Growth Fund U.S. Government Fund
High-Yield Opportunities Fund

Money Market
Delaware Cash Reserve

-17-

<PAGE>

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
- ---------------------------------------------------------------
Income Balanced Growth
Asset Class Portfolio Portfolio Portfolio
- ---------------------- ----------- ----------- ----------
U.S. Equity 20%-50% 35%-65% 45%-75%

International Equity 0%-10% 5%-20% 10%-30%

Fixed-Income 45%-75% 25%-55% 5%-35%

Money Market 0%-35% 0%-35% 0%-35%

A Portfolio will generally at all times be invested in at least four
Underlying Funds, consistent with the table above. A Portfolio may invest up to
100% of its total assets in cash, money market instruments or in Delaware Cash
Reserve 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 (Class A Shares in
the case of Delaware Cash Reserve). 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
(Class A Shares in the case of Delaware Cash Reserve). 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
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, 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. A 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.

-18-

<PAGE>

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 decreases. 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 invested primarily 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, to the extent
consistent with its investment objective, 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. Each Portfolio, to the extent consistent with its investment
objective, 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.

Because the Underlying Funds are separately managed, it is possible that
certain Underlying Funds in which a Portfolio invests may be acquiring
securities at the same time that other Underlying Funds in which that Portfolio
invests are selling the same security. Similarly, it is possible that a
Portfolio may directly acquire a security at the same time that an Underlying
Fund in which it invests is selling the same security, or vice versa. This
practice could result in higher indirect transactions costs for a Portfolio,
and thus adversely effect such Portfolio's returns, than would be the case if a
Portfolio were only investing directly in securities.

Each Portfolio is considered a nondiversified 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 are diversified investment companies. The Portfolios may not
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).

-19-

<PAGE>

The Manager has adopted Asset Allocation Guidelines (the "Guidelines")
which govern the Portfolios' purchases and redemptions of shares of the
Underlying Funds. Pursuant to these Guidelines, if the Manager anticipates that
a Portfolio's allocation transaction will disrupt the investment activities of
an Underlying Fund, the portfolio managers of the relevant Portfolio and
Underlying Fund will confer on steps to minimize adverse effects on both the
Portfolio and the Underlying Fund, such as staggering the timing and amounts of
such allocation transactions. In addition, the Manager will attempt to minimize
the number and size of allocation transactions taking place at any one time
while attempting to avoid losing investment opportunities for a Portfolio. As a
result, the Portfolios may, on occasion, be unable to purchase or redeem shares
of an Underlying Fund as quickly or in such amounts as they otherwise would in
the absence of such Guidelines. Such delays or changes in amounts may decrease
the total return and/or increase the volatility of the Portfolios.

* * *

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.

-20-

<PAGE>

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 are fundamental policies, and there is no assurance that
the Underlying Funds will achieve their respective investment objective. Each
Underlying Fund will constantly strive to achieve its objective 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 objective, 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 prospectus of each Underlying Fund. For a free copy of a
prospectus of any of the Underlying Funds, call 800-523-1918 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 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 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 Aggressive Growth Fund's investments. 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. 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.

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 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 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, 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 Aggressive Growth Fund invests in convertible debt
securities, those 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.

-21-

<PAGE>

At no time will the investments of Aggressive Growth Fund in bank
obligations, including time deposits, exceed 25% of the value of 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 & Poor's 500(R) Composite Stock Price 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. 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.

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 S&P 500, as well as capital gains potential.

-22-

<PAGE>

All available types of appropriate securities are under continuous study.
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. The Fund may also invest up to 20% of its total
assets in foreign securities (which may include ADRs, EDRs and GDRs), although
the Manager has no present intention of doing so. In seeking to obtain its
objective, 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 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. 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. 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. 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, Devon Fund will generally
invest at least 65% of its total assets in dividend paying common stocks.

In selecting stocks for 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 S&P 500 in exchange for anticipated dividend
growth.

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While the Manager believes that Devon Fund's objective may best be
attained by investing in common stocks, 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. 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 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 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 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.

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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 Investors Service, Inc. ("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 "junk bonds" are considered very speculative and may possibly
be in default or have interest payments in arrears.

The Real Estate Investment Trust Portfolio. The investment objective of The
Real Estate Investment Trust Portfolio is to achieve maximum long-term total
return. Capital appreciation is a secondary objective. The Real Estate
Investment Trust Portfolio seeks to achieve its objectives by investing in
securities of companies principally engaged in the real estate industry. Under
normal circumstances, at least 65% of The Real Estate Investment Trust
Portfolio's total assets will be invested in equity securities of real estate
investment trusts ("REITs"). The Real Estate Investment Trust Portfolio will
operate as a nondiversified fund as defined by the 1940 Act.

The Real Estate Investment Trust Portfolio invests in equity securities of
REITs and other real estate industry operating companies ("REOCs"). For
purposes of The Real Estate Investment Trust Portfolio's investments, a REOC is
a company that derives at least 50% of its gross revenues or net profits from
either (1) the ownership, development, construction, financing, management or
sale of commercial, industrial or residential real estate, or (2) products or
services related to the real estate industry, such as building supplies or
mortgage servicing. The Real Estate Investment Trust Portfolio's investments in
equity securities of REITs and REOCs may include, from time to time, sponsored
or unsponsored ADRs actively traded in the United States. Equity securities for
this purpose include common stocks, securities convertible into common stocks
and securities having common stock characteristics, such as rights and warrants
to purchase common stocks. The Real Estate Investment Trust Portfolio may also
purchase preferred stock. The Real Estate Investment Trust Portfolio may invest
in convertible securities and up to 10% of its assets in foreign securities.
The Real Estate Investment Trust Portfolio may also invest in mortgage-backed
securities.

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<PAGE>

such short-term investments. All these 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 be of comparable quality as
determined by the Manager.

Although The Real Estate Investment Trust Portfolio does not invest
directly in real estate, The Real Estate Investment Trust Portfolio does invest
primarily in REITs and may purchase equity securities of REOCs. Thus, because
The Real Estate Investment Trust Portfolio concentrates its investments in the
real estate industry, an investment in The Real Estate Investment Trust
Portfolio may be subject to certain risks associated with direct ownership of
real estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of
mortgage funds; overbuilding; extended vacancies of properties; increases in
competition; property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties resulting
from, environmental problems; casualty for condemnation losses, uninsured
damages from floods, earthquakes or other natural disasters; limitations on and
variations in rents; and changes in interest rates.

The Real Estate Investment Trust Portfolio may invest without limitation
in shares of 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 such as The Real Estate Investment Trust
Portfolio, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements in the Internal Revenue Code of 1986, as
amended (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. By investing in REITs indirectly through The Real Estate
Investment Trust Portfolio, a shareholder bears not only a proportionate share
of the expenses of The Real Estate Investment Trust Portfolio, but also,
indirectly, similar expenses of the REITs.

While The Real Estate Investment Trust Portfolio does not intend to invest
directly in real estate, The Real Estate Investment Trust Portfolio could,
under certain circumstances, own real estate directly as a result of a default
on securities that it owns. In addition, if The Real Estate Investment Trust
Portfolio has rental income or income from the direct disposition of real
property, the receipt of such income may adversely affect The Real Estate
Investment Trust Portfolio's ability to retain its tax status as a regulated
investment company.

The Real Estate Investment Trust Portfolio may also, to a limited extent,
enter into futures contracts on stocks, purchase or sell options on such
futures, engage in certain options transactions on stocks and enter into
closing transactions with respect to those activities. However, these
activities will not be entered into for speculative purposes, but rather to
facilitate the ability quickly to deploy into the stock market The Real Estate
Investment Trust Portfolio's positions in cash, short-term debt securities and
other money market instruments, at times when The Real Estate Investment Trust
Portfolio's assets are not fully invested in equity securities. Such positions
will generally be eliminated when it becomes possible to invest in securities
that are appropriate for The Real Estate Investment Trust Portfolio.

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In connection with The Real Estate Investment Trust Portfolio's ability to
invest up to 10% of its total assets in the securities of foreign issuers,
currency considerations may present risks if The Real Estate Investment Trust
Portfolio holds international securities. Currency considerations carry a
special risk for a portfolio of international securities. In this regard, The
Real Estate Investment Trust Portfolio may actively carry on hedging
activities, and may invest in forward foreign currency exchange contracts to
hedge currency risks associated with the purchase of individual securities
denominated in a particular currency.

The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with The Real Estate Investment Trust Portfolio's investment
objective.

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.

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. 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.

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<PAGE>

unrated securities ("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. 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
Markets Fund's assets will be invested in equity securities of issuers
organized in, having a majority of their assets in, or deriving a majority of
their operating income from 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 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, Botswana, Brazil, Chile, China, Colombia, Czech Republic, Estonia,
Ghana, Greece, Hong Kong, Hungary, India, Indonesia, Ivory Coast, Jamaica,
Jordan, Kenya, Korea, Latvia, Lithuania, Malaysia, Mauritius, Mexico, Morocco,
Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal, Russia, Slovenia,
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.

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<PAGE>

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.

Emerging Markets Fund 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 ("junk bonds")
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. Emerging Markets Fund may also invest in Brady Bonds and
zero-coupon securities.

International Equity Fund. The investment objective of 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 in, having a majority of their assets in, or deriving a majority of
their operating income from 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") or, after December 31, 1998, the Euro.
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

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of goods and services overseas as in the United States. International Equity
Fund may also invest in sponsored or unsponsored ADRs, EDRs or GDRs.

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. In certain countries, investments
by an investment company may only be made by purchasing shares of 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). 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. 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
will generally be $1.5 billion or less (at the time of purchase). 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") or, after December 31, 1998, the Euro. International Small Cap Fund is
managed by Delaware International.

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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 Small to Medium-Sized Companies under Other Investment
Policies and Risk Considerations.

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. In certain countries, investments by an
investment company may only be made by purchasing shares of 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 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. International Small Cap Fund may also invest in Brady Bonds. See High
Yield, High Risk Securities under Other Investment Policies and Risk
Considerations and Risk Factors under Investment Objectives and Policies.

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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. AIB Govett, Inc. (formerly known as John Govett &
Company Limited) 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, China, Hong Kong, India,
Indonesia, Japan, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Sri Lanka, Taiwan and Thailand.

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

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(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.

High-Yield Opportunities Fund. The objective of High-Yield Opportunities Fund
is to seek total return and, as a secondary objective, high current income.
High-Yield Opportunities Fund seeks to achieve its objective by investing
primarily in corporate bonds rated BB or lower by S&P or Ba or lower by
Moody's, or similarly rated by another nationally-recognized statistical rating
organization or, if unrated (which may be more speculative in nature than rated
bonds), judged to be of comparable quality by the Manager.

High-Yield Opportunities Fund will invest at least 65% of its assets at
the time of purchase in corporate bonds that may be rated BB or lower by S&P or
Ba or lower by Moody's, or similarly rated by another nationally-recognized
statistical rating organization, or if unrated (which may be more speculative
in nature than rated bonds), judged to be of comparable quality by the Manger.
High-Yield Opportunities Fund generally will not purchase corporate bonds
which, at the time of purchase, are rated lower than CCC by S&P or Caa by
Moody's. See Appendix A to this Prospectus for more rating information. If a
corporate bond held by High-Yield Opportunities Fund drops below these levels,
including a security that goes into default, High-Yield Opportunities Fund will
commence with an orderly sale of the security in a manner devised to minimize
any adverse affect on High-Yield Opportunities Fund. If a sale of the security
is not practicable for any reason, High-Yield Opportunities Fund will pursue
other available measures reasonably anticipated by the Manager to facilitate
repayment of the bond.

High-Yield Opportunities Fund may also invest in securities of, or
guaranteed by, the U.S. and foreign governments, their agencies or
instrumentalities and commercial paper of companies having, at the time of
purchase, an issue of outstanding debt securities rated as described above or
commercial paper rated A-1 or A-2 by S&P or rated P-1 or P-2 by Moody's or, if
unrated, judged to be of comparable quality by the Manager.

High-Yield Opportunities Fund may acquire zero-coupon bonds and, to a
lesser extent, pay-in-kind (PIK) bonds. High-Yield Opportunities Fund may also
invest in other types of income-producing securities, including common stocks
and preferred stocks, some of which may have convertible features or attached
warrants and which may be speculative.

High-Yield Opportunities Fund may purchase privately-placed debt and other
securities the resale of which is restricted under applicable securities laws.
Such securities may be less liquid than securities that are not subject to
resale restrictions. High-Yield Opportunities Fund will not purchase illiquid
assets, if more than 15% of its net assets would consist of such illiquid
securities.

High-Yield Opportunities Fund may invest up to 15% of its total assets in
securities of issuers domiciled in foreign countries.

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High-Yield Opportunities Fund 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 given then prevailing market conditions or pending
investment in other types of securities. All these 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.

Global Bond Fund. The investment objective of 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 it
is a global fund, under normal circumstances, at least 65% of Global Bond
Fund's 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.
However, Global Bond Fund may also invest in securities of issuers in emerging
markets countries, including Brady Bonds, which tend to be of lower quality and
more speculative than securities of developed country issuers. Such securities
may be rated lower than BBB by S&P or Baa by Moody's, or if unrated, are
considered by the Manager to be of equivalent quality. Global Bond Fund 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 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

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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, 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 ADRs, EDRs or GDRs. 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, Japan, Australia, Hong Kong and Singapore/Malaysia, as well as
Indonesia, Korea, the Philippines, South Africa, Taiwan and Thailand. In
certain countries, investments by an investment company may only be made by
purchasing shares of 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, 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 ("Rule 144A Securities") under the
Securities Act of 1933 (the "1933 Act"). 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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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-backed 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 15 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; 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.

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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 102% 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 Fund 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.

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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 102%
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 Fund invests primarily in
money market instruments.

Delaware Cash Reserve. As a money market fund, Delaware Cash Reserve's
investment objective is to seek to provide maximum current income, while
preserving principal and maintaining liquidity, by investing its assets in a
diversified portfolio of money market securities and managing the portfolio to
maintain a constant net asset value of $1.00 per share. While Delaware Cash
Reserve 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.

Delaware Cash Reserve limits its investments to those which its 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.

Delaware Cash Reserve'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, at
the time of purchase, such a security or, as relevant, its issuer, is 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. Delaware Cash Reserve will not invest more than 5% of
its total assets in securities rated in the second highest category by a rating
organization. Appendix A describes the ratings of S&P and Moody's.

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Delaware Cash Reserve 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. Delaware Cash Reserve 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.

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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 funds in Delaware
Investments.

SHAREHOLDER PHONE DIRECTORY

Shareholder Service Center and Investor Information Center
800-523-1918
Information on Existing Regular Investment Accounts and Retirement Plan
Accounts; Wire Investments; Wire Liquidations; Telephone Liquidations and
Telephone Exchanges Portfolio Information; Literature; Price; Yield and
Performance Figures

Delaphone
800-362-FUND
(800-362-3863)

Performance Information
You can call the Investor Information Center during business hours 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 Delaware Investments' Shareholder
Service Center. The representatives can answer any questions about your
account, the Portfolios, various service features and other funds in the
Delaware Investments family.

Automated Shareholder Services
You can purchase, redeem or exchange shares through Delaphone, Delaware
Investments' automated telephone system, or through Delaware Investments' Web
site, www.delawarefunds.com. For more information about how to sign up for these
services, call the Shareholder Service Center.

Dividend Payments
Dividends, capital gains and other distributions, if any, 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 fund in the Delaware Investments family 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.

Retirement Planning
An investment in the Portfolios may be a suitable investment option for
tax-deferred retirement plans. Delaware Investments offers a full spectrum of
qualified and non-qualified retirement plans, including the popular 401(k)
deferred compensation plan, IRA, and the new Roth IRA. Please call Delaware
Investments at 800-523-1918 for more information.

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MoneyLine(SM) Services
Delaware Investments offers the following services for fast and convenient
transfer of funds between your personal bank account and your 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 MoneyLineSM 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.

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.

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.

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 Investments family. See Classes of Shares.

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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 shares of funds in the Delaware Investments family 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 the other mutual funds in the Delaware Investments
family, 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 Investments family.
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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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 set at
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,
Class B Shares will automatically be converted into Class A Shares and,
thereafter, for the remainder of the life of the investment, the annual 12b-1
Plan fee of up to 0.30% for Class A Shares (currently set at 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 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

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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 duration of the
annual 12b-1 Plan expenses to which each of the Classes is subject and the
desirability of an automatic conversion feature, which is available only for
Class B Shares.

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 Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and 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 Shares, Class B Shares 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, if any, paid on Class A Shares, Class B Shares and Class C
Shares 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 5.75%. See Calculation of Offering Price and
Net Asset Value Per Share.

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<PAGE>

Purchases of $50,000 or more carry a reduced front-end sales charge as
shown in the following table.

Class A Sales Charges
- -----------------------------------------------------------------------------------------------------
Dealer's
Commission(3)
Front-End Sales Charge as % of as % of
Offering Offering
Amount of Purchase Price Amount Invested(2) Price
- -------------------------------- ---------- -------------------------------------- ------------
Income Balanced Growth
Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Less than $50,000 5.75% 6.15% 6.15% 6.12% 5.00%
$50,000 but under $100,000 4.75 4.95 5.04 5.02 4.00
$100,000 but under $250,000 3.75 3.86 3.94 3.92 3.00
$250,000 but under $500,000 2.50 2.53 2.58 2.57 2.00
$500,000 but under $1,000,000(1) 2.00 2.05 2.09 2.08 1.60
- -----------------------------------------------------------------------------------------------------

</TABLE>

(1) There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a Limited CDSC
of 1% may apply upon redemption of such shares made during the first year
after the purchase and 0.50% may apply upon redemption of such shares made
during the second year after the purchase

(2) Based upon the net asset value per share of the respective Class A Shares as
of the end of the most recent fiscal year.

(3) 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 Investments products and
services and who increase sales of funds in the Delaware Investments family 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 1933 Act.
- --------------------------------------------------------------------------------

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<PAGE>

Beginning July 1, 1998, 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:

Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
- -------------------------------------- --------------------
Up to $5 million 1.00%
Next $20 million up to $25 million 0.50
Amount over $25 million 0.25

Such Class A Shares are subject to a Limited CDSC of 1% if shares are
redeemed during the first year after the purchase and 0.50% if shares are
redeemed during the second year after the purchase.

For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other funds in the Delaware
Investments family 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 funds in the Delaware Investments family 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 Investments family, except as 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
Investments fund holdings. 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 Investments 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 fund in the Delaware Investments
family 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.

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<PAGE>

This privilege 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.

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.

Allied Plans
Class A Shares are available for purchase by participants in certain
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 Investments funds ("eligible Delaware Investments fund
shares"), as well as shares of designated classes of non-Delaware Investments
funds ("eligible non-Delaware Investments 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 Investments and eligible non-Delaware Investments
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 Investments fund shares.

Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible
fund shares, both Delaware Investments and non-Delaware Investments, which were
not subject to a front end sales charge, will be subject to the applicable
sales charge if exchanged for eligible Delaware Investments fund shares to
which a sales charge applies. No sales 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
Investments 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 Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.

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 Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments 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>

Buying Class A Shares at Net Asset Value
Class A Shares of a Portfolio may be purchased at net asset value under
the Delaware Investments 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 Investments family,
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 funds in the
Delaware Investments family. 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. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.

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 funds in the Delaware
Investments family and in any stable value product available through Delaware
Investments; 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 fund in the Delaware Investments family and such employer has properly
represented to Retirement Financial Services, Inc. in writing that it has the
requisite number of employees, and has received written confirmation back from
Retirement Financial Services, Inc. See Group Investment Plans for information
regarding the applicability of the Limited CDSC.

Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase
Institutional Class shares or purchase interests in a collective trust as a
result of a change in distribution arrangements.

Investors in Delaware Investments 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 Investments family at net asset value.

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<PAGE>

a fund account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.

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 funds in the
Delaware Investments family, 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 a Portfolio 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 investment accounts available from
Delaware Investments 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.

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 a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.

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.

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
compensates 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 5% 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 of up
to a maximum of 1% for approximately eight years after the purchase and, if
redeemed within six years of purchase, a CDSC.

Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, 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 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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<PAGE>

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
compensates 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%. A CDSC is 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 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 Class B Shares or Class C Shares

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<PAGE>

of a Portfolio, even if those shares are later exchanged for shares of another
fund in the Delaware Investments family. 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 Class B Shares of
the Portfolios:

Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- ------------------------------ --------------------
0-1 5%
2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None

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 Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of
0.30% (currently set at 0.25%) 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 Shares and
Class C Shares under Redemption and Exchange.

Other Payments to Dealers -- Class A Shares, Class B Shares 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 funds in the Delaware Investments family. 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.

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<PAGE>

Subject to pending amendments to the NASD's Conduct Rules, in connection
with the promotion of shares of funds in the Delaware Investments family, 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 SEC. It is likely that the NASD's
Conduct Rules 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 Conduct Rules as they may be
amended.

Institutional Class
In addition to offering the Class A Shares, Class B Shares 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 shares, contact the Distributor by writing to the address or by calling
the telephone number on the back cover of this Prospectus.

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<PAGE>

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 $50,000 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.

The Portfolios make it easy to invest by arrangement with your investment
dealer, by mail, by wire and by exchange.

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, Delaware Investments can refer you to one.

Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan 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 Investments 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 First Union National Bank, ABA #031201467, account number 2014128934013
(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 plan account, an appropriate
retirement plan application, to the specific Portfolio and Class selected, to
Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.

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<PAGE>

2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to First Union National Bank, 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
Investments family, 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 Investments
family, 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 Investments family. 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 funds in the Delaware Investments family.
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 funds in
the Delaware Investments family. 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 Classes of Shares 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 for
IRAs and other purposes. Shareholders should allow a reasonable amount of time
for initial purchases and changes to these plans to become effective.

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<PAGE>

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.

4. Wealth Builder Option
You can use the Wealth Builder Option to invest in a Portfolio through
regular liquidations of shares in your accounts in other funds in the Delaware
Investments family. You may also elect to invest in other mutual funds in the
Delaware Investments family 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 Investments family and invested automatically into
any other account in a mutual fund available from the Delaware Investments
family 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.

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 Investments family,
subject to the exceptions noted below as well as the eligibility and minimum
purchase requirements set forth in each fund's prospectus.

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Reinvestments of distributions into Class A Shares of a Portfolio or of
other funds in the Delaware Investments family are made without a front-end
sales charge. Reinvestments of distributions into Class B Shares of a Portfolio
or of other funds in the Delaware Investments family or into Class C Shares of
a Portfolio or of other funds in the Delaware Investments family 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
Investments family, 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 Investments family 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 Investments
family which offer that class 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 fund in
the Delaware Investments family 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.

Purchase Price and Effective Date
The offering price and net asset value of Class A Shares, Class B Shares
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 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 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 Investments family. 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.

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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 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 available from the Delaware Investments family will best meet your
changing objectives and the consequences of any exchange transaction. You may
also call Delaware Investments directly for fund information.

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 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 Shares
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 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.

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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 Investments
family (in each case, "New Shares") in a permitted exchange, will not be
subject to a CDSC that might otherwise be due upon redemption of 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 Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the fund from which Original Shares were exchanged. In an
exchange of Class B Shares from a Portfolio, such Portfolio's CDSC schedule may
be higher than the CDSC schedule relating to New Shares acquired as a result of
the exchange. For purposes of computing the CDSC that may be payable upon a
disposition of New Shares, the period of time that an investor held Original
Shares is added to the period of time that an investor held New Shares. With
respect to Class B Shares, the automatic conversion schedule of Original Shares
may be longer than that of 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 Shares 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. A signature guarantee can be
obtained from a commercial bank, a trust company, or a member of a securities
transfer association medallion program ("STAMP"). A signature guarantee cannot
be provided by a notary public. A signature guarantee is designed to protect
the shareholders, the Trust and its agents from fraud. 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(s) must accompany your request and also be in good order.
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.

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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 Investments family, 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
certificate(s).

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. First
Union National Bank'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 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.

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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 Investments family under the same
registration, subject to the same conditions and limitations as other exchanges
noted 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. Through the MoneyLine(SM) Direct Deposit Service, it may
take up to four business days for the transaction to be completed. 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 two years 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 Shares and Class C
Shares, below.

For more information on Systematic Withdrawal Plans, please call the
Shareholder Service Center.

Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or
shares into which such Class A Shares are exchanged) according to the following
schedule: (1) 1% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year
after the purchase, if such purchases were made at net asset value and
triggered the payment by the Distributor of the dealer's commission described
above.

The Limited CDSC will be paid to the Distributor and will be assessed on
an amount equal to the lesser of (1) the net asset value at the time of
purchase of 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 Class A Shares even if those shares are later exchanged for shares
of another fund in the Delaware Investments family 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 two years will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another fund in the Delaware Investments family 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 two-year holding period. The Limited CDSC is assessed if such two-year
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 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 Shares 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, 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 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 Code; (iv) distributions from a 403(b)(7) or 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) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or 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 1/2; 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 Shares 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 Shares 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 and it
satisfies certain other requirements relating to the sources of its income and
diversification of its assets. Although the Portfolios are nondiversified for
1940 Act purposes, they will be diversified for purposes of the Code. Under the
Code, a mutual fund's holdings of cash, U.S. government securities and other
regulated investment companies are, by definition, qualified assets for
purposes of the IRS' diversification rules.

On August 5, 1997, the Taxpayer Relief Act of 1997 (the "1997 Act") was
signed into law. This new law makes sweeping changes in the Code. Because many
of these changes are complex, and only indirectly affect a Portfolio and its
distributions to you, they are discussed in Part B. Changes in the treatment of
capital gains, however, are discussed in this section.

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 may 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. For
the period December 31, 1997 through September 30, 1998, none of the Portfolios'
dividends from net investment income qualified for the dividends-received
deduction.

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.

The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a maximum rate
of 20%. For investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum rate of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when a Portfolio's
securities were sold and how long they were held by a Portfolio before they
were sold. The holding periods for which the new rates apply were revised by
the Internal Revenue Service Restructuring Act of 1998 (the "1998 Act") and the
Omnibus Consolidated and Emergency Supplemental Appropriations Act, which
included technical corrections to the 1998 Act. Investors who want more
information on holding periods and other qualifying rules relating to these new
rates should review the expanded discussion in Part B, or should contact their
own tax advisers.

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The Trust will advise you in its annual information reporting at calendar
year end of the amount of its capital gain distributions which will qualify for
these maximum federal tax rates.

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 calendar year in which they
are 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 available from the Delaware
Investments family. 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 Investments
family 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.

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 the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.

Each year, the Trust will mail to you information on the tax status of a
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 Class A Shares, Class B Shares and
Class C Shares of each Portfolio alone will bear the 12b-1 Plan expenses
payable under their respective 12b-1 Plan. 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 Investments family since 1938. On September 30, 1998, the Manager and
its affiliates within Delaware Investments, including Delaware International,
were managing in the aggregate more than $40 billion in assets in the various
institutional or separately managed (approximately $23,666,360,000) and
investment company (approximately $17,194,990,000) accounts.

The Manager is a series of Delaware Management Business Trust. The Manager
changed its form of organization from a corporation to a business trust on
March 1, 1998. 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 oversees the Portfolios' direct
investment in securities. 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.

Portfolio Manager
J. Paul Dokas serves as portfolio manager of each of the Portfolios. Mr.
Dokas is responsible for both asset allocations among the Underlying Funds and
the Portfolios' direct investments in securities. Mr. Dokas holds a BBA in
Business from Loyola College and an MBA from the University of Maryland. Prior
to joining Delaware Investments 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.

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Because the Manager must consider the interests of the Portfolios as well
as those of the Underlying Funds, the Manager has adopted Asset Allocation
Guidelines ("Guidelines") for the Manager. Pursuant to these Guidelines, in the
event that the Manager anticipates that an allocation transaction (either a
purchase or redemption) may disrupt the activities of an Underlying Fund, the
portfolio managers of the relevant Portfolio and Underlying Fund will confer on
steps to minimize adverse effects on both the Portfolio and the Underlying
Fund, such as staggering the timing and amounts of such allocation
transactions. In addition, the portfolio manager will attempt to minimize the
number and size of allocation transactions occurring at any one time, while
attempting to avoid losing investment opportunities for the Portfolios.

The Portfolios use their 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
Investments family 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 and,
if applicable, yield 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 applicable. Each
Portfolio may also advertise aggregate and average total return information
concerning a Class over additional periods of time. In addition, the Portfolios
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 deductions of the maximum front-end sales charge or any applicable
CDSC.

The current yield for a Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the maximum offering price per share on the last day of the period.
The yield formula provides for semi-annual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period.

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 dated December 18, 1997.

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

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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 such 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) 0.30%
(currently set at 0.25%) of a Class A Shares' average daily net assets in any
year, and (ii) 1% (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
Shares, Class B Shares 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 0.30% annually
(currently set at 0.25%) with respect to each Portfolio's Class A Shares, and
1% 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 Classes.

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 dated December 18,
1997. The Transfer Agent also provides accounting services to each Portfolio
pursuant to the terms of a separate Fund Accounting Agreement.

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.
* * *

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As with other mutual funds, financial and business organizations and
individuals around the world, the Portfolios and the Underlying Funds could be
adversely affected if the computer systems used by their service providers do
not properly process and calculate date-related information from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust
and the Underlying Funds are taking steps to obtain satisfactory assurances
that their major service providers are taking steps reasonably designed to
address the Year 2000 Problem with respect to the computer systems that such
service providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of any of the Portfolios
or the Underlying Funds.

Several European countries are participating in the European Economic and
Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro." It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. The Portfolios and the Underlying Funds
investing in securities of participating countries could be adversely affected
if the computer systems used by their major service providers are not properly
prepared to handle the implementation of this single currency or the adoption
of the Euro by additional countries in the future. The Trust and the Underlying
Funds are taking steps to obtain satisfactory assurances that the major service
providers are taking steps reasonably designed to address these matters with
respect to the computer systems that such service providers use. There can be
no assurances that these steps will be sufficient to avoid any adverse impact
on the business of any Portfolio or Underlying Fund.

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. Among others, these expenses
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 expense ratios of each Class
reflects the impact of its 12b-1 Plan.

Shares
The Trust is an open-end management investment company. Each Portfolio is
nondiversified, as defined by the 1940 Act. Commonly known as a mutual fund,
the Trust was organized as a Delaware Business Trust on October 24, 1997. The
Trust currently consists of four series of shares: the Income, Balanced and
Growth Portfolios and the Asset Allocation Portfolio which is described in a
separate prospectus. Portfolio shares have 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 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.

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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 Class A Shares,
Class B Shares and Class C Shares. Similarly, as a general matter, the
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, 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 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, 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
Delchester and High-Yield Opportunities Funds will invest primarily in,
and Decatur Total Return, U.S. Growth, Small Cap Value, Emerging Markets and
International Small Cap Funds may invest in, high risk, high yield securities,
commonly known as "junk bonds." These securities entail the following risks:

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
its 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 such 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
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.

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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 a Portfolio to attain its investment
objective.

Zero-Coupon Bonds and Pay-in-Kind Bonds. The Real Estate Investment Trust
Portfolio and Global Bond, Delchester, High-Yield Opportunities and Emerging
Markets Funds 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 an Underlying Fund. For example, an
Underlying Fund accrues, and is required to distribute to shareholders, income
on its zero-coupon bonds. However, an Underlying Fund may not receive the cash
associated with this income until the bonds are sold or mature. If an
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, The Real Estate Investment
Trust Portfolio and 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 Fund invests in securities of
this type, they will maintain a segregated account to pay for them and mark the
account to market daily.

Mortgage-Backed Securities
The Real Estate Investment Trust Portfolio and 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).

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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 S&P or Baa or better by 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
Delaware Cash Reserve and Devon, U.S. Government and Limited-Term
Government 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
Delaware 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 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.

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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
The Real Estate Investment Trust Portfolio invests primarily in, and 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.

Investment in REITs presents certain further risks that are unique and in
addition to the risks associated with investing in the real estate industry in
general. Equity REITs may be affected by changes in the value of the underlying
property owned by the REITs, while mortgage REITs may be affected by the
quality of any credit extended. REITs are dependent on management skills, are
not diversified, and are subject to the risks of financing projects. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.

REITs (especially mortgage REITs) are also subject to interest rate risks
- - when interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.

REITs may have limited financial resources, may trade less frequently and
in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.

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.

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Foreign Securities and Foreign Currency Transactions
The Underlying Funds in the International Equity category invest their
assets primarily in securities of foreign issuers, and 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. The Real Estate Investment Trust Portfolio and Blue Chip,
Devon, DelCap, Small Cap Value and High-Yield Opportunities 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 United States 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.

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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 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. An 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 an
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 such 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 an
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 Funds will be covered, which means that such
Underlying Fund will own the underlying foreign currency. With respect to put
options on foreign currency written by an Underlying Fund, 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 to the amount such 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 Funds is to
protect the Underlying Funds against the fluctuations in interest or exchange
rates which otherwise might adversely affect the value of each Underlying
Fund's portfolio securities or adversely affect the prices of securities which
an 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, The Real Estate Investment Trust
Portfolio and 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. With respect to the Portfolios, 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.

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 an
Underlying Fund, plus any transaction costs, will reduce any benefit realized
by that Underlying Fund upon exercise of the option.

Purchasing a put option gives an Underlying Fund the right to sell one of
its securities for an agreed price up to an agreed date. The advantage is that
such Underlying Fund can be protected should the market value of the security
decline. However, an Underlying Fund must pay a premium for this right, whether
it exercises it or not.

Writing a covered call option obligates an Underlying Fund to sell one of
its securities for an agreed price up to an agreed date. The advantage is that
an Underlying Fund receives premium income, which may offset the cost of
purchasing put options. However, an 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.

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Closing transactions essentially let an 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 Standard & Poor's 100(R) Composite Stock Price Index and the Standard &
Poor's Over-the-Counter 250 Price Index. 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
Each Portfolio may enter into futures contracts on stocks, stock indices,
interest rates and foreign currencies, and purchase or sell options on such
futures contracts. These activities will not be entered into for speculative
purposes, but rather for hedging purposes and to facilitate the ability to
quickly deploy into the stock market a Portfolio's positions in cash,
short-term debt securities and other money market instruments, at times when
such Portfolio's assets are not fully invested in equity securities. Such
positions will generally be eliminated when it becomes possible to invest in
Underlying Funds or directly in securities that are appropriate for the
Portfolio involved.

For hedging purposes, each of The Real Estate Investment Trust Portfolio
and 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 Real Estate Investment Trust
Portfolio and 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 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 an Underlying Fund is
exercised, that 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.

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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, an 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 an 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 an Underlying Fund from closing out its positions relating
to futures.

Borrowings
Each Underlying Fund, except Delaware Cash Reserve, U.S. Government Fund
and Limited-Term Government Fund, and the Portfolios may borrow money as a
temporary measure for extraordinary purposes or to facilitate redemptions. Such
Underlying Funds and Portfolios will not borrow money in excess of one-third of
the value of their net assets. These Underlying Funds and Portfolios 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 or Portfolio'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 or Portfolios shall, within three days
thereafter (not including Sunday or holidays) or such longer period as the SEC
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 or Portfolio 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/Trustees. A repurchase agreement is a
short-term investment in which the purchaser (i.e., an 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, an Underlying Fund could experience delays and
expenses in liquidating the underlying securities.

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The funds in the Delaware Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the 1940 Act to
allow the funds in the Delaware Investments family 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 Delaware Cash Reserve, 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 an 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/Trustees, 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 The Real Estate Investment Trust Portfolio, Blue Chip Fund and
High-Yield Opportunities Fund), including repurchase agreements maturing in
more than seven days. While maintaining oversight, the Board of
Directors/Trustees 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 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 of Directors/Trustees 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 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.

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Convertible and Non-Traditional Equity Securities
The Real Estate Investment Trust Portfolio and Blue Chip, U.S. Growth,
Devon and New Pacific Funds may invest in convertible securities. From time to
time, a portion of High-Yield Opportunities Fund's assets may be invested 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 (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.

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<PAGE>

Temporary Defensive Measures

Each Underlying Fund (other than Delaware Cash Reserve) 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.

Quality Restrictions
Delaware Cash Reserve limits its investments to those which its 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.

Delaware Cash Reserve'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.

-86-

<PAGE>

Delaware Cash Reserve'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.
Delaware Cash Reserve 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
Delaware Cash Reserve 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.

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. International Small Cap Fund may
invest in smaller capitalization companies. These stocks have historically been
more volatile in price than larger capitalization stocks, such as those
included in the S&P 500. 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.

Unseasoned Companies
High-Yield Opportunities Fund 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, more established companies.
The companies in which the 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.

-87-

<PAGE>

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. 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 0.50%.

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 a Portfolio's investment objective will be
attained.

-88-

<PAGE>

The use of interest rate swaps by 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 an Underlying Fund is
contractually entitled to receive.

While The Real Estate Investment Trust Portfolio, Global Bond Fund and
Emerging Markets Fund 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. The Portfolios are also nondiversified with respect
to both direct investments in securities and investments in the Underlying
Funds. 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, for temporary, defensive
purposes, such as during periods of market instability.

Pursuant to an Order received from the SEC on April 6, 1998, the
Portfolios may, to the extent consistent with their respective investment
objectives, invest directly in the same securities and employ the same
investment strategies as any of the Underlying Funds.

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 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 each Portfolio's
performance during its most recently completed fiscal year appears in the
Portfolios' Annual Report. The remaining investment policies are not fundamental
and may be changed by the Board of Trustees without a shareholder vote.

Ratings
Appendix A describes the ratings of S&P and Moody's.

-89-

<PAGE>

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 IBCA, Inc.'s (formerly known as Fitch Investors Service,
L.P.) 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 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

-90-

<PAGE>

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.

-91-
<PAGE>

Delaware Investments 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 Investments at 800-523-1918.

Investment Manager
Delaware Management Company
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

[GRAPHIC OMITTED]

Printed in the U.S.A. on recycled paper.
P-XXX[--] PP11/98
www.delawarefunds.com

<PAGE>

FOUNDATION FUNDS
INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO PROSPECTUS
INSTITUTIONAL CLASS NOVEMBER 30, 1998

1818 Market Street, Philadelphia, PA 19103
For more information about
the Institutional Classes
call Delaware Investments at 800-510-4015

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 November
30, 1998, 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 (the "SEC"). 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 800-523-1918. The Portfolios' financial statements
appear in the Trust's Annual Report, which will accompany any response to
requests for Part B. The SEC also maintains a Web site (http://www.sec.gov) that
contains Part B, material we incorporated by reference, and other information
regarding registrants that electronically file with the SEC.

Each Portfolio also offers Class A Shares, Class B Shares and Class 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.

<PAGE>

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>

SYNOPSIS

Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to each Portfolio, subject to the supervision and direction
of the Trust's Board of Trustees. The Manager and certain of its affiliates
also provide investment management services to the Underlying Funds and certain
other funds available from the Delaware Investments family. 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
available from the Delaware Investments family, 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
available from the Delaware Investments family, 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.

<PAGE>

SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Portfolio's Institutional Class Shares follows:

Income Portfolio
Balance Portfolio
Shareholder Transaction Expenses Growth Portfolio
- -------------------------------------------------------------------------------
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 (after waivers) ...................... 0.00%(2)
12b-1 Fees ........................................... None
Other Operating Expenses ............................. 0.55%(3)
------
Total Operating Expenses (after waivers) ........ 0.55%
=====

(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 management fees ("Asset Allocation Fees") payable by the Portfolios
and to pay the Portfolios to the extent necessary to ensure that the "Total
Operating Expenses" of the Portfolios do not exceed 0.55% (exclusive of
taxes, interest, brokerage commissions and extraordinary expenses) through
June 30, 1999. 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 32.70%, 12.62% and 14.11% for the
Institutional Class of the Income, Balanced and Growth Portfolios,
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. In the absence of voluntary expense payments, "Other Operating
Expenses" would be 32.45%, 12.37% and 13.86% for the Institutional Class of
the Income, Balanced and Growth Portfolios, respectively.

2
<PAGE>

The following table sets forth the average aggregate total operating
expenses of the Underlying Funds:

Average Aggregate Total Fund Operating Expenses of Underlying Funds

------------------------------
Income Portfolio 0.90%
------------------------------
Balanced Portfolio 1.09%
------------------------------
Growth Portfolio 1.16%
------------------------------

3
<PAGE>

Underlying Fund Information

<TABLE>
<CAPTION>
Manage- Total
ment Expense
Underlying Fund Adviser Sub-Adviser** Fee Ratio***
- --------------- ------- ------------- ------- --------
<S> <C> <C> <C> <C>
Aggressive Growth Manager 1.00% 1.50%(7)

Blue Chip Manager Vantage* 0.65%(1) 1.20%

Decatur Total Return Manager 0.57%(2) 0.83%

DelCap Manager 0.75% 1.10%

Devon Manager 0.60%(3) 1.12%(7)

Small Cap Value Manager 0.75% 1.09%

Real Estate Investment Trust Manager Lincoln National* 0.75% 0.86%(7)

Trend Manager 0.75% 1.09%

U.S. Growth Manager Lynch & Mayer* 0.70% 1.14%(7)

Emerging Markets Delaware International* 1.25% 1.70%(7)

International Equity Delaware International* 0.75% 1.40%(7)

International Small Cap Delaware International* 1.25% 1.25%(7)

New Pacific Manager AIB Govett 0.80% 1.50%

Delchester Manager 0.59%(4) 0.81%

High-Yield Opportunities Manager 0.65%(5) 0.84%(7)

Global Bond Delaware International* 0.75% 0.95%(7)

Limited-Term Government Manager 0.50% 0.83%

U.S. Government Manager 0.60% 0.90%

Delaware Cash Reserve Manager 0.49%(6) 0.88%
</TABLE>

4
<PAGE>

*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.

***Includes management and other fees.

(7) Reflects voluntary waivers and payments of fees by the investment manager.

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.

<PAGE>

INCOME PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
- ------------------

Assuming Redemption
1 Year 3 Years
-------- --------
Institutional Class Shares ......... $6 $18

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 investors in understanding
the various costs and expenses they will bear directly or indirectly in owning
shares of the Portfolios.

6
<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

7
<PAGE>

<TABLE>
<CAPTION>
Balanced Portfolio Growth Portfolio
Institutional Class Shares Institutional Class Shares
--------------------------- --------------------------
Period Period
12/31/97(1) 12/31/97(1)
through through
9/30/98 9/30/98
<S> <C> <C>
Net Asset Value, Beginning of Period ...................................... $ 8.500 $ 8.500
Income (Loss) From Investment Operations
Net Investment Income (2).................................................. 0.169 0.078
Net Loss on Investments (both realized and unrealized) .................... (0.469) (0.398)
--------- --------
Total from Investment Operations ........................................ (0.300) (0.320)
--------- --------
Less Dividends and Distributions
Dividends from Net Investment Income ...................................... (0.070) none
Distributions from Net Realized Gain on Investments ....................... none none
--------- --------
Total Dividends and Distributions ....................................... (0.070) none
--------- --------
Net Asset Value, End of Period ............................................ $ 8.130 $ 8.180
========= ========
- -----------------

Total Return(3)............................................................ (3.56%) (3.77%)

- -----------------

Ratios and Supplemental Data

Net Assets, End of Period (000's omitted) ................................. $ 48 $ 48
Ratio of Expenses to Average Daily Net Assets ............................. 0.55% 0.55%
Ratio of Expenses to Average Daily Net Assets Prior to
Expense Limitation ....................................................... 12.62% 14.11%
Ratio of Net Investment Income to Average Daily Net Assets ................ 2.59% 1.21%
Ratio of Net Investment Loss to Average Daily Net Assets Prior
to Expense Limitation .................................................... (9.48%) (12.35%)
Portfolio Turnover Rate ................................................... 73% 77%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Income Portfolio
Institutional Class Shares
---------------------------
Period
12/31/97(1)
through
9/30/98
<S> <C>
Net Asset Value, Beginning of Period ...................................... $ 8.500
Income (Loss) From Investment Operations
Net Investment Income (2).................................................. 0.266
Net Loss on Investments (both realized and unrealized) .................... (0.356)
--------
Total from Investment Operations ........................................ (0.090)
--------
Less Dividends and Distributions
Dividends from Net Investment Income ...................................... (0.130)
Distributions from Net Realized Gain on Investments ....................... none
--------
Total Dividends and Distributions ....................................... (0.130)
--------
Net Asset Value, End of Period ............................................ $ 8.280
========
- -----------------

Total Return(3) ........................................................... (1.10%)

- -----------------

Ratios and Supplemental Data

Net Assets, End of Period (000's omitted) ................................. $ 49
Ratio of Expenses to Average Daily Net Assets ............................. 0.55%
Ratio of Expenses to Average Daily Net Assets Prior to
Expense Limitation ....................................................... 32.70%
Ratio of Net Investment Income to Average Daily Net Assets ................ 4.05%
Ratio of Net Investment Loss to Average Daily Net Assets Prior
to Expense Limitation .................................................... (28.10%)
Portfolio Turnover Rate ................................................... 81%
</TABLE>
- -----------
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total return reflects expense limitations in effect for a Portfolio. See
Summary of Expenses.

8
<PAGE>
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. It
seeks to achieve this objective by investing in primarily a mix of fixed-income
and domestic equity securities, including fixed-income and domestic equity
Underlying Funds, although it may invest up to 10% of its assets in
international equity securities, including international 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.

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 and employ the same investment strategies as any of the
Underlying Funds, to the extent consistent with each Portfolio's investment
objectives. The Portfolios will invest directly in securities or other
investment instruments for such purposes as avoiding undue disruption of the
activities of the Underlying Funds, hedging of the Portfolios' investment
positions, or making investments in asset classes not available in the
Underlying Funds. While it is anticipated that at most times the Portfolios
will be invested primarily in the Underlying Funds, it is possible, from time
to time, for the Portfolios to be substantially invested directly in
securities. The investment objective of each Portfolio is considered a
"non-fundamental policy," which means that it may be changed without approval
of a Portfolio's shareholders. There is no assurance that a Portfolio will
achieve its objective.

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.

9
<PAGE>

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 the Underlying Funds, as well as
invest in the same kinds of securities and employ the same investment
strategies as any of the Underlying Funds, 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, the volatility (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).

UNDERLYING FUNDS

U.S. Equity International Equity
Aggressive Growth Fund Emerging Markets Fund
Blue Chip Fund International Equity Fund
Decatur Total Return Fund International Small Cap Fund
DelCap Fund New Pacific Fund
Devon Fund
Small Cap Value Fund Fixed-Income
The Real Estate Investment Trust Portfolio Delchester Fund
Trend Fund Global Bond Fund
U.S. Growth Fund Limited-Term Government Fund
U.S. Government Fund
High-Yield Opportunities Fund

Money Market
Delaware Cash Reserve

<PAGE>

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.

Percentage Ranges of Investment in Asset Classes
------------------------------------------------

Asset Class Income Portfolio Balanced Portfolio Growth Portfolio
- ----------- ---------------- ------------------ ----------------
U.S. Equity 20%-50% 35%-65% 45%-75%
International Equity 0%-10% 5%-20% 10%-30%
Fixed-Income 45%-75% 25%-55% 5%-35%
Money Market 0%-35% 0%-35% 0%-35%

11
<PAGE>

The Underlying Funds may engage in a variety of investment strategies
which involve certain risks. Moreover, each Portfolio may, to the extent
consistent with its investment objective, 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. Each Portfolio, to the extent consistent with its investment
objective, 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.

12
<PAGE>

13
<PAGE>

INVESTMENTS 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 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
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 Aggressive Growth Fund's investments. 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. 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.

14
<PAGE>

At no time will the investments of Aggressive Growth Fund in bank
obligations, including time deposits, exceed 25% of the value of 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 (R) Composite Stock Price 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.

15
<PAGE>

All available types of appropriate securities are under continuous study.
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. The Fund may also invest up to 20% of its total
assets in foreign securities (which may include ADRs, EDRs and GDRs), although
the Manager has no present intention of doing so. In seeking to obtain its
objective, 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.

In selecting stocks for 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
S&P 500 in exchange for anticipated dividend growth.

<PAGE>

17
<PAGE>

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 "junk bonds" are
considered very speculative and may possibly be in default or have interest
payments in arrears.

The Real Estate Investment Trust Portfolio 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 given then prevailing market
conditions. Except when the Manager believes a temporary defensive approach is
appropriate, The Real Estate Investment Trust Portfolio will not hold more than
5% of its total assets in cash or such short-term investments. All these
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 be of comparable quality as determined by the Manager.

18
<PAGE>

While The Real Estate Investment Trust Portfolio does not intend to invest
directly in real estate, The Real Estate Investment Trust Portfolio could, under
certain circumstances, own real estate directly as a result of a default on
securities that it owns. In addition, if The Real Estate Investment Trust
Portfolio has rental income or income from the direct disposition of real
property, the receipt of such income may adversely affect The Real Estate
Investment Trust Portfolio's ability to retain its tax status as a regulated
investment company.

19
<PAGE>

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.

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. U.S. Growth Fund may invest up to 35% of its
assets in debt securities, bonds, convertible bonds, preferred stock and
convertible preferred stock. U.S. Growth Fund may also invest up to 10% of its
assets in securities rated lower than Baa by Moody's or BBB by 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 ("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. U.S. Growth Fund may invest up to 20% of its assets in
foreign securities.

<PAGE>

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 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.

21
<PAGE>

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. 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.

International Equity Fund. The investment objective of 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 in, having a majority of their assets in, or deriving a majority of
their operating income from 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") or, after December 31, 1998, the Euro.
International Equity Fund is managed by Delaware International.

<PAGE>

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. In certain countries, investments by an investment
company may only be made by purchasing shares of 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). 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. 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.

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
ADRs, EDRs, or GDRs, 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
Small to Medium-Sized Companies under Other Investment Policies and Risk
Considerations.

23
<PAGE>

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. In certain countries, investments by an investment company
may only be made by purchasing shares of 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.

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.

<PAGE>

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. AIB Govett, Inc. (formerly known as
John Govett & Company Limited) serves as sub-adviser for New Pacific Fund.

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, China, Hong Kong, India,
Indonesia, Japan, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Sri Lanka, Taiwan and Thailand.

Fixed-Income Funds
As described below, the following Underlying Funds invest primarily in
fixed-income securities.

(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.

25
<PAGE>

High-Yield Opportunities Fund will invest at least 65% of its assets at
the time of purchase in corporate bonds that may be rated BB or lower by S&P or
Ba or lower by Moody's, or similarly rated by another nationally-recognized
statistical rating organization, or if unrated (which may be more speculative
in nature than rated bonds), judged to be of comparable quality by the Manger.
High-Yield Opportunities Fund generally will not purchase corporate bonds
which, at the time of purchase, are rated lower than CCC by S&P or Caa by
Moody's. See Appendix A to this Prospectus for more rating information. If a
corporate bond held by High- Yield Opportunities Fund drops below these levels,
including a security that goes into default, High-Yield Opportunities Fund will
commence with an orderly sale of the security in a manner devised to minimize
any adverse affect on High-Yield Opportunities Fund. If a sale of the security
is not practicable for any reason, High-Yield Opportunities Fund will pursue
other available measures reasonably anticipated by the Manager to facilitate
repayment of the bond.

High-Yield Opportunities Fund may invest up to 15% of its total assets in
securities of issuers domiciled in foreign countries.

<PAGE>

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.
However, Global Bond Fund may also invest in securities of issuers in emerging
markets countries, including Brady Bonds, which tend to be of lower quality and
more speculative than securities of developed country issuers. Such securities
may be rated lower than BBB by S&P or Baa by Moody's, or if unrated, are
considered by the Manager to be of equivalent quality. 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.

27
<PAGE>

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.

28
<PAGE>

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-backed 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.

29
<PAGE>

Limited-Term Government Fund may also use repurchase agreements which are
at least 102% 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 Fund may invest no more than 10% of the
value of its net assets in illiquid securities.

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).

<PAGE>

U.S. Government Fund may use repurchase agreements which are at least 102%
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 Fund invests primarily in
money market instruments.

<PAGE>

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, 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, Class B Shares and Class C Shares
may have different sales charges and other expenses which may affect
performance. To obtain a prospectus relating to such classes, contact the
Distributor by writing to the address or calling the telephone number listed
on page 1 of this Prospectus.

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<PAGE>

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
plan 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 Investments at 1818 Market Street, Philadelphia, PA
19103.

Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to First Union National Bank, ABA #031201467, account number 2014128934013
(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 800-510-4015 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 plan account, an
appropriate retirement plan application, to the specific Portfolio and Class
selected, to Delaware Investments at 1818 Market Street, Philadelphia, PA
19103.

2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to First Union National Bank, as described above. You must advise your
Client Services Representative by telephone at 800-510-4015 prior to sending
your wire.

Investing by Exchange
If you have an investment in another mutual fund in Delaware Investments
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 Class B Shares and Class C
Shares of other funds available from Delaware Investments may not be exchanged
into the Classes. If you wish to open an account by exchange, call your Client
Services Representative at 800-510-4015 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.

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.

<PAGE>

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 Delaware Investments. 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.

<PAGE>

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 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 800-510-4015.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.

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 mutual fund in
Delaware Investments, 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 Investments
family. 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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<PAGE>

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 Delaware Investments, 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. A signature
guarantee can be obtained from a commercial bank, a trust company, or a member
of a securities transfer association medallion program ("STAMP"). A signature
guarantee cannot be provided by a notary public. A signature guarantee is
designed to protect the shareholders, the Trust and its agents from fraud. Each
Portfolio reserves the right to reject a signature guarantee supplied by an
institution based on its creditworthiness. Each Portfolio may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.

The redemption request is effective at the net asset value next determined
after it is received in good order. Payment is normally mailed the next
business day after receipt of your redemption request. If your shares are in
certificate form, the certificate(s) must accompany your request and also be in
good order. Certificates are issued for shares only if you submit a specific
request.

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 certificate(s).

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 shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being
exchanged.

37
<PAGE>

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 Investments family 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.

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

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 Shares, Class B
Shares and Class C Shares.

Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value.

<PAGE>

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 and it
satisfies certain other requirements relating to the sources of its income and
diversification of its assets. Although the Portfolios are nondiversified for
1940 Act purposes, they will be diversified for purposes of the Code. Under the
Code, a mutual fund's holdings of cash, U.S. government securities and other
regulated investment companies are, by definition, qualified assets for
purposes of the IRS' diversification rules.

The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a maximum of
rate 20%. For investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum of rate 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when a Portfolio's
securities were sold and how long they were held by a Portfolio before they
were sold. The holding periods for which the new rates apply were revised by
the Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998
Act") and the Omnibus and Consolidated and Emergency Supplemental
Appropriations Act which included technical corrections to the 1998 Act.
Investors who want more information on holding periods and other qualifying
rules relating to these new rates should review the expanded discussion in Part
B, or should contact their own tax advisers.

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<PAGE>

The Trust will advise you in its annual information reporting at calendar
year end of the amount of its capital gain distributions which will qualify for
these maximum federal tax rates.

See Taxes in Part B for additional information on tax matters relating to
each Portfolio and its shareholders.

<PAGE>

CALCULATION OF 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 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.

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 Shares, Class B Shares
and Class C Shares of each Portfolio alone will bear the 12b-1 Plan expenses
payable under their respective 12b-1 Plan. 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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<PAGE>

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.

<PAGE>

Because the Manager must consider the interests of the Portfolios as well
as those of the Underlying Funds, the Manager has adopted Asset Allocation
Guidelines ("Guidelines") for the Manager. Pursuant to these Guidelines, in the
event that the Manager anticipates that an allocation transaction (either a
purchase or redemption) may disrupt the activities of an Underlying Fund, the
portfolio managers of the relevant Portfolio and Underlying Fund will confer on
steps to minimize adverse effects on both the Portfolio and the Underlying Fund,
such as staggering the timing and amounts of such allocation transactions. In
addition, the portfolio manager will attempt to minimize the number and size of
allocation transactions occurring at any one time, while attempting to avoid
losing investment opportunities for the Portfolios.

The Portfolios use their 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
Investments family 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.

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 dated December 18, 1997.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the
Portfolios under an Agreement dated December 18, 1997. 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.

44
<PAGE>

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.

* * *

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
the Portfolios' investments and performance. The Trust's fiscal year ends on
September 30.

* * *

45
<PAGE>

Shares
The Trust is an open-end management investment company. Each Portfolio is
nondiversified, as defined by the 1940 Act. Commonly known as a mutual fund,
the Trust was organized as a Delaware Business Trust on October 24, 1997. The
Trust currently consists of four series of shares: the Income, Balanced and
Growth Portfolios and the Asset Allocation Portfolio, which is described in a
separate prospectus. Portfolio shares have 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.

<PAGE>

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

Redemptions. If, as a result of volatility in the high-yield market or
other factors, an Underlying Fund experiences substantial net redemptions of its
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 such Underlying Fund sells a
substantial number of securities to generate proceeds for redemptions, its asset
base will decrease and its expense ratio may increase.

47
<PAGE>

Zero-Coupon Bonds and Pay-in-Kind Bonds. The Real Estate Investment Trust
Portfolio and Global Bond, Delchester, High-Yield Opportunities and Emerging
Markets Funds 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 an Underlying Fund. For example, an
Underlying Fund accrues, and is required to distribute to shareholders, income
on its zero-coupon bonds. However, an Underlying Fund may not receive the cash
associated with this income until the bonds are sold or mature. If an
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.

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).

48
<PAGE>

<PAGE>

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
The Real Estate Investment Trust Portfolio invests primarily in, and 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.

REITs (especially mortgage REITs) are also subject to interest rate risks
- -- when interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.

REITs may have limited financial resources, may trade less frequently and
in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.

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Foreign Securities and Foreign Currency Transactions
The Underlying Funds in the International Equity category invest their
assets primarily in securities of foreign issuers, and 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. The Real Estate Investment Trust Portfolio and Blue Chip,
Devon, DelCap, Small Cap Value and High-Yield Opportunities 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.

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 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
International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.

<PAGE>

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.

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<PAGE>

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. An Underlying Fund may realize a gain or loss from
currency transactions.

<PAGE>

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<PAGE>

Such Underlying Funds may also purchase and write options on the types of
futures contracts that they can invest in.

56
<PAGE>

<PAGE>

Convertible and Non-Traditional Equity Securities
The Real Estate Investment Trust Portfolio and Blue Chip, U.S. Growth,
Devon and New Pacific Funds may invest in convertible securities. From time to
time, a portion of High-Yield Opportunities Fund's assets may be invested 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.

<PAGE>

Temporary Defensive Measures
Each Underlying Fund (other than Delaware Cash Reserve) 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.

<PAGE>
Delaware Cash Reserve'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.
Delaware Cash Reserve 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.

<PAGE>

OTHER INVESTMENT POLICIES

Each Portfolio's 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 each Portfolio's
performance during its most recently completed fiscal year appears in the
Portfolios' Annual Report. The remaining investment policies are not
fundamental and may be changed by the Board of Trustees without a shareholder
vote.

Ratings
Appendix A describes the ratings of S&P and Moody's.

63
<PAGE>

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 IBCA, Inc.'s (formerly known as Fitch Investors Service,
L.P.) 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 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.

64
<PAGE>

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.

<PAGE>

For more information, contact
Delaware Investments at 800-510-4015.

Investment Manager
Delaware Management Company
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

www.delawarefunds.com
L
O Printed in the U.S.A. on recycled paper.
G P-XXX[--] PP11/98
O

<PAGE>

Delaware Investments 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 Investments at 800-523-
1918, and shareholders of the Institutional Class should contact Delaware
Investments at 800-510-4015.

INVESTMENT MANAGER
Delaware Management Company
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

<PAGE>

- --------------------------------

DELAWARE GROUP FOUNDATION FUNDS

- --------------------------------

INCOME PORTFOLIO
- --------------------------------

BALANCED PORTFOLIO
- --------------------------------

GROWTH PORTFOLIO
- --------------------------------

PART B

STATEMENT OF
ADDITIONAL INFORMATION

- --------------------------------

NOVEMBER 30, 1998

DELAWARE
INVESTMENTS
===========

<PAGE>

- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER 30, 1998

- --------------------------------------------------------------------------------

DELAWARE GROUP FOUNDATIONS FUNDS

- --------------------------------------------------------------------------------

1818 Market Street
Philadelphia, PA 19103

- --------------------------------------------------------------------------------

For more information about the Institutional Classes: 800-510-4015

For Prospectus and Performance of Class A Shares, Class B Shares and
Class C Shares: Nationwide 800-523-1918

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
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Investment Objectives and Policies
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Accounting and Tax Issues
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Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
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Purchasing Shares
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Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
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Redemption and Repurchase
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Dividends and Realized Securities Profits Distributions
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Taxes
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Asset Allocation Agreements
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Officers and Trustees
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Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------

Financial Statements
- --------------------------------------------------------------------------------

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<PAGE>

Delaware Group Foundation Funds (the "Trust") is a
professionally-managed mutual fund of the series type. This Statement of
Additional Information ("Part B" of the Trust's registration statement)
describes the Income Portfolio, the Balanced Portfolio and the Growth Portfolio
(individually, a "Portfolio" and collectively, the "Portfolios"). Each
Portfolio currently offers three retail classes of shares, Class A Shares,
Class B Shares and Class C Shares (individually, a "Class" and collectively,
the "Fund Classes"), and one Institutional Class of shares (collectively, the
"Institutional Classes"). The Trust also consists of The Asset Allocation
Portfolio which is described in a separate Statement of Additional Information.

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 5.75%, 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 Asset Allocation
Agreements.

This Part B supplements the information contained in the current
Prospectuses for the Portfolios dated November 30, 1998, 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.

-2-

<PAGE>

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 (i) more than 50% of the
outstanding voting securities, or (ii) 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. Each Portfolio will not:

1. Invest more than 25% of its total assets in any one industry
(including investments in Underlying Funds that concentrate in that 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. For purposes of this restriction, investments in
the Underlying Funds will not be deemed to be investments in "investment
company" industry.

2. 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 (other
than shares of the Underlying Funds) to qualified broker/dealers or
institutional investors.

3. 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 (the "1933 Act"). No limit is
placed on the proportion of the Portfolio's assets which may be invested in such
securities.

4. Borrow money or issue senior securities, except to the extent
permitted by the Investment Company Act of 1940 (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. 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.

In addition to the above fundamental investment restrictions, each
Portfolio has the following investment restrictions which are non-fundamental
and may be amended or changed without approval of shareholders. Each Portfolio
will not:

1. Invest for the purpose of acquiring control of any company. This
policy will not prohibit acquisition of a controlling interest in an Underlying
Fund.

-3-

<PAGE>

2. Invest in securities of other investment companies, except in
accordance with the provisions of the 1940 Act in effect at the time of the
investment or any rules, regulations, SEC orders or staff positions thereunder.

3. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.

4. 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 Investments Family of Funds
(individually, an "Underlying Fund" and collectively, the "Underlying Funds")
listed below. In addition, if the Trust receives an exemptive order from the
Securities and Exchange Commission (the "SEC"), the Portfolios may invest in
the same kinds of securities as those in which the Underlying Funds may invest
and employ the same investment strategies as any of the Underlying Funds, to the
extent consistent with each Portfolio's investment objective 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 Delaware Management Company (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
The Real Estate Investment Trust Portfolio

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
High-Yield Opportunities Fund

Money Market
Delaware Cash Reserve

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.

-4-

<PAGE>

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, Fannie Mae, 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.

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.

-5-

<PAGE>

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 Investors Service,
Inc. ("Moody's") and A-1 by Standard & Poor's Ratings Group ("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 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.

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/trustees of an Underlying Fund and its investment manager will
continue to monitor the liquidity of that security to ensure that an
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 Board of Directors/Trustees of such
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
102% of the repurchase price, including the portion representing an
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 available from the Delaware Investments family have
obtained an exemption from the joint-transaction prohibitions of Section 17(d)
of the 1940 Act to allow the funds in the Delaware Investments family 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.

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

-6-

<PAGE>

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.

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 Board of
Directors/Trustees 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
portfolio loan transaction is the risk that the borrower would go bankrupt at a
time when the value of the security goes up. Therefore, an Underlying Fund
will only enter into loan arrangements after a review of all pertinent facts by
the respective investment manager, under the supervision of the Board of
Directors/Trustees, 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.

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<PAGE>
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, 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 to 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).

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

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<PAGE>

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 an Underlying Fund's yield to maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, an
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.

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
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 an 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
an Underlying Fund to buy a security. If the broker/dealer to whom an
Underlying Fund sells the security becomes insolvent, such 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 an 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

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<PAGE>

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.

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

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<PAGE>

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 an 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 such 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 and 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.

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 such 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 an 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

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<PAGE>

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 an 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 an Underlying Fund may be obligated to
pay. Interest rate swaps involve the exchange by an 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 such 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 investment manager. If there is a default by the counterparty,
an 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.

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<PAGE>

"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), an
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 such
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 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 such Underlying Fund's investment manager under guidelines
established by the Board of Directors/Trustees to be of comparable quality at
the time of purchase to rated instruments eligible for purchase under an
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, such 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 an 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.

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<PAGE>

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 an Underlying Fund's total assets only if
such notes are subject to a demand feature that will permit such Underlying
Fund to demand payment of the principal within seven days after demand by an
Underlying Fund. If not rated, such instruments must be found by an Underlying
Fund's investment manager under guidelines established by the Board of
Directors/Trustees, 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, government-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
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 (the "1934
Act").

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 those Underlying
Funds' holdings and commitments against changes in the level

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<PAGE>

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 an Underlying Fund may make or enter into will be subject
to the special currency rules described above.

Foreign Currency Transactions
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, an Underlying Fund's Custodian Bank or
subcustodian will place cash or liquid high grade debt securities in a separate
account of such Underlying Fund in an amount not less than the value of such
Underlying Fund's total assets committed to the consummation of such forward

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<PAGE>
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 an
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, an Underlying Fund may not
fully participate in the market appreciation.

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

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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 the 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, an 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 an Underlying Fund do not
aggregate more than 2% of that 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, such 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.

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

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<PAGE>

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 such 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 an
Underlying Fund. Secured put options will generally be written in circumstances
where the investment manager wishes to purchase the underlying security for an
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, an 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. An 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, an 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.

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<PAGE>

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 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 of Directors/Trustees, 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 an
Underlying Fund. An Underlying Fund anticipates entering into written agreements
with those dealers to whom such Underlying Fund may sell OTC options, pursuant
to which such 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 an 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

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<PAGE>

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 the
Underlying Fund to hedge such increased cost up to the 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 an 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 an 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 an 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 an 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

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<PAGE>

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 (R) Composite Stock Price Index ("S&P 500") or the New
York Stock Exchange Composite Index, or a narrower market index such as the
Standard & Poor's 100 (R) Composite Stock Price Index ("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

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<PAGE>

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 an 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 the 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 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 such 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 such
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 such 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, an
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 such
Underlying Fund intends to purchase.

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<PAGE>

If a put or call option an Underlying Fund has written is exercised,
such 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 such 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.

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 an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in an account at an 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.

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

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<PAGE>

variation margin is made and any loss experienced by an 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 an 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.

An 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, 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 in the portfolio
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 an Underlying Fund
could then buy debt securities on the cash market.

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, 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 such 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, an 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 such 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

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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 which an Underlying Fund has written is
exercised, such 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 such 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, such 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 an 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.

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, such 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 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

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interest payments on a security which it holds, such 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. An 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 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 an 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

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<PAGE>

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, an 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 such Underlying Fund desire to
resell that currency to the dealer.

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ACCOUNTING AND TAX ISSUES

When a Portfolio writes a call, or purchases a put option, an amount
equal to the premium received or paid by it is included in the section of the
Portfolio's assets and liabilities as an asset and as an equivalent liability.

In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Portfolio has
written expires on its stipulated expiration date, the Portfolio reports a
realized gain. If a Portfolio enters into a closing purchase transaction with
respect to an option which the Portfolio has written, the Portfolio realizes a
gain (or loss if the cost of the closing transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. Any such gain or loss is a short-term capital gain or loss for
federal income tax purposes. If a call option which a Portfolio has written is
exercised, the Portfolio realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security) from the
sale of the underlying security and the proceeds from such sale are increased by
the premium originally received.

The premium paid by a Portfolio for the purchase of a put option is
recorded in the section of the Portfolio's assets and liabilities as an
investment and subsequently adjusted daily to the current market value of the
option. For example, if the current market value of the option exceeds the
premium paid, the excess would be unrealized appreciation and, conversely, if
the premium exceeds the current market value, such excess would be unrealized
depreciation. The current market value of a purchased option is the last sale
price on the principal Exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an option
which a Portfolio has purchased expires on the stipulated expiration date, the
Portfolio realizes a short-term or long-term capital loss for federal income tax
purposes in the amount of the cost of the option. If a Portfolio sells the put
option, it realizes a short-term or long-term capital gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If a Portfolio exercises a put option, it realizes a capital gain or
loss (long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. However, since the
purchase of a put option is treated as a short sale for federal income tax
purposes, the holding period of the underlying security will be affected by such
a purchase.

Options on Certain Stock Indices--Accounting for options on certain
stock indices will be in accordance with generally accepted accounting
principles. The amount of any realized gain or loss on closing out such a
position will result in a realized gain or loss for tax purposes. Such options
held by a Portfolio at the end of each fiscal year will be required to be
"marked to market" for federal income tax purposes. Sixty percent of any net
gain or loss recognized on such deemed sales or on any actual sales will be
treated as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss.

Other Tax Requirements--Each Portfolio intends 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 and it satisfies
other requirements relating to the sources of its income and diversification of
its assets.

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In order to qualify as a regulated investment company for federal
income tax purposes, each Portfolio must meet certain specific requirements,
including:

(i) A Portfolio must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Portfolio's total
assets, and, with respect to 50% of the Portfolio's total assets, no investment
(other than cash and cash items, U.S. government securities and securities of
other regulated investment companies) can exceed 5% of the Portfolio's total
assets;

(ii) A Portfolio must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies; and

(iii) A Portfolio must distribute to its shareholders at least 90% of
its investment company taxable income and net tax-exempt income for each of its
fiscal years.

The Code requires the Portfolios to distribute at least 98% of its
taxable ordinary income earned during the calendar year and 98% of its capital
gain net income earned during the 12 month period ending October 31 (in addition
to amounts from the prior year that were neither distributed nor taxed to a
Portfolio) to you by December 31 of each year in order to avoid federal excise
taxes. The Portfolios intend as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by you as received in
December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.

The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.

The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, a Portfolio must recognize gain (but not loss) on any
constructive sale of an appreciated financial position in stock, a partnership
interest or certain debt instruments. A Portfolio will generally be treated as
making a constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.

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Investment in Foreign Currencies and Foreign Securities--The Portfolios
are authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Portfolio:

Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Portfolio accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Portfolio actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Portfolio's net investment company taxable income, which, in turn, will
affect the amount of income to be distributed to you by a Portfolio.

If a Portfolio's Section 988 losses exceed a Portfolio's other
investment company taxable income during a taxable year, a Portfolio generally
will not be able to make ordinary dividend distributions to you for that year,
or distributions made before the losses were realized will be recharacterized as
return of capital distributions for federal income tax purposes, rather than as
an ordinary dividend or capital gain distribution. If a distribution is treated
as a return of capital, your tax basis in your Portfolio shares will be reduced
by a like amount (to the extent of such basis), and any excess of the
distribution over your tax basis in your Portfolio shares will be treated as
capital gain to you.

The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Portfolio to track and record adjustments to foreign taxes paid on foreign
securities in which it invests. Under a Portfolio's current reporting procedure,
foreign security transactions are recorded generally at the time of each
transaction using the foreign currency spot rate available for the date of each
transaction. Under the new law, a Portfolio will be required to record at fiscal
year end (and at calendar year end for excise tax purposes) an adjustment that
reflects the difference between the spot rates recorded for each transaction and
the year-end average exchange rate for all of a Portfolio's foreign securities
transactions. There is a possibility that the mutual fund industry will be given
relief from this new provision, in which case no year-end adjustments will be
required.

The Portfolios may be subject to foreign withholding taxes on income
from certain of its foreign securities. If more than 50% of the total assets of
a Portfolio at the end of its fiscal year are invested in securities of foreign
corporations, a Portfolio may elect to pass-through to you your pro rata share
of foreign taxes paid by a Portfolio. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Portfolio); and (ii) entitled to
either deduct your share of such foreign taxes in computing your taxable income
or to claim a credit for such taxes against your U.S. income tax, subject to
certain limitations under the Code. You will be informed by a Portfolio at the
end of each calendar year regarding the availability of any such foreign tax
credits and the amount of foreign source income (including any foreign taxes
paid by a Portfolio). If a Portfolio elects to pass-through to you the foreign
income taxes that it has paid, you will be informed at the end of the calendar
year of the amount of foreign taxes paid and foreign source income that must be
included on your federal income tax return. If a Portfolio invests 50% or less
of its total assets in securities of foreign corporations, it will not be
entitled to pass-through to you your pro-rata shares of foreign taxes paid by a
Portfolio. In this case, these taxes will be taken as a deduction by a
Portfolio, and the income reported to you will be the net amount

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<PAGE>

after these deductions. The 1997 Act also simplifies the procedures by which
investors in funds that invest in foreign securities can claim tax credits on
their individual income tax returns for the foreign taxes paid by a Portfolio.
These provisions will allow investors who pay foreign taxes of $300 or less on a
single return or $600 or less on a joint return during any year (all of which
must be reported on IRS Form 1099-DIV from a Portfolio to the investor) to claim
a tax credit against their U.S. federal income tax for the amount of foreign
taxes paid by a Portfolio. This process will allow you, if you qualify, to
bypass the burdensome and detailed reporting requirements on the foreign tax
credit schedule (Form 1116) and report your foreign taxes paid directly on page
2 of Form 1040.

Investment in Passive Foreign Investment Company securities--The
Portfolios may invest in shares of foreign corporations which may be classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Portfolio receives an "excess distribution" with
respect to PFIC stock, the Portfolio itself may be subject to U.S. federal
income tax on a portion of the distribution, whether or not the corresponding
income is distributed by a Portfolio to you. In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which a Portfolio held the PFIC shares. A Portfolio itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Portfolio taxable years, and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years. In this
case, you would not be permitted to claim a credit on your own tax return for
the tax paid by a Portfolio. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain distribution might have been classified
as capital gain. This may have the effect of increasing Portfolio distributions
to you that are treated as ordinary dividends rather than long-term capital gain
dividends.

A Portfolio may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a Portfolio generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC during such period. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market a Portfolio's PFIC
shares at the end of each taxable year (and on certain other dates as prescribed
in the Code), with the result that unrealized gains would be treated as though
they were realized. A Portfolio would also be allowed an ordinary deduction
for the excess, if any, of the adjusted basis of its investment in the PFIC
stock over its fair market value at the end of the taxable year. This deduction
would be limited to the amount of any net mark-to-market gains previously
included with respect to that particular PFIC security. If a Portfolio were to
make this second PFIC election, tax at a Portfolio level under the PFIC rules
would generally be eliminated.

The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Portfolio (if any), the amounts distributable to you
by a Portfolio, the time at which these distributions must be made, and whether
these distributions will be classified as ordinary income or capital gain
distributions to you.

You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Portfolio acquires shares in that corporation. While
a Portfolio will generally seek to avoid investing in PFIC shares to avoid the
tax consequences detailed above, there are no

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guarantees that it will do so and it reserves the right to make such investments
as a matter of its fundamental investment policy.

Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Portfolio, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Portfolio's income available for distribution to you, and may cause
some or all of a Portfolio's previously distributed income to be classified as a
return of capital.

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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, periods, as applicable.
Each Portfolio may also advertise aggregate and average total return information
of its Classes over additional periods of time. In addition, each Portfolio may
include illustrations showing the power of compounding in advertisements and
other types of literature.

In presenting performance information for Class A Shares, the Limited
CDSC, or other CDSC, applicable only to certain redemptions of those shares will
not be deducted from any computation of total return. See the Prospectus for the
Fund Classes for a description of the Limited CDSC, or other 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.

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 Class A Shares only, 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.

Total return performance for each Class will be computed by adding
all reinvested income and realized securities profits distributions plus the
change in net asset value during a specific period and dividing by the offering
price at the beginning of the period. It will reflect, as applicable, the
maximum sales charge, or CDSC, paid with respect to the illustrated investment
amount, but not any income taxes payable by shareholders on the reinvested
distributions included in the calculation. Because securities prices fluctuate,
past performance should not be considered as a representative of the results
which may be realized from an investment in the Portfolios in the future.

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

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return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.

Average annual total return is not shown since the Portfolios have
been in operation for less than one year.

From time to time, a Portfolio may also quote each Class' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Portfolio (or Class) may be compared to
data prepared by Lipper Analytical Services, Inc. ("Lipper"), Morningstar,
Inc. or to the S&P 500 or the Dow Jones Industrial Average.

Lipper maintains statistical performance databases, as reported by a
diverse universe of independently-managed mutual funds. Morningstar, Inc. is a
mutual fund rating service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare a Portfolio's performance to another fund in
appropriate categories over specific time periods also may be quoted in
advertising and other types of literature. The S&P 500 and the Dow Jones
Industrial Average are industry-accepted unmanaged indices of
generally-conservative securities used for measuring general market performance.
The Russell 2000 Index TR is a total return weighted index which is comprised of
2,000 of the smallest stocks (on the basis of capitalization) in the Russell
3000 Index and is calculated on a monthly basis. The NASDAQ Composite Index is a
market capitalization price only index that tracks the performance of domestic
common stocks traded on the regular NASDAQ market as well as National Market
System traded foreign common stocks and American Depository Receipts. The total
return performance reported for these indices will reflect the reinvestment of
all distributions on a quarterly basis and market price fluctuations. The
indices do not take into account any sales charge or other fees. A direct
investment in an unmanaged index is not possible.

In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Brothers and Lehman
Brothers may be combined to create a blended performance result for comparative
performances. 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.

Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Portfolios may use the performance of
these capital markets in order to demonstrate general risk-versus-reward
investment scenarios. Performance comparisons may also include the value of a
hypothetical investment in any of these capital markets. The risks associated
with the security types in any capital market may or may not correspond directly
to those of a Portfolio. A Portfolio may also compare performance to that of
other compilations or indices that may be developed and made available in the
future.

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The Portfolios may include discussions or illustrations of the
potential investment goals of a prospective investor (including materials that
describe general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting, questionnaires designed to
help create a personal financial profile, worksheets used to project savings
needs based on assumed rates of inflation and hypothetical rates of return and
action plans offering investment alternatives), investment management
techniques, policies or investment suitability of a Portfolio (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic account rebalancing, the advantages and disadvantages
of investing in tax-deferred and taxable investments), economic and political
conditions, the relationship between sectors of the economy and the economy as a
whole, the effects of inflation and historical performance of various asset
classes, including but not limited to, stocks, bonds and Treasury bills. From
time to time advertisements, sales literature, communications to shareholders or
other materials may summarize the substance of information contained in
shareholder reports (including the investment composition of a Portfolio), as
well as the views as to current market, economic, trade and interest rate
trends, legislative, regulatory and monetary developments, investment strategies
and related matters believed to be of relevance to a Portfolio. In addition,
selected indices may be used to illustrate historic performance of selected
asset classes. The Portfolios may also include in advertisements, sales
literature, communications to shareholders or other materials, charts, graphs or
drawings which illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to, stocks, bonds,
treasury bills and shares of a Portfolio. In addition, advertisements, sales
literature, communications to shareholders or other materials may include a
discussion of certain attributes or benefits to be derived by an investment in a
Portfolio and/or other mutual funds, shareholder profiles and hypothetical
investor scenarios, timely information on financial management, tax and
retirement planning (such as information on Roth IRAs and Education IRAs) and
investment alternative to certificates of deposit and other financial
instruments. Such sales literature, communications to shareholders or other
materials may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail therein.

Materials may refer to the CUSIP numbers of the Portfolios and may
illustrate how to find the listings of the Portfolios in newspapers and
periodicals. Materials may also include discussions of other funds, products,
and services.

The Portfolios may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Portfolios may compare these
measures to those of other funds. Measures of volatility seek to compare the
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. Measures of volatility and correlation may be calculated using averages of
historical data. A Portfolio may advertise its current interest rate
sensitivity, duration, weighted average maturity or similar maturity
characteristics. Advertisements and sales materials relating to a Portfolio may
include information regarding the background and experience of its portfolio
managers.

The following tables present examples, for purposes of illustration
only, of cumulative total return performance for Class A Shares, Class B Shares,
Class C Shares and Institutional Class shares through September 30, 1998. For
these purposes, the calculations assume the reinvestment of any capital gains
distributions and income dividends paid during the indicated periods. The
performance does not reflect any income taxes payable by shareholders on the
reinvested distributions included in the calculations. The performance of Class
A Shares reflects the maximum front-end sales charge of 5.75% paid on the
purchase of shares but may also be shown without reflecting the impact of any
front-end sales charge.

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The performance of Class B Shares and Class C Shares is calculated both with the
applicable CDSC included and excluded. Past performance is no guarantee of
future results.

Cumulative Total Return(1)
Balanced Portfolio

Class A Institu-
Shares tional
(at Offer) Class
3 months ended
9/30/98 (14.82%) (9.58%)

6 months ended
9/30/98 (15.68%)(3) (10.41%)

9 months ended
9/30/98 (9.23%) (3.56%)

Period 12/31/97(2)
through 9/30/98 (9.23%) (3.56%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

(3) For the six months ended September 30, 1998, cumulative total return for
Balanced Portfolio A Class at net asset value was (10.52%).

Cumulative Total Return(1)
Balanced Portfolio

Class B Class B
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months ended
9/30/98 (14.30%) (9.80%)

6 months ended
9/30/98 (15.28%) (10.83%)

9 months ended
9/30/98 (8.80%) (4.02%)

Period 12/31/97(2)
through 9/30/98 (8.80%) (4.02%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

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Cumulative Total Return(1)
Balanced Portfolio

Class C Class C
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months ended
9/30/98 (10.59%) (9.69%)

6 months ended
9/30/98 (11.61%) (10.72%)

9 months ended
9/30/98 (4.86%) (3.90%)

Period 12/31/97(2)
through 9/30/98 (4.86%) (3.90%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

Cumulative Total Return(1)
Growth Portfolio

Class A Institu-
Shares tional
(at Offer) Class
3 months ended
9/30/98 (16.63%) (11.57%)

6 months ended
9/30/98 (17.89%)(3) (12.79%)

9 months ended
9/30/98 (9.42%) (3.77%)

Period 12/31/97(2)
through 9/30/98 (9.42%) (3.77%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

(3) For the six months ended September 30, 1998, cumulative total return for
Growth Portfolio A Class at net asset value was (12.90%).

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<PAGE>

Cumulative Total Return(1)
Growth Portfolio

Class B Class B
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months ended
9/30/98 (16.13%) (11.71%)

6 months ended
9/30/98 (17.47%) (13.13%)

9 months ended
9/30/98 (9.02%) (4.24%)

Period 12/31/97(2)
through 9/30/98 (9.02%) (4.24%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

Cumulative Total Return(1)
Growth Portfolio

Class C Class C
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)

3 months ended
9/30/98 (12.69%) (11.81%)

6 months ended
9/30/98 (14.09%) (13.22%)

9 months ended
9/30/98 (5.19%) (4.24%)

Period 12/31/97(2)
through 9/30/98 (5.19%) (4.24%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

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<PAGE>

Cumulative Total Return(1)
Income Portfolio

Class A Institu-
Shares tional
(at Offer) Class
3 months ended
9/30/98 (11.69%) (6.34%)

6 months ended
9/30/98 (12.07%)(3) (6.59%)

9 months ended
9/30/98 (6.91%) (1.10%)

Period 12/31/97(2)
through 9/30/98 (6.91%) (1.10%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

(3) For the six months ended September 30, 1998, cumulative total return for
Income Portfolio A Class at net asset value was (6.70%).

Cumulative Total Return(1)
Income Portfolio

Class B Class B
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months ended
9/30/98 (11.16%) (6.51%)

6 months ended
9/30/98 (11.63%) (7.03%)

9 months ended
9/30/98 (6.43%) (1.56%)

Period 12/31/97(2)
through 9/30/98 (6.43%) (1.56%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

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<PAGE>

Cumulative Total Return(1)
Income Portfolio

Class C Class C
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months ended
9/30/98 (7.44%) (6.51%)

6 months ended
9/30/98 (7.95%) (7.03%)

9 months ended
9/30/98 (2.53%) (1.56%)

Period 12/31/97(2)
through 9/30/98 (2.53%) (1.56%)

(1) Returns reflect the voluntary waiver of fees and payments of expenses by
the Manager. See Asset Allocation Agreements.

(2) Date of commencement of trading.

Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Trust and other mutual funds available
from the Delaware Investments family, 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 investment
disciplines employed in seeking the objectives of the Portfolios and the other
funds in the Delaware Investments family. 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

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<PAGE>

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 Investments
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 Direct Deposit Purchase Plan, Automatic Investing Plan and
Wealth Builder Option under Purchasing Shares Investing by Electronic Fund
Transfer 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 of a stock or bond fund over a
period of time will be lower than the average price per share of a Portfolio for
the same time period.

Number
Investment Price Per of Shares
Amount Share Purchased

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

Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
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 the Portfolios or any stock or bond fund in
the Delaware Investments family.

Dollar-cost averaging can be appropriate for investments in shares of
funds that tend to fluctuate in value. Please obtain the prospectus of any fund
in the Delaware Investments family in which you plan to invest through a
dollar-cost averaging program. The prospectus contains additional information,
including charges and expenses. Please read it carefully before you invest or
send money.

THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Portfolio
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. The Portfolios may include illustrations showing the
power of compounding in advertisements and other types of literature.

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<PAGE>

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
its judgment of their professional capability 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.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. A number of trades 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.

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 1934 Act and the Portfolios' Asset Allocation
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 Investments family. 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.

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<PAGE>

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 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 Investments family
such as custodian fees, and may, at the request of the Distributor, give
consideration to sales of shares of funds in the Delaware Investments family
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.

During the fiscal period December 31, 1997 through September 30, 1998,
the annualized portfolio turnover for the Balanced Portfolio, Growth Portfolio
and Income Portfolio was 73%, 77% and 81%, respectively.

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<PAGE>

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 fund in the Delaware Investments family, the Manager or any
of the Manager's 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 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 $50,000 or more in Class A Shareswhich
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 if in
the opinion of management such rejection is in a 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 5.75%; however, lower front-end sales
charges apply for larger purchases. Class A Shares are also subject to annual
12b-1 Plan expenses for the life of the investment.

Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed during the first year after purchase;
(ii) 4% if shares are redeemed during the second year after purchase; (iii)
3% if shares are redeemed during the third or fourth year after purchase;
(iv) 2% if shares are redeemed during the fifth year after purchase; (v) 1%
if shares are redeemed during the sixth year after purchase; and (vi) 0%
thereafter. 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' Prospectus.

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<PAGE>

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.

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 Plans Under Rule 12b-1 for the Fund Classes and
Determining Offering Price and Net Asset Value 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 Shares, Class B Shares and Class C Shares, of any expensesunder
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 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 Shares, Class B Shares
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, pursuant to Board action) or to purchase either Class B Shares 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 A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges and may include a series of purchases
over a 13-month period under a Letter of Intention signed by the purchaser. See
Front-End Sales Charge Alternatives - Class A Shares in the Prospectus for the
Fund Classes for a table illustrating reduced front-end sales charges. See also
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.

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<PAGE>

Certain dealers who enter into an agreement to provide extra training
and information on Delaware Investments products and services and who increase
sales of funds in the Delaware Investments family 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
As described in the Prospectus for the Fund Classes, 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. See Front-End Sales Charge Alternative - Class A Shares in the
Prospectus for the Fund Classes for the applicable schedule and further details.

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 above, 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 Shares
and Class C Shares under Redemption and Exchange in the Prospectus for the
Fund Classes for a list of the instances in which the CDSC is waived.

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' Prospectus. Such
conversion will constitute a tax-free exchange for federal income tax purposes.
See Taxes in the Prospectus 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,

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<PAGE>

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 Shares 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, each Portfolio may make payments out of the assets of
Class A Shares, Class B Shares 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
average daily net assets for the year of Class A Shares, 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.

Pursuant to Board action, the maximum aggregate fee payable by Class A
Shares is 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 Shares, Class B Shares 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 that Portfolio's B Class.
Also, any other material amendment to the Plans must be approved by a majority
vote of the trustees including a majority of the

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<PAGE>

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.

For the fiscal period December 31, 1997 through September 30, 1998,
payments from Balanced Portfolio A Class, Balanced Portfolio B Class and
Balanced Portfolio C Class amounted to $384, $1,118 and $1,434, respectively.
Such payments were used for the following purposes:

Balanced Portfolio Balanced Portfolio Balanced Portfolio
A Class B Class C Class

<S> <C> <C> <C>
Advertising $6 ----- -----
Annual/Semi-Annual Reports $366 $279 -----
Broker Trails ----- $512 $102
Broker Sales Charges ----- $270 $643
Dealer Service Expenses ----- $46 $177
Interest on Broker Sales Charges ----- ----- $512
Commissions to Wholesalers ----- ----- -----
Promotional-Broker Meetings ----- ----- -----
Promotional-Other ----- ----- -----
Prospectus Printing $12 ----- -----
Telephone ----- ----- -----
Wholesaler Expenses ----- $11 -----
Other ----- ----- -----
</TABLE>

For the fiscal period December 31, 1997 through September 30, 1998,
payments from Growth Portfolio A Class, Growth Portfolio B Class and Growth
Portfolio C Class amounted to $432, $1,786 and $183, respectively. Such payments
were used for the following purposes:
<TABLE>
<CAPTION>

Growth Portfolio Growth Portfolio Growth Portfolio
A Class B Class C Class

<S> <C> <C> <C>
Advertising ----- ----- -----
Annual/Semi-Annual Reports $430 ----- -----
Broker Trails ----- $446 $47
Broker Sales Charges ----- $754 $7
Dealer Service Expenses ----- $496 $100
Interest on Broker Sales Charges ----- $85 $5
Commissions to Wholesalers ----- ----- -----
Promotional-Broker Meetings ----- $5 -----
Promotional-Other $2 ----- -----
Prospectus Printing ----- ----- -----
Telephone ----- ----- -----
Wholesaler Expenses ----- ----- $24
Other ----- ----- -----

</TABLE>

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<PAGE>

For the fiscal period December 31, 1997 through September 30, 1998,
payments from Income Portfolio A Class, Income Portfolio B Class and Income
Portfolio C Class amounted to $360, $77 and $84, respectively. Such payments
were used for the following purposes:
<TABLE>
<CAPTION>

Income Portfolio Income Portfolio Income Portfolio
A Class B Class C Class

<S> <C> <C> <C>
Advertising ----- ----- -----
Annual/Semi-Annual Reports $360 ----- -----
Broker Trails ----- $21 $10
Broker Sales Charges ----- $17 $17
Dealer Service Expenses ----- $37 $3
Interest on Broker Sales Charges ----- $2 $18
Commissions to Wholesalers ----- ----- -----
Promotional-Broker Meetings ----- ----- -----
Promotional-Other ----- ----- -----
Prospectus Printing ----- ----- -----
Telephone ----- ----- -----
Wholesaler Expenses ----- ----- $36
Other ----- ----- -----
</TABLE>

Other Payments to Dealers -- Class A Shares, Class B Shares 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 funds in the Delaware Investments family. 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 funds in the Delaware Investments family.

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.

Current and former officers, trustees and employees of the Trust, any
other fund in the Delaware Investments family, the Manager, or any of the
Manager's affiliates and those 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 Investments family, including any fund that may be created, at
the net asset value per share. Family members (regardless of age) 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.

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<PAGE>

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 funds in
the Delaware Investments family. 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.

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 funds in the Delaware
Investments family and any stable value product available through Delaware
Investments, 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 Investments fund and such employer has properly represented to
Retirement Financial Services, Inc. in writing thatit has the requisite number
of employees, and received written confirmation back from Retirement Financial
Services, Inc.

Purchases of Class A Shares at net asset value may also be made by
bank sponsored retirement plans that are no longer eligible to purchase
Institutional Class shares or purchase interests in a collective trust as a
result of a change in the distribution arrangements.

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
Investments fund 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 by
any such purchaser previously enumerated 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%

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<PAGE>

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 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 Investments family (except shares of any fund in
the Delaware Investments family 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 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. For purposes of satisfying an investor's obligation under a Letter
of Intention, Class B Shares and Class C Shares of a Portfolio and the
corresponding classes of shares of other funds in the Delaware Investments
family which offer such shares may be aggregated with Class A Shares of a
Portfolio and the corresponding class of shares of the other funds in the
Delaware Investments family.

Employers offering a Delaware Investments 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 funds in the Delaware Investments family 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 funds available from the Delaware
Investments family 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 funds available from the Delaware Investments family (except shares of
any funds in the Delaware Investments family 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 fund in
the Delaware Investments family which carried a front-end sales charge, CDSC
or Limited CDSC). In addition, assets held by investment

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<PAGE>

advisory clients of the Manager or its affiliates in a stable value account may
be combined with other Delaware Investments 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 funds in the Delaware
Investments family which offer such classes (except shares of any funds in the
Delaware Investments family 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 fund in the
Delaware Investments family 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 $20,000 and subsequently purchases
$30,000 at offering price of additional shares of Class A Shares, the charge
applicable to the $50,000 purchase would currently be 4.75%. 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.

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 Investments family 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
Investments family, 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 Investments family 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

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<PAGE>

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 Prospectus for the Fund
Classes, based on total plan assets. If a company has more than one plan
investing in the Delaware Investments family 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 investment
accounts of Delaware Investments if they so notify the Portfolio in connection
with each purchase. See Retirement Plans for the Fund Classes under Investment
Plans for information about retirement 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, an affiliate 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.

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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<PAGE>

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 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 madefor 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 Funds in the Delaware Investments Family
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments family,
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 Prospectus for the Fund Classes.

Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Investments family 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.

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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<PAGE>

Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan -- Investors may arrange for a Portfolio
to accept for investment 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 -- The Automatic Investing Plan enables
shareholders to make regular monthly investments without writing checks.
Shareholders may authorize, in advance, to make arrangements for their bank to
withdraw a designated amount monthly directly from their checking account for
deposit into their Portfolio account. This type of investment will be handled in
either of the following two 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.

* * *

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 a 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 available from the Delaware Investments

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<PAGE>

family. Shareholders of the Fund Classes may elect to invest in one or more of
the other mutual funds available from the Delaware Investments family
through the Wealth Builder Option. See Wealth Builder Option and Redemption and
Exchange in the Prospectuses for the Fund Classes.

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 available
from the Delaware Investments family, subject to the conditions and
limitations set forth in the Fund Classes' Prospectus. 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 giving written notice to the fund from which exchanges are made.

Asset Planner
To invest in funds in the Delaware Investments family using the
Asset Planner asset allocation service, you should complete an Asset Planner
Account Registration Form, which is available only from a financial adviser or
investment dealer. Effective September 1, 1997, the Asset Planner Service is
only available to financial advisers or investment dealers who have previously
used this service. The Asset Planner service offers a choice of four
predesigned asset allocation strategies (each with a different risk/reward
profile) in predetermined percentages in funds in the Delaware Investments
family. 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
Investments 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 in the Prospectus for the Fund Classes. 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 Shares, Class B Shares 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 a Portfolio and of other
funds in the Delaware Investments family may be used in the same Strategy with
consultant class shares that are offered by certain other Delaware Investments
funds.

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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.

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. Delaware Investments offers a full spectrum of retirement
plans, including the 401(k) Deferred Compensation Plan, Individual Retirement
Account ("IRA"), and the new Roth IRA.

Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 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 Shares
and Class C Shares under Redemption and Exchange in the Prospectus 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.

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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 may be subject to
withholding.

Please contact your investment dealer or the Distributor for the
special application forms required for the plans.

Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.

Individual Retirement Account ("IRA")
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; however, participation
may be restricted based on certain income limits.

IRA Disclosures
The 1997 Act provides new opportunities for investors. Individuals have
five types of tax-favored IRA accounts that can be utilized depending on the
individual's circumstances. A new Roth IRA and Education IRA are available in
addition to the existing deductible IRA and non-deductible IRA.

Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.

Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.

Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual

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who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.

Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.

A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:

(i) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;

(ii) Substantially equal installment payments for a period certain of
10 or more years;

(iii) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;

(iv) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and

(v) A distribution of after-tax contributions which is not includable
in income.

Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).

Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.

Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.

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Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.

This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.

Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.

Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includible in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
educations expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.

A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.

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,

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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. For information concerning the applicability of
a CDSC upon redemption of Class B Shares and Class C Shares, see Contingent
Deferred Sales Charge - Class B Shares and Class C Shares under Classes of
Shares in the Prospectus for the Fund Classes.

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. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.

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 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 continue to 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. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. 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 Investments family. 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 the Prospectus for the Fund Classes.

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 shares
of any of the Classes in conjunction with such an arrangement. 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 the Prospectus for
the Fund Classes.

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

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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 the Fund. Although investors may use their own plan, there is available a
Delaware Investments 457 Deferred Compensation Plan. Interested investors should
contact the Distributor or their investment dealers to obtain further
information. 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 in the Prospectus for the Fund Classes.

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. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.

SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer 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 , its agent or certain other authorized
persons. See Distribution and Service under Asset Allocation Agreements. Orders
for purchases of Class B Shares, Class C Shares and Institutional Class
Shares 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 , its
agent or certain other authorized persons. 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 days on which the following holidays are observed: 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, is included in
each Portfolio's financial statements and is 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.

Each Class of each Portfolio will bear, pro-rata, all of the common
expenses of its respective Portfolio. 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 Class A Shares, Class B Shares and Class C Shares of each Portfolio
alone will bear the 12b-1 Plan expenses payable under their respective Plans.
Due to the specific

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distribution expenses and other costs that will be allocable to each class, the
NAV of each class of a Portfolio will vary.

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. A signature guarantee
can be obtained from a commercial bank, a trust company or a member of a
securities transfer association medallion program ("STAMP"). A signature
guarantee cannot be provided by a notary public. A signature guarantee is
designed to protect the shareholders, the Trust and its agents from fraud. 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 , its agent or certain other authorized persons,
subject to any applicable CDSC or Limited CDSC. See Distribution and Service
under Asset Allocation Agreements. 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 Prospectus for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 5% if shares are redeemed during the first year
after purchase; (ii) 4% if shares are redeemed during the second year after
purchase; (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; (v) 1% if shares are redeemed during the sixth year
following purchase; and (vi) 0% thereafter. Class C

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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 Prospectus 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.

Payment for shares redeemed will ordinarily be mailed the next business
day, but no later than seven days, after receipt of a redemption request in
good order by a Portfolio or certain other authorized persons (see Distribution
and Service under Asset Allocation Agreements); 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. The hold
period against a recent purchase may be up to but not in excess of 15 days,
depending upon the origin of the investment check. Dividends will continue to be
earned until the redemption is processed. 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, a
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 a 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 1940 Act 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 a 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.

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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 by the
Prospectuses 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.

* * *

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 First Union National Bank
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.

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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.

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 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 Shares, Class B Shares 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 a 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 funds in the Delaware Investments family
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

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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 Shares and Class C Shares and Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares under Redemption and Exchange
in the Prospectus for the Fund Classes. Shareholders should consult their
financial advisers to determine whether a Systematic Withdrawal Plan would be
suitable for them.

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

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.

-69-

<PAGE>

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 described below. 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. Each Portfolio is treated as a single tax entity
and capital gains for each Portfolio will be calculated separately.

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 a Portfolio that so qualifies will be
designated each year in a notice mailed to a Portfolio's shareholders, and
cannot exceed the gross amount of dividends received by a Portfolio from
domestic (U.S.) corporations that would have qualified for the
dividends-received deduction in the hands of a 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. Under the 1997 Act, the
amount that a Portfolio may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares on which the dividends
earned by a Portfolio were debt-financed or held by a Portfolio for less than a
46-day period during a 90-day period beginning 45 days before the ex-dividend
date and ending 45 days after the ex-dividend date. Similarly, if your Portfolio
shares are debt-financed or held by you for less than a 46-day period during a
90-day period beginning 45 days before the ex-dividend date and ending 45 days
after the ex-dividend date, then the dividends-received deduction for Portfolio
dividends on your shares may also be reduced or eliminated. Even if designated
as dividends eligible for the dividends-received deduction, all dividends
(including any deducted portion) must be included in your alternative minimum
taxable income calculation. Advice as to the tax status of each year's dividends
and distributions, when paid, will be mailed annually. For the period December
31, 1997 through September 30, 1998, none of the Portfolios' dividends from net
investment income qualified for the dividends-received deduction.

Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act , a Portfolio is
required to track its sales of portfolio securities and to report its capital
gain distributions to you according to the following categories of holding
periods:

"Mid-term capital gains" or "28 percent rate gain": securities sold by
a Portfolio after July 28, 1997 that were held more than one year but
not more than 18 months. These gains will be taxable to individual
investors at a maximum rate of 28%. This category of gains applied only
to gains and distributions in 1997.

"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold between May 7, 1997 and July 28, 1997 that were held
for more than 12 months, and securities sold by the Portfolio after
July 28, 1997 that were held for more than 18 months. As revised by the
1998 Act, this rate applies to securities held for more than 12 months
and sold in tax years beginning after December 1, 1997. These gains
will be taxable to individual investors at a maximum rate of 20% for
investors in the 28% or higher federal income tax brackets, and at a
maximum rate of 10% for investors in the 15% federal income tax
bracket. The Omnibus Consolidated and Emergency Supplemental
Appropriations Act passed in October of

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<PAGE>

1998 included technical corrections to the 1998 Act. The effect of this
correction is that essentially all capital gain distributions paid to
shareholders during 1998 will be taxed at a maximum rate of 20%.

"Qualified 5-year gains": For individuals in the 15% bracket, qualified
5-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject
to tax at higher rate brackets, qualified 5-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to
recognize gain on their shares in order to qualify such shares as
qualified 5-year property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the five year
holding period.

Each Portfolio has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, each
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 and it satisfies
other requirements relating to the sources of its income and diversification of
its assets. In order to qualify as a regulated investment company for federal
income tax purposes, each Portfolio must meet certain specific requirements,
including:

(i) Each Portfolio must maintain a diversified portfolio of securities, wherein
no security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of a Portfolio's total assets,
and, with respect to 50% of a Portfolio's total assets, no investment (other
than cash and cash items, U.S. government securities and securities of other
regulated investment companies) can exceed 5% of a Portfolio's total assets;

(ii) Each Portfolio must derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the sale or
disposition of stock and securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; and

(iii) Each Portfolio must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years.

The Code requires each Portfolio to distribute at least 98% of its
taxable ordinary income earned during the calendar year and 98% of its capital
gain net income earned during the 12 month period ending October 31 (in addition
to amounts from the prior year that were neither distributed nor taxed to a
Portfolio) to shareholders by December 31 of each year in order to avoid federal
excise taxes. Each Portfolio intends as a matter of policy to declare and pay
sufficient dividends in December or January

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<PAGE>

(which are treated by shareholders as received in December) but does not
guarantee and can give no assurances that its distributions will be sufficient
to eliminate all such taxes.

The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, a Portfolio must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. Each Portfolio will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.

Investment in Foreign Currencies and Foreign Securities--Each Portfolio
is authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to a
Portfolio:

If a Portfolio's Section 988 losses exceed such Portfolio's other
investment company taxable income during a taxable year, a Portfolio generally
will not be able to make ordinary dividend distributions to you for that year,
or distributions made before the losses were realized will be recharacterized as
return of capital distributions for federal income tax purposes, rather than as
an ordinary dividend or capital gain distribution. If a distribution is treated
as a return of capital, your tax basis in your Portfolio shares will be reduced
by a like amount (to the extent of such basis), and any excess of the
distribution over your tax basis in your Portfolio shares will be treated as
capital gain to you.

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<PAGE>

Portfolio to track and record adjustments to foreign taxes paid on foreign
securities in which it invests. Under a Portfolio's current reporting procedure,
foreign security transactions are recorded generally at the time of each
transaction using the foreign currency spot rate available for the date of each
transaction. Under the new law, a Portfolio will be required to record at fiscal
year end (and at calendar year end for excise tax purposes) an adjustment that
reflects the difference between the spot rates recorded for each transaction and
the year-end average exchange rate for all of a Portfolio's foreign securities
transactions. There is a possibility that the mutual fund industry will be given
relief from this new provision, in which case no year-end adjustments will be
required.

Each Portfolio may be subject to foreign withholding taxes on income
from certain of its foreign securities. If more than 50% of the total assets of
a Portfolio at the end of its fiscal year are invested in securities of foreign
corporations, such Portfolio may elect to pass-through to you your pro rata
share of foreign taxes paid by such Portfolio. If this election is made, you
will be: (i) required to include in your gross income your pro rata share of
foreign source income (including any foreign taxes paid by a Portfolio); and
(ii) entitled to either deduct your share of such foreign taxes in computing
your taxable income or to claim a credit for such taxes against your U.S. income
tax, subject to certain limitations under the Code. You will be informed by a
Portfolio at the end of each calendar year regarding the availability of any
such foreign tax credits and the amount of foreign source income (including any
foreign taxes paid by such Portfolio). If a Portfolio elects to pass-through to
you the foreign income taxes that it has paid, you will be informed at the end
of the calendar year of the amount of foreign taxes paid and foreign source
income that must be included on your federal income tax return. If a Portfolio
invests 50% or less of its total assets in securities of foreign corporations,
it will not be entitled to pass-through to you your pro-rata shares of foreign
taxes paid by such Portfolio. In this case, these taxes will be taken as a
deduction by a Portfolio, and the income reported to you will be the net amount
after these deductions. The 1997 Act also simplifies the procedures by which
investors in funds that invest in foreign securities can claim tax credits on
their individual income tax returns for the foreign taxes paid by a Portfolio.
These provisions will allow investors who pay foreign taxes of $300 or less on a
single return or $600 or less on a joint return during any year (all of which
must be reported on IRS Form 1099-DIV from a Portfolio to the investor) to claim
a tax credit against their U.S. federal income tax for the amount of foreign
taxes paid by a Portfolio. This process will allow you, if you qualify, to
bypass the burdensome and detailed reporting requirements on the foreign tax
credit schedule (Form 1116) and report your foreign taxes paid directly on page
2 of Form 1040. You should note that this simplified procedure will not be
available until calendar year 1998.

Investment in Passive Foreign Investment Company Securities--Each
Portfolio may invest in shares of foreign corporations which may be classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Portfolio receives an "excess distribution" with
respect to PFIC stock, such Portfolio itself may be subject to U.S. federal
income tax on a portion of the distribution, whether or not the corresponding
income is distributed by that Fund to you. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which a Portfolio held the PFIC shares. A Portfolio itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Portfolio taxable years, and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years. In this
case, you would not be permitted to claim a credit on your own tax return for
the tax paid by a Portfolio. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as

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<PAGE>

ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Portfolio distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.

A Portfolio may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, such Portfolio generally would be required to include in its
gross income its share of the earnings of a PFIC on a current basis, regardless
of whether distributions are received from the PFIC during such period. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market a Portfolio's PFIC shares
at the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. A Portfolio would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of its investment in the PFIC stock over
its fair market value at the end of the taxable year. This deduction would be
limited to the amount of any net mark-to-market gains previously included with
respect to that particular PFIC security. If a Portfolio were to make this
second PFIC election, tax at the Portfolio level under the PFIC rules would
generally be eliminated.

The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Portfolio (if any), the amounts distributable to you
by such Portfolio, the time at which these distributions must be made, and
whether these distributions will be classified as ordinary income or capital
gain distributions to you.

You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after the Fund acquires shares in that corporation. While a
Portfolio will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.

Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Portfolio, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Portfolio's income available for distribution to you, and may cause
some or all of such Portfolio's previously distributed income to be classified
as a return of capital.

Shareholders will be notified annually by the Trust as to the federal
income tax status of dividends and distributions paid by their Portfolio.

In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. Because shareholders' state
and local taxes may be different than the federal taxes described above,
shareholders should consult their own tax advisers.

See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.

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<PAGE>

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 Investments family since 1938. On September 30, 1998, the Manager
and its affiliates within Delaware Investments, including Delaware
International Advisers Ltd., were managing in the aggregate more than $40
billion in assets in the various institutional or separately managed
(approximately $23,666,360,000) and investment company (approximately
$17,194,990,000) accounts.

The Asset Allocation Agreement for each Portfolio is dated December 18,
1997 and was approved by the initial shareholder on December 31, 1997. 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.

On September 30, 1998, the total net assets of the Balanced Portfolio,
Growth Portfolio and Income Portfolio were $2,122,001, $1,553,562, and $596,186,
respectively. Investment management fees incurred, paid and waived for the
fiscal period December 31, 1997 through September 30, 1998 with
respect to each Portfolio follows:

Balanced Portfolio $623 earned
$-0- paid
$623 waived

Growth Portfolio $522 earned
$-0- paid
$522 waived

Income Portfolio $244 earned
$-0- paid
$244 waived

Under the general supervision of the Board of Directors, the Manager
makes all investment decisions which are implemented by the Portfolios. The
Manager pays the salaries of all directors, officers and employees who are
affiliated with both the Manager and 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.

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<PAGE>

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 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 0.55% (exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and applicable 12b-1 expenses)
through June 30, 1999.

Distribution and Service
The Distributor, Delaware Distributors, L.P., 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 their respective 12b-1 Plan.
The Distributor is an indirect, wholly owned subsidiary of DMH, Inc.

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 dated December 18, 1997. 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.

The Portfolios have authorized one or more brokers to accept on its
behalf purchase and redemption orders in addition to the Transfer Agent. Such
brokers are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Portfolios. For purposes of pricing, the
Portfolios will be deemed to have received a purchase or redemption order when
an authorized broker or, if applicable, a broker's authorized designee, accepts
the order. Investors may be charged a fee when effecting transactions through a
broker or agent.

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<PAGE>

OFFICERS AND TRUSTEES

The business and affairs of the Trust are managed under the direction
of its Board of Trustees.

Certain officers and directors of the Trust hold identical positions in
each of the other funds in the Delaware Investments family. On October 31, 1998,
the Trust's officers and trustees owned less than 1% of the outstanding shares
of Class A Shares, Class B Shares, Class C Shares and the Institutional Class.

As of October 31, 1998, management believes the following accounts held
5% or more of the outstanding shares of a Class of the Portfolios. With the
exception of DMC Profit Sharing Plans, the Portfolios have no knowledge of
beneficial ownership.

<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>

Income Portfolio Shiawassee Community TCH CU MPPP 9,645 18.84%
Class A Shares Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

Profit Sharing Plan for Richard Scott 9,236 18.04%
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708

Pension Plan for Richard Scott 8,081 15.79%
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708

Florence Wiseman 6,910 13.50%
904 East King Street
Owosso, MI 48867

Waltz Brothers 401(k) Plan 5,800 11.33%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

Anna M. Garber 5,251 10.26%
92 Strasburg Pike
Lancaster, PA 17602

Blast, Inc. 401(k) Plan 4,462 8.71%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

J. Mark Waltz 4,151 8.11%
1833 West Crescent
Park Ridge, IL 60068

Cappy E. Sumler 4,120 8.05%
1510 East 81st
Kansas, MO 64131

Kay Prezzato 2,708 5.29%
400 Gilbert St.
Owosso, MI 48867

Income Portfolio R. James Benninghoff 2,508 67.28%
Class B Shares 5601 Cold Water Road
Fort Wayne, IN 46825

</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>

Arden L. Nicholls, TTEE 356 9.54%
Arden L. Nicholls Family Trust
195 East Edgehill Drive
Providence, UT 84332

The SIMPLE IRA Account of 305 8.17%
Roberts Photography, Inc.
Amy L. Roberts
1414 Lakeland Cv.
Fort Wayne, IN 46825

The Roth IRA of Philip R. Bader 242 6.47%
1184 West Sutton Road
Metamora, MI 48455

The Roth IRA of Susan C. Bader 242 6.47%
1184 West Sutton Road
Metamora, MI 48455

Income Portfolio M. Pauline Wissler 3,697 30.07%
Class C Shares 227 Millwood Road
Lancaster, PA 17602

H. Dale Zimmerman 2,258 18.36%
Norma J. Zimmerman JT WROS
775 Stone Hill Road
Shoemakersville, PA 19555

Ruby D. Miller 1,919 15.60%
6451 County Road
Millersburg, OH 44654

DMTC Custodian for the IRA of 1,578 12.83%
Amos A. Bricker
2754 Mount Pleasant Road
Mount Joy, PA 17552

Income Portfolio Delaware Management Business Trust 5,972 100.00%
Institutional Class Attn: Joseph Hastings
1818 Market Street, Ste. 1600
Philadelphia, PA 19103

</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Balanced Portfolio John J. Hoober 401(k) Plan 64,032 33.49%
Class A Shares Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

Glenn A. Shively and 28,350 14.83%
Deborah Z. Shively, JT WROS
1401 Le Boutillier Road
Malvern, PA 19355

Shiawassee Community TCH CU MPPP 17,656 9.23%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

David L. Martin 14,864 7.78%
c/o John J. Hoober, Inc.
Box 39
3216 Mill Lane
Gordonville, PA 17529

Blast, Inc. 401(k) Plan 13,967 7.30%
Attn: Retirement Plans
1818 Marker Street
Philadelphia, PA 19103

Jeffrey D. Martin 13,091 6.85%
c/o John J. Hoober, Inc.
Box 39
3216 Mill Lane
Gordonville, PA 17529

NFSC/FMTC IRA 9,585 5.01%
For the Benefit of Jan B. Buckingham
1102 Glenwood Avenue
Nashville, TN 37204

Balanced Portfolio Sarah A. Anthony 9,148 16.57%
Class B Shares RR 3 Box 137
Kunkletown, PA 18058

Attn: Mutual Funds 9,086 16.46%
BHC Securities, Inc.
One Commerce Square
2005 Market Street - Ste. 1200
Philadelphia, PA 19103

DMTC For the Rollover IRA of 5,451 9.87%
Dewey H. Moon
2832 Fannie Thompson Road
Monroe, GA 30656

DMTC Custodian for the IRA of 3,458 6.26%
Alfred R. Kroening
304 East Arlington Street
Bangor, MI 49013
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Nancy J. Boyle and 3,069 5.56%
William W. Boyle, JT WROS
1355 Mohawk Drive
Port Charlotte, FL 33952

Balanced Portfolio Diabetes Foundation of Rhode Island, Inc. 14,499 16.94%
Class C Shares 1007 Waterman Avenue
East Providence, RI 02914

Elaine J. Avery 11,004 12.85%
1789 East 91st Street
Brooklyn, NY 11236

DMTC For the Rollover IRA of 7,982 9.32%
Joan F. Sylvander
1757 East 26th Street
Brooklyn, NY 11229

DMTC For the Rollover IRA of 6,422 7.50%
Catherine A. Horch
133 Henry St. - Apt. 8
Brooklyn, NY 11201

DMTC For the Rollover IRA of 5,522 6.45%
Josephine Benfatti
2017 Kimball Street
Brooklyn, NY 11234

Paul K. Graybill and 4,957 5.79%
Grace H. GraybilL, TEN ENT
4 Bomberger Road
Lititz, PA 17543

Balanced Portfolio Delaware Management Business Trust 5,931 100.00%
Institutional Class Attn: Joseph Hastings
1818 Market Street - Ste. 1600
Philadelphia, PA 19103

Growth Portfolio Ecko Tool & Die, Inc. 401(k) Plan 15,924 15.77%
Class A Shares Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

</TABLE>

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<PAGE>

Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Angelheart Designs, Inc. 401(k) Plan 15,450 15.30%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

Blast, Inc. 401(k) Plan 10,993 10.89%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

DMTC Profit Sharing Plan for 8,909 8.82%
Richard Scott
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708

B&S Cable 401(k) Plan 8,587 8.50%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

DMTC Pension Plan for 7,795 7.72%
Richard Scott
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708

Philip J. Lowe 6,490 6.43%
2946 Donelson Road
Jamestown, NY 14750

Resources Trust Company, Custodian 5,460 5.40%
For the Benefit of Allan Karson
Allan Karson Assoc., Inc.
P.O. Box 5900
Denver, CO 80217

Waltz Bros. 401(k) Plan 5,269 5.21%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

Mark A. Peterson 5,074 5.03%
3087 Donelson Road
Jamestown, NY 14750

Growth Portfolio DMTC For the Rollover IRA of 15,391 12.50%
Class B Shares Louis E. Meador
1301 Camden Place
Lawrenceville, GA 30043

</TABLE>

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<PAGE>
<TABLE>
<CAPTION>

Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>

NFSC/FMTC IRA For the Benefit of 9,037 7.34%
Joseph Morten Elkins
10602 Gray Fox Way
Savannah, GA 31406

Carolyn W. Shay 8,722 7.08%
9 North Marsh Road
Savannah, GA 31406

Jonathan A. Carver and 7,717 6.26%
Charles D. Carver, Sr., JT WROS
151 Amberidge Drive NW
Cartersville, GA 30120

DMTC Custodian for IRA of 6,186 5.02%
Charlotte K. Sebacher
5 Meadow Way
Sharpsburg, GA 30277

Growth Portfolio Richard K. Morford 3,281 17.50%
Class C Shares 1109 Tall Pines Court
Petoskey, MI 49770

Shore Line Construction, Inc. 401(k) Plan 1,598 8.52%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

GenFed Federal Credit Union 401(k) Plan 1,327 7.08%
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103

Judy A. Martinelli 1,049 5.60%
328 Barberry Lane
Peachtree City, GA 30269
</TABLE>

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<PAGE>

DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), 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 Retirement
Financial 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 Investments family. 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.

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<PAGE>

*Wayne A. Stork (61)
Chairman and Director and/or Trustee of the Trust and each of the
other 33 investment companies in the Delaware Investments
family and Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust
Chairman, President, Chief Executive Officer and Chief Investment
Officer of Delaware Management Company (a series of Delaware
Management Business Trust)
Chairman, Chief Executive Officer and Chief Investment Officer of
Delaware Investment Advisers (a series of Delaware Management
Business Trust)
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd. , Delaware International Holdings
Ltd. and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Retirement Financial
Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.

* Jeffrey J. Nick (45)
President, Chief Executive Officer and Director and/or Trustee of the
Trust and each of the other 33 investment companies in the
Delaware Investments family
Presidentand Director of Delaware Management Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.
Director of Delaware International Advisers Ltd.
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.

Richard G. Unruh, Jr. (59)
Executive Vice President of the Trust and each of the other 33
investment companies in the Delaware Investments family,
Delaware Management Holdings, Inc., Delaware Management
Company (a series of Delaware Management Business Trust) and
Delaware Capital
Management, Inc.
President of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Executive Vice President and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust
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.

- ----------------------
* Director affiliated with the Trust's investment manager and considered an
"interested person" as defined in the 1940 Act.

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<PAGE>

Paul E. Suckow (51)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Trust andeach of the other 33 investment companies in the
Delaware Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware
Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc. and
Delaware Management Business Trust
Director of Founders CBO Corporation
Director of HYPPCO Finance Company Ltd.
Before returning to Delaware Investments 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 Delaware Investments.

David K. Downes (58)
Executive Vice President, Chief Operating Officer, Chief Financial
Officer of the Trust and each of the other 33 investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc, Founders CBO Corporation, Delaware
Capital Management, Inc., Delaware Management Company (a
series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust
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 Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Retirement Financial Services, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various
executive capacities at different times within the Delaware
organization.

Walter P. Babich (71)
Director and/or Trustee of the Trust and each of the other 33
investment companies in the Delaware Investments family
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.

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<PAGE>

John H. Durham (60)
Director and/or Trustee of the Trust and 18 other investment companies
in the Delaware Investments family.
Partner, Complete Care Services.
120 Gilbraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each fund in the
Delaware Investments family from 1986 to 1991; President of
each fund from 1977 to 1990; and Chief Executive Officer of
each fund from 1984 to 1990. Prior to 1992, with respect to
Delaware Management Holdings, Inc., Delaware Management
Company, Delaware Distributors, Inc. and Delaware Service
Company, Inc., Mr. Durham served as a director and in various
executive capacities at different times.

Anthony D. Knerr (59)
Director and/or Trustee of the Trust and each of the 33 other
investment companies in the Delaware Investments family
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 (58)
Director and/or Trustee of the Trust and each of the other 33 other
investment companies in the Delaware Investments family
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.

W. Thacher Longstreth (78)
Director and/or Trustee of the Trust each of the other 33 other
investment companies in the Delaware Investments family
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman

Thomas F. Madison (62)
Director and/or Trustee of the Trust and each of the other 33
investment companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
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.

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<PAGE>

Charles E. Peck (72)
Director and/or Trustee of the Trust and each of the other 33
investment companies in the Delaware Investments family
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.

George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of the Trust and
each of the other 33 investment companies in the Delaware
Investments family
Senior Vice President and Secretary of Delaware Distributors, L.P.,
Delaware Management Company a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Management
Holdings, Inc.
Senior Vice President, Secretary and Director/Trustee of DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc., Founders Holdings, Inc.,
Retirement Financial Services, Inc., Delaware Capital
Management, Inc. , Delvoy, Inc. and Delaware Management
Business Trust
Executive Vice President, Secretary and Director of Delaware
Management Trust Company
Senior Vice President 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
executive capacities at different times within the Delaware
organization.

Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of the Trust andeach of
the other 33 investment companies in the Delaware
Investments family and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc. , Delaware
International Holdings Ltd., Delvoy, Inc. and Delaware
Management Business Trust
Chief Financial Officer/Treasurer of Retirement Financial Services,
Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various
executive capacities at different times within the Delaware
organization.

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<PAGE>

Michael P. Bishof (36)
Senior Vice President/Treasurer of the Trust and each of the other
33 investment companies in the Delaware Investments family
and Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Service
Company, Inc.
Senior Vice President and Treasurer/Managerof Investment Accounting
of Delaware Distributors, L.P. and Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Senior Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments 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.

J. Paul Dokas (38)
Vice President/Portfolio Manager of the Trust and two other
investment companies in the Delaware Investments family
Before joining Delaware Investmentsin 1997, Mr. Dokas was a
Director of Trust Investments for Bell Atlantic Corporation in
Philadelphia, where he held various positions from 1985 to
1997.

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<PAGE>

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 investment companies in the Delaware
Investments family for which he or she serves as a director or trustee 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. Only the independent trustees of the Trust receive
compensation from the Trust.
<TABLE>
<CAPTION>

Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Annual from the Investment
expected to be Accrued as Benefits Companies
received from Part of Trust Upon in Delaware
the Trust Expenses Retirement(1) Investments(2)
Name
<S> <C> <C> <C> <C>
W. Thacher Longstreth $185 None $38,500 $63,487
Ann R. Leven $185 None $38,500 $69,732
Walter P. Babich $185 None $38,500 $68,571
Anthony D. Knerr $185 None $38,500 $68,571
Charles E. Peck $185 None $38,500 $63,487
Thomas F. Madison $185 None $38,500 $65,154
John H. Durham (3) $-0- None $31,000 $25,506
</TABLE>

(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee 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 investment company in the
Delaware Investments family for which he or she serves as a director or
trustee for a period equal to the lesser of the number of years that
such person served as a director or trustee 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/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of
September 30, 1998, he or she would be entitled to annual payments
totaling the amounts noted above, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he or
she serves as a director or trustee, based on the number of
investment companies in the Delaware Investments family as of that
date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a
director or trustee for all 34 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John H.
Durham currently receives a total annual retainer fee of $31,000 for
serving as a director or trustee for 19 investment companies in
Delaware Investments, plus $1,757.50 for each Board Meeting attended.
Ann R. Leven, Walter P. Babich, Anthony D. Knerr and Thomas F. Madison
serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) John H. Durham joined the Board of Trustees of the Trust and 18 other
investment companies in Delaware Investments on April 16, 1998.

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<PAGE>

EXCHANGE PRIVILEGE

The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds available from the Delaware
Investments family are set forth in the relevant prospectuses for such classes.
The following supplements that information. The Portfolios 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 available from the
Delaware Investments family. 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 available from the Delaware Investments family 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 available from the Delaware Investments family.
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-
510-4015, 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 available from the Delaware Investments family. 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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<PAGE>

As described in the 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 funds in
the Delaware Investments family 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; (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 funds in the Delaware
Investments family: (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 funds in the Delaware Investments family are available for timed
exchanges. Assets redeemed or exchanged out of Timing Accounts in funds in the
Delaware Investments family 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 such 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 funds
in the Delaware Investments family:

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.

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<PAGE>

Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.

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. Social Awareness 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.

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. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Corporate Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds. Extended Duration Bond Fund seeks to provide
investors with total return by investing primarily in corporate bonds

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.

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.

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.

REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.

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<PAGE>

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 New Jersey Fund seeks a high level of current interest
income exempt from federal income tax and New Jersey state and 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. Tax-Free Pennsylvania Fund
seeks a high level of current interest income exempt from federal income tax and
Pennsylvania state and local taxes, consistent with the
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 Equity Fund seeks to achieve
long-term total return by investing in global securities that provide the
potential for capital appreciation and income. 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 16 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. Small Cap Value Series seeks
capital appreciation by investing in primarily small-cap common stocks whose
market values appear low relative to their underlying value or future earnings
and growth potential.

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<PAGE>

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. Social Awareness 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. REIT Series seeks to achieve maximum long-term total
return, with capital appreciation as a secondary objective, by investing in
securities of companies primarily engaged in the real estate industry.

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

-93-
<PAGE>

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 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 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

-94-
<PAGE>

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 funds in the Delaware
Investments family, 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).

-95-
<PAGE>

GENERAL INFORMATION

The Manager is the investment manager of the Portfolios. The Manager
also provides investment management services to certain of the other funds
available from the Delaware Investments family. An affiliate of the Manager
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 a variety of 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 mutual funds in the
Delaware Investments family outside the annuity. See Delaware Group Premium
Fund, Inc., above.

Access persons and advisory persons of the funds in the Delaware
Investments family, 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 Investments family. The Distributor
received net commissions from each Portfolio on behalf of Class A Shares, after
reallowances to dealers, as follow:
<TABLE>
<CAPTION>

Balanced Portfolio

Total
Amount of Amounts Net
Underwriting Reallowed Commission to
Fiscal Period Commission to Dealers the Distributor

<S> <C> <C> <C>
12/31/97 - 9/30/98 $18,454 $15,121 $3,333

</TABLE>

-96-
<PAGE>

Growth Portfolio

Total
Amount of Amounts Net
Underwriting Reallowed Commission to
Fiscal Period Commission to Dealers the Distributor

<S> <C> <C> <C>
12/31/97-9/30/98 $7,704 $6,391 $1,313

Income Portfolio

Total
Amount of Amounts Net
Underwriting Reallowed Commission to
Fiscal Period Commission to Dealers the Distributor

12/31/97-9/30/98 $1,047 $855 $192

</TABLE>

The Distributor received in the aggregate Limited CDSC or other CDSC
payments with respect to Class A Shares, Class B Shares and Class C Shares as
follows:

<TABLE>
<CAPTION>
Balanced Portfolio

Class A Shares Class B Shares Class C Shares
Fiscal Period Limited CDSC PaymentsCDSC Payments CDSC Payments

<S> <C> <C> <C>
12/31/97-9/30/98 $-0- $-0- $-0-

Growth Portfolio

Class A Shares Class B Shares Class C Shares
Fiscal Period Limited CDSC Payments CDSC Payments CDSC Payments

12/31/97-9/30/98 $-0- $438 $19

Income Portfolio

Class A Shares Class B Shares Class C Shares
Fiscal Period Limited CDSC Payments CDSC Payments CDSC Payments

12/31/97-9/30/98 $-0- $-0- $-0-
</TABLE>

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 Investments family. The Transfer Agent is
paid a fee by the Portfolios for providing these services consisting of an
annual per account chargeof $11.00 plustransaction charges for particular
services according to a schedule. Compensation is fixed each

-97-
<PAGE>

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 Investments family 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.

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.

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 Shares, Class B Shares 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.

-98-
<PAGE>

This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.

-99-
<PAGE>

FINANCIAL STATEMENTS

Ernst & Young LLP serves as the independent auditors for Delaware
Group Foundation Funds (the "Trust") and, in its capacity as such, audits the
annual financial statements of the Trust. The Trust's Statements of Net Assets,
Statements of Assets and Liabilities, Statements of Operations, Financial
Highlights and Notes to Financial Statements, as well as the report of Ernst &
Young LLP, independent auditors, for the fiscal period December 31, 1997 through
September 30, 1998 are included in the Trust's Annual Report to shareholders.
The financial statements and financial highlights, the notes relating thereto
and the report of Ernst & Young LLP listed above are incorporated by reference
from the Annual Report into this Part B.

-100-

<PAGE>
PART C

Other Information

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Part A - Financial Highlights

Part B - Statement of Net Assets
Statement of Assets and Liabilities
Statement of Operations
Notes to Financial Highlights
Accountant's Report

(b) Exhibits:

(1) Declaration of Trust.

(a) Declaration of Trust incorporated into this filing by
reference to the initial registration statement on Form N-1A
filed on October 24, 1997.

(2) By-Laws.

(a) By-Laws incorporated into this filing by reference to the
initial registration statement on Form N-1A filed on October
24, 1997.

(3) Voting Trust Agreement. Inapplicable.

(4) Copies of All Instruments Defining the Rights of Holders.

(a) Declaration of Trust. Declaration of Trust (October 1997)
incorporated into this filing by reference to the initial
registration statement on Form N-1A filed on October 24,
1997.

(b) By-Laws. By-Laws incorporated into this filing by reference
to the initial registration statement on Form N-1A filed on
October 24, 1997.

(5) Asset Allocation Agreement.

(a) Executed Asset Allocation Agreement (December 18, 1997)
between Delaware Management Company, Inc. and the Registrant
on behalf of the Balanced Portfolio incorporated into this
filing by reference to Pre-Effective Amendment No. 1 filed
on December 30, 1997.

(b) Executed Asset Allocation Agreement (December 18, 1997)
between Delaware Management Company, Inc. and the Registrant
on behalf of the Growth Portfolio incorporated into this
filing by reference to Pre-Effective Amendment No. 1 filed
on December 30, 1997.

<PAGE>

Part C - Other Information
(Continued)

(c) Executed Asset Allocation Agreement (December 18, 1997)
between Delaware Management Company, Inc. and the Registrant
on behalf of the Income Portfolio incorporated into this
filing by reference to Pre-Effective Amendment No. 1 filed
on December 30, 1997.

(d) Form of Asset Allocation Agreement (1998) between Delaware
Management Company and the Registrant on behalf of The Asset
Allocation Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 2 filed on June
17, 1998.

(6) (a) Distribution Agreement. Executed Distribution Agreement
(December 18, 1997) between Delaware Distributors, L.P. and
the Registrant on behalf of the Balanced Portfolio in-
corporated into this filing by reference to Pre-Effective
Amendment No. 1 filed on December 30, 1997.

(b) Executed Distribution Agreement (December 18, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of
the Growth Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on December
30, 1997.

(c) Executed Distribution Agreement (December 18, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf of
the Income Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on December
30, 1997.

(d) Form of Distribution Agreement (1998) between Delaware
Distributors, L.P. and the Registrant on behalf of The Asset
Allocation Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 2 filed on June
17, 1998.

(e) Administration and Service Agreement. Form of Administration
and Service Agreement (as amended November 1995) (Module)
incorporated into this filing by reference to the initial
registration statement on Form N-1A filed on October 24,
1997.

(f) Dealer's Agreement. Dealer's Agreement (as amended November
1995)(Module) incorporated into this filing by reference to
the initial registration statement on Form N-1A filed on
October 24, 1997.

(g) Mutual Fund Agreement for the Delaware Group of Funds (as
amended November 1995) (Module) incorporated into this
filing by reference to the initial registration statement on
Form N-1A filed on October 24, 1997.

<PAGE>
Part C - Other Information
(Continued)

(7) Bonus, Profit Sharing, Pension Contracts.

(a) Amended and Restated Profit Sharing Plan (November 17, 1994)
(Module) incorporated into this filing by reference to the
initial registration statement on Form N-1A filed on October
24, 1997.

(b) Amendment to Profit Sharing Plan (December 21, 1995)
(Module) incorporated into this filing by reference to the
initial registration statement on Form N-1A filed on October
24, 1997.

(8) Custodian Agreement.

(a) Custodian Agreement (Module) with The Chase Manhattan Bank
incorporated into this filing by reference to the initial
registration statement on Form N-1A filed on October 24,
1997.

(i) Letter to add the Income Portfolio, the Balanced
Portfolio and the Growth Portfolio to the Custodian
Agreement with The Chase Manhattan Bank attached as
Exhibit.

(ii) Form of Letter to add The Asset Allocation Portfolio to
the Custodian Agreement with The Chase Manhattan Bank
incorporated into this filing by reference to
Post-Effective Amendment No. 2 filed on June 17, 1998.

(9) Other Material Contracts.

(a) Executed Shareholders Services Agreement (December 18, 1997)
between Delaware Service Company, Inc. and the Registrant on
behalf of the Income Portfolio, Balanced Portfolio and
Growth Portfolio incorporated into this filing by reference
to Pre-Effective Amendment No. 1 filed on December 30, 1997.

(b) Form of Shareholder Services Agreement (1998) between
Delaware Service Company, Inc. and the Registrant on behalf
of The Asset Allocation Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 2 filed
on June 17, 1998.

(c) Executed Fund Accounting Agreement (Module) (August 19,
1996) with Delaware Service Company, Inc. incorporated into
this filing by reference to the initial registration
statement on Form N-1A filed on October 24, 1997.

(i) Executed Amendment No. 8 to Delaware Group of Funds
Fund Accounting Agreement attached as Exhibit.

(ii) Form of Amendment No. 11 to Delaware Group of Funds
Fund Accounting Agreement attached as Exhibit.

(iii) Form of Amendment No. 12 to Delaware Group of Funds
Fund Accounting Agreement attached as Exhibit.

<PAGE>
Part C - Other Information
(Continued)

(iv) Form of Amendment No. 13 to Delaware Group of Funds
Fund Accounting Agreement attached as Exhibit.

(10) Opinion of Counsel. Attached as Exhibit.

(11) Consent of Auditors. Attached as Exhibit.

(12) Inapplicable.

(13) Subscription Agreement. Incorporated into this filing by
reference to Post-Effective Amendment No. 2 filed January 21,
1998.

(14) Inapplicable.

(15) Plans under Rule 12b-1.

(a) Executed Plan under Rule 12b-1 for Class A of Balanced
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(b) Executed Plan under Rule 12b-1 for Class B of Balanced
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(c) Executed Plan under Rule 12b-1 for Class C of Balanced
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(d) Executed Plan under Rule 12b-1 for Class A of Growth
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(e) Executed Plan under Rule 12b-1 for Class B of Growth
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(f) Executed Plan under Rule 12b-1 for Class C of Growth
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(g) Executed Plan under Rule 12b-1 for Class A of Income
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

(h) Executed Plan under Rule 12b-1 for Class B of Income
Portfolio incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30, 1997.

<PAGE>
Part C - Other Information
(Continued)

(i) Executed Plan under Rule 12b-1 for Class C of Income
Portfolio incorporated into this filing by reference
to Pre-Effective Amendment No. 1 filed on December 30,
1997.

(16) Schedules of Computation for each Performance Quotation.
Inapplicable.

(17) Financial Data Schedules. Attached as Exhibit.

(18) Plan Under Rule 18f-3. Incorporated into this filing by
reference to the initial registration statement on Form N-1A
filed on October 24, 1997.

(a) Amended Appendix A to Plan under Rule 18f-3 incorporated
into this filing by reference to Pre-Effective Amendment No.
1 filed on December 30, 1997.

(19) Other: Trustees' Power of Attorney. Incorporated into this
filing by reference to Post-Effective Amendment No. 2 filed on
June 17, 1998.

Item 25. Persons Controlled by or under Common Control with Registrant. None.

Item 26. Number of Holders of Securities.

(1) (2)

Number of
Title of Class Record Holders
-------------- --------------

Delaware Group Foundation Funds
Balanced Portfolio Series:

Balanced Portfolio A Class
Common Stock 78 Accounts as of
No Par Value Per Share October 31, 1998

Balanced Portfolio B Class
Common Stock 65 Accounts as of
No Par Value Per Share October 31, 1998

Balanced Portfolio C Class
Common Stock 83 Accounts as of
No Par Value Per Share October 31, 1998

Balanced Portfolio Institutional Class
Common Stock 1 Account as of
No Par Value Per Share October 31, 1998
<PAGE>
Part C - Other Information
(Continued)

(1) (2)

Number of
Title of Class Record Holders
-------------- --------------

Delaware Group Foundation Funds
Growth Portfolio Series:

Growth Portfolio A Class
Common Stock 93 Accounts as of
No Par Value Per Share October 31, 1998

Growth Portfolio B Class
Common Stock 120 Accounts as of
No Par Value Per Share October 31, 1998

Growth Portfolio C Class
Common Stock 40 Accounts as of
No Par Value Per Share October 31, 1998

Growth Portfolio Institutional Class
Common Stock 1 Account as of
No Par Value Per Share October 31, 1998

Delaware Group Foundation Funds
Income Portfolio Series:

Income Portfolio A Class
Common Stock 36 Accounts as of
No Par Value Per Share October 31, 1998

Income Portfolio B Class
Common Stock 16 Accounts as of
No Par Value Per Share October 31, 1998

Income Portfolio C Class
Common Stock 24 Accounts as of
No Par Value Per Share October 31, 1998

Income Portfolio Institutional Class
Common Stock 1 Account as of
No Par Value Per Share October 31, 1998

Item 27. Indemnification. Incorporated into this filing by reference to the
initial registration statement on Form N-1A filed on October 24, 1997.
<PAGE>
Part C - Other Information
(Continued)

Item 28. Business and Other Connections of Investment Adviser.

Delaware Management Company, a series of Delaware Management Business
Trust, (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 Investments family (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
Government Fund, Inc., Delaware Group Income Funds, 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 Intermediate
Tax-Free Funds, Inc., Voyageur Tax-Free Funds, Inc., Voyageur Funds, Inc.,
Voyageur Insured 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.). In
addition, certain officers of the Manager also serve as directors/trustees of
the other funds in the Delaware Investments family, and certain officers are
also officers of these other funds. A company indirectly owned by the Manager's
indirect parent company acts as principal underwriter to the mutual funds in the
Delaware Investments family (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 Investments family.

<PAGE>
Part C - Other Information
(Continued)

The following persons serving as 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/Trustee of Delaware Management Company, Inc.
and Delaware Management Business Trust; Chairman of
the Board, President, Chief Executive Officer, Chief
Investment Officer of Delaware Management Company (a
series of Delaware Management Business Trust);
Chairman of the Board, President, Chief Executive
Officer and Director of DMH Corp., Delaware
Distributors, Inc. and Founders Holdings, Inc.;
Chairman, Chief Executive Officer and Chief
Investment Officer of Delaware Investment Advisers
(a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Director of
Delaware International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other
funds in the Delaware Investments family, Delaware
Management Holdings, Inc., and Delaware Capital
Management, Inc.; Chairman of Delaware Distributors,
L.P.; President and Chief Executive Officer of
Delvoy, Inc.; and Director and/or Trustee of Delaware
Service Company, Inc. and Retirement Financial
Services, Inc.

Richard G. Unruh, Jr. Executive Vice President of the Registrant, each of
the other funds in the Delaware Investments family,
Delaware Management Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust);
Executive Vice President and Director/Trustee of
Delaware Management Company, Inc. and Delaware
Management Business Trust; President of Delaware
Investment Advisers (a series of Delaware Management
Business Trust); and Director of Delaware
International Advisers Ltd.

Board of Directors, Chairman of Finance Committee,
Keystone Insurance since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors, of Finance
Committee, AAA Mid Atlantic, Inc. since 1989, 2040
Market, Philadelphia, PA; Board of Directors, Metron,
Inc. since 1995, 11911 Drive, Reston, VA

Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), the Registrant, each of the other funds in
the Delaware Investments family and Delaware
Management Holdings, Inc.; Executive Vice President
and Director of Founders Holdings, Inc.; Executive
Vice President of Delaware Capital Management, Inc.
and Delaware Management Business Trust; and Director
of Founders CBO Corporation

Director, HYPPCO Finance Company Ltd.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

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
Delvoy, Inc.; Executive Vice President, Chief
Financial Officer, Chief Administrative Officer and
Trustee of Delaware Management Business Trust;
Executive Vice President, Chief Operating Officer and
Chief Financial Officer of the Registrant and each of
the other funds in the Delaware Investments family,
Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.; President,
Chief Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.;
President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware International
Holdings Ltd.; Chairman, Chief Executive Officer and
Director of Retirement Financial Services, Inc.;
Chairman and Director of Delaware Management Trust
Company; and Director of Delaware International
Advisers Ltd.

Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square, PA

George M. Senior Vice President, Secretary and Director/Trustee
Chamberlain, Jr. of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware
Capital Management, Inc., Retirement Financial
Services, Inc., Delvoy, Inc. and Delaware Management
Business Trust; Senior Vice President, Secretary and
General Counsel of the Registrant and each of the
other funds in the Delaware Investments family;
Senior Vice President and Secretary of Delaware
Distributors, L.P., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Advisers (a series of Delaware Management
Business Trust) and Management Holdings, Inc.; Senior
Vice President and Director of International Holdings
Ltd.; Executive Vice President, Secretary and
Director of Delaware Management Trust Company; and
Director of Delaware International Advisers Ltd.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
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 Executive Vice President and General Counsel of
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.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust), Founders CBO Corporation and Retirement
Financial Services, Inc.; Executive Vice
President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc.
and Delvoy, Inc.; Senior Vice President of the
Registrant and each of the other funds in the
Delaware Investments family; Director of Delaware
International Advisers Ltd.

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, each of the other funds in the Delaware
Investments family and Founders Holdings, Inc.;
Senior Vice President/Investment Accounting of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust) and Delaware Service Company, Inc.;
Senior Vice President and Treasurer/Manager,
Investment Accounting of Delaware Distributors, L.P.
and Delaware Investment Advisers (a series of
Delaware Management Business Trust); Senior Vice
President and Assistant Treasurer of Founders CBO
Corporation; and Senior Vice President and Manager of
Investment Accounting of Delaware International
Holdings Ltd.

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., Delaware International Holdings Ltd.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delvoy, Inc. and Delaware
Management Business Trust; Senior Vice
President/Corporate Controller of the Registrant,
each of the other funds in the Delaware Investments
family and Founders Holdings, Inc.; Executive Vice
President, Chief Financial Officer and Treasurer of
Delaware Management Trust Company; Chief Financial
Officer and Treasurer of Retirement Financial
Services, Inc.; and Senior Vice President/Assistant
Treasurer of Founders CBO Corporation

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
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

Susan L. Hanson Senior Vice President/Global Marketing & Client
Services of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Service
Company, Inc.

Michael T. Taggart Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust)

Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Retirement Financial 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
Management Company (a series of Delaware Management
Business Trust), Delaware Service Company, Inc. and
Retirement Financial Services, Inc.

Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Investments family,
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust),
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 Retirement
Financial Services, Inc.; Assistant Secretary of
Delaware Management Business Trust; and Vice
President and Assistant Secretary of Delvoy, Inc.

Richelle S. Maestro Vice President and Assistant Secretary of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management
Business Trust), 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., Retirement Financial Services,
Inc., Founders Holdings, Inc. and Delvoy, Inc.; Vice
President and Secretary of Delaware International
Holdings Ltd.; and Secretary of Founders CBO
Corporation

Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
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 Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
Delaware Management Trust Company

Bruce A. Ulmer Vice President/Director of LNC Internal Audit of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Trust Company and Retirement Financial
Services, Inc.; Vice President/Director of Internal
Audit of Delvoy, Inc.

Joel A. Ettinger(2) Vice President/Director of Taxation of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware
Management Holdings, Inc., Founders Holdings, Inc.
and Founders CBO Corporation

Christopher Adams Vice President/Business Manager, Equity
Department of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Trust) and Delaware Service Company, Inc.

Dennis J. Mara(3) Vice President/Acquisitions of Delaware Management
Company, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust)

Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
Delaware Service Company, Inc.

Lisa O. Brinkley Vice President/Compliance of the Registrant, Delaware
Management Company, Inc., each of the other funds in
the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business
Trust), DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company,
Delaware Capital Management, Inc. and Retirement
Financial Services, Inc.; Vice President/Compliance
Officer of Delaware Management Business Trust; and
Vice President of Delvoy, Inc.

Mary Ellen Carrozza Vice President/Client Services of Delaware Management
Company, Inc., Delaware Management Company (a series
of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management
Business Trust) and the Registrant

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
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

Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant, 20 other
investment companies in the Delaware Investments
family; 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., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), 20 other investment
companies in the Delaware Investments family; 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., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), 17 investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.

Patrick P.Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant, 17 other
investment companies in the Delaware Investments
family and Delaware Capital Management, Inc.

Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant, 17 other
investment companies in the Delaware Investments
family

Mitchell L. Conery(4) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant, 17 other
investment companies in the Delaware Investments
family and Delaware Capital Management, Inc.

George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
10 investment companies in the Delaware Investments
family

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
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

John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), ten investment
companies in the Delaware Investments family,
Delaware Capital Management, Inc. and Trustee of
Delaware Management Business Trust

Gerald S. Frey Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and
10 investment companies in the Delaware Investments
family

Christopher Beck(5) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) 10 investment companies
in the Delaware Investments family

Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and seven other investment
companies in the Delaware Investments family

Andrew M. McCullagh, Jr.(7) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) the Registrant and eight other investment
companies in the Delaware Investments family

Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and 13 investment companies in the Delaware
Investments family

J. Paul Dokas(8) Vice President/Quantitative Analyst and Portfolio
Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), the Registrant and one
other investment company in the Delaware
Investments family

Cynthia Isom Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and 17 other investment
companies in the Delaware Investments family

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
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

Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc., Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), Registrant and 19 other
investment companies in the Delaware Investments
family

Marshall T. Bassett(9) Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust), the
Registrant and each of the other funds in the
Delaware Investments family

John A. Heffern(10) Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and each of the funds in the Delaware
Investments family

Lori P. Wachs Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and each of the funds in the Delaware
Investments family

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

- -----------
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
3 CORPORATE CONTROLLER, IIS prior to July 1997.
4 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
5 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
6 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
7 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset Management
LLC prior to May 1997.
8 DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to February
1997.
9 VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
10 SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities Corporation prior
to March 1997.

<PAGE>

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 Investments family.

(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 Investment
Advisers Limited Partner None

Delaware Capital
Management, Inc. Limited Partner None

Wayne A. Stork Chairman Chairman

Bruce D. Barton President and Chief Executive None
Officer

David K. Downes Executive Vice President, Executive Vice President, Chief
Chief Operating Officer Operating Officer and Chief
and Chief Financial Officer Financial Officer

Richard J. Flannery Executive Vice President/ Senior Vice President
General Counsel

George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice President/
Secretary/General Counsel

Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller

Terrence P. Cunningham Senior Vice President/Financial None
Institutions

Thomas E. Sawyer Senior Vice President/ None
National Sales Director

Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
</TABLE>
<PAGE>
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>
J. Chris Meyer Senior Vice President/ None
Director Product Management

William M. Kimbrough Senior Vice President/Wholesaler None

Daniel J. Brooks Senior Vice President/Wholesaler None

Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager

Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager

Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer

Eric E. Miller Vice President/Assistant Secretary/ Vice President/Assistant Secretary/
Deputy General Counsel Deputy General Counsel

Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary

Lisa O. Brinkley Vice President/Compliance Vice President/Compliance

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

Lori M. Burgess Vice President/Client Services None

Julia R. Vander Els Vice President/Participant Services None

Scott Metzger Vice President/Business Development Vice President/Business
Development

Larry Carr Vice President/Sales Manager None

Stephen C. Hall Vice President/Institutional Sales None

Gregory J. McMillan Vice President/ National Accounts None

Holly W. Reimel Senior Vice President/Manager, None
National Accounts

Christopher H. Price Vice President/Manager, None
Insurance

Stephen J. DeAngelis Senior Vice President, National None
Director/Manager Account Services

Andrew W. Whitaker Vice President/Financial Institutions None

Jessie Emery Vice President/Marketing None
Communications

Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales

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

Dale L. Kurtz Vice President/Marketing Support None

David P. Anderson Vice President/Wholesaler None

Gabriella Bercze Vice President/Wholesaler None

Larry D. Birdwell 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

Joseph Gallagher 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

Edward J. Hecker 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

Theodore T. Malone 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

Andrew Morris Vice President/Wholesaler None

Patrick L. Murphy Vice President/Wholesaler None

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 None
Technology

Scott Whitehouse Vice President/Wholesaler None

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
</TABLE>
(c) Inapplicable.

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.
<PAGE>
Part C - Other Information
(Continued)

Item 32. Undertakings.

(a) Not Applicable.

(b) Not Applicable.

(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>
Part C - Other Information
(Continued)

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 25th day of November, 1998.
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>
<S> <C> <C>
Signature Title Date
- -------------------------------------- --------------------------------- -----------------

/s/Wayne A. Stork Chairman of the Board and Trustee November 25, 1998
- --------------------------------------
Wayne A. Stork
Executive Vice President/
Chief Operating Officer/
Chief Financial Officer (Principal
Financial Officer and Principal
/s/David K. Downes Accounting Officer) November 25, 1998
- --------------------------------------
David K. Downes

/s/Walter P. Babich * Trustee November 25, 1998
- --------------------------------------
Walter P. Babich

/s/John H. Durham *
- --------------------------------------
John H. Durham Trustee November 25, 1998

/s/Anthony D. Knerr * Trustee November 25, 1998
- --------------------------------------
Anthony D. Knerr

/s/Ann R. Leven * Trustee November 25, 1998
- --------------------------------------
Ann R. Leven

/s/W. Thacher Longstreth * Trustee November 25, 1998
- --------------------------------------
W. Thacher Longstreth

/s/ Thomas F. Madison * Trustee November 25, 1998
- --------------------------------------
Thomas F. Madison

/s/Jeffrey J. Nick * Trustee November 25, 1998
- --------------------------------------
Jeffrey J. Nick

/s/Charles E. Peck * Trustee November 25, 1998
- --------------------------------------
Charles E. Peck
</TABLE>
* By /s/Wayne A. Stork
Wayne A. Stork
as Attorney-in-Fact
for each of the persons indicated
<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Exhibits

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS

Exhibit No. Exhibit

EX-99.B8AI Letter to add the Income Portfolio, the Balanced Portfolio
and the Growth Portfolio to the Custodian Agreement

EX-99.B9CI Executed Amendment No. 8 to Fund Accounting Agreement

EX-99.B9CII Form of Amendment No. 11 to Fund Accounting Agreement

EX-99.B9CIII Form of Amendment No. 12 to Fund Accounting Agreement

EX-99.B9CIV Form of Amendment No. 13 to Fund Accounting Agreement

EX-99.B10 Opinion of Counsel

EX-99.B11 Consent of Auditors

EX-27 Financial Data Schedules

<PAGE>

As of December 31, 1997

VIA UPS OVERNIGHT

The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245

Attention: Global Custody Division

Re: Global Custody Agreement, Effective May 1, 1996
between The Chase Manhattan Bank and those registered investment
companies (and on behalf of certain series thereof), listed on
Schedule A attached thereto ("Agreement")
----------------------------------------------------------------

Ladies and Gentlemen:

Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Foundation Funds for the benefit of Income, Balanced
and Growth Portfolios (the "Portfolios") hereby appoints The Chase Manhattan
Bank to provide custodial services for the Portfolios under and in accordance
with the terms of the Agreement and accordingly, requests that the Portfolios be
added to Schedule A to the Agreement effective as of December 31, 1997. Kindly
acknowledge your agreement to provide such services and to add the Portfolios to
Schedule A by signing in the space provided below.

DELAWARE GROUP FOUNDATION FUNDS
on behalf of the Balanced, Growth and
Income Portfolios

By:
--------------------------------------
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:

THE CHASE MANHATTAN BANK

By:__________________________

Its:_________________________

<PAGE>

EX-99.B9CI
Exhibit 24(b)(9)(c)(i)

AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly 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)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)

- ------------------
*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>

Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)

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 Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
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 Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)

<PAGE>

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 Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)

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)

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)

<PAGE>

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>

Dated as of December 18, 1997

DELAWARE SERVICE COMPANY, INC.

/s/David K. Downes
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 III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
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 STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
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.

/s/ Wayne A. Stork
By: ------------------
Wayne A. Stork
Chairman

<PAGE>
EX-99.B9CII
Exhibit 24(b)(9)(c)(ii)

AMENDMENT NO. 11
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)

<PAGE>

Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )

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 Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
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 Maturit Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)

<PAGE>

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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)

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.

Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)

Voyageur Funds, Inc.
Voyageur US 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)

<PAGE>

Voyageur Investment Trust II
Florida Limited Term 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>

Dated as of sEPTEMBER 14, 1998

DELAWARE SERVICE COMPANY, INC.

By:
--------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

By:
--------------------------------------------------
Wayne A. Stork
Chairman

<PAGE>

EX-99.B9CIII
Exhibit 24(b)(9)(c)(iii)

AMENDMENT NO. 12
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

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)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)

<PAGE>

Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)

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)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund

<PAGE>

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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)

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.

Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)

Voyageur Funds, Inc.
Voyageur US 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)

<PAGE>

Voyageur Investment Trust II
Florida Limited Term 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>

Dated as of September 14, 1998

DELAWARE SERVICE COMPANY, INC.

/s/ David K. Downes
By: -------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

/s/ Wayne A. Stork
By: ------------------
Wayne A. Stork
Chairman

<PAGE>

EX-99.B9CIV
Exhibit 24(b)(9)(c)(iv)

AMENDMENT NO. 13
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

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)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
Mid-Cap Value Fund (New)
Small Cap Contrarian Fund (New)
- ------------------
*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>

Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )

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)
New Europe Fund (New)
Latin America Fund (New)

Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund

<PAGE>

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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)

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.

Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)

Voyageur Funds, Inc.
Voyageur US 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)

<PAGE>

Voyageur Investment Trust II
Florida Limited Term 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>

Dated as of December 18, 1998

DELAWARE SERVICE COMPANY, INC.

By:
--------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

By:
--------------------------------------------------
Wayne A. Stork
Chairman

<PAGE>

Law Office

Stradley, Ronon, Stevens & Young, LLP

2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000

Direct Dial: (215) 564-8115

November 24, 1998

Delaware Group Foundation Funds
1818 Market Street
Philadelphia, PA 19103

Re: Legal Opinion-Securities Act of 1933
------------------------------------
Ladies and Gentlemen:

We have examined the Agreement and Declaration of Trust (the
"Declaration"), of Delaware Group Foundation Funds (the "Fund"), a series
business trust organized under the Delaware Business Trust Act, the By-Laws of
the Fund, and its proposed form of Share Certificates (if any), all as amended
to date, and the various pertinent corporate proceedings we deem material. We
have also examined the Notification of Registration and the Registration
Statements filed under the Investment Company Act of 1940 as amended, (the
"Investment Company Act") and the Securities Act of 1933 as amended, (the
"Securities Act"), all as amended to date, as well as other items we deem
material to this opinion.

The Fund is authorized by the Declaration to issue an
unlimited number of shares of beneficial interest at a par value of $0.001 and
currently issues shares of the Asset Allocation portfolio, Balanced Portfolio,
Growth Portfolio and Income Portfolio series of shares. The Declaration also
empowers the Board to designate any additional series or classes and allocate
shares to such series or classes.

The Fund has filed with the U.S. Securities and Exchange
Commission, a registration statement under the Securities Act, which
registration statement is deemed to register an indefinite number of shares of
the Fund pursuant to the provisions of Section 24(f) of the Investment Company
Act. You have further advised us that the Fund has filed, and each year
hereafter will timely file, a Notice pursuant to Rule 24f-2 under the Investment
Company Act perfecting the registration of the shares sold by the Fund during
each fiscal year during which such registration of an indefinite number of
shares remains in effect.

You have also informed us that the shares of the Fund have
been, and will continue to be, sold in accordance with the Fund's usual method
of distributing its registered shares, under which prospectuses are made
available for delivery to offerees and purchasers of such shares in accordance
with Section 5(b) of the Securities Act.

<PAGE>
Delaware Group Foundation Funds
November 24, 1998
Page 2

Based upon the foregoing information and examination, so long
as the Fund remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Declaration and the laws
of the State of Delaware.

We hereby consent to the use of this opinion, in lieu of any
other, as an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund under
the Securities Act and the applications, registration statements or notice
filings, and amendments thereto, filed in accordance with the securities laws of
the several states in which shares of the Fund are offered, and we further
consent to reference in the registration statement of the Fund to the fact that
this opinion concerning the legality of the issue has been rendered by us.

Very truly yours,

STRADLEY, RONON, STEVENS & YOUNG, LLP

BY: /s/ Bruce G. Leto
-------------------------
Bruce G. Leto

<PAGE>

Consent of Ernst & Young LLP, Independent Auditors

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 4 to the Registration Statement (Form N-1A) (No.
333-38801) of Delaware Group Foundation Funds of our report dated October 30,
1998, included in the 1998 Annual Report to shareholders.

/s/Ernst & Young LLP
Ernst & Young LLP

Philadelphia, Pennsylvania
November 24, 1998

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Directors
Delaware Group Foundation Funds

We have audited the accompanying statements of net assets and the statements of
assets and liabilities, of Delaware Group Foundation Funds (the "Trust")
(comprised of the Growth, Balanced and Income Portfolios) as of September 30,
1998, and the related statements of operations, statements of changes in net
assets and financial highlights for the period December 31, 1997 (commencement
of operations) through September 30, 1998. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examing, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of September 30, 1998, by correspondence with the Trust's custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Delaware Group Foundation Funds
at September 30, 1998, and the results of their operations, the changes in
their net assets and their financial highlights for the period December 31, 1997
(commencement of operations) through September 30, 1998, in conformity with
generally accepted accounting principles.

/s/Ernst & Young
Ernst & Young LLP

Philadelphia, Pennsylvania
October 30, 1998

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 021
<NAME> BALANCED PORTFOLIO A CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,353,735
<INVESTMENTS-AT-VALUE> 2,177,504
<RECEIVABLES> 1,400
<ASSETS-OTHER> 54,888
<OTHER-ITEMS-ASSETS> 0
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,791
<TOTAL-LIABILITIES> 111,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,300,701
<SHARES-COMMON-STOCK> 119,515
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,560)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (176,231)
<NET-ASSETS> 971,753
<DIVIDEND-INCOME> 17,888
<INTEREST-INCOME> 1,737
<OTHER-INCOME> 0
<EXPENSES-NET> 7,620
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<REALIZED-GAINS-CURRENT> (6,560)
<APPREC-INCREASE-CURRENT> (176,231)
<NET-CHANGE-FROM-OPS> (170,786)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,474
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121,481
<NUMBER-OF-SHARES-REDEEMED> 2,506
<SHARES-REINVESTED> 540
<NET-CHANGE-IN-ASSETS> 2,122,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 623
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83,093
<AVERAGE-NET-ASSETS> 291,736
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.153
<PER-SHARE-GAIN-APPREC> (0.463)
<PER-SHARE-DIVIDEND> 0.060
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.130
<EXPENSE-RATIO> 0.800
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 022
<NAME> BALANCED PORTFOLIO B CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,353,735
<INVESTMENTS-AT-VALUE> 2,177,504
<RECEIVABLES> 1,400
<ASSETS-OTHER> 54,888
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,233,792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,791
<TOTAL-LIABILITIES> 111,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,300,701
<SHARES-COMMON-STOCK> 50,162
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,560)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (176,231)
<NET-ASSETS> 407,796
<DIVIDEND-INCOME> 17,888
<INTEREST-INCOME> 1,737
<OTHER-INCOME> 0
<EXPENSES-NET> 7,620
<NET-INVESTMENT-INCOME> 12,005
<REALIZED-GAINS-CURRENT> (6,560)
<APPREC-INCREASE-CURRENT> (176,231)
<NET-CHANGE-FROM-OPS> (170,786)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,113
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,342
<NUMBER-OF-SHARES-REDEEMED> 7,313
<SHARES-REINVESTED> 133
<NET-CHANGE-IN-ASSETS> 2,122,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 623
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83,093
<AVERAGE-NET-ASSETS> 193,046
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.104
<PER-SHARE-GAIN-APPREC> (0.444)
<PER-SHARE-DIVIDEND> 0.030
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.130
<EXPENSE-RATIO> 1.550
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 023
<NAME> BALANCED PORTFOLIO C CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,353,735
<INVESTMENTS-AT-VALUE> 2,177,504
<RECEIVABLES> 1,400
<ASSETS-OTHER> 54,888
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,233,792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,791
<TOTAL-LIABILITIES> 111,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,300,701
<SHARES-COMMON-STOCK> 85,233
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,560)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (176,231)
<NET-ASSETS> 694,215
<DIVIDEND-INCOME> 17,888
<INTEREST-INCOME> 1,737
<OTHER-INCOME> 0
<EXPENSES-NET> 7,620
<NET-INVESTMENT-INCOME> 12,005
<REALIZED-GAINS-CURRENT> (6,560)
<APPREC-INCREASE-CURRENT> (176,231)
<NET-CHANGE-FROM-OPS> (170,786)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,914
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 95,236
<NUMBER-OF-SHARES-REDEEMED> 10,225
<SHARES-REINVESTED> 222
<NET-CHANGE-IN-ASSETS> 2,122,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 623
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83,093
<AVERAGE-NET-ASSETS> 296,498
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.104
<PER-SHARE-GAIN-APPREC> (0.434)
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<PER-SHARE-NAV-END> 8.140
<EXPENSE-RATIO> 1.550
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 024
<NAME> BALANCED PORTFOLIO INSTITUTIONAL CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,353,735
<INVESTMENTS-AT-VALUE> 2,177,504
<RECEIVABLES> 1,400
<ASSETS-OTHER> 54,888
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,233,792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,791
<TOTAL-LIABILITIES> 111,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,300,701
<SHARES-COMMON-STOCK> 5,931
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,560)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (176,231)
<NET-ASSETS> 48,237
<DIVIDEND-INCOME> 17,888
<INTEREST-INCOME> 1,737
<OTHER-INCOME> 0
<EXPENSES-NET> 7,620
<NET-INVESTMENT-INCOME> 12,005
<REALIZED-GAINS-CURRENT> (6,560)
<APPREC-INCREASE-CURRENT> (176,231)
<NET-CHANGE-FROM-OPS> (170,786)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 413
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,882
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 49
<NET-CHANGE-IN-ASSETS> 2,122,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 623
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83,093
<AVERAGE-NET-ASSETS> 51,825
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.169
<PER-SHARE-GAIN-APPREC> (0.469)
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<PER-SHARE-NAV-END> 8.130
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 011
<NAME> GROWTH PORTFOLIO A CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,721,918
<INVESTMENTS-AT-VALUE> 1,574,090
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<TOTAL-ASSETS> 1,635,882
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<OTHER-ITEMS-LIABILITIES> 82,320
<TOTAL-LIABILITIES> 82,320
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,712,126
<SHARES-COMMON-STOCK> 66,883
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13,740)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (147,828)
<NET-ASSETS> 546,507
<DIVIDEND-INCOME> 8,348
<INTEREST-INCOME> 868
<OTHER-INCOME> 0
<EXPENSES-NET> 6,212
<NET-INVESTMENT-INCOME> 3,004
<REALIZED-GAINS-CURRENT> (13,740)
<APPREC-INCREASE-CURRENT> (147,828)
<NET-CHANGE-FROM-OPS> (158,564)
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<NUMBER-OF-SHARES-SOLD> 70,740
<NUMBER-OF-SHARES-REDEEMED> 3,857
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,553,562
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 522
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 77,197
<AVERAGE-NET-ASSETS> 285,636
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.062
<PER-SHARE-GAIN-APPREC> (0.392)
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<PER-SHARE-NAV-END> 8.170
<EXPENSE-RATIO> 0.800
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 012
<NAME> GROWTH PORTFOLIO B CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,721,918
<INVESTMENTS-AT-VALUE> 1,574,090
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<TOTAL-LIABILITIES> 82,320
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,712,126
<SHARES-COMMON-STOCK> 108,732
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13,740)
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<ACCUM-APPREC-OR-DEPREC> (147,828)
<NET-ASSETS> 884,889
<DIVIDEND-INCOME> 8,348
<INTEREST-INCOME> 868
<OTHER-INCOME> 0
<EXPENSES-NET> 6,212
<NET-INVESTMENT-INCOME> 3,004
<REALIZED-GAINS-CURRENT> (13,740)
<APPREC-INCREASE-CURRENT> (147,828)
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<NUMBER-OF-SHARES-SOLD> 109,008
<NUMBER-OF-SHARES-REDEEMED> 276
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,553,562
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 522
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 77,197
<AVERAGE-NET-ASSETS> 326,884
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.014
<PER-SHARE-GAIN-APPREC> (0.374)
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<PER-SHARE-NAV-END> 8.140
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 013
<NAME> GROWTH PORTFOLIO C CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,721,918
<INVESTMENTS-AT-VALUE> 1,574,090
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<ACCUM-APPREC-OR-DEPREC> (147,828)
<NET-ASSETS> 74,033
<DIVIDEND-INCOME> 8,348
<INTEREST-INCOME> 868
<OTHER-INCOME> 0
<EXPENSES-NET> 6,212
<NET-INVESTMENT-INCOME> 3,004
<REALIZED-GAINS-CURRENT> (13,740)
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<NUMBER-OF-SHARES-SOLD> 9,145
<NUMBER-OF-SHARES-REDEEMED> 55
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,553,562
<ACCUMULATED-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 77,197
<AVERAGE-NET-ASSETS> 32,386
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.013
<PER-SHARE-GAIN-APPREC> (0.373)
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 014
<NAME> GROWTH PORTFOLIO INSTITUTIONAL CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,721,918
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<INTEREST-INCOME> 868
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<EXPENSES-NET> 6,212
<NET-INVESTMENT-INCOME> 3,004
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<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.078
<PER-SHARE-GAIN-APPREC> (0.398)
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 031
<NAME> INCOME PORTFOLIO A CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 627,449
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 032
<NAME> INCOME PORTFOLIO B CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 627,449
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 033
<NAME> INCOME PORTFOLIO C CLASS

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
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</TABLE>

<ARTICLE> 6
<CIK> 0001048133
<NAME> DELAWARE GROUP FOUNDATION FUNDS
<SERIES>
<NUMBER> 034
<NAME> INCOME PORTFOLIO INSTITUTIONAL CLASS

<S> <C>
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,882
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 90
<NET-CHANGE-IN-ASSETS> 596,186
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 244
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 80,758
<AVERAGE-NET-ASSETS> 51,673
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.266
<PER-SHARE-GAIN-APPREC> (0.356)
<PER-SHARE-DIVIDEND> 0.130
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.280
<EXPENSE-RATIO> 0.550
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>